Stagwell Q2: Digital Transformation Accelerates, Guidance Raised, but Leverage Caps Enthusiasm

What happened

Stagwell reported Q2 2026 revenue of $786 million, up 11% year-over-year, with net revenue growing 6% to $632 million, driven by an 18% organic surge in Digital Transformation. The company secured a record $171 million in net new business and raised full-year adjusted EPS guidance to $1.03-$1.17, signaling confidence in sustained momentum. Despite the strong top-line, GAAP net loss widened to $8 million, underscoring continued reliance on non-GAAP metrics such as adjusted EBITDA, which rose 15% to $109 million. The results highlight progress in scaling digital and data-enabled services, but elevated leverage at 4.28x net debt/EBITDA and high interest costs remain key risks. Execution on the Stagwell Marketing Cloud and meaningful deleveraging are essential to unlock the re-rating potential implied by the DCF valuation.

Implication

Stagwell’s digital transformation growth and expanding pipeline position it to capture market share in CTV and retail media; successful execution against raised EPS targets and balance sheet improvement could unlock significant upside toward base-case DCF value, but failure to deleverage or sustain organic growth may keep the stock range-bound.

Thesis delta

The strong Q2 and raised guidance increase conviction in Stagwell's digital transformation strategy and net new business momentum, supporting a path toward the base-case intrinsic value of ~$15/share. However, persistent GAAP losses and high leverage prevent a full upgrade, and we need evidence of deleveraging and sustained cash generation to shift from HOLD to BUY.