Dentsu deepens cost cuts as overseas turnaround slows

Dentsu has expanded its global cost-cutting plan and accelerated the consolidation of its international entities as the recovery of its loss-making overseas markets, including China and Australia, takes longer than expected.

The company management acknowledged that complex operations and inconsistent execution discipline have prevented the agency network from capturing growth opportunities, warning that macroeconomic uncertainty will keep certain markets in the red into FY2026.

Under new CEO Takeshi Sano, who previously led the group’s profitable Japanese operations, Dentsu is restructuring its international footprint. The company eliminated nearly 900 jobs in the first half of 2026, bringing total headcount reductions to approximately 3,000 of its planned 3,400 cuts.

To further streamline operations, Dentsu aims to slash global headquarters costs by 30% by FY2028—yielding around ¥12 billion in savings through automation and workflow simplification—and shutter an additional 70 to 80 international entities this financial year, with up to 80 more under consideration for FY2028.

This follows a corporate simplification drive that has already halved its legal entities from more than 1,000 in early 2021. Dentsu has achieved approximately ¥50 billion (US$314 million) in total operating cost reductions to date.

These operational headwinds have forced Dentsu to delay its recovery timeline by a year. The group now targets FY2027 for the complete elimination of loss-making markets, with all four operating regions expected to contribute to shareholder value by FY2028. For FY2028, Dentsu has set targets of a 16% operating margin and 2% to 3% organic growth, compared to its current full-year organic growth guidance of 1%.

For the first half ending 30 June, net revenue rose 3.7% year on year to ¥583.1 billion (US$366 million), driven by favorable exchange rates, though organic revenue growth stalled at 0.3%. Tight control over SG&A expenses lifted underlying operating profit by 6.6% to ¥71.98 billion, raising underlying operating margins by 30 basis points to 12.3%, while underlying net profit jumped 17.9%.

Regional performance remains sharply divided. While Japan delivered 5% organic growth in the first half of 2026, the Americas contracted by 5%. APAC saw an organic decline of 3.8%, as gains in India were offset by contractions across Australia (down between 0% and -10%), China, and Taiwan.

However, due to a weaker yen against the Chinese Yuan and other regional currencies, APAC net revenue rose 5.1% year on year to ¥49.55 billion. Enhanced SG&A cost controls helped narrow the region's underlying operating loss to ¥3.21 billion (compared to a ¥4.19 billion loss in the prior period), improving APAC's operating margin from negative 8.9% to negative 6.5%.

For the full year, Dentsu forecasts global revenue growth of 3.9% and an underlying operating profit drop of 3.6%, prioritising margin protection to resume dividend payouts as early as possible.

Addressing international media, Sano highlighted early progress in key turnaround markets, noting that China's profitability has improved and that portfolio adjustments—including business sales in Australia and New Zealand—are aiding recovery. While Sano emphasised that structural improvements and profitability remain the immediate priority, he cautioned that Dentsu will consider broader strategic exits for entities that fail to turn around within two to three years.

MARKETING-INTERACTIVE has reached out to Dentsu for more information.

Related articles:

dentsu China recycles OOH ad and billboard vinyl into trendy products
What Dentsu International's potential sale could mean for agency models