S4 Capital (LSE:SFOR) announced that it had cut its 2026 revenue guidance on Wednesday, with management now expecting full-year like-for-like net revenue to fall by a high-single-digit percentage, marginally below previous guidance, even as net debt came in far better than expected.
The London-listed digital advertising and marketing services group, led by Sir Martin Sorrell, reported third-quarter net revenue of £156.3 million, down 6.4% on a reported basis and 7.3% like-for-like against the same quarter of 2025. Nine-month net revenue fell 6.2% to £464.3 million, or 5.6% like-for-like.
Billings told a sharper story, down 12.4% in the quarter to £430.0 million, as hyperscaler and technology clients continued diverting spend toward AI infrastructure capital expenditure rather than marketing budgets.
Net debt ended the nine-month period at £76.0 million, a reduction of £75.1 million versus 30 September 2025, equivalent to leverage of 0.7 times pro-forma trailing 12-month operational EBITDA and well below the company's 1.0x target.
S4 Capital has continued repurchasing its Term Loan B debt, buying back a further €50.9 million since the quarter end, of which €10.5 million remains subject to settlement; combined with €125.3 million repurchased previously, this cuts outstanding Term Loan B to €198.8 million from an original €375 million.
Despite the softer revenue outlook, operational EBITDA is expected to hold at the current analyst consensus of £85 million, with the operational EBITDA margin now seen rising by at least 160 basis points to 13.7%, up from a previously guided increase of at least 100 basis points.
Adjusted basic earnings per share is expected to come in above current analyst consensus of 6.1p.
"We now expect 2026 like-for-like net revenue to be marginally below previous guidance down high-single digits, with operational EBITDA remaining at current analyst consensus level of £85 million," said Sorrell, adding that the group expects to be "comfortably within" its £50-80 million year-end net debt target and "almost net debt free by next year."
By practice, Marketing Services net revenue fell 6.2% like-for-like in the quarter to £142.7 million, hit by a scope reduction at BMW, primarily in EMEA, and the conflicts in Ukraine and the Middle East; Technology Services net revenue dropped 17.6% like-for-like to £13.6 million amid longer sales cycles.
Read more about S4 Capital
Geographically, the Americas, which account for the bulk of net revenue, fell 10.0% like-for-like in the quarter to £123.9 million, while EMEA and Asia-Pacific both improved, up 3.1% and 9.4% like-for-like respectively.
On 6 October, S4 Capital paid a first-time interim dividend of 1.35p per share, equivalent to 50% of adjusted basic earnings per share, and said it will recommend a final 2026 dividend in line with its policy of paying out 50% of adjusted basic EPS, subject to financial targets being met.
The company's capital allocation priority remains dividends first, debt repurchases second and share buybacks third as net debt falls further.
Separately, Nirvik Singh stepped down as a Non-Executive Director and as chair of the Nomination and Remuneration Committee on 30 September after moving into a full-time executive role leading Marketing Services across EMEA and Asia-Pacific, with fellow Non-Executive Director Alina Kessel taking over the committee chair; Christian Juhl has joined the board as a Non-Executive Director.
