Pearson Q1 Earnings Call Highlights

Key Points

• 4% revenue growth in Q1 gave Pearson a “good start to 2026,” with management reaffirming full‑year guidance and citing broad momentum led by Virtual Learning (+21%) alongside steady gains in Higher Education, ELL and Enterprise learning.
• Assessment & Qualifications fell 1% as expected but is forecast to return to growth in Q2, supported by new and extended contracts (including the U.K. STA, ACCA, Google Cloud and NCT) and management says it is “very confident” about A&Q’s recovery.
• Pearson is accelerating strategic AI and enterprise partnerships—launching initiatives like a Foundations of AI course and an Adobe Firefly certification—and says partners have committed “hundreds of millions” of incremental revenue to 2030, while completing an accelerated share buyback and managing a CFO transition.

Pearson NYSE: PSO reported a “good start to 2026,” posting 4% revenue growth in its first-quarter trading update, as management reiterated confidence in achieving full-year guidance and reconfirmed its medium-term outlook.

Chief Executive Officer Omar Abbosh said the performance reflected “continued strong execution from all our teams,” with momentum across much of the portfolio despite a modest decline in Assessment & Qualifications that the company said was anticipated.

First-quarter performance by business

Abbosh outlined results across Pearson’s business units, highlighting strength in Virtual Learning and steady growth in several other segments.

• Assessment & Qualifications (A&Q): Revenue declined 1%, which Abbosh said was expected. He said the business is “on track to return to growth in Q2 and beyond,” supported by new business including the U.K. Standards and Testing Agency and extended or awarded contracts such as ACCA and Google Cloud.
• Virtual Learning: Revenue increased 21%, which Abbosh called “another standout result,” driven by strong enrollment trends that “accelerated from the fall semester.” He added that preliminary market share data indicates Pearson is gaining share.
• Higher Education: Revenue grew 2% on what Abbosh described as “another solid performance” in Pearson’s U.S. core courseware business. He said Pearson expects Higher Education revenue growth this year to be higher than 2025, citing improvements in the K-12 channel and international markets.
• English Language Learning (ELL): Revenue rose 2%, reflecting institutional growth driven by China and enterprise offerings. Abbosh said Pearson still expects PTE to return to growth this year, supported by share gains in pricing, while noting the market remains pressured.
• Enterprise learning and skills: Revenue grew 8%, supported by growth in vocational qualifications and “continued momentum in enterprise solutions,” Abbosh said.

Abbosh also emphasized Pearson’s business mix, noting that about 90% of profit comes from “operationally complex, interconnected, hybrid, physical and digital services,” including assessments, virtual schools, and print, while the remaining ~10% comes from primarily digital courseware integrated into customer workflows.

Drivers in A&Q and Virtual Learning

In Q&A, Citi analyst Ciarán Donnelly asked about the expected return to growth in A&Q in Q2, including impacts from the New Jersey contract loss and PDRI comparisons. CFO Sally Johnson said A&Q’s Q1 dynamics included a comparison related to PDRI, with the “federal impact” occurring in Q2 of last year, making it less relevant for Q2 comparisons this year. She added that the New Jersey impact spans both Q1 and Q2.

Johnson said Q2 growth is expected to be supported by underlying business performance and newer contracts, citing “Salesforce and ServiceNow that started in the second half of last year.” She also pointed to Pearson’s NCT contract in the U.K. qualifications business—exam delivery for primary school students—as a seasonal contributor in the summer term. “Very confident in A&Q growth in Q2,” Johnson said.

On Virtual Learning, Johnson said enrollments were up 15% for Pearson. She attributed the performance to category tailwinds and execution, including enrollment process improvements and marketing. Johnson also noted Pearson added “enrollments in year,” which she linked partly to the timing of marketing spend. She said Q2 growth will still be “very good,” but not “quite as high as it was in Q1” because Pearson saw a small amount of funding upside in Q1 that it would “normally get in Q2.”

Deutsche Numis analyst Steve Liechti asked about phasing, and Johnson said Virtual Learning’s semester-driven pattern means Q1 and Q2 “generally would look very similar,” and that the company’s H1 can resemble H2 of the prior year. She referenced that Pearson had previously cited 18% growth in Virtual Learning in the second half of last year.

Contract activity in U.S. student assessment

Goldman Sachs analyst James Tate asked about Pearson’s U.S. student assessment activity, including contract expansions in Maryland and a win in Wyoming. Johnson said both contracts contribute “a small amount in the second half of 2026,” with additional upside in 2027 when Pearson has a full year of benefit.

She also described the tender environment as typical for the business and pointed to Pearson’s recent retention performance. “I’d remind you of our track record in terms of our retention rate,” she said, citing 96% last year, “and that included New Jersey.”

Enterprise partnerships and AI skilling initiatives

Abbosh highlighted strategic progress in AI-related learning and enterprise partnerships. He cited the launch of Pearson’s Foundations of AI course for U.S. school teachers and, with Adobe, what he described as the first professional certification for Adobe Firefly.

He also said Pearson has been developing relationships across nine partners, including Salesforce, and positioned the partnerships as long-term opportunities. Abbosh said these partners have “committed hundreds of millions of dollars of incremental revenues up to 2030 to Pearson,” with joint efforts spanning product development and go-to-market initiatives. Communication Coach, developed with Microsoft, was cited as one example.

In response to a question about enterprise learning and skills trends, Abbosh said the segment’s Q1 strength came in part from virtual and vocational qualifications, which he noted are typically weighted toward the first half. He said enterprise solutions tied to partnerships are “trending in a very good way,” while noting that the contracts are designed to ramp over time. Abbosh also described near-term demand from technology companies for training sales teams, partners, and end customers on rapidly evolving AI tools.

Middle East conflict and CFO transition

Abbosh addressed the conflict in the Middle East, saying Pearson’s “first priority” is the safety of its people and that the company is supporting employees. He said the region, including nearby countries such as Turkey and Pakistan, represents about 2% of Pearson’s revenue, primarily across A&Q and ELL, and that Pearson does not expect the conflict to affect full-year group growth “in any meaningful way.”

He said Pearson is managing operational considerations such as announced changes to school exam delivery, using “well-established contingency arrangements,” and noted early signs of potential disruption to the migration and study abroad market relevant to PTE, while reiterating confidence in 2026 guidance.

Abbosh also marked the call as Johnson’s final set of results as CFO, saying she has been working closely with incoming CFO Simon Robson to ensure a smooth transition, with plans to introduce Robson at interim results in the summer.

On capital allocation, Tate asked about the accelerated share buyback expected to be completed by the end of May and leverage levels. Johnson said the company is currently in the midst of the buyback and that there is “no capital allocation for the board to be making a decision on” at present, adding that future decisions would follow Pearson’s stated capital allocation policy.

About Pearson NYSE: PSO

Pearson plc is a global education company headquartered in London, England, with significant operations in North America, Europe, Asia, and Latin America. Tracing its roots back to 1844, Pearson evolved from its early beginnings into one of the world's leading providers of educational content, digital learning tools, and assessment services. The company's American subsidiary trades on the New York Stock Exchange under the symbol PSO.

Pearson's core business encompasses a broad portfolio of products and services for learners, educators, and institutions.

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