Executive Summary / Key Takeaways

• Thomson Reuters is undergoing a profound transformation, aggressively investing in Agentic AI to redefine workflows and accelerate organic growth across its core Legal and Tax & Accounting segments.
• New AI-powered offerings like CoCounsel Legal with Deep Research and CoCounsel for Tax with Ready to Review and Ready to Advise leverage the company's proprietary content and domain expertise to deliver quantifiable efficiency gains for customers.
• The company maintains robust financial health, reaffirming its full-year 2025 organic revenue growth guidance of 7% to 7.5% (with 9% for the "Big 3" segments) and projecting an adjusted EBITDA margin of approximately 39%, supported by strong free cash flow generation.
• Thomson Reuters strategically positions itself ahead of competitors in Tax & Accounting AI and differentiates in Legal through integrated, expert-trained AI solutions, leveraging its content and workflow tools as a durable competitive advantage.
• While the pace of customer change management and intense competition in the evolving AI landscape present ongoing considerations, TRI's clear strategic roadmap and commitment to shareholder returns underpin a compelling investment thesis.

A Legacy Reimagined by AI

Thomson Reuters Corporation, a venerable institution founded in 1799 and rebranded in 2008, stands at the forefront of a new era in professional services. The company has strategically evolved into a global content and technology powerhouse, providing critical information and workflow solutions to legal, tax, accounting, and corporate professionals. This evolution is particularly evident in its aggressive pivot towards artificial intelligence, a strategy designed to redefine how professionals work and to solidify TRI's market leadership.

The industry landscape is currently undergoing a rapid transformation, driven by digital innovation and the burgeoning capabilities of AI. Professionals across sectors face an acute talent shortage, increasing regulatory complexity, and an insatiable demand for efficiency. This environment creates a compelling need for advanced technological solutions that can automate routine tasks and free up time for higher-value work. Thomson Reuters estimates that AI-driven time savings alone could unlock a $32 billion opportunity for the legal and tax industries in the U.S.. The company's overarching strategy is to capitalize on these trends through substantial AI investments, continuous portfolio optimization via strategic acquisitions like Casetext, Materia, and SafeSend, and the divestiture of non-core assets such as FindLaw. This approach aims to sharpen its focus on content-enabled technology and generative AI opportunities within its core segments.

The AI Imperative: Technological Differentiation and Innovation

Thomson Reuters' core differentiated technology lies in its development and deployment of Agentic AI systems, which represent a significant leap beyond traditional AI assistants. These systems are characterized by their ability to use advanced reasoning models, access and utilize various tools to complete tasks, adapt to new information, and orchestrate complex, multi-step assignments autonomously. This capability allows professionals to "move beyond prompting and start delegating".

Thomson Reuters is uniquely positioned to deliver professional-grade agentic AI solutions due to four essential capabilities. First, it offers leading AI assistance through platforms like CoCounsel Legal and CoCounsel for tax, audit, and accounting. Second, it possesses comprehensive proprietary content and insights from Westlaw, Practical Law, and Checkpoint. Third, the company provides a robust portfolio of leading workflow software tools and analytics. Finally, it leverages substantial domain expertise from its more than 2,500 legal and tax editors and subject matter experts.

The tangible benefits of this technology are already evident across TRI's offerings. CoCounsel 2.0, a major upgrade to the AI Assistant, delivers results three times faster and includes a highly requested document comparison tool. Deep Research, integrated into CoCounsel Legal and available through the new Westlaw Advantage product, is hailed as the legal industry's first professional-grade agentic AI research capability. It is built to mimic experienced legal researchers, planning, reviewing, and adapting when encountering new information. This innovation means "what used to take hours now takes minutes" for complex legal research, setting a new standard compared to existing AI-assisted tools.

In the Tax & Accounting segment, the newly launched Ready to Review solution, currently in beta with a commercial launch slated for Q4 2025, automates the creation of the first draft of a tax return. Its AI agents autonomously extract and map data, run it through tax engines, and diagnose and resolve errors, "eliminating significant manual effort and improving accuracy". Complementing this, Ready to Advise, an agentic AI-powered tax planning advisory solution, analyzes client data to identify tailored tax planning strategies, ranked by relevance and potential impact. This provides step-by-step guidance and authoritative knowledge, enabling CPA firms to scale advisory services and generate incremental revenue.

Thomson Reuters' commitment to this technological edge is underscored by its substantial R&D initiatives. The company is investing over $200 million annually in AI for 2024 and 2025, split roughly evenly between operating expenses and capital expenditures. Strategic acquisitions like Materia (agentic AI for tax, audit, and accounting) and Safe Sign Technologies (legal-specific language models) further accelerate its AI roadmap. The company plans to launch over 15 additional agentic-guided workflows in CoCounsel Legal in Q3 2025, expanding capabilities in litigation and transactional law. These technological advancements are not merely product enhancements; they are foundational to expanding TRI's competitive moat, driving higher value for customers, justifying premium pricing, and accelerating organic growth by addressing critical pain points like talent shortages and workflow inefficiencies.

Segment-Specific Growth Engines: The "Big 3" in Focus

Thomson Reuters' "Big 3" segments—Legal Professionals, Corporates, and Tax & Accounting Professionals—are the primary drivers of its accelerated organic growth. These segments collectively delivered a robust 9% organic revenue growth in both Q1 and Q2 2025. The adjusted EBITDA for the Big 3 segments increased 7% to $621 million in Q2 2025, with the margin rising 130 basis points to 42.3%.

The Legal Professionals segment achieved an 8% organic revenue growth for the second consecutive quarter in Q2 2025, driven by strong momentum from Westlaw, CoCounsel, and solid Government growth, which itself grew 7%. The adoption of GenAI-enabled products within this segment is significant, with 22% of the company's annualized contract value (ACV) coming from these offerings by the end of Q2 2025, up from 20% in Q1 2025. Notably, small law firms are adopting new GenAI features as quickly as large law firms, a shift from historical trends that broadens the market opportunity.

The Corporates segment also demonstrated strong performance, with 9% organic revenue growth in Q2 2025. This growth was fueled by offerings in the Legal, Tax, and Risk portfolios, as well as the segment's International Businesses, with Practical Law, Indirect Tax, and Pagero being key contributors. The segment's organic growth improved significantly from 7% in 2023 to 10% in 2024, a testament to strong leadership and improved sales execution.

Tax & Accounting Professionals (TAP) continues to be Thomson Reuters' fastest-growing segment, delivering an impressive 11% organic revenue growth in both Q1 and Q2 2025. This robust performance is primarily driven by the Latin American and U.S. businesses, with SafeSend, UltraTax, and SurePrep serving as key drivers. The industry faces an acute talent shortage and increasing complexity in tax returns and audits, creating a pressing demand for efficiency and automation tools that TRI's offerings are designed to address.

Reuters News also contributed positively, with organic revenues rising 5% in Q2 2025. This segment is increasingly benefiting from a growing recurring revenue component from AI content licensing agreements, in addition to transactional deals, highlighting the enduring value of its journalistic content. Global Print, while declining 7% organically in Q2 2025, continues to generate substantial free cash flow, expected to be approximately $165 million in 2025.

Financial Fortitude and Strategic Capital Deployment

Thomson Reuters exhibits robust financial health, providing a strong foundation for its strategic initiatives. In Q2 2025, the company reported total organic revenue growth of 7%, with adjusted EBITDA increasing 5% to $678 million, resulting in a 70 basis point margin expansion to 37.8%.

This margin performance exceeded expectations due to healthy operating leverage and favorable expense timing.

Free cash flow for the first half of 2025 stood at $843 million, a 4% increase year-over-year, primarily driven by higher EBITDA.

The company's liquidity position is enviable, with net leverage at a mere 0.5x at the end of Q2 2025. Thomson Reuters estimates it possesses approximately $10 billion of capital capacity through 2027, positioning it to be both aggressive and opportunistic in its capital allocation. Strategic M&A remains the top priority for capital deployment, focused on bolstering existing "Big 3" segments and expanding into areas like Risk, Fraud & Compliance, Indirect Tax, and international businesses. The company has also demonstrated a commitment to shareholder returns, raising its annual dividend by 10% for the fourth consecutive year to $2.38 per share in Q1 2025. Thomson Reuters aims to return 75% of its free cash flow to shareholders, with dividends covering about 55% of this target, implying a need for approximately $400 million to $500 million in share buybacks for calendar year 2025 to meet this commitment. Capital intensity is expected to remain stable at approximately 8% for both 2025 and 2026, including the significant investments in GenAI.

Competitive Arena: Differentiating in a Dynamic Market

Thomson Reuters operates in a highly competitive landscape, facing both established players and agile startups, particularly in the burgeoning AI space. The company's competitive positioning is fundamentally anchored in its proprietary content, deep domain expertise, and a strategy focused on integrated, AI-powered workflow solutions.

In the Tax & Accounting segment, Thomson Reuters believes it is "ahead of competitors" with its CoCounsel for tax, audit, and accounting, Ready to Review, and Ready to Advise solutions, which are described as "unique solutions in the market". This leadership is critical given the acute talent shortage and increasing complexity driving demand for automation in the profession.

In the Legal segment, TRI faces a "new era of competition" from various startups specializing in legal AI assistants and traditional competitors launching new offerings. However, Thomson Reuters differentiates itself through several key moats. Its "depth and breadth of Westlaw and Practical Law" content, combined with the "deep expertise of our subject matter experts," provides a "durable differentiator". Furthermore, the company's strategy of offering a "single integrated solution that includes content and a best-of-breed AI assistant" is seen as a "winning strategy" that fosters a faster innovation roadmap. Deep Research in Westlaw is highlighted as "setting a new standard" for legal research, uniquely trained like an experienced lawyer to explore legal arguments and counterarguments, unlike generic AI solutions.

Comparing Thomson Reuters to its key competitors reveals distinct strengths and strategic approaches. Against RELX Group (RELX) (LexisNexis), TRI's legal offerings emphasize integrated analytics and user-friendly platforms, while LexisNexis is often perceived to have a qualitative edge in content depth and speed of updates. TRI's focus on end-to-end workflow solutions contrasts with RELX's specialized analytics. In shared markets, TRI's brand loyalty and customer-focused service delivery provide an edge, though RELX's broader international presence might offer greater growth potential.

Against Wolters Kluwer (WTKWY), particularly in Tax & Accounting, TRI's tools qualitatively excel in automation and integration, offering greater efficiency. Wolters Kluwer, however, is known for its depth in regulatory expertise. TRI's integrated ecosystem aims for comprehensive solutions, while Wolters Kluwer often focuses on specialized tools.

In business intelligence, TRI's Reuters News and Corporates segments compete with players like FactSet (FDS) and S&P Global (SPGI). TRI's offerings provide qualitative benefits in the breadth of content, including timely news and regulatory insights, making them versatile. FactSet, conversely, is often seen as leading in specialized financial analytics and real-time data. S&P Global excels in authoritative benchmarks and global scale. TRI's strategy of blending news with professional tools positions it as a more adaptable provider, while its competitors often focus on depth within specific financial niches.

Thomson Reuters' pricing strategy is "price to value," favoring enterprise-wide agreements and carefully managing the variable costs associated with large language models. This approach leverages its expanded role in customer success, such as Westlaw Precision AI's ability to produce a first draft of a research memo, a significant time-saver for litigators. The Materia acquisition similarly enables TRI to play an extended role in automating tax preparation workflows and meeting the demand for advisory services.

Outlook and the Path Ahead

Thomson Reuters has reaffirmed its full-year 2025 outlook, projecting organic revenue growth in the range of 7% to 7.5%, with its "Big 3" segments expected to grow approximately 9%. The company anticipates its adjusted EBITDA margin to rise by 75 basis points year-over-year to approximately 39%. Free cash flow is expected to be approximately $1.9 billion for 2025. These projections are supported by strong underlying bookings, healthy pipelines, and easier comparisons for both the Reuters business and Tax & Accounting Professional in the second half of the year.

Looking further ahead, Thomson Reuters has sharpened its financial framework for 2026, now forecasting organic revenue growth of 7.5% to 8%, driven by "Big 3" growth of approximately 9.5%. Adjusted EBITDA margin is expected to expand by at least 50 basis points in 2026, and free cash flow is projected to be in the range of $2 billion to $2.1 billion. Capital intensity is expected to remain stable at approximately 8% for both 2025 and 2026. The company has also raised its 2026 organic revenue growth targets for each of the "Big 3" segments by 1%, now expecting Legal Professionals to grow 8% to 9%, Corporates 9% to 11%, and Tax & Accounting Professionals 11% to 13%. This forward-looking guidance underscores management's confidence in its strategic responses and technological roadmap, particularly the continued scaling of its GenAI initiatives and the integration of recent acquisitions.

Risks on the Horizon

Despite a compelling growth narrative, several risks warrant investor attention. The pace of customer adoption and change management for AI tools, particularly within the traditionally conservative legal profession, remains a key variable. While interest is high, the actual integration of AI into daily workflows and its impact on business models (e.g., per-hour billing) is still evolving. The competitive landscape is intensifying, with both established players and agile startups vying for market share in the rapidly expanding AI solutions space.

Economic slowdowns, while mitigated by TRI's resilient business model (over 80% recurring revenue), could impact transactional revenues and the willingness of some clients to invest in new technologies. Integration risks associated with recent acquisitions like SafeSend and Materia, though managed with a proven playbook, could still present challenges. Furthermore, Reuters News will face difficult comparisons in Q4 2024 and Q1 2025 due to significant transactional generative AI content licensing revenue recognized in prior periods. Finally, the effective tax rate is expected to rise to approximately 19% to 19.5% in 2025 and 2026 due to global minimum tax regulations, which will impact net income.

Conclusion

Thomson Reuters is in the midst of a transformative period, strategically leveraging its deep content reservoirs and domain expertise to become a leader in Agentic AI for professional services. The company's aggressive investment in cutting-edge AI technologies, exemplified by CoCounsel Legal's Deep Research and the Tax & Accounting segment's Ready to Review and Ready to Advise, is not only enhancing customer efficiency but also expanding TRI's role within critical workflows. This technological leadership, coupled with a disciplined approach to portfolio optimization and capital allocation, is translating into accelerated organic growth and robust financial performance. While the competitive landscape remains dynamic and the pace of AI adoption by clients is a continuous factor, Thomson Reuters' clear strategic vision, strong balance sheet, and commitment to delivering value through innovation position it favorably for sustained growth and shareholder returns in the evolving professional services market.