Pearson reports strong Q3 growth with advances in AI and strategic enterprise partnerships for 2024
Pearson has released an update for the first nine months of 2024, reporting solid performance across all divisions and progress on its 2024 priorities.
The company achieved 5% underlying sales growth in Q3, contributing to a 3% growth for the year-to-date, excluding divested businesses. This places Pearson on track to meet its full-year financial targets.
Strategic developments in AI and enterprise partnerships
Pearson has continued to advance its AI capabilities and enterprise relationships. The company reported double-digit growth in Higher Education billings for products with AI study tools and is developing Teaching Pal, an AI-powered tool in its English Language Learning division, to create customised lesson content.
Pearson’s recent enterprise agreements include a multi-year partnership with ServiceNow, focused on skills development, and an expanded partnership with Degreed, which integrates Faethm’s data sets for real-time insights on skill relevance across sectors.
Omar Abbosh, Pearson’s Chief Executive, said:
“Pearson is delivering on the three priorities for 2024 that I identified at the start of the year. First, our focus on operational and financial performance has driven growth across all divisions this quarter and we are on track to meet full-year expectations.
“Second, we are accelerating our AI capabilities across the business and starting to see the commercial benefit. Third, expanded enterprise relationships with companies such as ServiceNow demonstrate progress on our intention to expand in workforce learning.”
Division-specific performance highlights
Assessment & Qualifications: Sales increased by 6% in Q3 and 3% over nine months. This includes growth in Pearson VUE, which launched a Generative AI Foundations certification, and gains in UK and International Qualifications, largely driven by volume, pricing, and growth in international markets.
Virtual Learning: Q3 sales rose by 4%, reflecting growth in Virtual Schools where enrolments for the 2024/25 academic year increased by 4%. However, sales for the nine-month period were down 4%, mainly due to the final portion of the OPM ASU contract in the first half of 2023. Pearson opened three new schools and added 19 career programmes for the current academic year, now offering 40 schools and 24 career programmes across 30 U.S. states.
Higher Education: Q3 sales grew 4%, bringing year-to-date performance to flat. Growth in the U.S. market was driven by increased adoption share, enrolments, and pricing, offset by some mix impacts. Pearson reported over five million student interactions with its AI study tools, now integrated into 90 titles, supporting strong engagement.
English Language Learning: Sales increased by 2% in Q3 and by 7% over the nine-month period, led by robust Institutional growth in markets such as Latin America and the Middle East. Teaching Pal, an AI tool to assist educators in creating customised lessons, is also being developed in this segment.
Workforce Skills: Sales for Workforce Skills were up 6% for both Q3 and the nine-month period, driven by Vocational Qualifications and Workforce Solutions. Recent agreements, such as the ServiceNow partnership, demonstrate Pearson’s strategy to leverage its Workforce Skills assets in enterprise solutions.
Financial position and outlook
Pearson’s financial position remains stable, with a strong balance sheet and a recent upgrade to a Baa2 rating from Moody’s. Pearson completed a £500 million share buyback and issued a £350 million Educational Bond.
The UK government’s appeal on the European Commission's State Aid decision means that Pearson will recover a previously paid £105 million, releasing a £63 million tax provision this year.
For the full year, Pearson’s guidance on underlying sales growth, adjusted operating profit, and interest and tax remain in line with expectations. Free cash flow conversion is anticipated at 95-100%.
