Recruiter SThree's half-year profit plunges as AI, war weigh on hiring

July 21 (Reuters) - British recruiter SThree's half-year like-for-like pretax profit fell by three-quarters as an AI-driven hiring slowdown and the economic impact of the Iran war weighed, it said on Tuesday, sending its shares down nearly 5%.

Recruiters worldwide are grappling with the fallout of the war, which is now in its fifth month and has prompted employers to delay recruitment decisions and left candidates wary of making moves.

SThree, which specialises in science, technology and engineering roles, said net fees, a key marker of recruiters' health, fell 14% in Germany, its largest single market, hurt by lower demand for software development jobs as companies move towards AI.

Its U.S. net fees rose 12%, reflecting stronger momentum in the region that was flagged by rivals as well.

British recruiters have been leaning on cost cuts to shore up profits as AI-driven efficiencies weigh on hiring, with firms also increasingly shifting toward shorter-term contracts.

"Macroeconomic conditions have remained mixed, as geopolitical tensions continue to create uncertainty. At the same time, AI is accelerating change across both client organisations and the staffing sector," CEO Timo Lehne said.

SThree posted pretax profit of £2.7 million ($3.63 million) for the six months ended May 31, compared with £10.1 million a year ago. Overall, net fees dropped 7% in the period, as reported in June.

The company continues to expect fiscal 2026 pretax profit of about £10 million, above the £8.8 million expected by analysts on average, per a company-compiled consensus.

($1 = 0.7439 pounds)

(Reporting by Prerna Bedi and Nithyashree R B in Bengaluru; Editing by Rashmi Aich, Nivedita Bhattacharjee and Jan Harvey)