Bank of America Maintains Buy on LSEG Amid Strong Q1 Execution and Strategic Momentum

The London Stock Exchange Group (LSEG) delivered a robust performance in Q1 2025, reinforcing its position as a global leader in financial infrastructure. Bank of America reaffirmed its Buy rating on LSEG, citing “reassuring” results that underscore the group’s resilience and strategic execution. With total income surging 8.7% year-on-year to £2.26 billion, LSEG’s diversified divisions—Data & Analytics, FTSE Russell, and Markets—are driving growth amid macroeconomic uncertainty.

Q1 Highlights: Cross-Divisional Strength and Margin Expansion

LSEG’s Q1 results were marked by accelerated organic growth across key segments:
- Data & Analytics (D&A): Revenue grew 5.1% organically, with the Analytics sub-segment (including tools like Yield Book and Lipper) expanding 7.4%. The division is transitioning to cloud-native platforms, with legacy Eikon’s planned retirement by June 2025 signaling a strategic pivot.
- FTSE Russell: Organic growth hit 9.6%, fueled by a 12.5% rise in asset-based revenue as equity indices and benchmarks benefit from rising market values.
- Markets Division: Organic growth reached 10.7%, driven by record volumes at Tradeweb, which reported $2.55 trillion in average daily trading volume (ADV)—a 19.1% organic increase. Elevated political and economic volatility sustained high trading activity through April.

Cost discipline further bolstered results: operating margins improved by 30 basis points to 48%, while operational expenses fell 5% year-on-year. This efficiency, paired with strong top-line growth, supports LSEG’s £2.4 billion equity free cash flow target for 2025.

Strategic Initiatives: Microsoft Partnership and Cloud Migration

LSEG’s partnership with Microsoft is advancing decisively:
- OpenDirectory, a cloud-based data platform, is set to launch in H2 2025, leveraging LSEG’s datasets with Microsoft’s Azure infrastructure.
- New co-heads for the D&A division—Gianluca Biagini and Ron Lefferts—are tasked with accelerating product development and client acquisition.

These moves align with LSEG’s 70% subscription-based revenue model, reducing cyclicality and positioning the group to capitalize on rising demand for institutional data solutions.

Risks and Challenges

Despite the positive trajectory, risks persist:
1. Valuation Concerns: LSEG’s market cap of £59.94 billion trades at ~15x EV/EBITDA, a premium to peers. Spark’s AI model issued a “Strong Sell” technical signal, though fundamentals support a “Outperform” rating.
2. Post-Euronext Adjustments: The Securities & Reporting division declined 9.8% due to the Euronext exit, though this impact is temporary until August 2025.
3. Fixed-Income Headwinds: The segment’s 5% revenue decline reflects sector-wide challenges, though Tradeweb’s dominance in rates trading mitigates exposure.

Investment Thesis: Defensive Growth with Upside

Bank of America’s Buy rating hinges on LSEG’s “all-weather” model, resilient cash flows, and strategic innovation:
- Cloud Migration: The shift to cloud-native platforms (e.g., OpenDirectory) positions LSEG to capture growth in institutional data demand.
- Shareholder Returns: A £500 million buyback program and bond repurchases at NPV-positive terms signal confidence in the balance sheet.
- Market Leadership: LSEG’s 10.7% Markets division growth and Tradeweb’s record volumes highlight its role as a critical provider of liquidity infrastructure.

Conclusion: Outperforming Through Diversification and Innovation

LSEG’s Q1 results reaffirm its ability to execute across divisions while navigating macro risks. With 8.7% total income growth, 7.8% organic growth, and a reaffirmed £2.4 billion equity free cash flow target, the group is well-positioned to outperform peers in 2025. While valuation and sector-specific risks merit caution, the strategic pivot to cloud-based analytics and institutional data solutions—backed by its Microsoft partnership—supports a long-term Buy case.

As geopolitical and economic uncertainty persist, LSEG’s low cyclicality and subscription-driven revenue streams make it a defensive yet growth-oriented play. Investors should monitor the sunset of Eikon and OpenDirectory’s launch in H2 2025 as key catalysts for future upside.

In a market hungry for reliable infrastructure plays, LSEG’s execution and innovation justify its Buy rating, with the potential to deliver double-digit total returns over the next 12–18 months.