Thomson Reuters Faces Challenges Despite Stable Core Growth

Thomson Reuters Shows Resilience Amid Sales Slowdown

Thomson Reuters Corp (NYSE: TRI) experienced a decline in stock value following its recent fiscal second-quarter 2025 results announcement. Despite reporting year-over-year revenue growth of 3%, the results fell slightly short of analyst expectations, sparking concern among investors. The reported revenue amounted to $1.785 billion, which contrasts with the anticipated $1.792 billion.

Performance Metrics and Key Insights

Despite a positive uptick in foreign currency contributions, total revenue growth faced headwinds due to net acquisitions and disposals, resulting in a 5% negative impact on overall performance. Adjusted earnings per share (EPS) of 87 cents surpassed the consensus estimate of 82 cents. The company's organic revenue increase of 7% was marked by growth in recurring revenues, which represented 82% of total revenues.

Segments Driving Growth

The main segments of the business performed variably. Notably, the 'Big 3' segments—Legal Professionals, Corporates, and Tax & Accounting Professionals—collectively contributed 82% of total revenues, with an impressive organic growth of 9%. However, within these categories, Legal Professionals observed a 2% decline in revenue, totaling $709 million.

Innovations Assisting Growth

On the brighter side, Corporates experienced a strong revenue rise of 7% year-over-year, reaching $472 million, while Tax & Accounting Professionals enjoyed an 11% growth, amounting to $277 million. The Reuters News segment also reported positive results, with revenues increasing by 7% to $218 million.

Challenges in Global Print Business

One significant challenge for Thomson Reuters was the downturn in its Global Print division, which saw a 7% revenue loss to $114 million. This drop underscores the shifting landscape in publishing, intensifying the need for adaptation and innovation. Furthermore, the company's adjusted EBITDA margin expanded impressively by 70 basis points to 37.8% during this quarter, reflecting better operational efficiency.

Financial Stability and Outlook

Thomson Reuters reported free cash flow of $566 million, bolstering its strong liquidity position with $664 million in cash and equivalents as of June 30. CEO Steve Hasker underscored the company's commitment to product innovation, emphasizing the launch of advanced AI tools, including CoCounsel Legal and CoCounsel for tax and audit purposes. These initiatives aim to leverage Thomson Reuters' reputable content to offer transformative AI solutions.

Future Projections and Market Sentiment

Looking ahead, the company has reiterated a revenue growth forecast of 3%-3.5%, estimating a range between $7.48 billion and $7.51 billion for fiscal year 2025. This outlook comes in light of the previous year’s 7% growth. Thomson Reuters also reaffirmed expectations for organic revenue growth between 7.0% and 7.5% and an adjusted EBITDA margin close to 39%.

Stock Performance Reaction

The current market reaction has seen Thomson Reuters stock decrease by 7.54%, trading at approximately $184.49 at the time of the publication. This decline reflects investor concerns surrounding the slower-than-expected revenue growth and performance variability across business segments.

Frequently Asked Questions

What caused the decline in Thomson Reuters stock?

The stock decline was primarily due to the company's fiscal Q2 results falling slightly below analyst expectations as acquisition and print challenges affected revenue growth.

What was the year-over-year revenue growth reported?

Thomson Reuters reported a 3% revenue growth year-over-year, amounting to $1.785 billion.

How did foreign currency impact revenue?

Foreign currency fluctuations had a slight positive effect on revenue growth during the quarter.

What is the forecast for fiscal year 2025?

The company maintains a forecast of 3%-3.5% revenue growth for FY25, aiming for total revenues between $7.48 billion and $7.51 billion.

What innovative products has Thomson Reuters launched recently?

The company has introduced several advanced AI tools, including CoCounsel Legal, which aims to enhance its service offerings in legal, tax, and accounting sectors.

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