WPP's 'pretty grim' profit warning: stock market analysts react

Analysts assessed whether further downgrades will be a broader industry issue.

WPP CEO Mark Read is due to retire from the board by 31 December
WPP CEO Mark Read is due to retire from the board by 31 December

WPP’s share price nose-dived almost 19% on Wednesday (9 July), following the agency group’s shock profit warning, and its valuation has now almost halved since the start of 2025.

Stock market analysts have been divided over whether WPP’s downgrade is specific to the company, after it released its unscheduled trading update which showed revenue-less pass-through-costs are set to fall between 5.5% and 6% in Q2 2025. This followed a 2.7% drop in Q1.

WPP also warned its annual revenues are expected to slide between 3% and 5% across the entire year, compared with the drop of between zero and 2% it predicted in February.

It attributed this to “tougher” macroeconomic conditions, “weaker new business performance” and “one-off” factors including "severance action” at WPP Media.

Analysts at investment bank Citigroup called it a “pretty grim statement” from WPP and said that the guidance was a “bit of a kitchen sink ahead of a new CEO”.

The idea of “kitchen-sinking” is to release all of a company’s bad news at the same time rather than drip-feeding it to audiences. 

Citigroup also said that rival agency group Publicis Groupe should be “relatively protected”, given its account wins, but said WPP’s warning that it had seen a sharper decline in June compared to April and May “may raise concerns for agencies generally”.

Citigroup’s analysts referred to a comment made by outgoing WPP CEO Mark Read, who said: “While we expected the second quarter to be similar to the first quarter, performance in June was worse than anticipated and we expect this pattern of trading in the first half to continue into the second half.”

The investment bank added that earnings-per-share at WPP could decline as much as 17%, with the minimum being 5%.

Morgan Stanley, meanwhile, said that half of WPP’s downgrade was an individual issue, “due to net new business (net losses)” and the other half because of wider conditions and “macro deterioration”.

WPP expected the loss of its $1.7 billion Mars account to Publicis to affect only its 2026 figures, but the disclosure that the loss will also have an impact on Q4 fed into its revenue guidance downgrade too.

Goldman Sachs was also in two minds about the company’s downgrade. It said: “Part of this is WPP specific as it is not winning business and the big migrations (Coke and Mars) are happening faster but it is also flagging a customer spend slowdown that is a sector issue.”

WPP lost its Coca-Cola business in North America to Publicis earlier this year, but renewed its partnership with the brand across all other markets. 

In addition, Barclays noted WPP-specific issues, but said it “still sees more than half of the organic downgrade from worsening macro”, which didn’t “make for a great read for the other agencies”.

JP Morgan, however, stated that it “[remained] neutral” towards the network. It said: “We see an ongoing period of management uncertainty, the risk of deeper restructuring when a new chief executive is appointed and the risk of continued H2 client losses. We are neutral rather than negative given the possibility that WPP could be vulnerable to possible M&A interest.”

WPP was once the world’s biggest agency group but was overtaken by Publicis Groupe on a net revenue basis last year and faces falling to third place when Omnicom completes its planned acquisition of Interpublic.

At its 2017 peak, WPP was worth £24 billion ($32.6 billion) and the share price stood at £19. Now it is valued below £5 billion ($6.8 billion) and the stock closed at the end of trading today at £4.29.

Source:
Campaign UK
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