Stagwell's AI Flourish: Record New Business and a Pivot to Organic Growth
Q2 2026 shows accelerating organic revenue, record new business, and a raised EPS outlook as the marketing challenger bets on AI.
MDCA · Earnings Call · 2026-07-30
The AI-Fueled Acceleration
Stagwell (MDCA) delivered its biggest second quarter in history, with organic revenue up 10% and organic net revenue up 5% year-over-year. The standout was Digital Transformation, which grew 18% organically, building on a 29% two-year stack. CEO Mark Penn attributed this to the ongoing agentic economy shift: “AI is the tech transformation that we were built for and our business is thriving as we become recognized as the leader of cutting-edge agentic marketing.” — Mark Penn, Chairman and Chief Executive Officer · 2026-07-30 When asked about sustainability, he was emphatic: “I think it's sustainable for about 10 years.” — Mark Penn, Chairman and Chief Executive Officer · 2026-07-30 The company is embedding AI across its offerings, from The Machine to SATS (built on Palantir's Foundry), and this is resonating with clients demanding faster, more intelligent marketing execution. The margin story is equally compelling. Adjusted EBITDA reached $109 million, up 15%, with margin expanding 140 basis points to 17.2%. The labor ratio fell to 60.9%, down 280 basis points year-over-year, as back-office automation and agentic coding drive efficiency. This is a clear sign that Stagwell is not just riding the artificial intelligence wave but operationalizing it internally.New Business Wins and the Organic Pivot
Net new business hit a record $171 million in the quarter, up 45% year-over-year, with flagship wins including IBM's creative account (pried from a 30-year incumbent), Visit California, Hershey, Mondelez, Heineken, and Allwyn. This breadth demonstrates that Stagwell's tech-forward, collaborative approach is winning against legacy players. In a prior call, Penn had predicted this momentum: “We're clearly ahead of the others out there in the marketplace in terms of able to really bring together data and AI and marketing sciences.” — Mark Penn, Chairman and Chief Executive Officer · 2025-11-06 The shift is also strategic: management explicitly pivoted capital from M&A to organic growth and product development. As Ryan Greene noted, the year's revenue target is now expected to be achieved "largely organically." This is a deliberate move to build a higher-multiple, platform-like business—one that can ride the broader AI data centers infrastructure buildout indirectly by servicing its enterprise clients' transformation needs. The enterprise technology ramp is also progressing. Committed revenue from products like The Machine and SATS reached $16 million, with another $16 million in pipeline, on track to exceed the $25 million bookings target for the year. This product-led growth is a new, company-unique theme that could accelerate beyond 2026.The Political Super Cycle and Capital Allocation
Communications grew 12% organically, an almost 700 basis point acceleration from Q1, driven by growing political work ahead of the midterms. Penn sees a multi-year super cycle: “This is going to be quite a political super cycle, unlike anything we have seen in modern history.” — Mark Penn, Chairman and Chief Executive Officer · 2026-07-30 The company's owned media assets, including RealClearPolitics, position it to capture outsized demand in 2027-2028. Capital allocation is increasingly shareholder-friendly. Stagwell repurchased 5.9 million shares at an average price of $6.22 in Q2, bringing YTD buybacks to $88 million, driving EPS up 39% to $0.25. Management raised full-year adjusted EPS guidance to $1.03-$1.17 and reiterated EBITDA guidance of $475-$525 million. Net leverage stood at 3.04x, with a path to mid-2s by year-end.Stagwell's transformation is real and accelerating. The combination of AI-native services, record new business, and a disciplined shift to organic growth distinguishes it from legacy agency peers. The raised guidance and aggressive buybacks underscore confidence, while the political tailwind provides a visible catalyst into 2028. For a small-cap marketing player, this is a compelling inflection point.This is just the start of a multiyear growth cycle for Stagwell.