Advanced AI Integration And Digital Shift Will Drive Success

Key Takeaways

• Accelerated shift to AI-powered digital products and data analytics is deepening customer value, spurring recurring revenue growth, and expanding profit margins.
  
• Focus on high-value digital subscriptions and prudent capital allocation strengthens long-term revenue momentum and supports sustainable EPS expansion.
  
• Shifts toward open access, rapid AI advances, rising competition, and heavy subscription dependence threaten RELX's margins, pricing power, revenue predictability, and long-term growth.

Catalysts

Provides information-based analytics and decision tools for professional and business customers in North America, Europe, and internationally.

• RELX's continued rollout and integration of advanced AI-powered analytics and decision tools across its Risk, STM, and Legal segments is deepening customer value, increasing product adoption, and supporting higher-margin, recurring digital revenues, with management expecting operating profit growth to outpace revenue growth-this is likely to drive further EPS and margin expansion.
  
• Ongoing shift away from print to electronic service delivery-now with print revenue managed separately and representing only ~4% of the business-removes a structural drag on growth, enhances transparency, and ensures a pure-play focus on high-value, recurring digital subscriptions, supporting long-term sustainable revenue and margin improvement.
  
• Increasing demand for data-driven compliance, regulatory, and risk management solutions (especially in financial crime compliance, digital identity, and insurance) positions RELX to benefit from the global expansion of regulatory requirements, translating into robust sales growth in core verticals and underpinning forward-looking revenue momentum.
  
• Strong balance sheet, robust cash conversion (100%), and prudent capital allocation-evidenced by ongoing bolt-on acquisitions in high-growth data analytics and digital risk-expand RELX's addressable opportunity and allow continued reinvestment or buybacks, enhancing long-term earnings and supporting EPS growth.
  
• Momentum in adoption of AI-enhanced platforms (Lexis+ AI, Protégé, ScienceDirect AI, etc.) across legal and academic customers is driving double-digit spend uplifts, with management noting strong new sales, increased renewal rates, and an accelerating shift of the revenue base to AI-integrated offerings-fueling both top-line growth and higher net margins.

RELX Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming RELX's revenue will grow by 6.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 20.2% today to 23.2% in 3 years time.
• Analysts expect earnings to reach £2.7 billion (and earnings per share of £1.47) by about July 2028, up from £1.9 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 35.6x on those 2028 earnings, down from 37.1x today. This future PE is greater than the current PE for the GB Professional Services industry at 22.3x.
• Analysts expect the number of shares outstanding to decline by 1.67% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.04%, as per the Simply Wall St company report.

RELX Future Earnings Per Share Growth

Risks

• The proliferation of open-access publishing policies, such as the NIH's requirement for research to be published open access, could accelerate a long-term shift away from traditional subscription-based academic publishing, potentially reducing RELX's STM division revenue and compressing margins as the value of paid content declines.
  
• Rapid advances in AI technology, including open-source models and new competitive entrants (e.g., Harvey in legal analytics), may commoditize data-driven analytics and decision tools, heightening pricing pressure and limiting RELX's ability to maintain premium pricing, which could negatively affect net margins and long-term earnings growth.
  
• A heavy reliance on subscription-based revenue-over 80% in Legal, with multi-year contracts-exposes RELX to potential client cost-cutting and renegotiation risk during sector downturns or public funding pressures (notably from U.S. university budget constraints), which could lead to higher churn, decreased revenue predictability, and margin instability.
  
• Industry-wide automation and digital disruption are lowering barriers for digital-native and start-up information providers, increasing competition in RELX's core markets and risking client disintermediation, which could erode market share and limit top-line growth in both professional and academic segments.
  
• As RELX invests heavily in developing and rolling out sophisticated AI-enabled products, ongoing technology/content acquisition and R&D expenses could outpace revenue growth if adoption or pricing uplifts slow, placing downward pressure on net margins and returns if the competitive landscape intensifies or market expansion stalls.

Valuation

• The analysts have a consensus price target of £44.597 for RELX based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of £49.2, and the most bearish reporting a price target of just £39.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be £11.5 billion, earnings will come to £2.7 billion, and it would be trading on a PE ratio of 35.6x, assuming you use a discount rate of 7.0%.
  
• Given the current share price of £39.07, the analyst price target of £44.6 is 12.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.