LSEG to Buy Octus for $3.5bn

(All growth rates on a constant currency basis unless otherwise stated)

• Strong, broad-based growth: Total income (excl. recoveries) +8.8% (+8.6% year-to-date). Led by Markets +12.5%, FTSE Russell +10.2%, Risk Intelligence +9.8%, and Data & Analytics +5.2%
• Sustained strength in Markets: leading global markets infrastructure benefitting from consistent investment and innovation
• Accelerating subscription businesses¹: 6.6% growth in subscription businesses in Q3; on track to deliver full year acceleration of c.50bps
• Raising revenue, margin and cash flow guidance: expecting full year growth of at least 8.0%, EBITDA margin expansion of 100-120bps, and equity free cash flow of at least £2.8 billion
• Driving adoption of AI solutions: 95% of top 200 customers using LSEG AI products; more than two-thirds of top 50 customers with MCP connection; expecting a growing contribution to revenues over time
• Enhancing growth with acquisitions of Octus and Trumid: highly complementary businesses, creating a global fixed income leader across the liquidity spectrum
• Returning capital to shareholders: £2.6 billion returned via buybacks this year; current £3.0 billion programme to complete by February 2027; capacity for a further £1.0-1.5 billion in 2027

LSEG serves its customers through the whole trade lifecycle and data value chain, across multiple asset classes. Trading and data are becoming more intertwined as financial markets grow and increase in sophistication, reinforcing our strategy and strengthening our proposition. The success of this approach is becoming increasingly evident in our financial and operational performance, driving a record financial performance in Q3 and increased expectations for the full year.

Our Markets businesses delivered strong double-digit growth in Q3 and a five year CAGR of over 9%. Continuing macroeconomic and geopolitical uncertainty complemented the established secular tailwinds from electronification of trading, increasing focus on capital efficiency, and more sophisticated risk management. Our track record of investing in our core, market-leading franchises like SwapClear and Tradeweb, driving scale and growth in established businesses like ForexClear and CDSClear, and innovating for customers in new areas like Post Trade Solutions and Digital Markets, delivers multiple drivers of long-term growth.

Our subscription businesses – Data & Analytics, FTSE Russell and Risk Intelligence – accelerated in Q3, up 6.6%. We continue to see broad demand across Data & Analytics, with particularly good traction in areas of recent investment including cloud-based solutions and our expanded private market content. In October we announced a partnership with NVIDIA, enabling customers to reduce processing of our Tick History data from hours to seconds. As indicated at H1, FTSE Russell re-accelerated and Risk Intelligence continued to deliver strong growth and powerful new solutions.

Record Q3 financial performance reflects the multiple levers of growth the Group has and the significant progress we have made both in transforming individual businesses and in combining them to create additional opportunities. Our upgraded guidance puts us on track to deliver the strongest organic annual revenue growth since 2018 and c.400bps of cumulative EBITDA margin expansion over the last three years.

Our comprehensive, accurate and proprietary data powers business-critical systems for most of the world’s leading financial institutions. With customer trust built up over decades and a history of openness in the way we operate, we are the natural partner of choice for the world’s largest buyside and sellside institutions, among others, as they experiment with, integrate and scale AI across their organisations. The adoption of AI represents a significant long-term opportunity for LSEG and our customers, which we anticipate will drive demand for data, and the associated growth in revenue, for the long-term.

We made significant progress in delivery of our AI strategy in Q3:

• Connecting LSEG Everywhere – Our large customers increasingly access our AI-ready data via multiple distribution channels including APIs, cloud platforms, MCP servers and traditional bulk feeds. Over two-thirds of our top 50 Data & Analytics customers have now connected to our MCP servers, and consumption through this channel for all users grew 5x quarter-on-quarter in Q3. We continue to expand the data and services made available through MCP, with additional datasets including transcripts, fixed income indices and risk models, and we remain on track to have the majority of our data available by year end. We also continue to take advantage of new distribution opportunities for our data, expanding our partnership with OpenAI in Q3, ensuring our data is available wherever customers choose to consume it.
• Driving adoption of transformational products – We rapidly scaled customer adoption of our Workspace AI solutions in Q3, ending the quarter with 47,000 AI Search users, up 30,000 from our H1 results in mid-July. Customer feedback is strong and engagement continues to grow, with average queries per user up 30% in Q3. AI Search is also now available in Microsoft Teams. We have also expanded our premium Workspace AI offering, Deep Research, leading to a 60% increase in usage during Q3.
• Commercialising customer engagement – Consistent with the approach outlined previously, our strategic priority remains driving customer adoption of our AI solutions and embedding our content in new AI distribution channels and agents. Customer engagement remains high with a 50% quarter-on-quarter increase in the number of commercial conversations involving AI in Q3 and consistent with the commercial model laid out in our H1 results.
• Enhancing the value of our broader Data & Analytics business – 80% of the AI agreements struck with customers thus far involve the purchase of additional datasets, illustrating how AI is enhancing our existing offering, opening up new distribution channels, and demonstrating how our Data & Analytics business is more valuable in an AI world.

The highly cash generative nature of our business gives us significant flexibility in capital allocation. We regularly assess acquisition opportunities, and we return surplus capital to shareholders subject to leverage and other considerations.

Acquisitions

In a separate release today, we are announcing that we have agreed to acquire Octus for a cash consideration of $3.535 billion. Octus is a leading provider of credit solutions, serving customers across private, illiquid and distressed credit. The acquisition will transform LSEG’s presence in credit and private markets data, creating a leading proposition in these high-growth areas. Combining Octus’ capabilities with LSEG’s fixed income data, analytics and distribution means customers will benefit from an integrated view of public and private credit intelligence, enabling them to source deals, assess risk and manage their portfolios through LSEG’s platform.

Earlier this week, Tradeweb announced that it had entered into a definitive agreement to acquire Trumid, an electronic credit trading marketplace, for a net purchase price of approximately $1.75 billion. Tradeweb and Trumid have highly complementary trading protocols and the combined suite of credit trading products will further differentiate Tradeweb’s multi-asset class platform, in part by expanding into earlier stages of the bond lifecycle.

These two acquisitions are not only highly complementary to LSEG’s and Tradeweb’s existing businesses, they will also accelerate LSEG’s strategy in fixed income, building a global leader in intelligence, data, workflows and trading across the entire credit liquidity spectrum.

Share buybacks

We repurchased £500 million of LSEG shares in Q3, taking our cumulative buybacks so far this year to £2.6 billion. Under our current programme we expect to repurchase a further £0.8 billion in Q4 and Q1 2027, concluding by February 2027, with the final tranche expected to start in the coming weeks. We have capacity for further share buybacks of £1.0-1.5 billion in 2027.

Consistent with previous guidance, we expect to end the current financial year around the middle of our 1.5-2.5x net debt to adjusted EBITDA leverage range. On a pro forma basis including the transactions and buyback programmes above, we anticipate ending 2027 around the upper end of our 1.5x-2.5x leverage range, before returning to the middle of that range by the end of 2028.

Following the continued strength of our business in Q3, we are further raising our guidance as follows:

• Organic constant currency growth in total income excluding recoveries is now expected to be at least 8.0%, (initial guidance of 6.5-7.5%, raised to 7.0%-7.5% at H1). This combines an acceleration in our subscription businesses’ organic growth and continued strong growth in our Markets division
• An improvement in constant currency EBITDA margin of 100-120 basis points (initial guidance of 80-100 basis points, raised to around 100 basis points at H1)
• Equity free cash flow of at least £2.8 billion, up from previous guidance of £2.7 billion. Both are based on foreign exchange rates of £1 = $1.32 and €1.17
• Capex intensity of c.9.5% of total income excluding recoveries
• Underlying effective tax rate of 24-25%

Source: LSEG