Thomson Reuters Navigates Contrasting Currents: Professional Services Surge Amid News Sector Headwinds

Thomson Reuters’ Q1 2025 earnings report reveals a company straddling two worlds: one of robust growth in its professional services segments, and another grappling with the disruptive forces of AI and shifting consumer preferences. While headline revenue rose just 1% year-over-year to $1.9 billion, the underlying story tells of a strategic pivot toward AI-driven automation and digital solutions, even as legacy businesses face existential challenges.

Revenue Performance: A Tale of Two Sectors
The company’s financial results highlight a stark divergence between its core professional services and its news operations. Organic revenue growth of 6%—the primary metric investors should focus on—was driven by its “Big 3” segments (Legal Professionals, Corporates, Tax & Accounting Professionals), which collectively grew 9% organically. Tax & Accounting, in particular, surged 11%, with margins improving 170 basis points to 56.7%, signaling strong execution in its high-margin software offerings.

However, the Reuters News segment suffered a 7% revenue decline as generative AI erodes demand for traditional content licensing. Transactional licensing revenue, which spiked in 2024 as clients sought to stockpile content before AI adoption, has since evaporated. Meanwhile, print revenue fell 5% organically as customers migrate to digital platforms like Westlaw, underscoring the industry-wide shift toward digital delivery.

Profitability: Margins Under Pressure, Guidance Maintained
Despite strong top-line momentum in key areas, profitability faced headwinds. Adjusted EBITDA margins dipped to 42.3% from 42.7% a year earlier, primarily due to lower margins in the news division, which saw EBITDA drop 34%. Operating profit grew just 1%, while IFRS diluted EPS fell 9% due to higher tax expenses and the absence of prior-year currency tailwinds.

Yet management remains confident, maintaining full-year 2025 guidance of 7.0–7.5% organic revenue growth and a ~39% adjusted EBITDA margin. The Q2 outlook, however, tempers optimism: organic growth is projected at ~7%, but margins are expected to dip to ~36%, likely reflecting investments in innovation.

Strategic Moves: Bets on AI and Automation
Thomson Reuters is doubling down on its AI and automation strategy, with two key moves:
1. SafeSend Acquisition: The $600 million purchase of SafeSend, a tax automation platform, positions the company to dominate “last-mile” tax workflows—document assembly, e-signatures, and regulatory delivery. This complements its existing SurePrep technology and addresses a $1 billion market opportunity, according to management.
2. AI Product Rollouts: CoCounsel, an AI-driven legal assistant, is generating recurring revenue through workflow integration, not just exploratory use. Alongside stalwarts like Westlaw and Practical Law, these tools are helping the company transition from content licensing to software-as-a-service (SaaS) models.

CEO Steve Hasker emphasized the company’s “heavy investment in innovation,” though specifics beyond SafeSend remain vague. The dividend increase—10% to $2.38 per share—underscores financial resilience, with 32 consecutive years of dividend growth a testament to steady cash flows.

Challenges Ahead: News Division and Currency Risks
The Reuters News segment’s struggles are a critical risk. With AI tools now capable of generating news at scale, the traditional content licensing model is obsolete. While the division accounts for only 16% of revenue, its margin contraction (now -34% EBITDA) could strain overall profitability.

Currency fluctuations and the sale of FindLaw (which contributed to the 4% drag from net disposals) also weigh on headline results. A weaker Canadian dollar—Thomson Reuters’ reporting currency—could further pressure margins in coming quarters.

Conclusion: A Stock for the Long Run, but Not Without Risks
Thomson Reuters’ Q1 results paint a company in transition. Its professional services segments, buoyed by AI and digital tools, are firing on all cylinders, with Tax & Accounting’s 11% growth and margin expansion proving particularly compelling. The SafeSend acquisition and CoCounsel’s SaaS model suggest sustainable top-line momentum.

Yet the news division’s decline and margin pressures highlight vulnerabilities. Investors should weigh the 7–7.5% organic growth guidance against the 9% Q1 growth in core segments—a gap that may narrow as competition and macroeconomic headwinds intensify.

The dividend hike and 32-year streak of increases are reassuring, but the stock’s valuation—trading at ~14x forward EV/EBITDA—demands clear execution on margin recovery and news division stabilization. For investors willing to bet on professional services’ long-term dominance and AI’s role in workflow automation, Thomson Reuters remains an intriguing play. But with a volatile news division and currency risks, this is a stock best held with a multiyear horizon.