Ad Agency Stocks Seen Turning AI Disruption to Their Advantage
(Bloomberg) — One of the major stock market themes of 2025 has been a decline in stocks that have been deprived of advances in artificial intelligence, especially in advertising agencies.
While British WPP Plc, struggling with contractual disruptions, lost 60 percent of its value this year, Publicis Groupe SA and Omnicom Group Inc. Rivals such as have suffered less declines due to broader fears that artificial intelligence will replace much of the manual work behind advertising.
However, a trend is developing among analysts that these companies can turn this disruption to their advantage. Bulls argues that big brands will become even more reliant on agencies to navigate an increasingly complex, multi-platform media landscape. This is reflected in suggestions that Publicis and Omnicom are near their best levels in recent years.
“The industry is being disrupted, but it’s not about eliminating middlemen; I think that’s the key,” said Morningstar analyst Mark Giarelli.
This year we’ve seen the acceleration of Google’s Nano Banana and OpenAI’s Sora 2, which create images and video from text commands. For the second year in a row, Coca-Cola Co. has released a Christmas ad created by artificial intelligence.
Alphabet Inc. There’s also pressure coming from Big Tech, with the company and Meta Platforms Inc. rolling out tools to help brands design ad campaigns on their own rather than relying on third-party consultants.
The main concern is that companies may choose to use these automated tools to create in-house marketing teams. In September, for example, cybersecurity firm Palo Alto Networks Inc. said it developed an entire advertising campaign on its own, without relying on outside agencies.
‘They know where we are’
But what Google or Meta can’t do is help brands allocate ad budgets across channels, Morningstar’s Giarelli said. That’s where ad agencies can add value, he said, because they can help clients avoid recurring spend between, say, Instagram Reels and Google Search.
This capability is based on consumer behavior data dating back to the 1980s, when direct mail campaigns dominated. “Advertising agencies are pretty good at understanding various aspects. They know to some extent where we are, what we’re thinking, and can craft a marketing message based on that,” Giarelli said.
All of this is happening at a time when the advertising landscape is becoming more complex and AI will likely enable the “almost instantaneous” creation of personalized digital content for each consumer, according to Bloomberg Intelligence analyst Matthew Bloxham.
“There will be a strategic role for agencies,” Bloxham said. “As you get more complex, you need more valuable advice to help you move forward, whether it’s overall marketing strategy or media strategy.”
JPMorgan Chase & Co. Another argument in support of advertising agencies is that lower production costs should allow the biggest brands to advertise more and invest more, according to analyst Daniel Kerven. As AI raises the bar for ad quality overall, he said it could encourage top advertisers to enter an “arms race” to create “unforgettable experiences.”
The debate around artificial intelligence has weighed on the sector’s valuations. WPP’s forward price-earnings multiple has fallen to a record low. Omnicom’s valuation is near the lowest since 2020, while Publicis’ valuation is near the 10-year average.
Any AI-driven rally in the broader market poses risks to the sector; because these names are grouped in brokers’ thematic baskets, which also include companies that appear to be uncomfortable with technology.
Some institutions may be under more pressure than others. WPP, for example, has cut guidance twice this year as it lost a number of high-profile clients to rivals. It will exit the FTSE 100 for the first time in 27 years.
Still, the agreements may offer a glimmer of hope for those left behind. Japan’s Dentsu Group Inc. is reviewing its overseas arm. The Times reported in November that WPP had received interest from Havas NV, but Havas later denied this.
Wedbush Securities analyst Joel Kulina said advertising agencies are poised for consolidation because they are locked in a “fight to survive in a digital-led world.”
–With help from Neil Campling.
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