WPP Shares Plunge 8% as Ad Giant Warns on Profits Amid Strategic Overhaul Launch

Rattled the City WPP plc (WPP), the FTSE 100 advertising leviathan, has cannonballed the City today by giving a profit warning related to ongoing revenue headwinds, which precipitated an 8% share plunge and an en masse strategic review.

The shift, focused on simplifying the business in a digital-first world, underscores how much the ad business is susceptible to technology disruption and economic downturn.

Profit Warning Beats Shares to 612p Low

WPP’s shocking revelation showed that the company had seen its like-for-like revenue growth stagnant at 1.2 per cent in the first nine months of the year, its lowest showing in comparison to the 2.5 per cent annual growth, with clients’ spending in North America and Europe areas going down in the face of inflationary squeezes.

The underlying operating profit will turn out to 5% lower than it was previously estimated at PS2.2 billion, with the inclusion of PS150 million of one-off restructuring expenses.

The blowback was immediate: the shares of WPP (LSE: WPP) fell 8.3% to 612p – the lowest point since 2022, destroying PS1.2 billion in market value. The scale of trading increased to 15 million shares as hedge funds between Man Group and Marshall Wace hastened the rush to leave following the widening of PS3.5 billion net debt at the firm.

This turnabout brings an end to a resounding poor year of WPP, which is down 25% YTD in comparison to the FTSE and its 19% rampage. The reckoning of Adland has come, City moaned, and the forward P/E of the stock had fallen to a desperate 6x with talk of pressure on the part of the activists.

FTSE 100 Slips to 9,720 on Ad Sectors Drag

FTSE 100, which soared to 9,756 yesterday, had fallen to 9,720 this morning in spotty business, WPP’s collapse scuttling media fellows such as Informa by 2. Some little relief was provided by commodities, and both BP and Shell are flat as Brent lingers at $72, and Fed Chair Powell hawkish tilted her head yesterday to quash rate-cut expectations.

European standards were declining less: the DAX declined 0.6% on export concerns, and the CAC 40 followed. The sterling lost 0.5% to 1.29 dollars, and this further aggravated the plight of multinationals. However, defensives such as Unilever stood their ground, emphasising the two-pronged strength of FTSE.

The troubles of WPP are indicative of wider creative business shocks, including the threat of AI invasion and questioning budgets on the part of clients, unlike the pharma and engineering success stories of AstraZeneca and Rolls-Royce of the week.

The Targets of Strategic Review: Cost Reduction and AI Pivot

The board at WPP, under the leadership of the CEO Mark Read, announced the review to include portfolio pruning, which could include divestiture of non-performing units such as Grey and Burson-Marsteller, and a PS500 million faster rollout of AI tools to create content. The company targets PS300 million yearly through savings by 2027, combining staff cuts with technological investments.

Principles’ strengths remain: GroupM media buying segment expands 4 per cent on programmatic advertisement bursts, and VML creative collections remain stable at PS10 billion. International presence in 100 countries cushions local downturns, with the Asia-Pacific region surging 6% on e-commerce drives.

With a 4.5% yield, battered WPP is a contrarian buy, at 0.7x sales – its lowest in a decade. Bargain hunters are wondering what is commonly referred to as fire sale territory, where free cash flow is covering dividends at a time when tightening occurs.

Prospect: Headwinds Collide With Overhaul Hope

Looking ahead to 2026, WPP expects 3% recovery of revenue on the US election stability and ad market recovery. Advantages: Generator AI cuts production expenses by 20%. Downsides? Sensitivity models suggest that another PS200 million would be cut from profits by the protracted recession.

The target given to analysts drops to 750p, which means a recovery of 22%, and the consensus is to hold at 12 houses. Pivot or perish is the word of strategists.

Stifel Rises on Brokerage Buzz

Rival Stifel Financial (LSE: SFG) – despite being US-based – shot up 1.2% in London on the M&A advisory rumours, although WPP has a long shadow, having 7b PS7b capacity to its niche. FTSE media is a story of excesses.

Markets Mull Powell, Budget Brink

With FTSE futures wobbling at 9,700 as October 30 passes, Reeves’ budget and ECB crosshairs in view. The statement by WPP is a call to attention on the vulnerability of the ad industry, but it provoked speculation about the era of reinvention.