Jul 21 (Reuters) – Interpublic (IPG.N) cut annual growth expectations on Friday, reporting a drop in quarterly revenue as customers in the technology sector slashed marketing budgets, sending shares of the ad group down more than 12%.
Rival Omnicom also posted weak results for the quarter, highlighting pressure on advertising agencies as economic uncertainty prompts companies to tighten budgets.
Interpublic, whose clients include Google and Samsung Electronics (005930.KS), which is owned by Alphabet, now expects full-year organic sales growth of between 1% and 2%, compared to its previous forecast of 2% to 4%.
“Tech continued to weigh significantly on growth,” said CEO Philippe Krakowsky, adding that the results “did not match our expectations.”
The owner of Mediabrands, R/GA and MullenLowe posted revenue declines of 2.5% to $2.67 billion for the April-June quarter. The decline was due to general weakness in key markets, with net sales down 2.5% in the US and 4.3% in Europe.
Net income was $265.5 million, or 69 cents per share, compared to $229.6 million, or 58 cents per share, a year earlier, due to lower interest expenses.
Interpublic had previously said it was investing in artificial intelligence and hiring senior executives to lead its AI efforts. R/GA has also brought generative AI into its creative processes with clients such as Verizon, Opendoor and Nike.
Analysts worry, however, that the rise of in-house AI tools from third-party vendors or digital platforms could lead clients to forego the services of ad agencies.
Shares of Omnicom fell more than 5%.
Reporting by Samrhitha Arunasalam in Bengaluru; Edited by Krishna Chandra Eluri
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