Sed command not working as expected

I am using Ubuntu over WSL. It looks like sed is not working as intended. It doesn't replace the text if the search text in more than one character.

When I execute the following command

sed 's/l/XYZ/gi'

it works perfectly fine where as when I switch l to a word like localhost

sed 's/localhost/XYZ/gi'

then it stops working. Any pointers?

Update: I am using sed version 4.4

sed --versionsed (GNU sed) 4.4