After massive layoffs earlier this year, technology giants have found one more item to slash: marketing budgets.

Several large advertising companies reported a sharp cutback in spending from US tech and telecom companies, which had recently become some of the largest marketers in the world.

WPP Plc shares dropped as much as 8%, the most in a year, on Friday as the UK-based advertising group cut its revenue guidance for the full year, citing lower sales in the US from tech clients. “It took us a little bit by surprise,” Chief Executive Officer Mark Read said in an interview.

Revenue growth excluding pass-through costs will be 1.5% to 3.0% for the full year, WPP said in a statement on Friday. It had previously guided for 3% to 5%. Revenue excluding pass-through costs for the first half was £5.8 billion ($7.4 billion), a 2% increase from a year earlier on a like-for-like basis, WPP said. Analysts surveyed by Bloomberg were expecting sales to grow to 3%.

Read said there was “some pullback” in the second quarter but that marketing from tech giants would eventually rebound. He declined to name the clients that cut back but said he worked with “all the major technology companies.”

WPP is not alone. In July, Omnicom Group Inc. similarly reported a miss in sales in its financial results. The advertising holding company also blamed a pause in spending from tech and telecom firms. Omnicom CEO John Wren told analysts that these companies had grown “conservative” in their costs after “pretty severe restructurings” in the first half of the year.

Likewise, S4 Capital Plc, the advertising firm founded by former WPP boss Martin Sorrell, reported in July that its tech clients were “remaining cautious and very focused on the short term.” Analysts at Citi Group described WPP as “another victim of US tech” in the ad market.

Publicis Groupe SA appears to have defied the trend after the group beat estimates and raised its guidance for 2023 earlier in the year. The French firm has focused on investing more in data services over creative tools, and primarily works with European clients. This has so far given it an edge over its peers in a challenging environment for ad firms, according to analysts at Bloomberg Intelligence.

Since the start of the year, giants like Microsoft, Amazon, Meta and Apple have cut more than 100,000 jobs after hiring surges during the pandemic.

(Updates with Mark Read interview and context throughout)

Author: Charlotte Hughes-Morgan and Mark Bergen