Executive Summary / Key Takeaways

• Gartner, Inc. ($IT) is strategically leveraging its proprietary data and AI-powered innovations like AskGartner to enhance client value and internal productivity, positioning itself as an indispensable guide for enterprises navigating complex technological shifts, particularly in artificial intelligence.
• Despite macroeconomic headwinds, including U.S. federal government policy changes and tariff impacts, Gartner delivered Q3 2025 financial results ahead of expectations, driven by strong Insights contract value growth (6% ex-federal) and improved renewal rates.
• The company is actively adapting its operations and sales strategies, focusing on client engagement and sales force optimization, which are expected to accelerate contract value growth to high single digits in 2026 and double digits by 2027.
• Gartner maintains a robust financial profile, characterized by significant free cash flow generation, a strong balance sheet, and an aggressive share repurchase program, underscoring its commitment to long-term shareholder value creation.
• Key risks include ongoing macroeconomic volatility, the impact of U.S. federal government procurement challenges, and potential client spending reductions, though Gartner's diversified client base and unique value proposition provide resilience.

Gartner's Enduring Value Proposition in a Dynamic World

Gartner, Inc. (NYSE:IT), founded in 1979, has established itself as a global leader in research and advisory, delivering actionable, objective business and technology insights that empower organizations to make smarter decisions and achieve stronger performance on their mission-critical priorities. The company's core business model, centered on subscription-based research, conferences, and consulting, provides a stable and recurring revenue stream, a foundational strength that has allowed it to thrive through various economic cycles. Gartner's strategic evolution has consistently focused on enhancing shareholder value, notably through a significant share repurchase program initiated in 2015 and expanded incrementally through 2025, demonstrating a clear commitment to capital return.

The current macroeconomic environment presents a complex tapestry of challenges and opportunities. Geopolitical polarization, supply chain disruptions, and escalating cybersecurity threats continue to create uncertainty for executives worldwide. However, the rapid ascent of artificial intelligence (AI) stands out as both a profound challenge and an unprecedented opportunity. Gartner positions itself as an essential service, guiding leaders across every function, geography, and industry through these complexities, particularly in harnessing AI innovation, optimizing costs, and navigating public policy changes.

In this competitive landscape, Gartner's market positioning is that of a dominant leader in IT insights and consulting. Its primary competitive advantages, or moats, stem from its strong brand recognition, the powerful network effects derived from a vast client base, and its proprietary research methodologies. This translates into superior pricing power and robust customer loyalty, fostering recurring revenue and healthy margins. Compared to specialized research firms like Forrester Research (FORR), Gartner's broader scale and deeper network of experts provide a more comprehensive suite of resources, enhancing client decision-making. While Forrester might exhibit agility in niche tech insights, Gartner's established brand and wider ecosystem generally lead in market share capture and operational execution. Against global professional services firms like Accenture (ACN), Gartner differentiates through its independent research and advisory expertise, offering unbiased insights that complement Accenture's more implementation-oriented approach. Similarly, when contrasted with technology and consulting conglomerates like IBM (IBM), Gartner's focus on client-centric research, unburdened by hardware or software sales, provides a unique value proposition in neutral advisory services.

Technological Edge: AI as a Differentiator and Productivity Engine

Gartner's core technological differentiation lies in its unparalleled access to and synthesis of proprietary data, combined with the expertise of its world-class analysts. This unique data trove is not available in the public domain and forms the bedrock of its insights. It includes the industry's largest IT Key Metrics database, an extensive online peer network of over 139,000 unique users, more than 500,000 one-on-one client discussions annually, and over 3 million ratings and reviews of technology and software services. This vast, real-time, and continuously updated dataset uniquely positions Gartner to help clients determine the right AI tools, applications, and benefits.

The company is actively enhancing this technological moat through significant R&D and new technological developments, with AI at the forefront. AskGartner, an AI-driven tool rolled out to all licensed users without additional fees, exemplifies this innovation. This tool enables quick access and generates in-depth summaries of Gartner's business and technology insights. It is designed to increase client engagement and retention, with some clients reporting time savings of up to 75% on the platform. Crucially, AskGartner's responses are fully grounded in Gartner's proprietary insights, distinguishing it from other AI tools that rely on public internet information.

Internally, Gartner is leveraging AI to improve productivity and effectiveness across its operations. The company's data science team utilizes sophisticated proprietary AI models to systematically identify topics of greatest interest to clients. Advanced proprietary AI tools for content production have led to a 31% year-over-year increase in content published per analyst and a 75% reduction in average publishing time. Service delivery teams are using AI tools to better prepare for client discussions, and sales teams are employing AI to hone their selling skills. With over 50 internal AI applications, mostly custom-built, Gartner views AI as a continuous innovation strategy to enhance effectiveness, both for clients and internal operations.

For investors, this technological differentiation is paramount. It strengthens Gartner's competitive moat, enabling higher pricing power and deeper client relationships. The quantifiable benefits, such as increased client engagement and internal efficiency, directly contribute to improved financial performance, market positioning, and long-term growth strategy. Gartner's ability to integrate AI into its core offerings and internal processes reinforces its leadership in providing trusted, actionable insights, a critical advantage in an increasingly AI-driven world.

Financial Resilience and Strategic Capital Deployment

Gartner's financial performance in Q3 2025 demonstrated resilience amidst a dynamic external environment, with results exceeding expectations. Total revenues for the quarter reached $1.52 billion, an increase of 3% year-over-year on a reported basis, and 1% excluding foreign currency impact. For the nine months ended September 30, 2025, total revenues were $4.74 billion, up 4% on both reported and FX-neutral bases. The overall contribution margin for Q3 2025 stood at 69%, a 90-basis point improvement from the prior year. Adjusted EBITDA for the quarter was $347 million, a 2% increase year-over-year, with foreign exchange providing a nearly 3 percentage point benefit. Adjusted EPS for Q3 2025 was $2.76, marking a 10% increase from the same period last year.

However, net income for the three and nine months ended September 30, 2025, decreased to $35.36 million and $487.08 million, respectively, primarily due to a $150 million goodwill impairment loss recognized in the Digital Markets reporting unit and increased operating expenses, partially offset by higher revenues and lower net interest expense. This impairment was attributed to ongoing market weakness and internal organizational changes. The effective income tax rate also increased, largely due to the non-deductibility of this goodwill impairment for tax purposes.

Segment-wise, Business and Technology Insights (Insights) remains the largest and most profitable. Insights revenue grew 5% as reported and 4% FX neutral in Q3 2025, with a robust contribution margin of 77%. Contract Value (CV) for Insights reached $5.05 billion at the end of Q3 2025, up 3% year-over-year, or approximately 6% excluding the U.S. federal government. Global Technology Sales (GTS) CV increased 2% (5% ex-federal), while Global Business Sales (GBS) CV grew 7% (9% ex-federal). Client engagement, a key leading indicator, was up in the quarter, and client retention was higher year-over-year. In-quarter contract renewal rates, excluding the U.S. federal government, also improved from Q2 to Q3.
Conferences revenue for Q3 2025 was $74.55 million, a 2% decrease as reported and 4% FX neutral, primarily due to lower attendee revenue from conference timing shifts. Despite this, attendee ratings are at all-time highs, and advanced exhibitor bookings for 2026 conferences are strong. Consulting revenue decreased by 3% in Q3 2025, impacted by a 7% decline in labor-based consulting revenue, though contract optimization revenue increased by 12%. Consulting backlog decreased by 9% year-over-year to $194.9 million, partly due to a large project slipping out of the quarter. The "Other" segment, now including Digital Markets, saw revenues of $55.22 million in Q3 2025.

Gartner's liquidity and capital allocation strategy underscore its financial strength. As of September 30, 2025, the company held $1.43 billion in cash and cash equivalents and had approximately $0.7 billion in available borrowing capacity on its revolving credit facility. Operating cash flow for Q3 2025 was $299 million, contributing to a free cash flow of $269 million. The company's balance sheet is robust, with $2.1 billion of liquidity, low leverage, and nearly 90% fixed interest rates. Gartner remains committed to its disciplined share repurchase program, buying back $1.1 billion of stock in Q3 2025, reducing its share count by 6% year-over-year. Year-to-date through September, approximately $1.5 billion in stock has been repurchased. This aggressive capital return, coupled with strategic tuck-in M&A, is expected to create significant long-term shareholder value.

Outlook and Path to Accelerated Growth

Gartner has increased its full-year 2025 guidance, reflecting its strong Q3 performance and positive trends. The company now expects consolidated revenue of at least $6.475 billion, representing FX-neutral growth of approximately 3%. Insights revenue is projected to be at least $5.06 billion (FX-neutral growth of ~4%), Conferences revenue at least $630 million (FX-neutral growth of ~6%), and Consulting revenue at least $575 million (FX-neutral growth of ~2%). Full-year EBITDA is guided to at least $1.575 billion, with margins of 24.3%, and adjusted EPS is expected to be at least $12.65. Free cash flow is anticipated to be at least $1.145 billion, converting at 165% of GAAP net income. For Q4 2025, adjusted EBITDA is projected to be at least $400 million.

Management's outlook for 2026 and beyond signals a clear path to accelerated growth. Gartner anticipates reaccelerating contract value growth to high single digits in 2026, ultimately reaching sustained double-digit growth by 2027 and beyond. This acceleration is predicated on several factors:

• U.S. Federal Government Normalization: Removing DOGE-related headwinds, with no assumption for net growth, is expected to add approximately 200 basis points to CV growth in 2026.
• Tariff-Affected Industry Clarity: As companies in tariff-affected industries gain more clarity on trade policies, a return to normal spending patterns is expected to add at least 100 basis points to growth.
• Tech Vendor Reacceleration: The tech vendor market is on a path back to double-digit growth, with continued reacceleration expected to add another 100 basis points to growth.
• Operational Improvements: Enhanced operational execution, including increased focus on cost optimization insights, the continued rollout of AskGartner, and other strategic initiatives, is projected to add 100 to 200 basis points to growth.

Gartner's long-term financial model remains unchanged, targeting 12% to 16% Research CV growth, which is expected to drive double-digit revenue growth and modest EBITDA margin expansion through operating leverage. Free cash flow is anticipated to grow at least as fast as EBITDA, supported by modest capital expenditure needs and the benefit of upfront client payments. The company plans for mid-single-digit sales headcount growth in GTS and double-digit QBH growth in GBS for 2025, outside of directly impacted areas, reflecting a commitment to investing for future growth while maintaining strong margins.

Risks and Mitigating Factors

Despite a compelling investment thesis, Gartner faces several pertinent risks. The macroeconomic environment remains dynamic, with CEO confidence having fallen to recessionary levels in Q2 2025, and 78% of CEOs implementing cost-cutting measures. This has led to longer sales cycles and escalated purchase decisions, impacting new business velocity.

Challenges within the U.S. federal government, driven by Department of Government Efficiency (DOGE) initiatives, have made it more difficult for clients to purchase or renew Gartner's products. Nearly all U.S. federal contracts are up for renewal in 2025, with dollar retention year-to-date at around 46%. While Gartner is actively working to align with changing priorities and adjust to new procurement processes, this remains a near-term headwind.

The impact of evolving tariff policies on "tariff-affected industries" (representing 35% to 40% of Gartner's contract value) has also led to strong cost-saving measures and slower decision-making. While the selling environment in these industries is showing modest improvement due to increased certainty, this remains a factor to monitor. Furthermore, small tech vendor churn continues to be the biggest driver of the decline in enterprise client count, as these clients exhibit higher-than-average churn rates. Foreign currency fluctuations also pose a risk, as a 10% change in exchange rates could impact cash and cash equivalents by approximately $112.8 million.

Gartner mitigates these risks through its diversified client base, strong value proposition, and operational agility. The company's focus on mission-critical priorities like AI and cybersecurity ensures continued relevance. Its disciplined expense management and strategic investments in sales capacity and technological innovation are designed to navigate challenging environments and position the company for long-term success.

Conclusion

Gartner, Inc. stands as a resilient and strategically agile enterprise, adept at converting market complexities into opportunities. Its core investment thesis is underpinned by an indispensable value proposition: providing actionable, objective insights that guide global executives through their most critical business and technology challenges. The company's commitment to technological leadership, particularly through its proprietary data and AI-powered tools like AskGartner, reinforces its competitive moat and enhances client engagement, driving both retention and internal efficiency.

Despite facing macroeconomic headwinds, including U.S. federal government procurement shifts and tariff-related spending caution, Gartner's Q3 2025 performance exceeded expectations, demonstrating its operational effectiveness. The company's clear roadmap for accelerating contract value growth in 2026 and beyond, supported by strategic adaptations and a focus on core strengths, signals a robust future. With a strong balance sheet, consistent free cash flow generation, and a disciplined approach to capital allocation through share repurchases, Gartner is well-positioned to deliver sustained double-digit growth and expand shareholder value over the long term, cementing its role as an essential partner in the evolving digital economy.