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RELX PLC's AI-Driven Reinvention: A Blueprint for Sustained Margin Expansion and Value Creation
Wesley ParkThursday, Jul 24, 2025 5:05 am ET
37min read
Aime SummaryIn an era where artificial intelligence is reshaping industries,
(LSE: REL) stands out as a masterclass in strategic transformation. By embedding AI-driven analytics across its four core segments—Risk, Scientific, Technical & Medical (STM), Legal, and Exhibitions—RELX has not only fortified its competitive edge but also unlocked a path to long-term margin expansion. For investors seeking a company that marries technological innovation with disciplined financial execution, RELX's journey offers a compelling case study.
The AI Flywheel: From Automation to Enhanced Client Value
RELX's shift to AI-enhanced platforms isn't just about cost-cutting—it's about creating a self-reinforcing cycle of value. Let's break it down:
Risk Segment: This division, which provides fraud detection and compliance tools, has become a cash cow for
. By integrating AI into its analytics, RELX has reduced manual oversight while improving accuracy. The result? Higher client retention and a 15% year-over-year increase in operating profit in 2024. The Risk segment's adjusted operating margin now exceeds 35%, a testament to the scalability of AI-driven solutions.STM Segment: Through Elsevier, RELX is accelerating scientific discovery by deploying large language models to parse vast datasets. This isn't just a tech upgrade—it's a revenue accelerator. Subscribers now pay a premium for faster, more precise insights, driving a 10% growth in STM's operating profit in 2024. The segment's AI tools are also reducing content curation costs, padding margins without sacrificing quality.
Legal Segment: LexisNexis's generative AI assistants have revolutionized legal workflows. Tasks that once took hours—like contract reviews or compliance checks—are now completed in minutes. This efficiency has boosted the Legal segment's operating profit by 11% in 2024, with margins expanding faster than revenue. The segment's 20% revenue contribution in Q1 2025 underscores its growing importance to RELX's bottom line.
Exhibitions Segment: While smaller, this division is leveraging AI to digitize event management and attendee engagement. The shift has reduced overhead costs and created new revenue streams, such as virtual conference tools. Adjusted operating profit here nearly doubled from £162 million in 2022 to £398 million in 2024, a staggering turnaround.
Margin Expansion: A Symphony of Efficiency
RELX's financials tell a story of disciplined execution. Adjusted operating margins have climbed from 31.4% in 2022 to 33.9% in 2024, outpacing many peers. This isn't a one-off—it's a structural shift. Here's why:
- Digital Revenue Dominance: 83% of RELX's revenue now comes from fully digital products, which have inherently lower marginal costs. This creates a flywheel effect: more data fuels better AI tools, which drive higher client retention and deeper pricing power.
- Cost Discipline: By automating back-office functions and reducing reliance on manual labor, RELX has trimmed operating expenses without sacrificing service quality. For instance, the Legal segment's operating profit growth outpaced revenue in 2024, a clear sign of margin leverage.
- Recurring Revenue Model: With 90% of its revenue recurring, RELX benefits from predictable cash flows. This stability allows the company to reinvest in AI R&D, further widening its moat.
Investment Appeal: Justifying the Premium
RELX's forward P/E of 28.8x may seem rich compared to its 2024 earnings, but the numbers tell a different story. The company's adjusted operating profit grew 15% in 2022, 13% in 2023, and 10% in 2024, with no signs of slowing down. At this pace, RELX could hit £3.5 billion in adjusted operating profit by 2026, translating to a 35%+ margin.
Moreover, the company's capital efficiency is unparalleled. With a 98% cash flow conversion rate in 2023, RELX has the firepower to fund AI initiatives while rewarding shareholders. Share buybacks and dividend hikes—up 9% in 2024—signal management's confidence in the business's long-term prospects.
The Verdict: A Buy for the Long Haul
RELX isn't just surviving in the AI era—it's thriving. By transforming its core segments into high-margin, data-driven engines, the company has positioned itself as a leader in information analytics. For investors, the key takeaway is clear: RELX's AI-driven reinvention is a long-term value creator.
Action Plan:
- Buy RELX PLC for its durable moat and margin resilience. The company's recurring revenue model and AI-first strategy offer downside protection.
- Monitor the Legal and Risk segments for continued margin expansion, as these are the primary drivers of near-term growth.
- Watch for share price volatility around AI investment announcements, but stay focused on the long-term trajectory.
In a world where AI is the new electricity, RELX isn't just a beneficiary—it's a master generator.
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