According to Business Insider, Thomson Reuters reported quarterly results showing its legal unit grew organic revenue 9% to $700 million, with AI features driving double-digit growth across its CoCounsel products. Despite this, shares fell more than 6% on Tuesday and are down over 30% since mid-July as investors question whether the company’s legal AI offerings can compete with ChatGPT and new rivals. CEO Steve Hasker argued the company’s combination of Westlaw’s legal data and human editorial oversight creates a “difficult, if not impossible, to replicate” advantage. Meanwhile, competitors are emerging everywhere – LexisNexis partnered with AI startup Harvey in June, and Clio acquired legal data specialist vLex for $1 billion in late August.
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The AI Legal Showdown
Here’s the thing about legal AI – it’s not just about having smart algorithms. The legal world runs on precedent, accuracy, and trust. Thomson Reuters has been building that trust for decades with Westlaw, which ingests over 300 million documents annually and has attorneys and editors adding headnotes and verifying facts. About 85% of their primary documents carry these editorial upgrades. That’s their supposed moat.
But here’s the problem: lawyers are already using ChatGPT. They’re either doing it officially or on the side, and other business people are increasingly tapping the chatbot for legal input too. When Harvey’s CEO says buyers benchmark legal AI solutions against the latest general-purpose models, that tells you everything. OpenAI doesn’t even need to build a specialized legal product to shape this market – they just need to keep making ChatGPT better.
Model Wrapper or Real Winner?
The billion-dollar question hanging over Thomson Reuters is whether they’re building something with enduring value or just a fancy wrapper around other companies’ AI models. After all, CoCounsel itself uses large language models including OpenAI’s GPT offerings. So if OpenAI decided to sell a vertically packaged legal app directly to law firms, wouldn’t that cut out the middleman?
Hasker’s counterargument makes sense on paper – specialized tools with unique, accurate legal data should beat general-purpose AI. In litigation, there’s “no room for error and significant consequences for being wrong.” But how much of an edge does curated legal data really give when foundation models keep improving? And let’s be honest – when the CEO admits that “anyone who will tell you they know exactly what’s going to happen in this environment is probably slightly deluded,” that’s not exactly a ringing endorsement of their own crystal ball.
Why Investors Are Nervous
Look, the stock drop tells you everything. A 6% single-day decline after what should have been a decent earnings report? That’s investors voting with their wallets. They’re seeing venture funding pile into legal AI startups, they’re watching OpenAI demo contract review tools that could compete directly, and they’re wondering if Thomson Reuters’ decades of legal data dominance will matter in an AI-first world.
Hasker called competing AI startup valuations “squishy,” which is corporate-speak for “overhyped.” But here’s the reality – when Clio drops $1 billion on vLex and LexisNexis partners with an OpenAI-backed startup, the competitive landscape is changing fast. Thomson Reuters might have the data, but they’re playing defense as much as offense now. And in tech, playing defense is rarely a winning long-term strategy.
