Third-quarter total income, excluding recoveries, rose 8.8% (7.8% expected), on an organic currency neutral basis, to £2.4bn. Growth was broad-based, led by Markets and FTSE Russell, which benefited from higher trading activity.
Gross profit rose at a faster pace, up 9.9% to £2.2bn (as expected), benefiting good cost control.
The group completed £0.5bn of share buybacks during the period, taking the year-to-date total to £2.6bn, with the remaining £0.8bn set to be completed by next February.
Full-year guidance has been upgraded, with total income, excluding recoveries, now expected to grow by at least 8.0%. Free cash flow is forecast to be at least £2.8bn.
The shares were up 3.7% in early trading.
Our view
LSEG’s third quarter strengthened the case that it can benefit from AI rather than be displaced by it. Subscription growth accelerated, markets remained strong; as well, guidance moved higher for revenue, margins and cash flow. The next step is turning AI adoption into faster growth in its core Data & Analytics business.
The central debate is whether new ways of accessing financial information strengthen LSEG’s position or undermine its existing business. We see reasons for optimism. LSEG owns scarce, regulated datasets and critical market infrastructure that AI models need but cannot easily replicate. Making that content available wherever customers choose to use it looks sensible.
There are tangible signs that this is working. Some 80% of AI agreements signed so far involve customers buying additional datasets, and usage through new AI distribution channels is growing rapidly. That supports the argument that AI can expand demand for LSEG’s content, rather than simply change how customers access it.
Growth across the subscription businesses accelerated to 6.6%, although Data & Analytics growth held at 5.2%. We’re encouraged, but acceleration here would provide stronger evidence that AI is translating into revenue. Shifting pricing dynamics as AI interfaces and agents become more widely used remain worth monitoring.
LSEG is more than just a stock exchange. After buying Refinitiv in 2021, it now earns most of its revenue from tools and services that financial professionals rely on daily. Clearing and settlement, which help ensure that transactions are completed smoothly and provide further diversification and resilience during market ups and downs.
The push to boost profitability is bearing fruit, with more revenue flowing through to earnings. Free cash flow is now expected to reach at least £2.8bn this year, giving LSEG room to invest in growth and consider other uses of capital. That financial flexibility is an important strength while the AI debate plays out.
Planned acquisitions of Octus and Trumid broaden the group’s position in credit data and trading, and maintaining capacity for £1.0-1.5bn of buybacks in 2027 was reassuring to hear, though not guaranteed. But acquisitions bring execution risk, and debt is expected to approach the upper end of the target range next year.
In our view, LSEG has the right set of attributes to succeed. Strong fundamentals give us reason to remain positive on the longer-term outlook, with the earnings multiple now settled into a less demanding range as disruption fears have bedded in. But we don’t think that those concerns are going away anytime soon, and we expect sentiment to remain on shaky ground for the foreseeable future.
Environmental, social and governance (ESG) risk
The commercial services industry is low/medium risk in terms of ESG. Social and governance risks are the most acute - like product governance, data privacy & security, and labour relations - as exposure to environmental risks is minimal. Companies operating within facilities maintenance are also exposed to community relations and emissions risks.
According to Sustainalytics, LSEG’s overall management of material ESG issues is strong.
LSEG has no significant ongoing risk events and has board-level responsibility over sustainability issues. Data privacy is supported through regular risk assessments and employee training. It offers sustainable solutions, such as ESG data and holds UN PRI signatory status but does not provide specifics about its responsible products programme.
LSEG key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember that yields are variable and not a reliable indicator of future income. Keep in mind that key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.