Al Arabia shares fall 47% in 3 months amid rising costs, Q2 2026 losses

Logo of Arabian Contracting Services Co.

Shares of Arabian Contracting Services Co. (Al Arabia) lost almost half their value, declining nearly 47% over the past three months, making it the biggest Saudi-listed decliner during the period.

Al Arabia’s stock fell about 59% year-to-date (YTD).

It reached an all-time high of SAR 271 on Feb. 12, 2024, before gradually slumping through September 2025, during which it lost 30% of its value. It then rebounded to SAR 130 before starting a new downtrend at the end of March 2026, following the release of its 2025 financial results. The stock subsequently lost around 60% of its value, including nearly 47% over Q2 2026 alone, making it the worst-performing stock on the Saudi market.

The stock’s re-pricing follows elevated valuations in late 2023 and early 2024, when investors and analysts priced Al Arabia as a high-growth play following its acquisition of Faden Media and the signing of several contracts in Riyadh and at King Khalid International Airport, as well as optimism surrounding the Remat Al-Riyadh contract.

However, following the TASI-listed company’s recent financial results, investors shifted their focus from contract growth and expansion toward earnings sustainability, particularly after its operations turned loss-making in Q2 2026.

Following steady annual profitability through 2023, financial metrics grew increasingly volatile in 2024, culminating in profit contractions, net losses in 2025, and operating losses by Q2 2026, per Argaam Charts.

The operational downturn was attributed to several factors, including the company obtaining a SAR 1.1 billion loan in late 2023 to finance the full acquisition of Faden Media, which coincided with a high interest rate environment.

As a result of borrowing, financing costs soared, which in turn weighed on the company’s net profit. Financing costs were also affected by higher lease liabilities following the acquisition of Faden Media.

In 2022, financing costs on borrowings stood at around SAR 13 million, while lease liabilities amounted to around SAR 41 million. By the end of 2025, lease liabilities had reached SAR 186 million, while financing costs on borrowings stood at SAR 143 million.

Remat Al-Riyadh contract: From catalyst to caution

Signed in October 2023 for a 10-year term, the Remat Al-Riyadh agreement was initially viewed by analysts and investors as a core revenue catalyst given the size of the Riyadh market, long-term visibility, and potential billboard site density, prompting research houses to raise their valuations at the time.

However, a number of challenges related to that contract began to arise, including minimum guaranteed revenue commitments payable to Remat Al-Riyadh, making the contract’s profitability dependent on the company’s ability to generate sufficient revenue to cover these obligations. The company had attributed its initial 2025 losses to high-cost accounting charges tied to the long-term agreement. As a result, research houses revised their assumptions, prioritizing unit economics and asset yields over total project scale.

Simultaneously, setup costs, depreciation, and lease expenses for new OOH sites scaled ahead of revenue generation. Cost of revenues outpaced top-line growth, pushing the company into gross losses in Q2 2026 for the first time.

At the same time as costs increased, revenue declined for the third consecutive quarter, reaching its lowest level since September 2022 in Q2 2026, at SAR 263 million, compared with SAR 415 million in the previous quarter and SAR 425 million in the corresponding quarter.

Al Arabia cited reduced ad spending and budget cancellations by major corporate clients linked to regional geopolitical tensions as the primary driver of lower campaign volumes.

Although the company announced the signing of several new contracts, it was still facing rising costs alongside declining revenue. With fixed or semi-fixed commitments and site costs, lower revenue put significant pressure on margins, resulting in a gross loss for the first time in Q2 2026.

Outlook

Al Arabia’s recent financial results showed that cost growth driven by expansion, acquisitions and new advertising sites coincided with a decline in revenue due to geopolitical conditions, leading to margin contraction and a shift to losses.

At the same time, the company has long-term contracts and new advertising sites that provide a base for revenue growth as operations ramp up and occupancy rates increase.

The Riyadh advertising contract remains the most important factor, given its size and significant impact on revenue and costs. A recovery in advertising spending, repricing, and higher asset utilization could provide a turning point for the company’s results in coming periods.

Key risks include continued weak demand and revenue due to geopolitical tensions, pressure on advertising rates amid competition, and higher rental, depreciation, and financing costs. A delayed progress toward positive margins could also contribute to lower retained earnings and a decline in the company’s shareholders’ equity.

The company’s most recent cash dividend was for 2022, when it distributed SAR 115 million, equivalent to SAR 2.09 per share.