Executive Summary

Q3 delivered solid growth and margin execution: revenue $743.0m (+4.5% YoY), net revenue $615.0m (+5.9% YoY), Adjusted EBITDA $115.0m (+3.1% YoY), Adjusted EBITDA margin 18.6% on net revenue; GAAP diluted EPS $0.09 and Adjusted EPS $0.24 .
Strength was broad-based ex-Advocacy: net revenue ex-Advocacy rose 10.2% and ex-Advocacy Adjusted EBITDA grew 23.5% to $103m; Communications (Advocacy) remained cyclical headwind (-33.9% net revenue YoY) .
Management announced a “holy grail” AI partnership with Palantir to build an audience/activation platform; initial MVPs are live, with commercialization aimed for 2026, positioning STGW as a technology-first marketer and potential multi-hundred-million revenue opportunity over time .
2025 guidance reaffirmed: ~8% total net revenue growth, Adjusted EBITDA $410–$460m, Adjusted EPS $0.75–$0.88, and FCF conversion >45%; cash from operations YTD improved by ~$100m vs prior year with net leverage at 3.42x at Q3-end .
Potential stock reaction catalysts: accelerating non-Advocacy growth and margin improvement, AI/Palantir commercialization path, marketing cloud momentum (138% YoY net revenue), and reiterated full-year outlook; offset by near-term Communications/Advocacy softness .

What Went Well and What Went Wrong

What Went Well
- Ex-Advocacy growth and margins accelerated: net revenue ex-Advocacy +10.2% YoY; ex-Advocacy Adjusted EBITDA +23.5% YoY to $103m with margins +200 bps YoY, driven by labor discipline and cost initiatives .
- Marketing Cloud scaled fast: Q3 net revenue $27.2m (+137.5% YoY) with substantial EBITDA loss improvement (-$1.1m vs -$3.4m), underpinned by product traction (e.g., Harris Quest) and Agent Cloud launch .
- AI leadership narrative: Palantir audience platform partnership, Adobe content supply chain rollout, “The Machine” progress; management calling it “the holy grail of marketing” and targeting significant 2026 monetization .
What Went Wrong
- Communications/Advocacy remained a drag: Q3 Communications net revenue fell 14.3% YoY (organic -20.9%); Advocacy net revenue -33.9% YoY to $37m, weighing on consolidated organic growth (-0.4% total) .
- GAAP EPS still modest and interest expense elevated: diluted EPS $0.09; net interest expense $25.2m in Q3; leverage at 3.42x, albeit trending lower into seasonally strong Q4 .
- Capex and capitalized software stepped up to fund tech pivot ($26.3m capex and $45.3m capitalized software YTD), pressuring near-term free cash flow despite underlying OCF improvement .

Financial Results

Metric	Q3 2024	Q2 2025	Q3 2025
Revenue ($USD Millions)	$711.3	$706.8	$743.0
Net Revenue ($USD Millions)	$580.2	$598.1	$614.5
Adjusted EBITDA ($USD Millions)	$111.2	$92.9	$115.0
Adjusted EBITDA Margin % (on Net Revenue)	19.2%	15.5%	18.6%
Diluted EPS (GAAP) ($)	$0.03	$(0.02)	$0.09
Adjusted EPS ($)	$0.22	$0.17	$0.24

Versus Wall Street estimates (S&P Global)

Consensus EPS/Revenue/EBITDA for Q3 2025 were unavailable via S&P Global at the time of retrieval; therefore estimate comparisons are not shown.

Ex-Advocacy snapshot

Revenue ex-Advocacy: $686m in Q3 2025 (+12.0% YoY) .
Net Revenue ex-Advocacy: $578m in Q3 2025 (+10.2% YoY) .
Adjusted EBITDA ex-Advocacy: $103m in Q3 2025 (+23.5% YoY) .

Segment net revenue (YoY)

Segment (Net Revenue)	Q3 2024 ($m)	Q3 2025 ($m)	YoY %
Marketing Services	$225.4	$246.1	9.2%
Digital Transformation	$85.3	$95.4	11.9%
Media & Commerce	$145.6	$154.2	5.9%
Communications	$112.6	$96.5	(14.3%)
The Marketing Cloud	$11.4	$27.2	137.5%
Eliminations	$(0.1)	$(4.8)	NM
Total Net Revenue	$580.2	$614.5	5.9%

KPIs

KPI	Q3 2025	Prior/Context
Net New Business	$122m (Q3)	$472m LTM
U.S. ex-Advocacy Organic Growth	5.2% (Q3)	U.S. total organic +0.6% (Q3)
EMEA Net Revenue Growth	+39.6% YoY (Q3)	International total +25.9% YoY (Q3)
Cash from Operations (YTD)	$30.7m	Up ~$100m YoY per company commentary
Net Leverage	3.42x (Q3)	Target <3.0x by YE (seasonal cash)
Cash & Cash Equivalents	$132.2m (9/30)	Total available liquidity $429m
Share Repurchases	7.0m in Q3; $90m YTD	$80m remaining authorization (as of Q3)
Top 25 Client Avg.	~$28m annual net revenue	+16% YoY growth in top 25 (Q3)

Guidance Changes

Metric	Period	Previous Guidance (Q2 2025)	Current Guidance (Q3 2025)	Change
Total Net Revenue Growth	FY 2025	~8%	~8%	Maintained
Adjusted EBITDA	FY 2025	$410m–$460m	$410m–$460m	Maintained
Adjusted EPS	FY 2025	$0.75–$0.88	$0.75–$0.88	Maintained
Free Cash Flow Conversion	FY 2025	>45%	>45%	Maintained

Notes: Guidance reiterated; includes anticipated M&A impacts. Company provides non-GAAP guidance under S-K 10(e) “unreasonable efforts” exception .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 2025)	Current Period (Q3 2025)	Trend
AI/Technology initiatives	Q1: Palantir testing; Adobe content supply chain; “The Machine” rollout planned end of summer . Q2: Deployed first versions; AI-enabled tools to drive ~15% cost reduction over time; top-25 client growth .	Formal Palantir partnership; MVPs live; Agent Cloud launched; ~$35m tech investment in quarter; targeting meaningful 2026 revenue .	Accelerating
Communications/Advocacy	Q2: Comm. network modest growth but advocacy cyclical; softness visible .	Advocacy pullback weighed; Communications -14.3% YoY net revenue; management expects reversal in 2026 political cycle .	Soft now; potential 2026 tailwind
Media strategy & owned media	Q2: Centralized Stagwell Media Platform; in-housing capabilities .	Upgrade tech spine to compete on efficiency, not scale; stake in RealClearPolitics to expand owned media .	Building
Cost savings & cash flow	Q1: Target $80–$100m by YE26; begin actions . Q2: Actioned $20m; OCF +$122m YTD .	On pace for $60–$70m actions in 2025; AI tool adoption rising; OCF +~$100m YoY YTD .	Improving
Regional trends	Q2 org. growth: U.S. (-0.2%), “Other” +10.1% .	EMEA +39.6% net revenue; U.S. ex-Advocacy organic +5.2% .	International-led
Government contracts	Q2: First wins; pipeline building .	Shutdown not a major impediment; finals in 3–4 bids; multi-year stability benefits .	Growing

Management Commentary

“With double-digit growth in non-advocacy work, strong organic growth in nearly all areas, enhanced cash flow and increased non-advocacy margin, this quarter again demonstrates how Stagwell is a winner in an industry undergoing significant transformation.” – Mark Penn, CEO .
“An active focus on labor efficiency and cost discipline resulted in a 19% adjusted EBITDA margin, and drove an impressive 9% year-over-year increase in adjusted EPS to $0.24, even with the cyclical advocacy pullback.” – Ryan Greene, CFO .
“This is the holy grail of marketing brought to life.” – Mark Penn on the Palantir partnership; goal is potentially “hundreds of millions” in revenue over time .
“Ex-advocacy EBITDA jumped 23% year-over-year to $103 million, and our ex-advocacy margin of 18% is the highest we have achieved in two years.” – Mark Penn .

Q&A Highlights

Palantir partnership TAM/timing: Installations could be $5–10m each; commercial impact is “definitely a 2026 phenomenon” with advanced versions in market within months .
CapEx/Tech pivot: ~$55m allocated across The Machine, content supply chain, marketing cloud products, data assets, and tech refresh; shift from M&A toward technology .
Media positioning: Compete via technology/data vs scale; owned media push (e.g., RealClearPolitics) to deliver ROI and differentiate .
Communications softness: Advocacy and broader PR headwinds; expected normalization with political cycle .
Government work: Multi-year contracts add stability; margins comparable given admin burden; pipeline building from zero base .

Estimates Context

S&P Global consensus for Q3 2025 EPS, revenue, and EBITDA was unavailable at the time of retrieval; therefore we cannot quantify beats/misses vs Street for this quarter. We will update when S&P Global data becomes available.

Key Takeaways for Investors

Non-Advocacy growth and margins are re-accelerating; ex-Advocacy Adjusted EBITDA +23.5% YoY with margin expansion, indicating underlying health despite cyclical Advocacy headwinds .
The Palantir alliance and internal tech (Agent Cloud, The Machine, Adobe stack) deepen STGW’s AI moat; commercialization slated 2026 could be a step-function revenue driver if early client traction persists .
Marketing Cloud momentum is tangible (net revenue +137.5% YoY) with improving profitability trajectory; management still contemplates future structural options if value not recognized internally .
Cash conversion is improving on sustainable working-capital gains; leverage at 3.42x with seasonally strong Q4 supports path to sub-3x YE target .
Near-term watch items: Communications/Advocacy trajectory into election year; pace of AI platform client wins; continued cost actions flowing to EBITDA; and any changes to FY25 guidance in Q4 .
Segment mix favors Digital Transformation and Marketing Services (both double-digit growth), while Media & Commerce inflected positive and should benefit from tech-enabled media stack upgrades .
For trading: Reiterate-focused guide plus AI partnership can anchor sentiment; lack of Street consensus data this quarter limits headline “beat/miss” framing but fundamentals show sequential improvement ex-Advocacy .

Supporting detail and source documents: Q3 2025 press release and 8-K schedules, Q3 call transcript, prior quarter earnings materials .

Stagwell Inc (STGW)·Q3 2025 Earnings Summary