Sorrell's S4 Capital revenue falls as tech clients focus spending on AI

(Reuters) -Martin Sorrell's ad group S4 Capital posted an 11.4% drop in first-quarter revenue, in line with its expectations following two profit warnings last year, as technology clients prioritised spending on artificial intelligence over marketing.

 The owner of ad agencies Monks and MightyHive, which derives almost half of its business from the tech sector, said ongoing growth challenges from a key tech clients had continued in the quarter.

"The global macroeconomic environment has become even more challenging in 2025. Clients, therefore, are likely to remain cautious," Sorrell said in S4's trading update on Wednesday.

Sorrell acknowledged that the company was operating in "volatile global macroeconomic conditions" and that tariffs imposed by U.S. President Donald Trump were a principal risk.

"However, once the levels of tariffs are negotiated and impacts assessed, we believe clients will become more selective about the geographies in which they operate in order to find growth," he said.

Last month, GroupM and Ogilvy owner WPP said tariffs had not yet had a major impact on spending by its clients as they were still assessing their scope before making budget decisions.

S4 reported revenue of 163.7 million pounds ($218 million) for the three months to March 31, and affirmed its forecast for 2025 revenue and operational core earnings to be broadly similar to 2024.

($1 = 0.7510 pounds)

(Reporting by Shashwat Awasthi in Bengaluru; Editing by Janane Venkatraman and Ewan Harwood)