Client tech company woes, tail winds from client losses and two agencies in turnaround mode drove Interpublic further into negative growth territory in the second quarter, prompting the firm to downgrade its full-year organic growth outlook to between 1% and 2%. The Q2 organic revenue decline was 1.7% while the first half was down 0.9%. 

Previous guidance had the firm generating between 2% and 4% organic growth (which strips out the impact of M&A and currency fluctuations) in 2023. 

Reacting to the news Wall Street sent IPG shares down more than 10% in Friday morning trading. 

But the company stressed that the second half of the year would improve as a handful of big new business wins start to kick in and help the company achieve 3.5% to 4% organic growth for the final two quarters of the year. The wins included a significant expansion of the company’s Pfizer account, while Initiative won  alcohol distributor Constellation Brands, UM pulled in plant-based food marketer Upfield, and Mediabrands won a major Bristol Myers assignment. Those Q2 wins followed the GEICO media win in the first quarter.  

While the category giving IPG the most trouble is technology and telecom, IPG CEO Philippe Krakowsky acknowledged that the tech portion of that cluster was where most of the problems lay. And it's primarily an issue for the U.S. region which posted a 2.5% organic decline for Q2. He didn’t identify specific firms but noted that it was a “small group of large companies.” The company’s tech clients include Microsoft and Google. 

Krakowsky explained that in recent years tech & telecom typically account for about 15% of the firm’s net revenue. In Q2 that figure dropped to 12%. He noted that the firm’s two big digital agencies (Huge and R/GA) remain in “turnaround” mode and also “over index” with clients in the tech sector. Asked when problems in the sector might abate, Krakowsky said it was hard to say but that it was likely to be an issue for IPG for most of the year. "It's more protracted than we thought," he said.

Krakowsky stressed that 8 of the firm’s 10 top categories remain healthy, but that “unrelenting macro concerns” have resulted in many clients making small cuts to budgets, “adding up to impact.” The retail category was down “modestly.” 

Headcount was down 1.2% for the first half as the firm tries to realign personnel with adjusted full-year results. As a result severance payments were higher than usual, totaling 1.7% of net revenue.  

Despite the problems and as evidenced by recent wins, media remains one of IPG’s strongest performers as does its healthcare offering. PR, which was part of the Pfizer win and experiential also contributed solid results in Q2.  

IPG’s announcement ended a week of mixed results for holding companies reporting Q2 performance as Omnicom growth slowed significantly, while Publicis leads the pack with organic growth of 7.1% for the second quarter and first half.