Pearson (PSON.L) Downgrade to Neutral Further outperformance likely requires growth acceleration into 2027

Equity Research 4 August 2026 | 3:15AM BST

Pearson (PSON.L) Downgrade to Neutral: Further outperformance likely requires growth acceleration into 2027

PSON.L 12m Price Target: 1,375p Price: 1,249.5p Upside: 10.0% NEUTRAL James Tate Pearson reported solid H1 results and is on track to deliver FY26 | Goldman Sachs International guidance. Our Buy thesis was that Pearson could deliver consistent Adam Berlin mid-single-digit organic growth, which would support a re-rating to | Goldman Sachs International mid-teens P/E. This has now played out. Pulkit Gubgotra | For the shares to continue outperforming, we believe group Goldman Sachs India SPL organic growth would need to accelerate to 6% in 2027, following an increase from 3% in 2024 to 5% in 2026E. While we Key Data _____________________________________ see scope for this to be achieved, our forecasts are more Market cap: £9.7bn / $13.1bn Enterprise value: £10.4bn / $13.9bn cautious for three reasons: (1) demographic headwinds are likely 3m ADTV: £22.2mn / $29.7mn United Kingdom to weigh on US college enrolments from H2, (2) the market Europe Media & Internet environment for PTE remains challenging with limited evidence of M&A Rank: 3 Leases incl. in net debt & EV?: No improvement, and (3) Enterprise Solutions growth has largely been GS Forecast __________________________________ subdued. The business unit has yet to meaningfully contribute to 12/25 12/26E 12/27E 12/28E

group growth, as revenues from most enterprise contracts tend to Revenue (£ mn) New Revenue (£ mn) Old 3,577.0 3,577.0 3,733.6 3,754.2 3,914.1 3,947.2 4,098.8 4,141.6 be recognised elsewhere within the group. EBIT (£ mn) EPS (p) New EPS (p) Old Our medium-term fundamental view on Pearson remains P/E (X) constructive, where we continue to see solid execution and Dividend yield (%) 2.2 2.1 2.2 2.3 CROCI (%) 8.3 7.9 9.0 9.7 supportive structural growth drivers underpinning growth. In N debt/EBITDA (ex lease,X) 0.7 0.7 0.7 0.7 particular, we expect A&Q to be the main driver of growth, 12/25 6/26 12/26E -- reflecting a growing need for high-quality assessment & verification EPS (p) --

in an AI world, with the company benefiting from leading market GS Factor Profile ______________________________ positions with global scale and very strong retention rates. That said, Growth

we believe the risk/ reward is more balanced at current valuation Financial Returns

levels (on ~16x 12m fwd P/E, slightly ahead of its 10-year median, Multiple and now in line with RELX), with our 2026/27 forecasts broadly in line with consensus. Integrated

As a result, we downgrade Pearson to Neutral from Buy. Our Percentile 20th 40th 60th 80th 100th

12-month target price of 1,375p (from 1,365p) implies ~9% upside, PSON.L relative to Europe Coverage

compared with our sector average of ~15%. PSON.L relative to Europe Media & Internet

Source: Company data, Goldman Sachs Research estimates. Upside risks exist if Pearson can deliver consensus upgrades into See disclosures for details. 2027 through: (1) greater levels of cost efficiencies by leveraging AI,

Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.

Goldman Sachs Pearson (PSON.L)

Pearson (PSON.L) Balance Sheet (£ mn) _______________________________________ NEUTRAL Rating since Aug 4, 2026 12/25 12/26E 12/27E 12/28E Cash & cash equivalents Accounts receivable 1,082.0 1,164.6 1,220.9 1,278.5 Inventory Ratios & Valuation __________________________________________ Other current assets /25 12/26E 12/27E 12/28E Total current assets 2,320.0 2,560.4 2,596.5 2,473.3 EV/sales (X) 2.3 2.2 2.0 1.9 Net PP&E EV/EBITDAR (X) 9.6 9.2 8.3 7.4 Net intangibles 3,009.0 3,009.0 3,009.0 3,009.0 EV/EBITDA (excl. leases) (X) 9.6 9.2 8.3 7.4 Total…