The Australian marketing and communications sector has spent the past two years absorbing a technology shock that arrived faster than most agencies planned for. Generative AI can now draft copy, storyboard a campaign, cut media buys and build audience segments in minutes, tasks that once justified whole teams of billable hours. For the listed agency groups that trade on the ASX, that shift is not a side story. It goes to the core of how they make money, and whether investors will pay up for their earnings again.
Enero Group (ASX:EGG), the Sydney-based owner of a stable of creative, media and communications businesses, has become a useful case study in how that transition is playing out on the public market. A recent analyst note from Kalkine frames the company’s investment case around three connected threads: the performance of its underlying agencies, the pace of its AI adoption, and a push to rebuild the margins that came under pressure through a bruising couple of years. You can read the original Kalkine coverage here.
A group rebuilding after a rough patch
Enero is not a household name the way its agencies are. The group sits above brands spanning advertising, technology public relations, and programmatic media, including the digital advertising arm that has done much of the heavy lifting on earnings in recent years. That concentration cuts both ways. When digital advertising demand runs hot, the numbers look strong. When it cools, or when a single large client relationship shifts, the whole group feels it.
That is roughly the arc the market has watched. A period of standout growth gave way to softer trading as advertising budgets tightened and the earnings mix normalised, which squeezed profitability and knocked the share price well off its highs. The current chapter, as the investment commentary tells it, is about stabilising the base, protecting cash flow and demonstrating that the group can lift margins back toward healthier levels without simply cutting its way there. Management under chief executive Brent Scrimshaw has pointed repeatedly to operational discipline and a sharper focus on the parts of the portfolio that generate the best returns.
Where AI fits
The reason AI keeps surfacing in Enero’s story is that it hits the agency model at both ends. On the cost side, automation promises to strip time and expense out of production, research and reporting, exactly the work that has traditionally been labour-heavy. If an agency can deliver the same output with fewer hours, margins improve even when revenue is flat. That is the optimistic reading, and it is central to why some analysts see a path back to stronger profitability.
On the revenue side, though, the picture is more contested. Marketing services have long been priced, at least in part, on effort. If clients come to understand that a polished campaign asset now takes a fraction of the time to produce, they will expect to pay less for it. The risk for every agency group, Enero included, is that AI compresses fees faster than it compresses costs, leaving margins no better off and possibly worse. The winners in that scenario are the agencies that reposition themselves around strategy, brand thinking and measurable outcomes, the parts of the job that are hardest to automate, rather than around volume production.
So the investment debate splits cleanly into two viewpoints. The bull case holds that Enero’s exposure to digital and data-driven advertising makes it a natural beneficiary of AI tooling, with automation lowering its cost base and its programmatic operations positioned to ride the broader shift of ad spend into digital channels. The bear case counters that agency groups sit in a structurally exposed spot, that AI could erode the pricing power of their most commoditised services, and that a recovery in reported margins may owe as much to cost control and a favourable comparison against a weak prior year as to any durable competitive edge. Both readings can be true at once, which is why the share price has been volatile rather than trending cleanly in either direction.
The Australian stakes
Enero matters beyond its own register of shareholders because it is one of the few pure-play marketing and communications groups Australian investors can buy on the local exchange, alongside larger media and marketing names. How it navigates AI offers a live read on a sector that employs tens of thousands of Australians across advertising, PR, media planning and creative production. Much of that workforce sits in exactly the roles automation touches first.
The pressure is not hypothetical. FluentSea has reported modelling from EY-Parthenon suggesting AI could reshape a third of Australian jobs, with knowledge and services work squarely in the frame. Agencies are among the most exposed white-collar workplaces in the country, and the way listed groups such as Enero handle the transition, whether they redeploy staff into higher-value advisory work or lean on AI to shrink headcount, will set a template that smaller independent shops and in-house marketing teams end up following. It also feeds a broader national question about where creative and knowledge work sits in an economy that is trying to build sovereign AI capability rather than simply consume tools built offshore.
There is a client-side stake too. Australian brands, from the big banks and retailers to government advertisers, spend heavily with agencies every year. As those clients build their own AI-assisted marketing functions, some of the work that once flowed to external agencies may stay in-house. That dynamic puts a premium on the strategic, senior counsel that Enero’s businesses say they want to be known for, and less on the production line that AI is busy commoditising.
What’s next
For investors, the near-term test is straightforward. Enero needs to show that margin recovery is real and repeatable, not a one-off rebound, and that its AI investments are translating into either lower costs or defensible new services rather than just marketing gloss. Results updates, commentary on client demand across its digital and communications arms, and any detail on how AI is being embedded into day-to-day agency workflows will all be scrutinised closely.
The wider lesson for the Australian creative economy is that AI is no longer a future consideration for agencies. It is already reshaping cost structures, client expectations and, ultimately, the valuations the market is willing to assign. Enero’s journey back toward stronger margins will be watched as a signal of whether traditional agency models can adapt, or whether the value is quietly migrating to the technology platforms and in-house teams doing the work themselves.
Sources: Kalkine via GNews.
