Pearson Shares Plummet 9.5% Amid Contract Loss and AI Uncertainty: What’s Next for the Education Giant?

Summary
• Pearson (PSO) plunges 9.5% to $13.025, hitting a 52-week low of $12.9935
• 2025 sales growth of 4% and $610–615M adjusted profit fail to offset New Jersey contract loss
• CEO Omar Abbosh’s bullish 2026 outlook clashes with investor skepticism over AI disruption

Today’s sharp selloff in Pearson’s shares reflects a stark disconnect between management’s confidence in strategic progress and market concerns over near-term headwinds. Despite strong cash flow and AI-driven partnerships, the loss of a key U.S. assessment contract and unresolved questions about AI’s impact on education have triggered a volatile intraday drop. Traders now face a critical juncture: Will February results and AI integration prove transformative, or will operational risks dominate the narrative?

New Jersey Contract Loss and AI Uncertainty Weigh on Pearson’s Outlook
Pearson’s 9.5% intraday decline stems from two key catalysts: the loss of a New Jersey student assessment contract, which will weigh on H1 2026 performance, and unresolved investor skepticism about AI’s disruptive potential. While the company highlighted AI-powered tools like Communication Coach and partnerships with Microsoft and IBM, the market fixated on the absence of concrete 2026 guidance and the tangible revenue hit from the New Jersey contract. This duality—strong fundamentals versus near-term execution risks—has triggered a flight to safety, with short-term traders capitalizing on the sharp move below key support levels.

Options Playbook: Capitalizing on Volatility and Key Support Levels
• MACD: 0.1708 (bullish divergence), Signal Line: 0.1543, Histogram: 0.0165 (positive momentum)
• RSI: 60.28 (neutral), Bollinger Bands: 14.41 (upper), 14.11 (middle), 13.82 (lower)
• 200D MA: 14.58 (current price 13.03, bearish divergence)

Key Levels: 13.82 (Bollinger lower band), 14.11 (200D MA), 14.58 (resistance). The 200D MA remains a critical psychological barrier; a break below 13.82 could trigger a test of the 52-week low at 12.85. For short-term traders, the PSO20260220P12.5 put option (strike $12.50, expiry 2/20/26) offers high leverage (54.23%) and implied volatility (28.16%), with a delta of -0.3032 indicating moderate sensitivity to price declines. A 5% downside scenario (target $12.38) yields a potential 60% return on this contract.

Second Option: PSO20260320P12.5 (strike $12.50, expiry 3/20/26) has a higher IV (41.02%) and gamma (0.1652), making it ideal for a prolonged bearish trade. With a delta of -0.3656 and leverage ratio of 20.66%, this contract balances time decay (theta -0.004576) and price sensitivity. A 5% move to $12.38 would generate a 41% payoff.

Action Insight: Aggressive bears should prioritize PSO20260220P12.5 for short-term volatility, while longer-term positioning favors PSO20260320P12.5. Monitor the 13.82 support level; a break confirms a deeper correction.

Backtest Pearson Stock Performance
The performance of the PSO (ProShares UltraShort Oil) after a -9% intraday plunge from 2022 to now has shown mixed results in the backtest. While the 3-Day, 10-Day, and 30-Day win rates are relatively high at 52.18%, 55.40%, and 60.69%, respectively, the average returns over these periods are modest, with a maximum return of only 4.00% over 30 days. This suggests that while PSO has a strong short-term winning streak, the overall performance after the significant intraday plunge is moderate.

Pearson at a Crossroads: February Results Will Define 2026 Trajectory
Pearson’s current price action reflects a tug-of-war between long-term strategic optimism and near-term operational risks. The loss of the New Jersey contract and unresolved AI integration questions have created a short-term overhang, but the company’s strong cash flow and AI partnerships offer a path to recovery. Investors should watch the 27 February results for clarity on 2026 guidance and the pace of AI-driven revenue growth. In the broader market, Mohawk Industries (MHK) remains the sector leader with a -0.6755% intraday decline, underscoring the fragility of consumer-facing stocks. For Pearson, the 13.82 support level and February options expiry will be pivotal. Act Now: Short-term bears target PSO20260220P12.5; long-term holders await February clarity before committing.