Thomson Reuters Corp. TRI-T modestly raised its revenue projections for the year and increased its dividend after a strong first quarter, even as company leaders are watching for warning signs that corporate customers could press pause on new software purchases while a period of high interest rates drags on.
The Toronto-based information and software provider reported revenue increased 8 per cent to US$1.89-billion, which included 9-per-cent growth from its three largest businesses that serve legal, corporate, tax and accounting professionals. The fast start to the year gave Thomson Reuters executives the confidence to nudge the top end of their expectations for revenue growth this year half a percentage point higher, to as much as 7 per cent.
After saying for several consecutive quarters that it was taking longer to close new software contracts with corporate clients, “the first quarter showed a bit of a reprieve of that, and we’re hopeful that that indicates better trading conditions for us for the rest of this year and into next,” chief executive officer Steve Hasker said in an interview. “But I think it’s too early to tell.”
Expectations of imminent interest rate cuts that could boost business confidence have been put on hold as central bankers wait for clear signs that inflation is coming under control.
“I think this higher-for-longer refrain has been growing and with us for a little while, but it’ll be interesting to see what it does to multiyear software purchases. Because typically, like a lot of categories of investment, it causes a bit more hesitancy,” Mr. Hasker said. “The backdrop is uncertain.”
The reaction from clients to Thomson Reuters’s new products that use generative artificial intelligence, such as its AI-based legal assistant CoCounsel that runs on OpenAI’s ChatGPT technology, has been positive “across the board,” Mr. Hasker said. But he stressed that the company is early in a multiyear evolution during which it plans to spend at least US$100-million annually to build AI into its products. Though the technology is advancing very rapidly, he said the pace of adoption among professionals such as lawyers will be somewhat slower, as will the anticipated regulatory response.
“They’re starting to feather in these technologies but there hasn’t been a wholesale rewiring of the profession yet,” he said.
For the second straight quarter, Thomson Reuters also reported a bump in revenue for its Reuters News division – a year-over-year increase of 21 per cent, to US$210-million – which was largely from one-time revenue from licensing deals the company has signed with AI companies that are using Reuters news articles to build their models. Though some news outlets such as the New York Times have sued AI companies over alleged copyright infringements, others such as Thomson Reuters have struck deals that pay them for providing access to archives and new news stories.
Thomson Reuters did not provide details of the licensing deals, and does not yet have agreements with all the major AI providers.
“We had a pretty simple philosophy toward this change – that these models are here to stay in various forms, and that they’re going to be influential in terms of consumer behaviour, media audience behaviour and ultimately humanity,” Mr. Hasker said. “And that they need to be trained, and they may as well be trained on the very best content.”
Woodbridge Co. Ltd., the Thomson family holding company and controlling shareholder of Thomson Reuters, also owns The Globe and Mail.
For the three months that ended March 31, Thomson Reuters reported profit of US$481-million, or US$1.06 per share, compared with US$756-million or US$1.59 in the same quarter last year.
The company also raised its annual dividend by 10 per cent to US$2.16, which is consistent with its pace of dividend hikes in recent years.