London Stock Exchange Group (LSEG) and Microsoft have entered into a new long-term strategic partnership to architect LSEG’s data infrastructure using the Microsoft Cloud, and to jointly develop new products and services for data and analytics. The partnership will build on the good progress made by LSEG on the integration of Refinitiv and enhance its position as a world-leading financial markets infrastructure and data provider.

With the Microsoft Cloud and its AI capabilities, the deal significantly advances LSEG’s strategy of building an efficient and scalable platform for its Data & Analytics business to deliver next-generation services for a range of customers across the financial markets value chain through improved workflow and greater flexibility.

Microsoft to make equity investment in LSEG through acquisition of shares 

Under the arrangements, LSEG’s data platform and other key technology infrastructure will migrate into Microsoft’s Azure cloud environment. Workspace, LSEG’s next-generation data and analytics workflow solution, will become interoperable with certain Microsoft applications and the companies plan to introduce innovative new cloud-based analytics services. LSEG and Microsoft have also agreed to explore the development of digital market infrastructure based on cloud technology, with a goal to transform how market participants interact with capital markets across a broad range of asset classes. Migration of regulated applications will be subject to applicable regulated entity board and regulator approval, prior to the relevant migration.

David Schwimmer, CEO of LSEG, said:

“This strategic partnership is a significant milestone on LSEG’s journey towards becoming the leading global financial markets infrastructure and data business, and will transform the experience for our customers.”

“Bringing together our leading data sets, analytics, and global customer base with Microsoft’s comprehensive and trusted cloud services and global reach creates attractive revenue growth opportunities for both companies.

“We are delighted to welcome Microsoft as a shareholder. We believe our partnership with Microsoft will transform the way our customers discover, analyse, and trade securities around the world, and create substantial value over time. We look forward to delivering on that potential.”

Satya Nadella, Chairman and CEO, Microsoft, said:

“Advances in the cloud and AI will fundamentally transform how financial institutions research, interact, and transact across asset classes, and adapt to changing market conditions.”

Strategic partnership highlights

• New collaboration to architect LSEG’s data infrastructure and build intuitive next-generation productivity, data and analytics and modelling solutions with Microsoft Azure, AI, and Microsoft Teams
• Step-change in services for customers across the financial markets value chain, including an enhanced version of LSEG Workspace with seamless Teams communication and Microsoft 365 interoperability with built-in compliance for the first time
• LSEG’s data platform and other key technology infrastructure to migrate to Microsoft Azure, enhancing its existing cloud migration strategy
• Microsoft to purchase approximately 4% equity stake in LSEG through the acquisition of shares from the Blackstone/Thomson Reuters Consortium
• It is intended that Scott Guthrie, Microsoft’s Executive Vice President, Cloud and AI Group, will be appointed as a non-executive director of LSEG in due course subject to receipt of appropriate approvals

Financial effects for LSEG

• Expected to increase LSEG’s revenue growth meaningfully over time as new products come on-stream
• Total incremental cash costs over 2023-2025 expected to be in the range of £250-300 million, including around £100 million in capex and a 50-100 basis points impact on EBITDA margin over the same period
• Contractual commitment by LSEG for minimum cloud-related spend with Microsoft of $2.8 billion (£2.3 billion) over the term of the partnership, reflecting minimum cloud consumption expectations and consistent with existing long-term opex and capex plans
• Additional spend with Microsoft will be driven by the success of the strategic partnership, based on demand for LSEG’s data platform and other professional services