The new AI defence
LSEG, and other financial data and desktop providers saw shares sell off sharply in early February as fears grew around AI disintermediation risk, and seat-based revenue contraction following new plug-ins with Anthropic’s Claude1. LSEG have since sought to address these concerns, in their FY2025 results release, by championing its 'LSEG Everywhere' strategy, highlighting how MCP (Model Context Protocol) facilitates seamless integration of its trusted, AI-ready data into clients' existing AI workflows2.
However, the Third Bridge experts we spoke to offer a far more measured perspective on LSEG’s long-term resilience. Here is what we heard from our experts:
Compliance risk protects LSEG from AI disintermediation fears
One of the key concerns investors have focused on regarding LSEG is based on fears that generative AI tools from firms such as Anthropic could commoditise or replace Data & Analytics (D&A) revenue.
More than an exchange: LSEG’s Data & Analytics now accounts for 44% of group revenue.
Source: LSEG FY2025 Preliminary Results (released Feb 2026).
One former LSEG executive we spoke to recently suggested that AI-native start-ups could replicate roughly 70% of LSEG’s data and capabilities. However, the final 30% is where the “real value” sits and creates formidable barriers, with clients demanding 100% data accuracy for compliance, risk management, and regulatory reporting.
Furthermore, switching providers is “brutal”, a basic migration takes 3-6 months, extending to 6-18 months once audits, compliance, business continuity plans, disaster recovery, and insurance are factored in. Price is not seen as a key switching decider, with relationship being the most important aspect. Switching is further complicated by accidental regulatory moats such as the Digital Operational Resilience Act (DORA) for Tier-1 incumbents, helping increase stickiness for LSEG, FactSet, S&P Global, and Bloomberg.
Shifting from seat-based licenses to usage-driven API revenue streams
Another key concern raised by the market is based on potential declining seat-based revenues and the timeframe to transition to usage-based API revenues, supported by AI agent consumption3. Our experts have highlighted in multiple interviews that AI should drive consumption upwards, which should benefit in the long-term, though there is concern around the transition phase.
One expert described phase one (present day to 2027) as a period of early API pilots where reported numbers remain stable, as major contracts are not up for renewal. Phase 2 (2027-2029) could see P&L pressure as major rivals hit an AI-native environment, and reduced seat-count may harm revenues. Finally, Phase 3 (2029 onwards) should unveil the ultimate winners. Although it is too early to say who will come out on top, experts say LSEG’s MCP data distribution approach looks stronger than Bloomberg’s current strategy of building LLMs in-house.
MCP expansion raises concerns over data boundaries and control
Whilst the opportunity looks promising, our experts have highlighted data security risks, with one of the key ones arising from how LSEG and other MCP distributors ensure their data remains protected by secure boundaries.
Some tech firms, such as Meta, have pursued the motto of “move fast and break things”, which raises concerns about this approach being adopted in AI.4 One former Director at LSEG highlighted that this mantra could pose challenges, with hard-to-detect breaches being possible and of significant concern. These concerns are echoed by other industry veterans we’ve interviewed, with one highlighting a power imbalance between LLMs and MCP data providers.
Microsoft partnership fails to materialize immediate growth
Microsoft’s partnership with LSEG, which was announced in December 2022, should play a significant role in enabling LSEG's MCP capabilities. One former LSEG global leader highlighted the benefits of enterprise-level, trusted data workflows powered by AI, spanning from trading infrastructure to back-office operations. The primary upside is expected within the D&A division as assets are integrated into Microsoft’s offering, though the full business case payoff is not anticipated until post-2027-28.
However, some observers remain skeptical about the near-term revenue uplift. While management initially suggested that new product launches would drive meaningful revenue growth5. Experts we’ve spoken to suggest those early expectations were potentially overly optimistic. A necessary adjustment period is currently underway as the industry shifts from pilot programs to full-scale integration.
LSEG D&A growth trails early Microsoft partnership hype
Source: LSEG
What Investors Should Be Asking & Looking For Going Forward
Investors should be asking some key questions regarding LSEG. On AI and MCPs, one of the key questions suggested by a former LSEG executive is evidence of an audit trail to understand where data goes when it enters an AI system, and if AI gets it wrong, who is accountable, alongside what correction procedures may follow. Furthermore, with concerns raised about vulnerabilities following the Claude Mythos6 selected release, questions around AI governance should be a focus.
Looking at LSEG as a whole, the firm also recently announced a GBP 3bn buyback, with one former director noting it signals LSEG as a value play. Investors should consider the tradeoffs of using capital to support the share price short-term, against further investments in technology or acquisitions. Our experts believe LSEG would be better off spending capital on consolidating its position in the financial infrastructure space to help build a five to ten-year competitive moat around its technology, alongside AI investment to further cement leadership.
All insights in this article are based on information shared by Third Bridge experts.
For media enquiries, please contact us at comms@thirdbridge.com.
Transcript references:
1. Financial Services Desktops & Data Feeds – AI Disintermediation & Revenue Moats
2. LSEG – In the AI Storm – Monetisation Shifts & Product Outlook
3. LSEG – Can It Future-proof Revenue? – Data & Analytics Product & Revenue Evolution
References:
2. https://www.lseg.com/en/investor-relations/financial-results/2025-preliminary-results
4. https://www.businessinsider.com/ai-challenges-companies-fast-paced-innovation-strategy-2026-3
6. https://www.ft.com/content/ec7bb366-9643-47ce-9909-fc5ad4864ae5?syn-25a6b1a6=1
