Thomson Reuters Misses on Q3 Earnings and Revenue, Shares Slide 9.9%

Thomson Reuters missed both earnings and revenue estimates for the third quarter of 2026, and the market punished it within days: the stock declined 9.9% since results landed on Nov. 3. Adjusted earnings of 81 cents per share fell 9% short of the Zacks Consensus Estimate of 89 cents. Revenues of $1.83 billion missed the $1.91 billion consensus by 3.9%. The numbers grew, but not fast enough. For finance chiefs, the quarter is a study in growth that still disappoints.

What did the top line actually do?

Revenues rose 10% year over year, and organic revenues also grew 10%, carried by strength across the company's core businesses. Earnings climbed 14% from 71 cents a year earlier, supported by higher adjusted EBITDA and a lower share count. Generative AI-enabled products represented 34% of annualized contract value, up from 24% a year ago. That mix shift matters. It signals where contract economics are heading.

One structural change sits behind the figures. On Oct. 1, 2026, Thomson Reuters sold a 51% stake in its Global Print business, now operating independently as Westbridge Print. The quarter's results, and prior quarters' comparatives, treat the divestiture as discontinued operations.

The share-price damage extends beyond one report. Over the past year, TRI's shares lost 24.8%, while the industry declined 5% and the Zacks S&P 500 composite gained 10.7%.

Where is the revenue coming from?

Recurring revenues, which account for 88% of the total, increased 9% year over year, with organic recurring revenues up 8%. Transaction revenues climbed 27%, including 23% organic growth, reflecting Pagero implementations and generative AI-related content licensing. The three core segments, collectively the Big 3, contributed 88% of total revenues.

By segment:

• Legal Professionals: revenues up 9% to $788 million, 9% organic; Westlaw and CoCounsel Legal drove recurring growth, while CLEAR lifted transactions.
• Corporates: revenues up 11% to $544 million, 10% organic; transaction revenues jumped 32% on e-invoicing implementation activity.
• Tax, Audit & Accounting Professionals: revenues up 11% to $276 million, 10% organic, supported by CoCounsel, SafeSend, SurePrep and Latin American operations.
• Reuters: revenues up 12% to $232 million, 12% organic, including roughly $19 million in transactional generative AI content licensing. Excluding that licensing in both periods, organic growth was 7%.

How did profitability hold up?

Adjusted EBITDA increased 10% to $651 million, but the margin contracted 30 basis points to 35.5%, reflecting higher costs and the Global Print discontinued-operations treatment. The quarter absorbed $22 million of severance expenses, cutting the adjusted EBITDA margin by roughly 120 basis points. Legal Professionals' margin fell 240 basis points to 46.6% on higher technology and other costs.

Corporates generated $197 million of adjusted EBITDA, Tax, Audit and Accounting $83 million. Reuters' adjusted EBITDA surged 37% to $56 million on higher transactional revenues. Operating profit declined 22% to $402 million, primarily reflecting a prior-year gain on the sale of the remaining minority interest in Elite plus higher software amortization.

What about cash flow and the balance sheet?

Here the picture sharpens. Net cash from operating activities fell 15% to $599 million. Free cash flow decreased 23% to $408 million, hurt by unfavorable working capital movements, higher income tax payments and increased capital expenditures. The company completed its $600 million share repurchase program and issued approximately $2 billion in notes during September. Net leverage stood at 1.0 times as of Sept. 30, 2026. The Global Print sale to KKR-advised capital accounts delivered roughly $500 million in gross proceeds, with Thomson Reuters retaining 49%.

Is the AI pipeline delivering?

The next-generation CoCounsel Legal platform showed encouraging adoption: its active user base grew more than 60% in September from August, and users completed 2.4 times the work recorded at the previous version's peak. The company expanded Westlaw Brief Builder and added multinational legal research covering more than 100 countries. The next-generation CoCounsel Tax, Audit and Accounting platform introduced agentic capabilities for finished professional work. Pagero added eight countries in 2026 and now supports compliance across more than 90 jurisdictions.

What does the outlook say?

For full-year 2026, Thomson Reuters expects total revenue growth of about 9.5% and organic revenue growth of 8.5-9%, excluding Global Print. The Big 3 organic growth outlook stays unchanged at 9.5-10%. Management projects an adjusted EBITDA margin of approximately 39% and free cash flow of roughly $2.1 billion. Capital expenditures should run at 8.5-9% of revenues, with net interest expense near $190 million.

For the fourth quarter, management expects organic revenue growth of about 8% and an adjusted EBITDA margin of approximately 42%, with Reuters' slower growth and moderating transactional revenues weighing on performance. Thomson Reuters currently carries a Zacks Rank #5 (Strong Sell).

In plain terms: growth remains intact, but costs, severance and weakening cash conversion have dented a story investors once paid a premium for.