Thomson Reuters (TRI) Q2 FY25 earnings call: guidance and Q&A

What percentage of workflow is currently automated by agentic AI, and how does this impact the previously outlined GenAI TAMs?

Automation is still relatively modest overall, varying by profession. Tax & Accounting has more automation in core calculations, with new agentic AI automating 'shoulder tasks' like document ingestion and advisory services. Legal, a 350-year-old profession, has less existing automation, offering significant opportunity for agentic AI in first-draft processes. The company is on track for the 20% TAM increase discussed at Investor Day but will update externally in 2026.

“The Legal profession is different. I think legal profession is by some counts 350 years old in its current form. And other than the discovery and word processing and a number of other tools that have been implemented over time, the process is still fairly similar and has been for centuries. And so we think that generative AI and agentic AI hold promise to fundamentally automate large portions of the first draft process in preparation...”

asked by Drew McReynolds · answered by Stephen Hasker

How does Thomson Reuters' AI solution set compare to competitors, especially given recent partnerships by main competitors and internal law firm developments?

In Tax & Accounting, TR believes it is ahead with CoCounsel, Ready to Review, and Ready to Advise. In Legal, TR differentiates with its proprietary content (Westlaw, Practical Law) and deep domain expertise (2,500+ experts). The company sees its single integrated solution (content + AI assistant) as a winning strategy, with competitor moves validating this approach. Deep Research in Westlaw is highlighted as a new standard, specifically trained for legal research unlike generic AI.

“I think where we are differentiated and where our confidence is, if anything, growing is, first and foremost, in our content as a differentiator. So the depth and breadth of Westlaw and Practical Law and the deep expertise of our subject matter experts, 2,500 or more in total, gives us, we think, a differentiation, and it's a durable one.”

asked by Manav Patnaik · answered by Stephen Hasker

What were the drivers of Q2 margin performance, and why is full-year guidance unchanged despite the strong Q2?

Q2 margin benefited from good operating leverage, timing of expenses, and favorable revenue mix. Full-year guidance is reaffirmed because the favorable revenue mix is not expected to continue, and Q2 expense timing benefits (including SafeSend integration costs) will reverse in H2. Q3 will also see normal seasonality in Tax & Accounting and a tough comp for Reuters News. Management remains confident in achieving the full-year 39% margin guidance.

“First, we had good operating leverage. As I've shared in the past, at a roughly 7% to 7.5% organic revenue growth range, we are generating about 110 basis points of operating leverage. So good leverage in Q2. Second, we did have some timing of expenses in Q2 that will reverse during the second half of the year. And third benefit in the second quarter was revenue mix, including some of our Print products.”

asked by Scott Fletcher · answered by Michael Eastwood

How is Thomson Reuters thinking about deploying its excess capital given strong free cash flow and low leverage, particularly regarding share buybacks and M&A?

The company has $10 billion in capital capacity by end of 2027. Strategic M&A in existing Big 3 segments (Risk, Fraud & Compliance, Indirect Tax, international businesses) is the top priority. Dividend growth will continue (4 consecutive years of 10% growth). Share buybacks of $400 million to $500 million are possible in FY25 to meet the 75% free cash flow return commitment, with a decision expected after the September Board meeting.

“First priority remains strategic M&A. We think that strategic M&A has the highest return potential from our lens. We remain very focused on our existing Big 3 and bolstering those.”

asked by Tim Casey · answered by Michael Eastwood

Is Westlaw Advantage a separate module requiring an upgrade from Precision, and has the user interface across Westlaw CoCounsel improved for better integration?

Westlaw Advantage is a new subscription tier for Westlaw, and an upgrade is required to access Deep Research and other new AI features. Regarding the user interface, the launch of CoCounsel Legal introduces a much more integrated offering, seamlessly combining CoCounsel, Westlaw, and Practical Law into a single experience, with continuous improvements planned.

“Westlaw Advantage is a new subscription tier for Westlaw... You do need to adopt Westlaw Advantage to get the Deep Research capabilities.”

asked by Andrew Steinerman · answered by David Wong

Can the 22% GenAI-enabled ACV be broken down by segment, and what unlocks value in the Tax & Accounting space for AI?

The 22% GenAI-enabled ACV is not broken down externally, but currently, the larger portion is Legal due to Westlaw Precision. Going forward, all three segments (Legal, Corporates, Tax & Accounting) are expected to increase their GenAI-enabled ACV. In Tax & Accounting, AI unlocks value by addressing acute talent shortages and automating complex tasks, leading to potentially higher interest and uptake from customers compared to other professions.

“there's a particular sort of characteristic within the Tax & Accounting and Audit spaces, which is an acute talent shortage... And so the profession faces a very significant challenge, and that is talent shortages. And the technology, therefore, has a really important role to play in addressing that fundamental issue.”

asked by Toni Kaplan · answered by Stephen Hasker