Beyond Resilience, Testing the Growth Algorithm

Research evidence excerpt

Beyond Resilience, Testing the Growth Algorithm

6 JUL '27

Self-help: Positive

Key: Historical Stock Performance Current Stock Price Price Target Technology Diffusion: Positive

Source: Refinitiv, Morgan Stanley Research, Morgan Stanley Institutional Equities Division. The probabilities of our Bull, View descriptions of Risk Rewards Themes here

Base, and Bear case scenarios playing out were estimated with implied volatility data from the options market as of 20

Jul 2026. All figures are approximate risk-neutral probabilities of the stock reaching beyond the scenario price in either

three-months’ or one-years’ time. View explanation of Options Probabilities methodology here

BULL CASE 1,810p BASE CASE 1,335p BEAR CASE 735p

Re-skilling opportunity => top-line Mid-single-digit % growth and margin Risks materialise (AI, evolving US policy)

acceleration expansion

Our bear case sees a more significant

Our bull case assumes faster growth (high We assume that Pearson's strong core slowdown across the group top line, such as

single digit) across the Group, with ELS and allows the company to continue delivering with Higher Education turning slightly

Virtual Learning seeing a marked mid-single-digit growth and margin negative due to volume/pricing pressures

acceleration driven by structural trends. expansion. Fastest growth segment ELS (declining enrolments, budget constraints,

Margin progression is more significant as the benefits from the re-skilling theme, whilst pricing pressures due to more competition

company derives a lot of efficiencies from lowest-growth segment Higher Ed reflects and lower barriers to entry to creating

implementing AI tools internally and still moderate headwinds from enrolment trends content) and emerging segments