Thomson Reuters revenue rises, shares drop on investment costs

By Kenneth Li and Aditya Soni

Nov 3 (Reuters) - Thomson Reuters reported higher third-quarter revenue on Tuesday, but its shares fell on what some investors said were concerns over the impact on profit of higher AI spending.

The Toronto-based content and technology company raised its full-year 2026 organic revenue outlook to an increase of between 8.5% and 9.0%, up from about 8%. That figure tracks sales from existing businesses on a constant currency basis.

Shares in Thomson Reuters were down 7% at $113.46 on Nasdaq as some investors fretted over higher spending. Shares in the company have fallen by more than 14% so far in 2026, compared with a 10% rise in the S&P 500.

Thomson Reuters shares are the latest to be hit by investors worried about rising AI costs. Wall Street has punished stocks from software firms to Apple, Alphabet and Amazon this earnings season on fears that the mounting bill will eat into corporate profits.

"The long-term expectation has been steady margin improvement in 2027 and beyond," Doug Arthur, an analyst at Huber Research, said of the Thomson Reuters results.

"But Thomson Reuters is now hedging on that as they see additional growth opportunities. It's smart, but disappointing to investors," Arthur added, referring to growth opportunities from investing in AI.

Thomson Reuters, the owner of the Westlaw legal database, the Reuters news agency and the Checkpoint tax and accounting service, reported a 10% rise in third-quarter revenue to $1.83 billion and adjusted earnings per share of 81 cents.

"Innovation momentum continues," CEO Steve Hasker said in an interview after the Thomson Reuters third-quarter results. Hasker highlighted rebuilt versions of CoCounsel Legal, which features AI agents that help lawyers draft briefs and motions.

Thomson Reuters excluded its global print division from the results, after the sale of a majority stake in the business.

MARGIN PRESSURE

"The results continue to show strong demand for Thomson Reuters' products, including Westlaw and CoCounsel, with no evidence to date of a slowdown from AI-native entrants," said Maher Yaghi, an analyst at Scotia Capital, in a research note.

Revenue rose by double digits across the combined segments of legal, tax and accounting and corporates as a result of recurring revenue and new AI upgrades to CoCounsel Legal and CoCounsel Tax, Audit and Accounting, Thomson Reuters said.

Revenue at Reuters rose by 12%, boosted by a surge in licensing revenue from generative AI, with transaction revenue in the news division increasing by 56% to $44 million.

In the legal division, AI spending, $22 million in severance costs and the impact of its purchase of AI data and analytics platform Noetica put pressure on margins, which fell to 46.6% from 49%.

Thomson Reuters executives said they expected higher revenue from premium tier pricing for AI agentic products to offset AI spending in the legal division. These include new AI-assisted research products in Thomson Reuters Westlaw and other products that can draft legal briefs.

Analysts question whether Thomson Reuters could turn these new AI-powered products into long-term growing businesses.

"Can it (Thomson Reuters) turn AI into durable, recurring, high-margin revenue at scale?" said Adam Sarhan, CEO of 50 Park Investments in New York.

Hasker said that Thomson Reuters was making progress in attracting new customers to its proprietary Thomson AI model and expected to announce Skadden, Arps, Slate, Meagher & Flom LLP as a new "strategic AI" partner on Tuesday.

"It will be the first of many," Hasker said in an interview, with reference to the big US law firms.

Thomson Reuters said it has about $9 billion to $10 billion to invest and executives said on Tuesday that they saw a pipeline of potential investments in AI, legal, tax and accounting and other areas next year. The company did not specify what it would buy.

Chief Financial Officer Gary E. Bischoping Jr. said in an interview that about 34% of Thomson Reuters underlying contract value, which breaks down a contract's total value, relied on generative AI in the third quarter.

This was up from 32% in the second and from 24% last year.

(Reporting by Kenneth Li in New York and Aditya Soni in Bangalore; Editing by Alexander Smith and Edward Tobin)