LSEG's Workflows Business: A Strategic Buy Amid AI Overreaction and Structural Growth

The recent selloff in London Stock Exchange Group (LSEG) shares has created a compelling opportunity for investors to capitalize on a market overreaction. The Workflows segment, which accounts for 22% of LSEG's revenue but only 11% of its profits, has been unfairly maligned due to fears of disruption from agentic AI. However, a closer examination of LSEG's structural growth drivers, AI resilience strategies, and valuation metrics reveals a fundamentally undervalued asset with a clear path to outperformance.

The Overreaction: A Mispricing of Risk

LSEG's Workflows business has faced headwinds as investors fret over slowing annual subscription value growth and the rise of AI-native tools. This has led to a £8 billion market value drop in the past quarter, despite the segment contributing just 8% of LSEG's total valuation on a peer basis. RBC Capital Markets argues this reaction is disproportionate. The Workflows segment, which includes the Workspace desktop platform, remains a critical infrastructure for financial institutions, offering curated, auditable data that AI models cannot replicate easily.

The market's focus on short-term risks has overshadowed LSEG's strong first-half 2025 results: higher capital returns, reaffirmed guidance, and a forward P/E of 21x for FY26—a 25% discount to data provider peers. At current levels (~9,262p), LSEG trades at a significant discount to its intrinsic value, as highlighted by RBC's 13,200p price target (a 42.5% upside).

Structural Growth Drivers: LSEG's AI-Resilient Ecosystem

LSEG's long-term competitiveness is anchored by four pillars that position it as the “central nervous system” for AI in finance:

1. Data Sovereignty: The 2021 acquisition of Refinitiv has given LSEG access to high-integrity, multi-asset datasets, which are essential for training AI models in a sector where accuracy and compliance are non-negotiable. These datasets act as a “security net,” reducing hallucination risks and establishing LSEG as the go-to provider for GPT-ready financial data.

2. Microsoft Symbiosis: A 10-year partnership with Microsoft integrates LSEG's data into Microsoft's cloud and AI infrastructure, creating network effects. Tools like “Financial Meeting Prep” and natural language querying demonstrate how LSEG and Microsoft are redefining productivity. This symbiosis ensures LSEG's data becomes a native component of Microsoft's enterprise environment, where thousands of financial institutions operate.

3. Sovereign Tailwind: The UK's AI Opportunities Action Plan, including sovereign compute investments and AI Growth Zones, directly benefits LSEG. Regulatory flexibility from the FCA and initiatives like the “Supercharged Sandbox” (collaborating with Nvidia) accelerate innovation while mitigating risk.

4. “Intel Inside” Paradigm: LSEG is shifting from a market operator to an embedded infrastructure provider. Its AI-powered tools are designed to augment human expertise, not replace it. The Responsible AI Framework ensures trust and adoption across a heavily regulated industry.

Entry Point and Catalysts: Timing the Reassessment

The current discount to RBC's price target represents a compelling entry point. Even if Workflows were valued at zero, LSEG's sum-of-the-parts analysis suggests a 15% upside. Key catalysts include:
- November 10 Innovation Forum: Management will address AI concerns and showcase Microsoft partnership rollouts, potentially stabilizing sentiment.
- Q4 Workflows Performance: Stable or improved revenue growth could reassure the market about the segment's long-term relevance.
- Regulatory Tailwinds: The UK's AI Growth Zones and National Data Library will further bolster LSEG's infrastructure needs.

Conclusion: A Buy for the Long-Term

LSEG's Workflows business is not a liability but a misunderstood asset. The market's overreaction to AI risks has created a rare opportunity to invest in a company with structural growth drivers, a defensible moat, and a forward P/E that is unsustainable relative to its peers. With a current price of ~9,262p and a price target of 13,200p, the risk/reward ratio is highly favorable. Investors who recognize the long-term value of LSEG's AI-resilient ecosystem are likely to benefit from both capital appreciation and a robust dividend yield.

For those seeking exposure to the AI-driven financial infrastructure revolution, LSEG offers a unique combination of undervaluation, strategic foresight, and regulatory tailwinds. The time to act is now—before the market corrects its mispricing.