Interpublic lowered annual growth expectations on Friday and posted a fall in quarterly revenue as clients in the technology sector slashed marketing budgets, sending the advertising group's shares down 8% in premarket trading.
Rival Omnicom also posted weak earnings for the quarter, underscoring the pressure on ad agencies as economic uncertainty prompts businesses to tighten their budgets.
Interpublic, which has clients that include Alphabet-owned Google and Samsung Electronics, said it now expects full-year organic revenue growth of between 1% and 2%, compared with its prior projection of 2% to 4%.
"Tech continued to weigh significantly on growth," said CEO Philippe Krakowsky, adding the results were "inconsistent with our expectations".
The owner of Mediabrands, R/GA and MullenLowe posted a 2.5% fall in revenue to $2.67 billion for the April-June quarter. The drop was due to broad-based weakness in its major markets, with net revenue falling 2.5% in the U.S and 4.3% in Europe.
Net profit was $265.5 million, or 69 cents per share, compared with $229.6 million, or 58 cents a share, from a year earlier, on the back of lower interest expense.
Interpublic had previously said it was investing in artificial intelligence and hired senior executives to lead its AI efforts. R/GA has also brought in generative AI into its creative processes with clients such as Verizon, Opendoor and Nike.
Analysts, however, worry the rise of in-house AI tools provided by third-party vendors or digital platforms could prompt clients to abandon services from advertising agencies.
Shares of Omnicom were down more than 2% in premarket trade.
(Reporting by Samrhitha Arunasalam in Bengaluru; Editing by Krishna Chandra Eluri)
