Investors wary, but ad agencies confident in AI's promise

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Investors remain cautious on advertising agencies as concerns about artificial intelligence disruption and economic uncertainty linger, but industry executives are increasingly confident AI will strengthen rather than weaken the sector, according to Berenberg.

Following meetings with clients after starting coverage of Publicis PUBP.PA, WPP WPP.L and Havas HAVAS.AS in June, the German bank found concerns about AI's long-term impact on agency business models persist.

However, feedback from last month's Cannes Lions International Festival of Creativity, a leading annual event for the advertising industry, painted a more optimistic picture.

The debate around AI has evolved, with agencies now increasingly focusing on how the technology can improve productivity and client outcomes rather than replace staff.

"Last year's 'AI replaces people' fear has shifted to 'AI as-an-instrument'," said Berenberg analysts Anna Patrice and Davide Amorim.

The analysts said agency employees are finding that AI makes them more efficient and frees them to focus on higher-value work. Industry experts also stressed that the growing complexity of global advertising campaigns continues to favour large agency networks over smaller rivals.

"As such, we reiterate our positive view on the sector," concluded Berenberg.