SThree cuts 2026 profit guidance as global hiring weakness persists, upgrades AI investment

SThree, the specialist recruiter for science, technology, engineering and maths roles, warned Tuesday that persistent weakness in global hiring will weigh on profits next year and announced increased investment in artificial intelligence, sending its shares tumbling about 20%.

The group now expects pre‑tax profit for the year ending November 2026 to be around £10 million, well below analysts’ forecasts of roughly £30.5 million. SThree said macroeconomic uncertainty had persisted for longer than expected and that the board took “the prudent view that this subdued activity will continue into FY26.”

SThree reported that net fees fell 12% year‑on‑year in the three months to the end of August, with contract hiring down 13% and permanent recruitment down 5%. The Netherlands, the UK and Germany were the weakest markets over the quarter, with net fees declining 35%, 27% and 21% respectively. The company also recorded double‑digit declines in the US and Japan, though it said contract hiring in the US showed improvement in the third quarter.

The board said the lower 2026 guidance also reflects planned investment to improve the group’s long‑term prospects, including “next generation AI” and further cost‑cutting measures to deliver future benefits. The company said it remains on target for pre‑tax profits of around £25 million for 2025.

Chief executive Timo Lehne said the business was “well advanced” in embedding new technology and a unified platform that is providing data‑driven insights and early signs of scalability. He said the tech‑enabled model would allow SThree to invest in “agentic AI functionality, to deliver quality STEM candidates quicker and more efficiently,” and that investment in AI combined with cost optimisation would create a “stronger, more agile business.”

Investors reacted sharply. SThree shares dropped to 147p, their lowest level in nearly 17 years, and have lost roughly half their value since the start of 2025.

Recruitment markets across the UK, US and Europe have come under pressure this year amid recession fears, persistent inflation and trade tensions, which have dampened hiring activity, particularly for contract roles that are sensitive to short‑term economic swings. SThree’s results underscore the uneven nature of the recovery in professional and technical hiring, where demand can vary substantially by geography and sector.

Analysts and investors will be watching how quickly the investments in AI translate into improved productivity and lower operating costs. SThree said the new digital backbone has already helped reduce time to first interviews in early adopter markets and improved placement levels among junior cohorts, but the company acknowledged that the broader macro environment remains challenging.

The company’s decision to accelerate technology spending while trimming near‑term profit expectations reflects a strategic bet that deeper automation and data‑driven recruitment tools will create competitive advantages in a market where clients increasingly seek rapid, specialist hires. For now, however, SThree faces a period of subdued demand that it expects to extend into the next fiscal year, with the board signalling that further cost measures will be used to shore up margins as the investments take effect.