Arthur Sadoun on Publicis’ growth, sector woes and why neglecting talent is ‘kiss of death’

The Publicis chief executive was speaking in an annual results interview after another year when the French agency group outperformed rivals, with revenues up 5.6% and record profit margin of 18.2%. Headcount rose by 5800 to 114,000.

Sadoun expects the “momentum” from last year's new-business wins, such as Mars and its “AI-powered growth model”, to drive revenues up between 4% and 5% in 2026.

There was “not one client” where Publicis didn’t use AI as part of its winning pitch last year, according to Sadoun, who said its growth showed AI is not “a headwind”.

Publicis hits record profit margin, adds 5800 staff and hikes cash bonuses 8%

He stressed Publicis was focusing on new capabilities and contrasted that with rival Omnicom, which he claimed was consolidating legacy assets, following its IPG takeover.

However, Publicis' share price dropped about 9% on the day of the results, which analysts said was part of a widespread sell-off of tech and media stocks as investors fretted about the impact of new products from Anthropic, a major player in AI.

Tim Nollen, an analyst at US-based Sovereign Sector Research, said Publicis' results were “solid numbers, now sustained over a long period” since the pandemic. “Pundits worrying about a 'slowdown' in growth” in some parts of Publicis such as the US were “splitting hairs”, he said.

Sadoun also talked in the interview about the fallout from Omnicom’s IPG takeover and why Publicis is paying what he said was the “highest bonus pool” in the agency sector because “treating people as a commodity is a kiss of death in our industry”.

How do you rate 2025? It looks like a good year for Publicis because you hit your forecast and a bit more, but the market doesn't seem to like agency groups.

I rate 2025 as a very strong year, if not a very special year for Publicis [as it headed into its 100th anniversary year in 2026]. And the reason why I rate it so highly is particularly because of the market conditions. We are facing an [agency] industry that, on average, when we exclude Publicis, grew negative. And if everyone was reporting in net revenues, it would be dramatically negative. I invite you to look at the [expected] guidance for Q4 when it comes to our competition [they will report results in the coming weeks].

Despite this chaotic environment, we are delivering a growth for the year of 5.6%, with an acceleration in the second half, particularly in Q4 at 5.9%. We are going to generate, once again, roughly $1billion of additional revenue – again, at the moment where [on average] everyone [else] is negative – while increasing all of our financial KPIs and investing in talent, AI and new business like never before.

Add to that our ability in 2025 to have a client retention rate of 98%, an ability to have a favourable arbitrage from a client when it comes to AI [in terms of preferring Publicis over rivals], and the new business [performance] with some marquee wins like Coke, Mars, PayPal, Nespresso, and I can go on and on.

We are also able to come back again with the same strong guidance of 4% to 5% [for growth in 2026], in an environment that is getting tougher, with [year-on-year] comparables that are higher, after what has been a fantastic 2025.

In terms of 2026, you're giving the same growth guidance as a year ago. You talk about new business “tailwinds”. So how much is this forecast actually down to new-business wins from last year coming on stream, like Mars, versus organic growth in 2026?

The first reason why we are growing is that we lose less clients than our competition. We should never forget that the retention rate and growing your own [existing] clients is the biggest contributor to growth. If you take [new business in] 2025, it’s 300 basis points [or about 3%] out of 5.6% [of our growth].

When you look at 2026, we anticipate new business to be roughly 200 basis points [out of the forecast of 4% to 5% growth]. Why? Because some of the pitches that we won in 2025 started to hit [in terms of revenue] in 2025 and others did not [as they only come on-stream in 2026]. And we anticipate client growth to be between 200 to 300 basis points [that will make up the remainder].

What’s going on beyond Publicis’ top line net revenue growth? Your pass-through costs [for non-billable costs, which are passed on directly to the client] have gone up by 38% or about €850m. Why are they going up so much faster than net revenue?

As you know, we report in net, so pass-through costs are not in our growth. That's a very important point. If we were to start to report – as Omnicom does – in gross [when pass-through costs are included], our growth would be way higher.

What I can tell you, which I think is encouraging for the entire industry as we are first to publish [annual results], is that we have seen very strong activity from our clients in Q4. We have been seeing clients spending more on different things – in events, in production and in many areas, more than we expected [which contributed to pass-through costs].

Connected Media, which includes Publicis Media and data unit Epsilon, is 60% of your net revenues and has been growing by a high single-digit percentage, so it would seem a possibility that principal media [when an agency buys inventory and creates media products that it can sell to a client at a profit] or another part of the media division could be driving a lot of these pass-through costs.

Absolutely not. Principal media doesn’t represent more than 1% [of total net revenues]. More importantly, we report in net. We are not reporting in gross [when it comes to the performance of the media division].

The reason why we are growing so fast in Connected Media is threefold: first, huge client retention rates – 98%. Second, our ability to grow through new media services with our clients, like influencer, that is growing triple digits or commerce that is growing 20%. And, third, new clients that have been won either in 2024 or early in 2025.

You hit out at Omnicom last year over what you called its “apples and oranges” approach on revenue [because it reports gross, not net]. You said you might need to move from net to gross revenues, effectively reporting organic growth, including pass-through costs going forward [in order to have a like-for-like comparison]. Omnicom has given no indication that it’s going to switch to disclosing net. So are you going to switch to gross?

We've been very clear. Omnicom is the only player in the industry that is reporting in gross. When they were a distant third [behind Publicis and WPP], it was not a problem. Now that they are number one [in terms of gross revenues], they have a duty to bring more transparency to their numbers, particularly at the moment where investors have already decided that, in terms of market cap, there are two players [Publicis and Omnicom] representing 80% of the market. Because that's a reality when you look at our industry today [WPP, Dentsu and Havas represent only 20% of the big five alongside Publicis and Omnicom].

If they [Omnicom] were to ignore the norm and stay in gross, we will have no alternative and [Publicis would] definitely move to gross. We will do that with time, step by step, transparently, comparing one [net] to another [gross]. But I am hopeful they [Omnicom] are going to change.

In your investor presentation, you talk about how Publicis’ model now offers “agentic business transformation”. Are there clients that are already using this model and is it generating meaningful revenue?

The reason we are growing 5.6% is this [AI-powered growth model]. The reason why we are winning clients, the reason why we are retaining clients, and the reason why we are growing clients is because we have the capabilities, we have the model, and even, more importantly, the people to truly deliver agentic business transformation... [It’s] not [about creating] a new shiny toy, with a UX done with AI, that looks like it’s changing the world [for a client] while not actually changing their model and delivering business outcomes.

Can you name any clients?

There is not one client that we have won last year that was not fitting into this model.

Publicis talks about wanting to be the “most valuable partner” for clients. But surely every agency group wants to be the MVP?

No, not at all. First, Omnicom wants to be the largest – the new Omnicom is the old WPP, with a gap [in terms of size versus Publicis] that is smaller than at the time I took my job [as CEO in 2017] when WPP was leading [by size]. We don’t believe being the largest is what matters. What we believe is what matters is to be the MVP, meaning to truly bring new capabilities to clients, to make sure that they can grow instead of consolidating more of the same for the sake of efficiencies.

Two, [being MVP means] taking great care of our people, because it's a kiss of death to consider them as a commodity. We do [that] by investing in training and investing in new tools. We have hired 5000 people at a rate that is roughly a bit less than 5%, so lower than our growth rate, but still important [plus around 675 staff joined through acquisitions, which increased total headcount by 5800 to 114,000].

We have increased salaries on average by 7%. We have increased our [cash] bonus pool by 8% and, again, we believe that this is a key differentiator at Publicis and something we’re very proud of.

Last but not least, we want to be the MVP for our shareholders. That’s very simple – we are prioritising transformative growth versus legacy asset consolidation. This is a very different strategy [from some rivals]. I'm not saying that one is better than another – please take note of that – but this is our strategy.

We are looking for new capabilities. We are looking to hire and retain the best talent and train them. We are looking at an end-to-end model that is truly connected, in order to make sure that by growing our clients, we grow ourselves. And by growing ourselves, we actually grow every financial KPI, which is again a very different strategy from acquiring more assets in what is a legacy business.

On the 7% average salary rise, you previously said you gave a similar increase in 2024. When Campaign reported it last year, some other industry people expressed some doubts privately about a 7% increase when they tried to crunch your own numbers about personnel costs.

This is a number that we are giving to the financial community. So we can just call our auditor and they will give you the number [as proof].

The 7% is impressive. But what is really impressive is the size of the bonus pool compared to others [which is about €550m (£474m), up slightly on a year earlier]. Despite all the difficulties of the market, we are not only keeping but increasing what is by far the highest bonus pool of the industry [the cash bonus element is up 8.3%, although the stock element is down].

This talent thing is very important. Treating people as a commodity is a kiss of death in our industry.

Are you seeing any change in client behaviour since the Omnicom takeover of IPG, which closed at the end of November? In your Q3 results in October, you said that you had already seen a bit of a shift from four to three main players.

The only thing that really changed dramatically is that the competitive landscape has been reduced to three players – that's the reality. Actually clients did not wait for the deal to be closed to actually anticipate that. And this is something that is changing the paradigm pretty significantly.

What did you make of the scale of the Omnicom restructure that was announced at the start of December? There were a lot of layoffs. Previously when Elon Musk bought Twitter, he showed that the business could operate with significantly fewer people. Were you surprised by the scale of the headcount reduction that Omnicom has made? Has it made you think about whether you could do things with fewer people through technology or, just simply, simplification?

First of all, I will never insist enough, we should not consider people as a commodity in a service business. Second, we started to use AI to optimise our cost structure and the way people work in 2017. There is a reason why today, we have not only the best growth, but also the best margin. Because making sure that we have better productivity, better people, better paid, is something that we have done in the last 10 to 15 years already, and we are there.

I don't know any of the detail [in terms of the Omnicom restructure], so the last thing I will do is comment on what they did.

If we look back on a year ago, Publicis has continued to grow quite well, but much of the rest of the sector has struggled. Enders Analysis, which is based in the UK, has just come out with a report this week about the ad industry and it talks about 2026 being “a make or break year” for agencies. You’ve addressed this before, but the stock prices of Publicis and other groups suggest investors don't have faith in the sector. So what's going to happen? Enders suggests WPP does not have a lot of time and that Dentsu seemingly being unable to sell its international business makes a WPP break-up more likely.

I can't anticipate what will happen in the agency sector. Investors have already voted [in terms of stock price valuations] – there are two players representing 80% of the market cap.

When it comes to Publicis, I think that quarter after quarter we have demonstrated that we have extracted ourselves from the pack by delivering roughly every year, an additional €1bn of revenue and increasing all of our financial KPIs that are already the best of the industry, and being number one in new business.

The truth is we are not looking really at what is happening in our industry, but how do we position ourselves versus the walled gardens, versus the hyperscalers, versus other martech companies? And how can we continue to be this kind of connective tissue that lives among [companies with] market caps that are way bigger than ours but need companies like ours to help our clients navigate this landscape.

By the way, I think the latest announcement by Open AI that they are going to use advertising [by offering it to advertisers for the first time] is a good example of why you need [independent] companies like Publicis, [which are] very strong on data, [can] profoundly transform through technology, with best capabilities in media and creative [to advise clients].

At Microsoft's recent earnings, it said Publicis bought 95,000 seats for its AI tool, Microsoft Copilot, for your staff. What are you expecting from getting close to 90% of your employees using it?

At a moment when our peers and the press were mocking Publicis in 2017, because we were saying that AI will be a big part of advertising’s future, one of the very few people that thought it was serious was Satya Nadella [the CEO of Microsoft].

Sataya Nadella created [internal Publicis platform] Marcel with me at the time. Since then, we have never stopped… We believe that adding Copilot to our Marcel platform will make sure that every one of our people can really progress by using AI. It is a priority for us but, unlike some others, we don't make a big noise about that, because it's really about making sure we do what is right for our people, not for the PR.

Source: Campaign UK