Thomson Reuters Shares Fall 5% Despite Strong Q1 Results

Thomson Reuters delivered impressive first-quarter results that exceeded analyst expectations, as reported by Bloomberg. The company earned $1.27 per share on an adjusted basis, surpassing the $1.21 expected by a Bloomberg survey of analysts. Revenue of $2.09 billion also beat expectations, demonstrating the company's ability to maintain strong financial performance despite AI-related market pressures. According to the latest earnings transcript, organic revenues grew 8% for the quarter, with total company adjusted EBITDA reaching $881 million, a 9% increase versus Q1 2025, reflecting a 42.2% margin. The company's Big Three segments delivered 9% organic revenue growth, with Legal organic revenue growing 9% despite softer government growth, while Legal excluding government accelerated to 11% in Q1 from 9% last quarter.

CEO Steve Hasker told analysts during the earnings call that the company continues to see 'broad-based positive signs' in terms of customer retention, according to Bloomberg reports. The company affirmed its full-year revenue guidance and announced that CoCounsel, its AI tool for lawyers, had reached 1 million users on February 24. An updated, agentic version of CoCounsel is currently in testing with plans to launch in the third quarter. As reported in the latest earnings transcript, the percent of annualized contract value from GenAI-enabled products reached 30% at the end of Q1, up from 28% last quarter, with a 2-3 percentage point quarterly growth run-rate. The company expects a further step-up in AI-enabled product mix, with quarterly metrics indicating accelerating user activity—monthly CoCounsel legal users quadrupled year over year, and deep-research searches via Westlaw Advantage rose more than sevenfold in six months. Thompson has begun to outperform leading frontier models on specific legal tasks, providing important optionality as the company continues to execute its AI innovation roadmap.

The Big Three segments delivered 9% organic revenue growth for the quarter, with Legal organic revenue growing 9% despite softer government growth, while Legal excluding government accelerated to 11% in Q1 from 9% last quarter. Tax, Audit & Accounting organic revenues grew 10%, driven by CoCounsel for tax and audit, Latin American business, SafeSend, and SurePrep. Reuters' organic revenues rose 6%, driven by growth in the agency business and contract with LSEG, which included $3 million of intercompany transactional licensing revenue related to Reuters News content being used for other Thomson Reuters Corporation products. However, Global Print organic revenues declined 5% year-over-year, as reported in the earnings transcript. Pagero, Confirmation, Westlaw, CoCounsel, and international businesses were key contributors to the performance.

Despite strong quarterly performance, Thomson Reuters faces several near-term headwinds that could impact future results. As reported by Briefing.com, the company expects Q2 EBITDA margin compression to ~38% due to seasonality and higher AI-related costs. However, management highlighted that productivity benefits are building into Q3 and Q4, with the company positioned for 100 basis points of full-year margin expansion. The company repurchased $262 million of shares in the first quarter and completed a $605 million return of capital with concurrent share consolidation, reducing share count by approximately 2%. With more than $9 billion of estimated capital capacity through 2028, Thomson Reuters remains positioned to be both aggressive and opportunistic in capital deployment. The company raised its annual dividend by 10% for the fifth consecutive year in February, demonstrating its commitment to shareholder returns.