London Stock Exchange Group PLC (LSE:LSEG) (LSEG) shares jumped higher in early deals after the firm announced a 10-year partnership with Microsoft Corp which has taken a stake of around 4% in the UK bourse operator.
The partnership involves next-generation data and analytics, as well as cloud infrastructure solutions, according to a statement by the LSEG.
It will include a new data infrastructure for the London exchange and analytics and modelling solutions with Microsoft Azure, AI, and Microsoft Teams.
“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,” David Schwimmer, CEO of LSEG, said in the statement.
The move is forecast to increase LSEG's revenue growth meaningfully over time as new products come on-stream although total incremental cash costs over 2023-2025 of £250mln to £300mln will see a 50 to 100 basis points hit to EBITDA margin over the same period.
There is a contractual commitment by LSEG for a minimum cloud-related spend with Microsoft of £2.3bn over the term of the partnership, reflecting minimum cloud consumption expectations and consistent with existing long-term opex and capex plans, the company said.
Satya Nadella, chairman and CEO, Microsoft, said: "Our partnership will bring together the industry leadership of the London Stock Exchange Group with the trust and breadth of the Microsoft Cloud - spanning Azure, AI, and Teams - to build next-generation services that will empower our customers to generate business insights, automate complex and time-consuming processes, and ultimately, do more with less."