Published - November 12, 2022 @ 3:37 PM (EET)

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On Monday, US tech giant Microsoft (NASDAQ:MSFT) agreed to take 4% ownership of the London Stock Exchange Group and shift the exchange's financial data platform onto the tech giant's cloud computing platform.

As part of the 10-year partnership, the UK bourse operator said it would spend at least $2.8 billion on Microsoft products, including next-generation data and analytics with Microsoft Azure, AI, and Microsoft Teams. 

Depending on the partnership's success and the demand for LSEG's data platform, spending could increase under the long-term deal.  In a separate statement, Microsoft estimated that the "partnership, and broader market opportunity, could generate an additional $5 billion in revenue."

The agreement also reflects the growing trend between tech firms and exchanges following similar partnerships between Amazon.com (NASDAQ:AMZN) and Nasdaq, as well as Google-parent Alphabet (NASDAQ:GOOGL) and CME Group.

Shares of LSEG were up 4% in Europe on Monday.

In the statement, CEO David Schwimmer 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."

WHY IT MATTERS

Microsoft and LSEG will work together to develop new collaboration tools and advance and integrate LSEG's Workspace product with Microsoft Teams, the firm's messaging app.

The release further said that Scott Guthrie, executive vice president for Microsoft's AI and cloud group, will join LSEG as a non-executive director.

"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," said Microsoft CEO Satya Nadella.

Kicking off a new era with a significant focus on data and analytics, LSEG last year completed a $27 billion purchase of trading company Refinitiv.

Following the Refinitv deal, Thomson Reuters, owner of Reuters News, gained a minority shareholding in LSEG.

It is expected that the purchase will be completed in the first quarter of 2023.