Market watchers back advertising companies to recover despite rough 2025

Stock prices for advertising companies have taken a beating in 2025, with artificial intelligence threatening to change how brands create and manage their marketing campaigns. Yet some market watchers believe these firms might actually benefit from the changes ahead.

British advertising giant WPP Plc has seen its stock price drop 60% this year after losing several major clients. Other companies in the sector, including Publicis Groupe SA and Omnicom Group Inc., have also declined, though not as sharply. Investors worry that AI will soon handle much of the hands-on work that agencies currently do.

However, a growing number of analysts think these worries might be overblown. They say big brands will need agencies more than ever to help them manage advertising across an increasingly complicated media world.

Stock recommendations for Publicis and Omnicom have recently reached some of their highest levels in years.

“The industry is being disrupted, but it’s not being disintermediated — I think that’s the key,” said Mark Giarelli, an analyst at Morningstar.

New AI tools raise concerns over in-house marketing

New AI tools have gained significant ground this year. Google’s Nano Banana and OpenAI’s Sora 2 can create images and videos just from written instructions. Coca-Cola Co. ran a Christmas commercial made by AI for the second year in a row.

Tech giants are also putting pressure on the industry. Alphabet Inc. and Meta Platforms Inc. have introduced their own tools that let brands design ad campaigns without hiring outside consultants.

The biggest worry is that companies might use these automated systems to build their own marketing departments. In September, cybersecurity company Palo Alto Networks Inc. said it created an entire advertising campaign by itself without help from any outside agencies.

But Google and Meta cannot help brands figure out how to spread their advertising budgets across different platforms, according to Giarelli. This is where agencies can prove their worth, helping clients avoid spending money twice on similar audiences between Instagram Reels and Google Search, for example.

This ability comes from information about consumer behavior that agencies have collected since the 1980s, when direct mail campaigns were the main marketing tool. “Ad agencies are quite good at understanding a variety of characteristics. They know where we are, what we’re thinking to some degree, and they’re able to tailor a marketing message based on that,” Giarelli said.

The advertising world is getting more complicated at the same time. AI will likely allow companies to create personalized digital content “almost on the fly” for each individual consumer, according to Bloomberg Intelligence analyst Matthew Bloxham.

“There is going to be a strategic role for agencies,” Bloxham said. “With more complexity, you want more valued advice to help you navigate through, whether that’s the overall marketing strategy or media strategy.”

Lower costs could spark advertising arms race

Another reason to be optimistic about agencies comes from JPMorgan Chase & Co. analyst Daniel Kerven. He argues that lower costs for making ads should lead to more advertising and bigger spending from major brands. When AI makes all ads better in general, top advertisers might compete in an “arms race” to create “unforgettable experiences,” he said.

The AI debate has hurt how investors value these companies. WPP’s forward price-to-earnings multiple has dropped to an all-time low. Omnicom’s valuation sits near its lowest point since 2020, while Publicis is closer to its 10-year average.

If AI stocks rally in the broader market, it could hurt advertising agencies even more, since brokers often group them with companies expected to struggle against new technology.

Some agencies face bigger challenges than others. WPP cut its financial guidance twice this year after losing several prominent clients to competitors. The company is about to leave the FTSE 100 index for the first time in 27 years.

But mergers and acquisitions could help struggling players. Japan’s Dentsu Group Inc. is reviewing its international operations. The Times reported in November that WPP has received interest from Havas NV, though Havas later denied this.

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