When talking about the best AI play on the market, investors automatically think about chipmakers or data centre companies. That’s not surprising, but it does often conceal another emerging opportunity.
That opportunity is Thomson Reuters (TSX: TRI). Yes, the news brand is an AI play. More specifically, the company sells research, information and software that professionals who work in legal, tax and accounting markets use daily for their work.
Earlier this month, Thomson Reuters’ stock popped, and it drew attention to the growing AI presence in that company. But what exactly can Thomson Reuters do with AI?
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Why Thomson Reuters is an AI play
A lawyer researching a case needs sources that they can depend on. Similarly, an accountant needs accurate rules and client information.
Thomson Reuters already supplies the tools for this type of work. And that’s where introducing AI in areas in which its customers are already used to paying for help holds potential.
A great example of this is Thomson Reuters’ AI assistant for legal, tax and accounting professionals called CoCounsel. Back in February of this year, Thomson Reuters said CoCounsel reached one million users across 107 countries.
Think about that level of coverage, and the potential revenue opportunities.
Since then, Thomson Reuters has expanded CoCounsel to guide users through a legal assignment flow, from research and analysis until reaching a finished document.
This pits Thomson Reuters in a different position from a company that’s trying to sell yet another standalone AI tool. Thomson Reuters ’ customers are already working inside many of its products. CoCounsel sits alongside those products, drawing on the information needed to check its output.
Can AI become a bigger part of the business?
One million CoCounsel users is an encouraging sign of adoption. That being said, it doesn’t reveal to investors how much of Thomson Reuters’ revenue is attributed to that growing AI segment.
Turning to results, the most recent quarterly report from Thomson Reuters is for the second quarter. In that quarter, Thomson Reuters reported revenue of US$2 billion, reflecting a gain of 9% over the prior period.
Organic growth during the period was 8%. That shows the company’s established business is still growing strongly alongside its AI opportunity.
More specifically, Thomson Reuters said that growth in its Legal Professionals segment was driven by Westlaw and CoCounsel. That suggests the AI platform is already contributing to growth within the core business.
Thomson Reuters also generated free cash flow of US$727 million in the quarter. That represents 29% growth over the prior period.
Is Thomson Reuters stock worth a look?
Thomson Reuters offers exposure to AI through a business that already serves legal, tax and accounting customers. That makes the company an intriguing stock to consider that is different from the usual suspects in the AI field.
That being said, Thomson Reuters also offers appeal to investors outside that emerging AI opportunity. The company’s core operations are well-established and continue to generate revenue for the company. Thomson Reuters also offers a quarterly dividend, which, as of the time of writing, pays a yield of 2.6%.
In other words, Thomson Reuters is an established business that still shows strong growth, pays a small dividend, and has an emerging AI opportunity with long-term potential.
That makes it an intriguing opportunity for long-term investors, even with the recent pop in the stock price.
