Stagwell Boosts 8% Revenue Outlook with Palantir Tech Partnership

Earnings Call Insights: Stagwell Inc. (STGW) Q3 2025

Management View

The CEO, Mark Penn, emphasized Stagwell's position as a "winner" in an evolving industry. He highlighted the company's consistent growth in non-advocacy net revenue and the significant impact of the Palantir announcement. The company reported $743 million in total revenue and $615 million in net revenue, showing increases of 12% and 10% respectively compared to the previous year. Penn noted that the ex advocacy EBITDA rose by 23% year-over-year to $103 million, with an ex advocacy margin of 18%, which is the highest in two years.

He also mentioned the adjusted earnings per share of $0.24, up 9% from the previous year, and record LTM net new business of $472 million. Strategic updates included a shift from M&A to technology development, particularly in AI, and the launch of a new partnership with Palantir to create an "industry-first audience platform." This partnership is described as the "holy grail of marketing finally brought to life."

Penn also noted that a major use of capital this year was buying back shares, with $90 million worth of shares repurchased so far. The basic share count now stands at 252 million, down 4% from last year.

CFO Perspective

CFO Ryan Greene discussed the new structure with five segments: Marketing Services, Media and Commerce, Digital Transformation, Communication, and The Marketing Cloud, aimed at simplifying reporting and improving transparency. Greene reported $743 million in revenue for Q3, with net revenue of $615 million, up 5.9% year-over-year. While reported organic growth was down 0.4%, it improved to 3.2% when adjusted for advocacy, with nearly all segments achieving higher levels.

Outlook

Stagwell reiterated its annual guidance, with Penn stating, "we're reiterating the outlook of approximately 8% total net revenue growth, $410 million to $460 million in adjusted EBITDA, $0.75 to $0.88 in adjusted EPS and 45% free cash flow conversion." Greene added similar figures, noting that the company expects a strong finish in the fourth quarter, which is typically their strongest, and anticipates being within the specified ranges on all metrics.

Financial Results

Greene reported that net revenue, excluding advocacy, has accelerated throughout the year, with 9.1% in Q1, 9.9% in Q2, and 10.2% in Q3. Adjusted EBITDA was $115 million, up 3% year-over-year, even without the higher gains from cyclical political work. Adjusted EBITDA margin on net revenue was 18.6%. Adjusted net income was $63 million, up 6%.

Segment performance included Marketing Services net revenue of $246 million, Digital Transformation $95 million, Media and Commerce $154 million, Communications $97 million (including $37 million in advocacy), and The Marketing Cloud $27 million, which grew 138% year-over-year. The Marketing Cloud's adjusted EBITDA margin improved from negative 30% to negative 4%. Cash flow from operations year-to-date was $31 million, up $100 million year-over-year.

Greene highlighted that the company repurchased 7 million shares for $37 million in Q3, bringing year-to-date repurchases to 17.6 million shares for $90 million. $80 million remains available under the approved plan. Net leverage stood at 3.4x at quarter end.

Q&A Highlights

Laura Martin from Needham asked about the background and TAM of the Palantir partnership. Penn explained that the partnership came from discussions with Alex Karp and described the TAM as "enormous," with installations ranging from $5 million to $10 million. He expected significant revenue by the end of 2026.

Steve Cahall from Wells Fargo questioned the media strategy. Penn stated that while they cannot compete on scale with behemoths, they can beat them on better technology and data use.

Barton Crockett from Rosenblatt asked about the RealClearPolitics stake. Penn mentioned opportunities for the midterms and presidential election to work with the team and upgrade monetization.

Jason Kreyer from Craig-Hallum inquired about government shutdown impacts. Penn noted no significant effect but expressed hope for the government to reopen.

Crockett also asked about potential Marketing Cloud spin-off criteria. Penn said it must reach a sustainable level, at least $250 million or $300 million in revenue.

Sentiment Analysis

Analysts focused on the Palantir partnership, media strategy, and technology investments, expressing interest in growth prospects and scalability. The tone was neutral to positive, with questions aiming for clarity on execution and future impact.

Management maintained a confident and optimistic tone, with Penn emphasizing Stagwell's leadership in AI and technology. The sentiment during prepared remarks and Q&A was consistently positive, using phrases like "we are clearly positioned as one of the winners" and "I think the TAM here is really quite enormous."

Compared to the previous quarter, management's tone was more assertive in highlighting technology pivots and strategic partnerships.

Quarter-over-Quarter Comparison

The current quarter saw a strategic shift from M&A to technology, reinforced by the Palantir partnership and greater emphasis on AI. Previous quarter discussions centered more on integration and M&A as growth drivers.

Guidance was reiterated for both quarters, but this quarter included additional details on technology investments, share repurchases, and reporting structure changes.

Analysts in both quarters concentrated on growth, AI, and the impact of business pivots, but this quarter saw heightened focus on the Palantir deal and technology monetization.

Key metrics such as revenue, adjusted EPS, and cash flow continued to improve sequentially. Management confidence appeared higher, especially regarding technology and AI.

Risks and Concerns

Management cited a slowdown in the communications vertical, reflecting industry-wide issues in that segment, and noted that the client base is undergoing significant transformation, with larger clients expanding while smaller clients turn over.

Advocacy revenue softness and broader PR-related challenges were acknowledged, with expectations of improvement in the upcoming political cycle.

Government shutdown was noted as a potential delay but not a significant impact on new government contracts.

Final Takeaway

Management underscored Stagwell's transformation into a technology-first marketing leader, reinforced by its new Palantir partnership and robust AI-driven product strategy. The company reaffirmed its financial outlook and highlighted strong momentum in non-advocacy growth, margin expansion, and strategic capital deployment, positioning itself for further growth and industry leadership in 2026 and beyond.