As AI reshapes professional services, Thomson Reuters is betting that its products will command a premium.
AI is now fully integrated into daily workflows, moving beyond experimental testing. This is driving demand for software that helps professionals get more work done in less time. McKinsey's workplace AI research found that 92% of companies plan to ramp up their AI investments in the years ahead.
The legal industry is diving in headfirst. According to Deloitte's 2026 Legal AI Survey, 79% of corporate legal departments have increased their AI budgets, with spending rising by an average of 67% y/y. Leaders are turning to AI to cut costs, speed up work, and bring more work in-house.
One company that stands to benefit is Thomson Reuters. The Canadian company provides AI-powered content and workflow software for legal, tax, audit, compliance and government professionals.
With its vast proprietary legal content database, AI-driven products, such as Westlaw Advantage and CoCounsel, and a strong presence in government and compliance markets, Thomson Reuters is emerging as a major beneficiary. This strategy is clearly filtering through into the company’s stronger topline growth.
Financials march ahead
Revenue came in at USD 2.1bn for Q1 26, up 10% y/y from 1.9bn in Q1 25. Legal Professions segment drove the growth, climbing 10% y/y to USD 756m from USD 688m. The Corporate segment also made strides, rising 11% y/y to USD 608m from USD 548m.
Adjusted EBITDA rose 8.9% y/y to USD 881m in Q1 26 from USD 809m. Meanwhile, its adjusted EBITDA margin was 42.2% in Q1 26, declining 10bp y/y. This quarter absorbed USD 12m in severance charges from workforce restructuring. A flat margin under those conditions highlights resilience.
Net earnings increased 5.5% y/y to USD 459m in Q1 26 from USD 434m. The gain would have looked stronger had it not been for interest expenses and weaker discontinued operations.
In Q1 26 net cashflow from operations was USD 505m compared to USD 445m in Q1 25. That increase gives management room to keep investing in AI products, pursue acquisitions, and continue returning capital to shareholders without stretching the balance sheet.
Mind the (AI) gap
Thomson Reuters shares have fallen 24.8% over the past 12 months and currently trade at CAD 138.4 (USD 98.7), well below their 52-week high of CAD 285.3 (USD 202.5). Investors seem to be taking a cautious view on the company's ability to translate its aggressive AI investments into sustained earnings growth.
Valuation wise, the market is demanding clearer proof that products such as CoCounsel and Westlaw AI can drive durable growth and margin expansion. The stock trades at a FY 26e P/E of 24.8x, below its 3-year average P/E of 32.6x. This cautious stance doesn't seem to faze analyts.
Analyst sentiment remains constructive: 13 of 18 analysts rate the stock ”Buy”, while five recommend “Hold”. The average target price of CAD 173.5 (USD 123.2) suggests a 24.7% upside potential if execution continues to match management's AI ambitions.
The roadblocks
Thomson Reuters faces intensifying competition as AI lowers barriers to entry, with both established rivals and AI-native firms competing for customers and talent. In addition, evolving AI, privacy and data protection regulations may increase compliance costs, restrict product development, and heighten legal and operational risks. Together, these risks do not threaten Thomson Reuters' near-term trajectory, but they set the ceiling on how much of the sector's structural upcycle the company can capture.
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