Publicis Groupe S.A. (PUB) Earnings Call Transcript & Summary

Good morning. This is the conference operator. Welcome, and thank you for joining the Publicis Group First Half 2026 Earnings Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Arthur Sadoun, Chairman and CEO of Publicis Group. Please go ahead, sir.

Thank you, Judith, Borgo, and welcome to Publicis Group First Half 2026 Earnings Call. I am Arthur Sadoun, and I'm here in Paris is our CFO, Loris Nold. Jean-Michel Bonamy is also here and will be available to take all of your questions off-line after this call. I will start this presentation by sharing the main highlights of our Q2 and H1 performance showing an acceleration on all fronts. Louis will then walk you through the full details of our numbers. And I will come back with outlook and the reason for our confidence in raising our guidance and sustaining our strong momentum in H2 and beyond. As usual, we will take all of your questions together after the presentation. But before we start, please take the time to read the disclaimer, which is an important legal matter. Let's dive into the presentation with actually 4 key highlights. In a nutshell, in the first half of the year, we have been accelerating on all fronts. First, on net organic growth, with Q2 at plus 4.8% despite a tougher comparable and a still challenging macro environment. Second, on new business with a very strong first part of the year, which allow us to raise our guidance. Third, on our financial KPIs starting with our headline margin increasing to 17.5% while investing further on our talent in AI and in ramping up our new business wins. Fourth, on our differentiation and addressable market expansion through strategic acquisitions, leveraging the strength of our balance sheet. Let's start with the details of our top line performance. In Q2, we once again reaffirmed our ability to deliver even in challenging macroeconomic conditions. Organic growth came in at plus 4.8% in on a net revenue basis. As expected, this represents a sequential acceleration versus our Q1 at plus 4.5% and and despite a 100 basis point higher comparable base in an increasingly uncertain geopolitical context. This acceleration was driven by our marketing transformation activities, representing 87% of our net revenue, where we continue to capture a disproportionate share of our client demand for AI-powered services and products. They grew at plus 6.5% organically in Q2 compared to plus 5.6% in Q1, ahead of our 6-year CAGR at plus 5.3%. This contributed to further widening the gap with our peers to 610 basis points in Q2 according to consensus. In detail, Connecting Media, representing 62% of our net revenue, delivered a very strong performance again this quarter. at high single-digit growth accelerating versus Q1. This performance was driven by double-digit growth in Europe and high single-digit growth in the U.S. It reflects our continued ability to accelerate market share gains, thanks to our scaled AI-powered media offering. Intelligent creativity, which is 25% of net revenue posted solid low single-digit growth in line with the expected long-term growth profile of the segment. The only part of our business that was seriously impacted by the macroeconomic uncertainty and particularly the Middle East conflict is technology, as experienced by other IT consulting firm, including the market leader. We continue to see delays in large transformation programs, of course, in the Gulf but with a direct effect on many other geographies and companies. This led to mid-single-digit decline in Publicis Sapient representing 13% of group net revenue. I will make just 2 remarks on Sapien performance. First, comparing Q2 with Q1 I would highlight that Sapien faced a significant offer comp in Q2 of 600 basis points versus Q1. And therefore, we saw a sequential stabilization in terms of net revenue. Second, our ability to accelerate in Q2 and raise our guidance at group level despite those macroeconomic challenges, makes our performance and resilience even more remarkable. Turning to our geographies. We had another strong demonstration of the consistency and resilience of our country model globally. In particular, our 2 largest regions, totaling 86% of our net revenue, both grew organically at 5% or above. The U.S. was up 5.5%, accelerating versus Q1, driven by high single-digit growth in Connected Media with major wins from last year ramping up. Europe, delivered a very strong plus 5% growth broad-based across markets, accelerating strongly versus Q1 despite a much higher comp of close to 200 basis points. Asia Pac recorded a plus 2.6% growth with strong performance in Greater China at plus 7.5%, while we experienced localized softness in Southeast Asia. LatAm continues its excellent trajectory at plus 11%. EMEA was done minus 8.3%, as expected, directly impacted by geopolitical tension in the region. Moving to our second highlights. Our very strong new business performance in the last months make us confident in delivering the same momentum in H2 as in H1. In the last 18 months, we have seen a dramatic reduction of the competitive landscape due particularly to consolidation. After a very strong finish to 2025 we have had a couple of very sizable wins in the first half of the year with a real material financial impact that will start to progressively ramp up through the back end of the year, but also some local wins with more immediate impact on our numbers. That makes us very confident in raising our guidance range from 4% to 5% to 4.5% to 5%. Third, we accelerated on all our financial KPIs. We improved our H1 headline operating margin again this year to 17.5%. We were able to unlock 50 basis points of margin improvement as we continue to extract operating leverage, allowing us to reinvest more than 30 basis points in our new business, AI plan and our talent pool upgrade and deliver the remaining 17 basis points in margin increase. Headline EPS came at EUR 3.52 in H1 2026, up 5.7% at constant currencies. -- and headline free cash flow reached EUR 957 million in H1, up 20.8% at constant currency. Getting to our fourth and final highlights. In H1, we are accelerating on our differentiation with 2 important strategic acquisitions. We finalized the acquisition of 160 over 90 in sport marketing by putting Epsilon data at this core and connecting it to our end-to-end media ecosystem, we will be uniquely positioned to make sports the fastest-growing media segment of our industry, addressable and measurable at scale. And we announced the acquisition of LiveRamp in May, which, once closed, will enable us to enter a totally new addressable market, data cocreation. With Rivera as part of our strong interconnected ecosystem of Publicis Sapient, Epsilon and Marcell, we will go even further and faster in delivering agentic transformation for our clients safely and transparently in their own environment. Thanks to their successful integration into our power of and model and their ability to open up new addressable markets. Get our bolt-on acquisitions over the last 2 years have delever close to 20% annual organic growth on a stand-alone basis. EPS growth acceleration at group level and a strong contribution to our new business wins. Our ability to continue expanding our capabilities and addressable market has been made possible, thanks to the strength of our balance sheet. Actually, there is 1 last highlights for H1. -- after the -- can Lions name Publicis can say, Agency of the Year for the past 2 years, and their client AXA as Brand of the Year in 2025. The festival has now recognized LopaMiller as its 2026 Agency of the Year. It's an incredible accomplishment that is only made better by the fact that Heineken, our global client since 2014 has been named creative brand of the year. This latest achievement from Lean Mulan is everything we love at Publicis, breakthrough work for iconic brands that demonstrate the power of creative ideas to transform our client businesses. I will now hand over to Loris to take you through the Q2 and H1 financials in detail before I return with our outlook and strategic update.

Thank you, Arthur, and good morning, everyone. Let me begin with the key highlights of our H1 2026 results. Revenue was EUR 8. 734 billion, up 3% versus 2025, and and up 5.3% on an organic basis. Net revenue was EUR 7. 229 billion, up 1.1% versus 2025 and and up 4.7% on an organic basis. Operating margin was EUR 1.261 billion, up 1.5% versus 2025 and and up 7.4% at constant currency, while the operating margin rate reached 17.4%. When excluding the LiveRamp transaction costs, headline operating margin was EUR 1.268 billion, with a record headline operating margin rate of 17.5%, up 17 basis points versus 2025. Headline net income was EUR 885 million, down 0.5% on a reported basis, but up 5.3% at constant currency. Last, free cash flow before change in working capital was EUR 950 million. When excluding the LiveRamp transaction costs, headline free cash flow was up 20.8% at constant currency. I will now get into the details of the P&L, free cash flow and balance sheet, starting with Q2 revenue and net revenue. Q2 revenue was EUR 4.743 billion, up 4.2% on an organic basis. Net revenue was EUR 3 billion and EUR 769 million. Organic growth was plus 4.8%, which comes on top of plus 5.9% in Q2 2025. I -- there was a negative impact of currency of 170 basis points due to the depreciation of the U.S. dollar, the pound sterling and several LatAm and APAC currencies versus the euro. And acquisitions, net of disposals contributed a positive 110 basis points, reflecting the impact of our 2025 and 2026 acquisitions namely captivate, P-value, hetmell, GI and 160over90. When factoring in those items, net revenue was up 4.2% on a reported basis. . Let's move to the next slide and our Q2 net revenue by region. North America was up 5.4% on an organic basis on top of plus 5.8% in Q2 2025. There was a negative impact of the U.S. dollar versus euro, partly offset by the contribution from acquisitions and reported revenue was up 4.4% in Q2. Europe delivered plus 5% in organic growth. There was a negative impact of the pound sterling versus euro leading to reported growth of plus 4.2% for the region. Asia Pacific posted plus 2.6% organic growth. There too, there was a negative impact of currency depreciation versus euro offset by the contribution from acquisitions, leading to a reported growth of plus 2.8% in Q2. Latin America continued to perform very strongly and reported plus 11% organic growth. When adding the negative impact of currencies and the contribution of acquisitions, reported growth was at plus 13.5%. And finally, Middle East and Africa was impacted by the geopolitical situation, leading to an organic decline of minus 8.3%. Let's get into more details for each region, starting with North America. In the U.S., the group's largest geography which represents 58% of our net revenues, organic growth was plus 5.5% after plus 5.3% in Q2 last year. Connected Media was up high single digits and intelligent creativity was up mid-single digits, benefiting from new business wins and scope expansions. Technology was down mid-single digit in Q2. Let's now turn to the performance in Europe on the next slide. The U.K., which represents 9% of our net revenue posted a plus 2.8% organic growth. When excluding technology, organic growth was plus 8.1% and driven by very strong growth in Connected Media. Technology was down as public Sapiens in U.K. is servicing some clients based in the Middle East. France, which represents 5% of our net revenue was close to flat. Lastly, our operations in Central and Eastern Europe were up double digit driven by strong growth in all segments with Poland, Romania and Czech Republic performing very well. Turning to the next slide for our performance in the rest of the world. Asia Pacific, which represents 9% of our net revenues, was up 2.6% organically. China continues to be very solid at plus 7.5% organic growth in Q2 partly mitigated by a softer performance in Southeast Asia, largely due to the impact of the Middle East conflict. Latin America posted a plus 11% organic growth in Q2, driven by double-digit growth in Connected Media and Intelligent creativity, in particular, in Brazil, Mexico and Colombia. As mentioned earlier, Middle East and Africa posted 8.3% organic decline in Q2 with UAE and Lebanon being the most impacted countries as expected. In Q2, we estimated that the conflict in the Middle East had a negative impact of 30 basis points on our net organic growth. For your reference, you'll find on the next slide, our H1 2026 performance by region. As you can see, all regions posted a strong organic performance, leading to plus 4.7% in total for the group, on top of plus 5.4% in H1 2025. Last, net revenue was up 1.1% on a reported basis. Moving to the next slide and our simplified P&L down to the operating margin. Personnel expenses, excluding restructuring charges, were down 0.6% year-on-year, generating 110 basis points in margin improvement. Restructuring charges increased by 21% due to the continued investment in talent upgrades with a 17 basis point impact on margin. Other operating expenses to the next slide and our simplified P&L down to the operating margin. Excluding the Live rent acquisition costs, were up 7.1% and representing 70 basis points of incremental costs as a percentage of net revenue. Depreciation was up 2.7%, mainly due to increased IT investments. Headline operating margin was EUR 1.268 billion, up 2.1% versus last year. At constant currency, the increase was plus 7.4%. Headline operating margin rate was 17.5%, up 17 basis points against the record level of 2025. When including the LiveRamp transaction costs, Operating margin was EUR 1.261 billion. . Moving to our next slide and our operating margin bridge. -- our headline margin was up by 17 basis points, which includes, first, an improvement of 110 basis points of personnel costs, excluding restructuring charges, driven by 3 main factors: some scalability benefits on our 2025 recruitments, combined with some early impact from our densification initiatives on task optimization, some rebalancing between our people costs and G&A when it comes to our AI investments as we rolled out our AI productivity tools to our talent. Some adjustments, including at Publicis Sapient and our continued cost management discipline, notably when it comes to recruitment in H1. And second, this improvement was mitigated by 2 factors: a 17 basis points increase in our restructuring charge as we continue to upgrade our talent pool and a 76 basis points increase in our other costs, reflecting, in part, higher spending on AI products and tools and some additional depreciation linked to our IT investments. Moving now to our headline income statement below operating margin and focusing on the main items. Headline net financial expenses were a charge of EUR 62 million versus EUR 44 million in 2025, mostly attributable to lower interest income for our U.S. dollar cash balance. Headline net income tax was EUR 312 million with an effective tax rate of 25.9%. We -- the increase versus 2025 is due to positive nonrecurring impact of some tax audits in 2025 and lower deductible LTP expenses in 2026. Headline net income was EUR 885 million, down 0.5% versus 2025. Again, the increase was 5.3% at constant currency. Next slide, our headline EPS fully diluted grew by 5.7% at constant currency to reach EUR 3.52. On a reported basis, it grew at plus 0.3%. Moving to the next slide, free cash flow. Our free cash flow before change in working capital reached EUR 950 million up 14.7% versus 2025 and up 19.9% at constant currency. Headline free cash flow before change in working capital was up 20.8% at constant currency. Increase in EBITDA of EUR 26 million contributed to the year-on-year growth. There was also a tailwind in tax paid, mostly resulting from nonrecurring payments in 2025 and some benefits following the change in tax regulation in the U.S. in H2 2025. This was partly mitigated by higher financial interest charge resulting from lower cash balances in U.S. dollars. Moving to the next slide, use of cash. in H1 2026, Change in working capital represented an outflow of EUR 2.089 billion, fully in line with our expectations and reflecting the usual seasonality. The year-on-year deterioration of EUR 344 million in H1 cash outflow is largely explained by the reversal of the EUR 234 million positive effect recorded at year-end 2025. Acquisitions, including paid earnout, amounted to EUR 672 million. It includes the upfront cash payments for AI and 1600 and the payment of earn-outs related to influence. On share buybacks, we spent EUR 181 million in H1 2026 to cover our LT plans. Other known in cash items represented a positive EUR 235 million versus a negative EUR 274 million in H1 2025. I -- there are 2 main reasons for the EUR 509 million swing. 2025 was impacted by currency translation deterioration with the depreciation of currencies versus the euro. Change in earn-outs improved by EUR 214 million versus H1 2025 as H1 2026 included the elimination of the earn-out debt related to influential -- when you consider payment for acquisitions and new earnouts, we invested EUR 517 million in H1 2026. Overall, net cash decreased by EUR 1.763 billion in. Moving to my last slide, net financial debt. The average net debt on the last 12 months was EUR 1.11 billion, representing an increase of EUR 295 million compared to last year due to the acquisitions completed over the last 12 months. We closed H1 2026 with a net debt of EUR 1.25 billion. And the financial leverage remained roughly stable at 1 time as expected. This concludes my financial presentation, and I now give the floor back to you, Arthur.

Thank you, Loris. As you just saw, in Q2, we have been accelerating on all fronts, organic growth, new business, financial KPIs and the differentiation of our model. This makes us very confident in sustaining our strong momentum for the rest of the year and raising our guidance despite persistent macroeconomic uncertainties -- we now expect an organic growth range of plus 4.5% to 5%, which represents an acceleration in H2 versus H1 when adjusted for the 40 basis points of comparable -- we are confirming our guidance on an operating margin rate slightly above 18.2% in 2026. And we now expect our free cash flow to reach circa EUR 2.2 billion, up from circa EUR 2.1 billion previously. There are actually 3 major reasons that make us confident in sustaining our momentum in this challenging time both for the end of the year and as we enter 2027. First, we continue to win market share, thanks to our differentiated model. To cut the long story short, not only are we winning more than our competition, but we are also losing less. As evidenced in our guidance upgrade, we have sustained our very strong new business track record in the first part of the year. with several large wins, some that were made public and some that were not. As you know, we don't disclose our new business wins as we are not chasing for headlines. But just to give you an idea, the 6 major wins of the last 6 months alone will secure close to 200 basis points of growth on a full year basis when they fully ramp up. But what I believe is more remarkable is that being at the heart of our client transformation allow us to have a very high retention rate of close to 100%. In fact, we haven't had any losses in the last 12 months that could materially impact in the next 12 months. Second reason for our confidence is that we are growing with our clients, thanks to AI AI has, first and foremost, been a structural tailwind for us for several years now. Since the rise of January 3 years ago, we have actually grown by circa 20% allowing us to continue increasing the gap with our peers. Actually, over the last 3 years, we have grown 4x faster than our competition on average. AI allows us to connect our unmatched capabilities in data media production and technology and meet client investments to business outcomes. It has contributed significantly in accelerating the performance of our marketing activities, which represent 87% of our revenue. This was visible once again when those capability grew organically by 6.5% versus 5.6% in Q1. Those of you who came to our presentation in can hear directly from 2 of our largest clients that we won in the last year, how we are able, thanks to AI data and technology to transform their marketing model and deliver high growth at a lower cost in a unique way. This is the main reason why we are growing our client base by 200 to 300 basis points every year. AI also continued to be a productivity boost with significant gains from automation and task optimization. Actually, since the launch of our AI platform, Marcellin 2017, we have almost doubled our EBITDA and our margin has increased by 270 basis points over the last 8 years. Last but not least, the third reason for our confidence is our continued investment in talent and capabilities. Our strategy in the last 18 months has been the polar opposite of our competitors. Not only have we been acquiring new capabilities from commerce to influencers and now sports and data corporation, but we have also been investing in talent. -- by recruiting and retaining the best profiles, training everyone for this new world and reinventing how our team operates with AI tools. This is highly valued by our clients who are looking for partners who can invest on their behalf, in the capabilities they need to win and the people who can get them there. From that perspective, our strong financial structure is clearly a competitive advantage. -- as it positions us as a trusted partner of our clients all along their transformation journey. Our only focus will remain execution as we deleverage our balance sheet over the next 18 months. Well, as you have seen in H1, not only have we demonstrated once again the consistency and the reliability of our business performance, but we have actually accelerated on every front. This allows us to upgrade our organic growth guidance and improve every financial KPI for the rest of the year despite ongoing macroeconomic difficulties. Our net new business the growth we deliver with our clients, thanks to AI and our continued investment in our talent and capabilities make us confident in maintaining our momentum beyond 2026, and in reaffirming our '27 and '28 objectives of delivering at least 7% to 8% net revenue growth on average and 8% to 10% annual headline EPS growth at constant currencies. Let me finish by thanking our team for their incredible work and our clients for their trust. Thank you all for listening. And now with Loris, who will take all of your questions.

[Operator Instructions] The first question is from Adam Berlin at Goldman Sachs.

3 questions, if I could. The first question is around 2027 organic growth. We've obviously got good trends in media and creative. -- uncertainty about what's going to happen with Sapient. But is it -- is there any reason why we wouldn't see this momentum in media and creative continuing into 2027 as we put together forecast for next year? That's the first question. The second question is, we had a short cease fire in the Middle East for a few weeks. Can you just talk about what you saw in terms of demand for services. Did they kind of quickly bounce back and then get subdued again when the spire stopped? Or was it not really much changed during that brief period just to get a sense of what might happen when hopefully, the war finally ends. And then the third question is for Loris, you talked a little about 7% growth in underlying operating -- other operating costs, and you mentioned AI. Is that essentially tokens are we seeing kind of the higher cost of tokens come into your business? Is that something we should expect to continue? Do you have a plan to kind of manage those costs as you continue to use AI more in your client work? Any thoughts on how that might develop would be very helpful.

Thank you, Adam. I'm going to take 1 and 2, and I guess I will leave you 3. Look, it's a bit early to talk about '27, I guess. What I can tell you is a couple of things is you have seen over the year, the strength of our media and creative business -- by the way, not only in winning new business but in increasing our revenue with existing clients and not losing big clients. So far, I'm touching wood because it could happen any time. But again, when we look at '27, it's definitely too early to give you an indication, but there is a good sign of confidence. The first is the new business we have won recently allow us today to be very confident that we will deliver again 200 basis points next year. The second that for me is the most important 1 because it's the 1 that could keep me awake from sleeping is we haven't lost any big clients in the last 6 months that could have an impact at least for the beginning of next year. So that means that we are answering '27 with a good dynamic. And maybe the most important 1 them for next year and in general is -- we have a conjunction at Publicis of 2 incredibly strong factor that again makes us very confident for the future, and this is why we are reiterating our guidance for '27 and '28 is that on 1 side, you have seen a drastic reduction of the competitive landscape. I mean, five years ago, we had the double of player at global level that we have today. And let's be clear, it doesn't mean that the smaller players are not tenders locally. But when it comes to big marquee company with huge spend, I will, let's say, above EUR 800 million. the competitive landscape has been reduced from 4 to 3 players. So that is helping us. And what is on the top of that is that not only the competitive landscape is reducing but on the other hand, our addressable market is just increasing. This is why we have insisted on the 20% growth of our bolt-on acquisition. We are -- thanks to our balance sheet and the strength of our balance sheet investing in new sector that will allow us to grow. So again, don't expect any number from us, but expect already us outperforming the industry again in 2027. It's a bit early to say, but we feel confident about that when you look at new business and addressable market and entering into H1 2027 with a lot of confidence. The Middle East question is a very big question. So the impact of the Middle East as a business is basically not really material because it's 3% of our revenue. Yes, it has been declining. -- but nothing significant that would change anything a bit on the margin, by the way. And I think it's interesting to see that not only we are accelerating, but but sustaining our momentum despite these kind of things that are having an impact. Now your question is more interesting on the fact that the Middle East is having not an impact on the demand and the service. I think that, again, if I take a step back, you need to look at those challenging times that our clients are having a very different attitude when it comes to OpEx and CapEx investments. So on the 1 hand, they know that if they cut their marketing spend, they will lose market share. That actually will be very difficult to win back. They have experienced that many times. So they are very aware -- and honestly, this is why despite the conflict in the Middle East, we continue to capture a disproportionate share of our client demand when it comes to AI power marketing services and products. I mean, again, it's 87% of our business, and it has been growing in Q2 by 6.5%. And we are seeing, thanks to that, every effort we have made, how we have implemented AI allowing us to increase the gap by more than 600 basis points based on consensus with our peers. Where there is a difficulty is that on the other hand, the lack of visibility that is due to these geopolitical events are actually now coming back on the top -- and it's true that it led all of our clients in the IT services to delay further their large discretionary expenditure that are more about CapEx in this case. And this wait-and-see attitude LSE has been very well drafted by the competitors of Sapient and particularly the leader. So I won't insist on that. But again, when you compare like-for-like, the kind of slowdown in CapEx investment is also our case with Sapiens. Again, I'm going to insist a lot on that, and I'm sure there will be a question about Sapet later, but -- what is very important for us, and hopefully, you see this in our performance is that despite this challenging environment will be the Middle East will it be what is happening in the IT sector, we are able to raise our guidance. And actually, we are expecting an acceleration in H2 versus H1 on an underlying basis. And this is thanks to the strength of our overall model. I'm going to stop here. I'm sure there will be a question on Sapient, so we'll come back. But Loris, I will pass on you. .

Sure. Adam. So when you're looking at AI run costs, I would make 3 or 4 comments -- the first is those are typically for licenses and usage. And as such, they are very much a normal operating cost. The second is we have good visibility on real-time consumption including at the user level, and we track them on a daily basis with limits and alerts that we put in place to monitor and control the usage -- the third point is, as you saw from H1, there is definitely a rebalancing between the people cost and tech cost, and we've said that before. But we're expecting it to stabilize now. What we are observing, if anything, is that the productivity benefits that those tools can generate do offset the cost, and it's been clearly evidenced in our margin improvement. So if anything, it's been having a positive impact on our margin, and we anticipate this to continue. .

Yes. We can't go in the detail of what we are doing there, but it's incredible to see how wearable not only to accelerate on our top line, but accelerate on our bottom line, all of this while investing massively into our future. .

The next question is from Adrien de Saint Hilaire , Bank of America.

Thank you very much. I've got a few, please. Art, on the 6 accounts you mentioned, are these new clients? Or is that scope of work expansion with existing ones? Secondly, on your Connected Media performance, in particular, in the U.S. Is that a function of clients increasing their marketing budgets? Or is that more a function of Publicis increasing its wallet share, let's say, with those clients? And then lastly, on, I'm just trying to reconcile your comments you made recently about the fact that clients are willing to pay more for people than technology. And then at the same time, we see that, indeed, you're spending more on technology than on people perhaps in the first half, I mean, in terms of percentage growth in absolute terms. If we could just reconcile those comments. .

Yes. I'm going to go the other way and I'm going to stop by the third. To be clear, and this is a discussion we had is that we believe that we need to have the right balance between people and technology. I like -- and I know it's a bit provocative in the AI world, but I'd like to say that we are still a service business. We are a service business with the best capabilities of our industry and beyond in data technology and of course, AI. But the truth is the reason why we have been performing so well today is that we have the right balance between the best people of the industries and unique capabilities, all of this working through the power of well. And by the way, if you look outside of the holding company world, even in the LLM world or in the tech world, the companies that are striving today are the ones that have this good balance between service and product because, again, and maybe the question will come back later. AI is very difficult to implement at an enterprise level -- it's difficult to scale. It's very expensive. It doesn't deliver business outcome immediately. And so yes, you need the best capabilities, but you also need the right people to take the client by the end and bring in to this. And this is why, by the way, -- we continue to invest in our talent and the least we can say is that we also invest in our capabilities. Connected Media in the U.S. Now the truth is we are winning market share. And I'll come back to that on new business. Clients are spending more with us. I'm not even talking about new business because your question was more on our clients. The reason why we can go 200 to 300 basis points with our clients. And actually, it's way more when you look at connecting media is exactly for the reason I explained earlier about the addressable market. When you take leadership, is the influential influencer world. You see your revenue growth. You win in new business, but you see revenue growth. When you invest heavily in Agenticcommerce, you see our revenue growth tomorrow, when we're going to invest or actually when we're going to scale sports and make it addressable and measurable. We're going to see our revenue growth. So we are continuing to nourish new capabilities our connected media system, and of course, our clients, and we are growing from there basically. Now coming back to your question on new business, let me take a second on that and try to wrap up a lot of things that has been said because I know there have been a lot of questions in the recent weeks. And again, this morning, we already received a few. I mean First of all, and you would remember that we had a very good finish of 2025, very high finish. And the truth is we also had a very strong first half of the year when it comes to overall new business basically and honestly, thanks to the differentiation of our model, but also because, as I said before, the competitive landscape has been dramatically reduced. -- and some players has been a bit distracted recently. So what we wanted to give you, again, as in everything we are doing today is give you clarity, visibility, okay? And so we basically had 6 major wins, which are to answer your question, new accounts. It's new client. If it's an existing client, it goes into our client growth. If it's a new business, is that it's a new client. And this has allow us those new clients, those 6 new clients has allowed us to rapidly deliver -- we will deliver thanks to those wins, 200 basis points of contribution on a full year basis. I mean, we are talking here about EUR 300 million of net new revenue for the group. I think it's important to understand the magnitude of what we're talking to, okay? And to give you a bit more color because I think it's important, this is going to ramp up. But out of the 200 basis points, there will be only 50 basis points this year. This is why, by the way, we are upgrading our guidance because now we feel confident that we see those 50 basis points, we can upgrade our guidance and the other EUR 150 million is going to be for 2027, both the question I had before, which again makes us confident for next year. Now I know it's a bit complicated. And I'm sorry because as you know, we don't comment on new business wins. We don't give you names. We don't do the price and because we don't talk to the trade press about what we win, there are some things that you can see and other that you can't. And we have a big question about that, that has come many times, which is, okay, some of your competitors have been planning basically for the last 3 quarters through actually be lines that they have done even better than us, okay? Let's be clear, if it's not only a line it should translate after what is 9 months into their numbers and their performance starting now. And honestly, this would be great for the industry because we need our peers to do well. So if they are doing even better, great, but I think what is important for you to take out of that is what matters is not the press line is how what we win translate into growth and margin. And I guess when you look at the last 7 years, we have been #1 in new business, we have made a good case out of that. And again, I'm sorry, we are not disclosing more than this. But for many reasons, we have decided to stop a couple of years ago. And as you can see in our performance, it has pretty helped us. So I'm going to stop there. I know I'm talking too much. So now I'm going to make shorter answer because I'm very frustrated about the Tuesday game, so I'm trying to recover. Let's go the game, the soccer. Next question.

The next question is from Jerome Bodin, BHF.

Three questions on my side. The first one, just to follow up on the Middle East question. So can you just precise what's the assumption in your guidance? So you said the drag of basis point in Q2. So is that the assumption for H2? And the same question for Sasan is the assumption, a decline of mid-single digit. So that's my first question. The second 1 is on Sapient. So you have not said much so far about the Microsoft partnership. So I don't know if that's the right timing, but I would be curious to have a bit more color on how the relationship is evolving and in particular, on the go-to-market and revenue generation. and staying on Sapient. So you said when you closed -- when you announced the acquisition, that LiveRamp will be integrated within Sapient. So could you just help us to understand the rationale behind this move? Is it just -- is it mainly an organization question, so to make sure that LiveRamp will be seen as independent from Epsilon? Or is it also a commercial decision to leverage the Sapien client relationship and sales force .

I'm going to start very quickly on the LiveRamp question. It won't be part of Sapient. It will be part of technology, to be very clear because it's a tech company and it's a product company by a sense. Again, I will be very, very pleased to answer your question once we close, but there is very little I can say for the moment more than what I said during the call. So again, it's going to be in technology, but not part of Sapient. And by the way, as we are on that, -- we took the day of the acquisition. Since then, honestly, the reaction from our clients has been extremely positive. And to come back to 1 point that has to do with tax, as you might have read here and there -- our competition have raised an issue about neutrality. And the truth is that for our clients -- this is a nonevent, all of them. And the reason why it's an event, which comes back to your question, is that you need to understand that LiveRamp technology is neutral by design. LiveRamp is the technology. It's a platform of data collaboration. And so it will live within our technology. It will work particularly with Sapient to build agent for sure. But more than that, at the moment, it's very difficult for me to tell you. We need to go through the process. And then I promise we'll have a lot of time to answer all of your questions. On Microsoft, again, we don't talk about any particular client. So I won't be able to give you much more detail, although that the relationship is very, very strong. But maybe I use this opportunity and then I'll pass on to you on the Middle East, and we will start by Sapient, I guess, and then go on to the guidance. To tell you a couple of things about Sapient that hopefully will start to answer your question. First, as we say, like the rest of the IT consulting industry that you know well, -- we are experiencing a slowdown that is only amplified by the middle East crisis. We talked about that, okay? But I think what is very important there and Loris mentioned it, and I did is that actually, Sapient was facing a significant pick of our comp in Q2 versus Q1 of 600 basis points. So actually, those guys have managed to stabilize their net revenue sequentially which is when you look at all the headwinds in the industry is important to note. Second, and that's definitely for your question. So far, I don't know about you, but it's not like we see the world getting any better soon. We saw a couple of news this morning and say how the market is going to react to that. But things so far are not going to get better. So to be clear, we are not including any major improvements in our guidance for H2 for Sapient. So actually, we expect it to be in line with the industry. But -- what is important there is that Sapient only represent 13% of our revenue. And I think this is something that we need to insist on. But when you look at their performance in isolation, Actually, this is not reflecting the full value it creates for the group. Sometimes, I'm asking myself, are we right to put Sapient apart? Because again, it doesn't show what it brings to our group, okay. In a couple of words. Sapient is actually supporting our top line of the marketing activities. The reason why we are growing so fast at 6.5% is not only thanks to our creative and media operation is because on what represents 87% of our revenue. We have Sapient Technology, we have Sapient Engineer, more than 20,000 people that can help us in production that has truly become a taxing. I mean we are growing double digits in production. It's helping us on media that is growing close to double digits. And it's definitely helping to bring some pitches through the enterprise-grade AI solution they've got, and that is making a real difference. And what you don't see there is that it also contribute to our operating margin outperformance versus our peers as we can leverage all of their technology internally. So maybe the thing I want to leave you with on Sapient is that of course, they are part of their business that remain very exposed to the software IT spending that all of our peers -- all of their peers are experiencing. But the true value extends far beyond in own P&L. And so again, maybe in a couple of months, we will spend more time explaining this because the reason why we are performing as we do as a group, has also to do with how we use the Agentic and AI expertise of Sapient for what is 87% of our business, that is growing 6.5% with a good margin, as you have seen in Q2.

And Jerome, a couple of points maybe on the Middle East. I mean, first, as we said before, the reason represents less than 3% of our revenues. And as Art was talking about Sapient, where we see a larger impact from the region is on public Sapient including, by the way, in the U.K. as it's a hub that manages a number of clients based in the Middle East. When you look at the overall impact in Q2 of the Middle East region, it's approximately 30 basis points on the top line, as I said earlier in my presentation. Now looking at the rest of the year, I mean, obviously, we can't predict when the conflict is going to be resolved, but we included in our upgraded guidance, the fact that the situation more or less remains the same. .

Again, the resilience of our model is maybe what we are the product of being able to accelerate in H2 despite all the headwinds we've been just talking, hopefully, is reassuring. And you know the story is that if everything was doing well, imagine what we can deliver when we are delivering 4.8% on such a difficult quarter in terms of headwinds. .

Next question is from Nicolas Langlet, BNP Paribas.

Yes. I've got 3 questions. First one, the full guidance, what has to go right to land at the top end of your organic sales change guidance? Do you need a better macro or potentially the underlying momentum on connected media could be sufficient to reach PI? Second question on the pitch environment, how would you characterize the current pipeline -- and would you say you see more sensitive opportunities for the group in H2 compared to H1? And finally, on personnel costs, -- so they were down 90 basis points in H1. Loris, you mentioned the rebalancing and the adjustment at Sapient. So what would have been the decline on an underlying basis -- and looking ahead, should we expect the gap between net revenue and personnel cost growth to widen from here or to stay roughly at the current level? .

Thank you, Nicolas. So for those that just joined, again, I'm going to start with the guidance. So as you know, we are now expecting our net organic growth to reach roughly between 4.5 to 5, which is an upgrade. And more importantly, this means that we're going to outperform by far our industry for the 7 years in a row. To come back to your question, I will make a couple of comments. First, again, we told you we want to give you visibility. I think it's important to see that we are expecting Q3 and Q4 to be within this new guidance, okay? So again, sustained momentum to come back to your question about what we have been doing. Second, and we have been insisting on that, but we see the same dynamic between H1 and H2. And actually, we see an acceleration when you look at the underlying basis as the comp is tougher. And to come back to your point, honestly, what will make us able to reach the higher end of the guidance is that the macro condition needs to improve, need to improve a bit. We see the lever to get there, don't get me wrong. We are making sure that we are anticipating a world that doesn't change that much now. But if it were to improve for any reason, yes, we should be able to reach the higher end of our guidance. On pitch activity, I mean, it's busy. It's a busy time, and I think that there is some good news and less good news, I would say. The first good news is that clients every day understand more that with the rise of AI, they have to show their partner, and we talked about that, primarily on capabilities and talent. And that's the reason why we're winning. And by the way, the peak are shorter. They are more on capabilities and clients understand this need so much so that in some cases, actually, we are not pitching anymore and winning without a pitch just about the client picking the tires. We have a couple of examples on that. some of them, by the way, are not public. The second news I already talked about it is that the competitive landscape is reducing. So this, of course, improve the chance of the leaders to win. And as we are 1 of them, it's improving our chance to win. I would say the only less good news is that the financial pressure of some of our other players in our industry has led to some pricing behavior sometimes that are not right, the truth, and you know how we behave on that we are trying not to participate when we anticipate that the client is going to be really price driven, which we understand perfectly, but we are not interested by that. We have actually passed in H1 roughly 6 pitches around that because we thought it would be only price-driven. But let's be clear, this is not the norm. And I want to insist on that, and that's something that actually is very encouraging is that clients now understand the value of what we bring. And although, of course, believe me ask for a very competitive offer most of them know that the outcome should be a win-win relationship. You really need to get that is that -- by the way, it's pretty funny because some many, by the way, were saying that be an headwind for us. Not only it is a tailwind when you look at our number, I talked about that. We grew by 20%. We doubled our EBITDA. But even more importantly, AI creates a more complex world. And it means that our clients more than ever need the right capabilities and the right people. And this helped us also in terms of new business. you want to take the last one? .

Yes, Nicolas, on personnel costs, it's a bit too early to guide on the full year when it comes to personnel costs depending on the balance with reinvestment in H2 around talent upgrades and obviously, where we need to invest in new business win ramp-ups. But you should assume that personnel costs go down as a percentage of revenue this year. And as I said earlier, it's a combination of a few factors and maybe it's worth repeating some of them. One, we had some scalability benefits in some of our recruitments of 2025. to which you need to add the early impact of the initiative we've launched when it comes to processes and task optimization through Agentic AI. Definitely, the rebalancing that I spoke about on people cost and G&A when it comes to AI investment as we rolled out those productivity tools, but that again should stabilize given the investments were already made. And then the adjustment that we see here and there, including a public Sapient. So -- but again, what's important is that we confirm the slight improvement in our margin for the full year. .

The next question is from Ciaran Donnelly, Citi.