Dentsu targets JPY 50bn cost cuts as it puts AI and APAC at growth core

MUMBAI: Dentsu is trimming the fat to make room for growth. The Japanese advertising group has unveiled an updated mid-term management plan that targets more than JPY 50 billion in operating cost reductions by FY2027, while directing investment towards AI, Media and Data & Technology.

The plan, unveiled on August 14 by global CEO Takeshi Sano, covers FY2026 to FY2028 and aims to restore profitability, strengthen the balance sheet and simplify Dentsu’s international operations.

The company has raised its previous cost-reduction target of JPY 35 billion to JPY 50 billion to more than JPY 50 billion by FY2027.

Dentsu is also targeting an operating margin of 16 per cent and organic growth of 2 to 3 per cent by FY2028.

“We are prioritising the restoration of profitability and improving financial soundness to secure capacity for future growth,” Sano said.

A major part of the restructuring will focus on Dentsu’s corporate structure.

The company expects Global HQ costs to fall by around 30 per cent by FY2028 compared with its original FY2026 plan. It is also continuing to reduce the number of international entities following a major simplification of its global footprint.

Dentsu said it had already halved its international entity count from more than 1,000 in January 2021 to January 2026. It now plans to remove another 70 to 80 international entities during FY2026.

A further reduction of around 50 to 80 entities is being considered by FY2028.

The cost reset is intended to free up capital for investments in areas where Dentsu sees stronger growth potential rather than simply shrinking the business.

AI is central to that reinvestment strategy.

Dentsu plans to integrate AI more deeply into its operations through an open ecosystem model, combining its own capabilities with external AI platforms, technology partners and co-created solutions.

The group is also developing proprietary AI solutions and agentic workflows, with applications spanning planning and decision-making, content activation and project management.

Dentsu invested JPY 3.7 billion internally in Media, AI and Data & Technology during the first half of 2026.

The company wants the technology push to go beyond efficiency gains, positioning AI as part of an “AI-powered marketing transformation” offering for clients.

Dentsu has assigned distinct roles to its four regions as part of the recovery plan.

Japan is designated the Group Core, the Americas the Growth Engine, EMEA the Turnaround Focus and APAC the Next Growth Base.

Japan has recorded positive organic growth for 13 consecutive quarters. Its strategy includes expanding value chains, growing its SME business and developing opportunities around sports and entertainment intellectual property.

In the Americas, Dentsu expects US customer experience management to return to positive growth in FY2026. The region will focus on AI transformation, consultative selling and its B2B and technology capabilities.

EMEA remains the most challenging region, with the company focusing on standardising media-led solutions, strengthening key markets and consolidating operations.

APAC, meanwhile, will create room for investment through portfolio rationalisation and operational changes. China and Australia achieved underlying operating profitability in FY2025, while Dentsu is considering measures including partial divestment of its ANZ CXM operations.

The region has also been identified as a priority for data, social and commerce, with greater cross-market collaboration expected to improve both competitiveness and efficiency.

Dentsu expects some markets to remain loss-making in FY2026 because of macroeconomic uncertainty. However, it aims to have no loss-making key markets by FY2027 among markets that had received more than JPY 10 billion in cumulative investment as of February 2025.

By FY2028, the group expects all four regions to contribute to shareholder value.

The company is also prioritising cash flow and balance sheet recovery, with near-term M&A expected to remain disciplined. Internal investment will take precedence as Dentsu rebuilds its financial capacity.

A return to dividend payouts is also among the company’s goals as profitability improves.

The strategy represents a balancing act for Dentsu: shrink the corporate machinery, redirect the savings into AI and growth areas, and restore the profitability needed to fund the next phase. For APAC, being labelled the “Next Growth Base” puts the region firmly at the centre of that turnaround.