Gartner Q1 2025 Earnings Report

Gartner EPS Results

• Actual EPS: $2.98
• Consensus EPS: $2.72
• Beat/Miss: Beat by +$0.26
• One Year Ago EPS: $2.93

Gartner Revenue Results

• Actual Revenue: $1.54 billion
• Expected Revenue: $1.53 billion
• Beat/Miss: Beat by +$758.00 thousand
• YoY Revenue Growth: +4.20%

Gartner Announcement Details

• Quarter: Q1 2025
• Date: 5/6/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, May 6, 2025
• Conference Call Time: 8:00AM ET

Gartner (NYSE:IT) operates as a research and advisory company in the United States, Canada, Europe, the Middle East, Africa, and internationally. It operates through three segments: Research, Conferences, and Consulting. The Research segment delivers its research primarily through a subscription service that include on-demand access to published research content, data and benchmarks, and direct access to a network of research experts. The Conferences segment offers executives and teams in an organization the opportunity to learn, share, and network. The Consulting segment offers market-leading research, custom analysis, and on-the-ground support services. This segment also offers actionable solutions for IT-related priorities, including IT cost optimization, digital transformation, and IT sourcing optimization. Gartner, Inc. was founded in 1979 and is headquartered in Stamford, Connecticut.

Gartner Q1 2025 Earnings Call Transcript

Key Takeaways

• Financial performance: Q1 contract value grew 7% (8% ex-US federal), with revenue of $1.5B (+6% FXN), EBITDA of $385M (+3% FXN), EPS of $2.98 (+2%), and free cash flow of $288M (+73%), all above expectations.
• Segment resilience: Research CV grew 7% (subscription revenue +8% FXN), GTS CV grew 6% (7% ex-federal), GBS CV grew 11%, same-conference revenue was +12% FXN, and consulting revenue rose 5% with backlog up 16% and contract optimization +38%.
• US federal impact: Federal business (~4% of CV) saw ~50% dollar retention on $225M in Q1, with nearly all contracts up for renewal in 2025 (40% already transacted in Q1) and Gartner focused on regaining and expanding this client base.
• 2025 outlook: Updated guidance calls for at least 4% FXN revenue growth to $6.535B, EBITDA ≥$1.535B, EPS ≥$11.70, free cash flow ≥$1.145B, and a long-term target of 12–16% CV growth with margin expansion in a normalized macro environment.
• Capital allocation & investment: Repurchased $163M of shares in Q1, holds $2.1B cash and $2.8B liquidity, remains disciplined and opportunistic on buybacks and tuck-in M&A, while growing sales headcount mid-single digits to drive future double-digit growth.

Presentation

[David Cohen, Senior Vice President, Investor Relations at Gartner]

Good morning, everyone. Welcome to Gartner's First Quarter twenty twenty five Earnings Call. I'm David Cohen, SVP of Investor Relations. At this time, all participants are in a listen only mode. After comments by Gene Hall, Gartner's Chairman and Chief Executive Officer and Craig Safian, Gartner's Chief Financial Officer, there will be a question and answer session.

[David Cohen, Senior Vice President, Investor Relations at Gartner]

Please be advised that today's conference is being recorded. This call will include a discussion of first quarter twenty twenty five financial results and Gartner's outlook for 2025 as disclosed in today's earnings release and earnings supplement, both posted to our website, investor.gartner.com. On the call, unless stated otherwise, all references to EBITDA are for adjusted EBITDA, with the adjustments as described in our earnings release and supplement. All contract values and associated growth rates we discuss are based on 2025 foreign exchange rates. All growth rates in Gene's comments are FX neutral unless stated otherwise.

[David Cohen, Senior Vice President, Investor Relations at Gartner]

All references to share counts are for fully diluted weighted average share counts unless stated otherwise. Reconciliations for all non GAAP numbers we use are available in the Investor Relations section of the gartner.com website. As set forth in more detail in today's earnings release, certain statements made on this call may constitute forward looking statements. Forward looking statements can vary materially from actual results and are subject to a number of risks and uncertainties, including those contained in the company's 2024 annual report on Form 10 ks and quarterly reports on Form 10 Q, as well as in other filings with the SEC. I encourage all of you to review the risk factors listed in these documents.

[David Cohen, Senior Vice President, Investor Relations at Gartner]

Now, I will turn the call over to Gartner's Chairman and Chief Executive Officer, Gene Hall.

[Eugene Hall, CEO & Chairman at Gartner]

Good morning, and thanks for joining us today. Gartner remains resilient in a complex environment. In Q1, contract value grew 7%. First quarter revenue, EBITDA, EPS, and free cash flow were ahead of our expectations. We increased headcount across our sales organizations by 4%.

[Eugene Hall, CEO & Chairman at Gartner]

As we navigate another year of volatility, uncertainty, complexity, and ambiguity, we'll continue to be agile, and we'll target our investments to support long term sustained double digit growth. Research continues to be our largest and most profitable segment. Research contract value grew 7%. Excluding The US Federal business, contract value grew 8%. Within research, we serve executives and their teams through distinct sales channels.

[Eugene Hall, CEO & Chairman at Gartner]

Global Technology Sales, or GTS, serves leaders and their teams within IT. GTS contract value grew 6%. Excluding The US Federal business, contract value grew 7%. Contract value with tech vendor clients improved for the fourth consecutive quarter. Global business sales or GBS serves leaders and their teams beyond IT.

[Eugene Hall, CEO & Chairman at Gartner]

This includes HR, supply chain, finance, marketing, legal, sales, and more. GBS contract value increased 11%. Gartner Conferences deliver extraordinarily valuable insights to engaged and qualified audience. On a same conference basis, revenue grew 12%. Gartner Consulting is an extension of Gartner Research.

[Eugene Hall, CEO & Chairman at Gartner]

Consulting helps clients execute their most strategic initiatives through deeper project based work. Consulting is an important complement to our IT research business. Consulting revenue grew 5% against a strong compare from Q1 twenty twenty four. Revenue from contract optimization grew robust 38%, and consulting backlog grew 16%. Overall, our Q1 financial results were ahead of expectations.

[Eugene Hall, CEO & Chairman at Gartner]

Gartner has a unique client value proposition. We deliver actionable, objective insight, guidance, and tools that help our clients succeed with their mission critical priorities. We practice disciplined cost management while remaining agile and prudently investing for future growth. We generate free cash flow well in excess of net income. And we return capital to our shareholders through our repurchase program.

[Eugene Hall, CEO & Chairman at Gartner]

Over the past five years, we've seen persistent elevated levels of volatility in the macroeconomic environment. The COVID-nineteen pandemic, the bursting of a tech spending bubble, the highest inflation in forty years, a sharp rise in interest rates, the first ground war in Europe in eighty years. Now, government policy and tariff changes are affecting enterprises across The US and around the world in different and complex ways. There's a high level of macroeconomic uncertainty. Executives know they need help.

[Eugene Hall, CEO & Chairman at Gartner]

Gartner is the best, most cost effective source for the insight, guidance, and tools they need to succeed. We help our clients make smarter decisions that address mission critical priorities such as cost optimization, managing through public policy changes, leveraging AI innovation, cybersecurity, and more. And we do this while helping them manage risk, save time, save money, and build confidence. Gartner helps senior executives make smarter decisions to achieve their mission critical priorities. Today, one urgent priority for the majority of our clients is harnessing the potential of artificial intelligence.

[Eugene Hall, CEO & Chairman at Gartner]

Of course, Gartner is one of the world's leading experts in AI. We help thousands of end user enterprises determine the best uses and business cases for AI. With our in-depth understanding of end user business cases, we also advise thousands of technology vendors on how to compete in the AI marketplace. And finally, we use AI internally to support our business. We develop proprietary insight, guidance, and tools to help senior executives make smarter decisions on their mission critical priorities.

[Eugene Hall, CEO & Chairman at Gartner]

Our 2,500 experts develop these proprietary insights, guidance, and tools by analyzing our more than 500,001 on one conversations that we hold with clients every year. In addition, we conduct proprietary primary research, which is only available through Gartner to supplement these conversations. All of this creates a valuable data set that is massive, proprietary, and constantly updated. Finally, we incorporate publicly available data where helpful, often using AI. The combination of our 2,500 experts, hundreds of thousands of conversations with end users and technology vendors, and proprietary data methodologies and process makes our insights, guidance and tools highly valuable, highly unique, and highly differentiated from any other source.

[Eugene Hall, CEO & Chairman at Gartner]

A core element of our strategy is continuous improvement and innovation, which we will apply to further increase our value and differentiation over time. Our powerful client value proposition gives us a vast untapped market opportunity, and we know the right things to do to capture that opportunity. Gartner has proven best practices that address how we serve our clients, recruit, hire, train, and deploy our salespeople, create our insights, guidance, and tools, host attendees at our conferences, and support our largest technology clients through consulting. We also have best practices that address how we approach expense management to optimize flexibility while increasing selling capacity. For the remainder of 2025, we plan to grow sales headcount in the mid single digits, excluding directly impacted areas.

[Eugene Hall, CEO & Chairman at Gartner]

This reflects our commitment to invest for future growth while delivering strong margins and free cash flow. Our plan is to exit the current environment better, faster, and stronger than before. With continued sales headcount growth and a return to historically strong productivity, we're well positioned to accelerate growth as the external environment evolves. We expect to reaccelerate CV growth to our target of 12% to 16% when the macroeconomic environment returns to normal. And we expect EBITDA margins to expand through the natural operating leverage in the business.

[Eugene Hall, CEO & Chairman at Gartner]

Gartner has a highly diversified client base. The US Federal Government represents approximately 4% of our total contract value. Our U. Federal business has been impacted by the recent policy changes. Nearly all of our U.

[Eugene Hall, CEO & Chairman at Gartner]

S. Federal contracts are up for renewal in 2025. Roughly 40% of these were transaction in Q1, the largest quarter of the year, and we renewed roughly half that business. We remain laser focused on creating and delivering value for our US federal clients. As the US federal government modifies and refines their priorities, we believe that we will be a core part of helping them achieve critical priorities such as cybersecurity, cost optimization, digital transformation, and more.

[Eugene Hall, CEO & Chairman at Gartner]

Stock buybacks are an important way we return value to shareholders. We remain eager to repurchase shares aggressively. Our approach is designed to optimize returns by being price sensitive, opportunistic, and disciplined. In closing, Gartner delivered financial results ahead of expectations. Tech vendor CV growth continued to accelerate.

[Eugene Hall, CEO & Chairman at Gartner]

We have a powerful client value proposition and a vast addressable market opportunity. We will continue to create value for our shareholders by providing actionable objective insight, guidance and tools to our clients, prudently investing for future growth, remaining agile and disciplined in our approach to expenses, and returning capital to our shareholders through our share repurchase program. We expect to deliver modest margin expansion over time alongside double digit top line growth and will continue to generate significant free cash flow well in excess of net income. All of this and more positions us to drive long term double digit growth and sustain our track record of success far into the future. With that, I'll hand the call over to our Chief Financial Officer, Craig Safian.

[Craig Safian, Executive VP & CFO at Gartner]

Thank you, Gene, and good morning. First quarter contract value or CV grew 7% year over year. Revenue, EBITDA, adjusted EPS and free cash flow were better than expected as we continue to execute well in an increasingly complex environment. We were resilient in a quarter affected by macro factors. Since we reported Q4 twenty twenty four results in early February, there were notable changes in the US federal government end market.

[Craig Safian, Executive VP & CFO at Gartner]

The broader selling environment also shifted during the quarter as many company decision makers started to adjust to the evolving global macro economy. We are updating our guidance to reflect Q1 performance, the new macro landscape, the benefit from the move in FX rates, and our own expense agility. We repurchased $163,000,000 of stock in the quarter, maintaining flexibility as the market digest the changes in the macro landscape. We remain eager to repurchase shares, which we will do opportunistically. First quarter revenue was $1,500,000,000 up 4% year over year as reported and 6% FX neutral.

[Craig Safian, Executive VP & CFO at Gartner]

In addition, total contribution margin was 69, up 20 basis points from last year. EBITDA was $385,000,000 up 1% as reported and 3% FX neutral versus the first quarter of twenty twenty four. Adjusted EPS was $2.98 up 2% from Q1 of last year. And free cash flow was $288,000,000 a very strong performance for our first quarter. Research revenue in the quarter grew 4% year over year as reported and 6% FX neutral.

[Craig Safian, Executive VP & CFO at Gartner]

Subscription revenue grew 8% FX neutral. Non subscription research revenue was in line with our expectations. First quarter research contribution margin was 74% consistent with last year. Contract value was $5,100,000,000 at the end of the first quarter, up 7% versus the prior year. Contract value and CV growth are FX neutral.

[Craig Safian, Executive VP & CFO at Gartner]

Excluding the US federal government, CV grew 8%. Contract value growth with tech vendors continued to improve. Global CV was $63,000,000 lower than Q4 twenty twenty four with around 80% of the change attributable to the US federal government end market. CV growth was broad based across practices, industry sectors, company sizes, and geographic regions. Across our combined practices, all of the industry sectors except two grew at high single digit rates led by the energy, healthcare, and manufacturing sectors.

[Craig Safian, Executive VP & CFO at Gartner]

CV grew at high single digit rates across all enterprise sizes small, which grew low single digits. We also drove double digit or high single digit growth in the majority of our top 10 countries. Canada, which represents about 3% of total CV, had a more challenging selling environment in the quarter. Nearly all of our US federal contracts will come up for renewal during 2025 with about 40% having transacted in Q1, the largest quarter of this calendar year. In the first quarter, the dollar retention was almost 50%.

[Craig Safian, Executive VP & CFO at Gartner]

At March 31, we had $225,000,000 of US federal CV. Global technology sales contract value was $3,900,000,000 at the end of the first quarter, up 6% versus the prior year. Excluding the US Federal Government from both periods, GTS CV grew 7% in the quarter as the tech vendor market continued to improve. Dollars 44,000,000 of the $58,000,000 change in GTS CV from Q4 was due to the US Federal Government. While retention for GTS was 101% for the quarter, GTS new business was down 4% compared to last year.

[Craig Safian, Executive VP & CFO at Gartner]

GTS quota bearing headcount was up 3% year over year. Our regular full set of GTS metrics can be found in our earnings supplement. Global business sales contract value was $1,200,000,000 at the end of the first quarter, up 11% year over year. All of our major GBS practices grew at double digit or high single digit rates. Growth was led by the sales, finance, and legal practices.

[Craig Safian, Executive VP & CFO at Gartner]

GBS CV was $5,000,000 below the fourth quarter. Excluding the US Federal Government, GBS CV was largely unchanged from Q4. Wallet retention for GBS was 105% for the quarter. GBS new business was down 3% compared to last year. GBS quota bearing headcount was up 9% year over year.

[Craig Safian, Executive VP & CFO at Gartner]

As with GTS, a regular full set of GBS metrics can be found in our earnings supplement. Conferences revenue for the first quarter was $73,000,000 increasing 4% as reported and 5% FX neutral compared to Q1 of twenty twenty four. Adjusting for the two conferences we moved to Q2 this year, revenue increased around 12% FX neutral. Contribution margin was 38% consistent with typical Q1 seasonality. We held 10 destination conferences in the first quarter as planned.

[Craig Safian, Executive VP & CFO at Gartner]

Q1 consulting revenue was $140,000,000 compared with $135,000,000 in the year ago period of about 4% of reported and 5% FX neutral. Consulting contribution margin was 38% in the first quarter. Labor based revenue was $104,000,000 This part of the segment was down 4% versus Q1 of last year's reported and 2% FX neutral against a tough compare. Backlog at March 31 was $214,000,000 increasing 16% year over year FX neutral. This was driven by strength in multi year contracts.

[Craig Safian, Executive VP & CFO at Gartner]

In contract optimization, we delivered $36,000,000 of revenue in the quarter, up 36% versus Q1 of last year and 38% FX neutral. The quarter was ahead of our expectations. Our contract optimization revenue is highly variable. Consolidated cost of services increased 3% year over year in the first quarter as reported and 4% FX neutral. The biggest driver of the increase was higher compensation costs.

[Craig Safian, Executive VP & CFO at Gartner]

SG and A increased 6% year over year in the first quarter as reported and about 7% on an FX neutral basis. SG and A increased in the quarter as a result of headcount growth. EBITDA for the first quarter was $385,000,000 up 1% from last year's reported and up 3% FX neutral. We outperformed in the first quarter through modest revenue upside, effective expense management and a prudent approach to guidance. Depreciation in the quarter of '20 '9 million dollars was up 10% compared to 2024.

[Craig Safian, Executive VP & CFO at Gartner]

Net interest expense excluding deferred financing costs in the quarter was $12,000,000 This is favorable by five million dollars versus the first quarter of twenty twenty four due to higher interest income on our cash balances. The modest floating rate debt we have is fully hedged through the third quarter of twenty twenty five. The Q1 adjusted tax rate, which we use for the calculation of adjusted net income, was 21% for the quarter. This compares to last year's rate of 19%. The tax rate for the items used to adjust net income was 26% for the quarter.

[Craig Safian, Executive VP & CFO at Gartner]

Adjusted EPS in Q1 was $2.98 up 2% compared to Q1 last year. We had 78,000,000 shares outstanding in the first quarter. This is an improvement of over 1,000,000 shares or about 1% year over year. We exited the first quarter with just under 78,000,000 shares on an unweighted basis. Operating cash flow for the quarter was $314,000,000 up 66% compared with last year.

[Craig Safian, Executive VP & CFO at Gartner]

CapEx was $26,000,000 up about $3,000,000 year over year. This was primarily due to real estate related costs and in line with our expectations. First quarter free cash flow was $288,000,000 up 73% compared with Q1 in 2024. Free cash flow on a rolling '4 quarter basis was 120% of GAAP net income and 97% of EBITDA. As we noted last quarter, there were several items in 2024 that affect rolling four quarter net income and free cash flow, including after tax insurance proceeds, a real estate lease termination payment, and tax planning benefits.

[Craig Safian, Executive VP & CFO at Gartner]

Adjusting for these items, free cash flow on a rolling four quarter basis was 20% of revenue, 82% of EBITDA, and 155% of GAAP net income. At the end of the first quarter, we had about $2,100,000,000 of cash. Our March 31 debt balance was about $2,500,000,000 Our reported gross debt to trailing twelve month EBITDA was well under two times. Our expected free cash flow generation, available revolver and excess cash remaining on the balance sheet provide ample liquidity to deliver on our capital allocation strategy of disciplined share repurchases and strategic tuck in M and A. Our balance sheet is very strong with $2,800,000,000 of liquidity, low levels of leverage and effectively fixed interest rates.

[Craig Safian, Executive VP & CFO at Gartner]

We repurchased $163,000,000 of stock during the first quarter. At the end of Q1, our share repurchase authorization was approximately $870,000,000 As we continue to repurchase shares, our capital base will shrink. Over time, this is accretive to earnings per share and combined with growing profits also delivers increasing returns on invested capital. We are updating our full year guidance to reflect recent performance and trends. Since we reported Q4 results in early February, the world has become significantly more dynamic.

[Craig Safian, Executive VP & CFO at Gartner]

We are applying all the lessons we've learned from prior challenging environments. We are shifting our focus to the things our clients need the most in an extraordinarily uncertain operating environment. We're also remaining agile in managing our cost structure while also investing for future growth. In particular, we are preserving and growing our selling capacity outside of directly impacted areas, which is a key input into our algorithm for future sustained double digit growth. The U.

[Craig Safian, Executive VP & CFO at Gartner]

S. Dollar weakened significantly during Q1. We now expect FX to benefit revenue growth by about 50 basis points and EBITDA growth by about 130 basis points in 2025. We've provided both the FX driven and operational changes to guidance in our earnings supplement. As a reminder, about one third of our revenue and operating expenses are denominated in currencies other than the US dollar.

[Craig Safian, Executive VP & CFO at Gartner]

For research subscription revenue in 2025, our guidance reflects an expectation that Q1 trends for new business and retention continue for the balance of the year. We've also incorporated the information we have about US federal spending decisions to date. In addition, we've taken a prudent view of the outlook as the current environment remains very dynamic. For the non subscription part of the research segment, we've built a continuation of recent traffic and pricing trends into the guidance. For Conferences, we are basing our guidance on the 53 in person destination conferences we have planned for 2025.

[Craig Safian, Executive VP & CFO at Gartner]

We have good visibility into current year revenue with a majority of what we've guided already under contract. For consulting, we have more visibility into the next quarter or two based on the composition of our backlog and pipeline as usual. Given the shifts in the macro environment, we have been thoughtful about the outlook for the labor based part of the business. Contract optimization has had several very strong years and the business remains highly variable. We've incorporated a prudent outlook for this part of the segment.

[Craig Safian, Executive VP & CFO at Gartner]

Our base level assumptions for consolidated expenses have changed to reflect the revenue outlook. We have demonstrated our ability to manage costs prudently in any market environment and we will remain agile. We will do this while also investing for future growth. Our plan is to exit the current environment better, faster and stronger than before. We can both deliver on our EBITDA margin commitments for this year while investing for future growth.

[Craig Safian, Executive VP & CFO at Gartner]

Our plan for both GTS and GBS is for mid single digit sales headcount growth outside of directly impacted areas. This reflects our commitment to invest for future growth while delivering strong margins and free cash flow. We're maintaining recruiting capacity and are prepared to go faster on the hiring based on the macro driven demand. And as the selling environment gets back to normal, we expect significant benefits from QBH productivity. Our updated 2025 guidance is as follows.

[Craig Safian, Executive VP & CFO at Gartner]

We expect research revenue of at least $5,340,000,000 which is FX neutral growth of about 4%. This reflects subscription research revenue growth of about 5%. We expect Conferences revenue of at least $625,000,000 which is FX neutral growth of about 6%. We expect consulting revenue of at least $575,000,000 which is growth of about 2% FX neutral. The result is an outlook for consolidated revenue of at least $6,535,000,000 which is FX neutral growth of four percent.

[Craig Safian, Executive VP & CFO at Gartner]

We now expect full year EBITDA of at least $1,535,000,000 up $25,000,000 from our prior guidance. We expect 2025 adjusted EPS of at least $11.7 up about $0.25 from last quarter. For 2025, we expect free cash flow of at least $1,145,000,000 This reflects a conversion from GAAP net income of 137%. Our guidance is based on 78,000,000 fully diluted weighted average shares outstanding, which reflects the repurchases made through the end of the first quarter. For Q2, we expect adjusted EBITDA of at least $400,000,000 Our financial results through March were ahead of expectations, underscoring the resilience of our business model.

[Craig Safian, Executive VP & CFO at Gartner]

While we updated the revenue guidance to reflect the macro landscape, we will also benefit from the latest FX rates. Our EBITDA margin outlook is now higher than it was in February. We have successfully navigated challenging macro environments before and know the right things to do. We are running our operational best practices including delivering exceptional value for our clients, running our sales and services best practices playbooks, investing in sales capacity, which is a key ingredient for future sustained double digit top line growth, managing our expenses aggressively and thoughtfully to protect profitability and cash flow, and using our strong balance sheet and cash flow to buy our stock and for tuck in M and A. Looking out over the medium term in a normal macro environment, our financial model and expectations are unchanged.

[Craig Safian, Executive VP & CFO at Gartner]

With 12% to 16% research CV growth, we will deliver double digit revenue growth. There is operating leverage in the business, which allows us to expand margins. With gross margin expansion, sales costs growing about in line with CV growth and G and A leverage, we will deliver modest EBITDA margin expansion. We can grow free cash flow at least as fast as EBITDA because of our modest CapEx needs and the benefits of our clients paying us upfront. And we'll continue to deploy our capital on share repurchases, which will lower the share count over time and on strategic value enhancing tuck in M and A.

[Craig Safian, Executive VP & CFO at Gartner]

With that, I'll turn the call back over to the operator and we'll be happy to take your questions. Operator?

[Operator]

Thank

[Operator]

you.

[Operator]

Our first question comes from the line of Jeff Meuler with Baird. Your line is now open.

[Jeffrey Meuler, Analyst at Robert W. Baird]

Thank you. Good morning. So what percentage of the contract value base are you following the directly impacted areas? And how are you managing sales headcount I guess for U. S.

[Jeffrey Meuler, Analyst at Robert W. Baird]

Federal Government agency prospects or the more meaningfully other directly impacted areas in terms of are you reassigning it to other opportunities? Or are you preserving some of that capacity, including to position for win back opportunities?

[Craig Safian, Executive VP & CFO at Gartner]

Hey, Jeff. Good morning. Thanks for the question. Start and then Gene will finish up on your question. So from a directly impacted area perspective, it is largely US Federal that we're talking about now.

[Craig Safian, Executive VP & CFO at Gartner]

And so obviously we're not looking to grow our QBH there. But we wanted to make sure it was really clear that outside of that directly impacted area, we were actually targeting to continue to grow the number of headcount, number of territories for both GTS and GBS in the mid single digits.

[Eugene Hall, CEO & Chairman at Gartner]

Yeah. Basically, Jeff, as Craig said, the largest impacted area is by far is US federal government. And there, what we're planning to do is we're not backfilling, and we're basically making sure we're controlling our headcount there very carefully. The rest of the business, the nonimpact areas, as I said, we're continuing to grow in mid single digits this year.

[Jeffrey Meuler, Analyst at Robert W. Baird]

But you're not reassigning the US federal government headcount. You're keeping them there for now.

[Eugene Hall, CEO & Chairman at Gartner]

Yeah, great question. So basically, we have some very strong public sector salespeople. We wanna make sure we retain them and those really strong salespeople. Where we can reassign them, we are absolutely reassigned because we have plenty of sales opportunities. In some cases, it makes sense.

[Eugene Hall, CEO & Chairman at Gartner]

In other cases, it doesn't.

[Eugene Hall, CEO & Chairman at Gartner]

But wherever we can, we, of course, are retaining our great salespeople.

[Jeffrey Meuler, Analyst at Robert W. Baird]

Got it.

[Jeffrey Meuler, Analyst at Robert W. Baird]

And then what is where there's early cancels for convenience among US federal government agency contracts, what is the rev rec treatment and what is the contract value treatment? And can you just give us any sense of if that's a meaningful percentage of the attrition versus just nonrenewal as a contract naturally comes

[Craig Safian, Executive VP & CFO at Gartner]

question. So actually, we've got details on that in the queue. But let me just summarize for the benefit of everyone on the call. So as it stands right now, we've got about $30,000,000 worth of termination notices related to contracts that are set to expire later in the year. One way to think about it is it's sort of just normal course.

[Craig Safian, Executive VP & CFO at Gartner]

We've just been notified ahead that those things will not be renewing or they will or we have the termination notice in hand. That 30,000,000 remains in contract value because we are continuing to recognize the revenue on it. But in the grand scheme of not only The US federal business, but actually on total CV, it's a relatively small amount. But that's how we're handling it. And there's a little bit more detail in the queue, I think on page 25, if you want to search it out.

[Jeffrey Meuler, Analyst at Robert W. Baird]

All right, I'll look for that. Thank you.

[Operator]

Thank you. Our next question comes from the line of Toni Kaplan with Morgan Stanley. Your line is now open.

[Toni Kaplan, Executive Director, Senior Equity Research Analyst at Morgan Stanley]

Thanks so much. I was hoping to get just maybe a little bit more color on the guidance. I know you talked about on the slide and in the remarks that the guidance reflects 1Q new business and retention trends. I know you mentioned that there was a little bit of a change during the quarter, maybe a slower like back half of the quarter. So wanted to sort of understand, does the guidance reflect like the complete 1Q, which was maybe a little bit better or more weighted towards like the more recent, like slower experience that you've seen?

[Craig Safian, Executive VP & CFO at Gartner]

Yeah, Tony, it's great question. So when we were together in early February talking about Q4, our commentary at that point through the month of January is we hadn't really seen a change in the selling environment. And that was the case. Clearly, things started to change mid February into early March. I would say from a metric perspective, though, since we are so dominated by the third month of every quarter, What we saw in the back half of February and March, and in particular in March, is reflective of the quarter.

[Craig Safian, Executive VP & CFO at Gartner]

And again, we've taken that experience and rolled it forward across Q2, Q3 and Q4 to drive that update on revenue guidance. So while January was normal, it's really small. And the bulk of the volume in Q1 actually happened during the month of March.

[Toni Kaplan, Executive Director, Senior Equity Research Analyst at Morgan Stanley]

Got it. And then I wanted to ask, I know US federal government was sort of the big impact for what has changed on the government side. I wanted to though broaden it out to, you know, are you seeing anything at the state and local level or international government level that is similar to U. S. Federal and also maybe just opportunity for win back would be, as Jeff sort of alluded to, as well, is there an opportunity there this year too?

[Toni Kaplan, Executive Director, Senior Equity Research Analyst at Morgan Stanley]

Thanks.

[Eugene Hall, CEO & Chairman at Gartner]

So Tony, first on the win back side. So we believe we provide a lot of value to our clients, including our US federal government clients on helping you know, we help on things like having strong cybersecurity capabilities, cost optimization, use of AI, which are priorities for every enterprise, including public sector enterprises. And so we believe we provide a lot of value there and will over time continue to provide a lot of value to the federal government. If you look at the state and local governments in The United States, there wasn't much change in Q1 compared to what we've seen in previous quarters. The same is true for governments around the world outside of The US, whether it's at the federal level or at the provincial or state and local government level.

[Operator]

Thanks a lot. Thank you. Our next question comes from the line of George Tong with Goldman Sachs. Your line is now open.

[George Tong, Sr. Research Analyst - Equity Research at Goldman Sachs]

Hi. Thanks. Good morning.

[George Tong, Sr. Research Analyst - Equity Research at Goldman Sachs]

Your business outlook for 2025 Research revenue was downwardly revised by $135,000,000 Can you elaborate on how much of this reflects updated views on federal contract renewals versus updated views on other customer segments like tech vendors and enterprise functional leaders?

[Craig Safian, Executive VP & CFO at Gartner]

Yeah, George, good morning. I would say that the guide is reflective of everything we've seen and everything we know. And so obviously the biggest thing or the largest impact that we saw that was off trend in Q1 was related to the US federal government, which we just talked about Jeff and Tony. But in terms of what we're seeing more broadly, macroeconomically, has been factored into the updated guidance. I think what I'd say is from an update on the guidance perspective, and this applies to all the revenue lines, but research in particular, is we took our Q1 experience and we flowed that through across our contract expirations for the balance of the year.

[Craig Safian, Executive VP & CFO at Gartner]

We took what we knew specifically about US federal government. We modeled in the new FX rates. And as always, we try and take a prudent approach to how we approach our guidance for the full year. So I'd say those are the four things that factored into the update of all the guidance lines and the research line in particular.

[George Tong, Sr. Research Analyst - Equity Research at Goldman Sachs]

And can you talk a little bit more about what you're seeing with tech vendors and enterprise functional leaders? Would you say that those trends are holding up better than what you're seeing with federal contract renewals?

[Eugene Hall, CEO & Chairman at Gartner]

So what I said with tech vendors, the market continues to improve. Our business there is accelerating, particularly the larger vendors. The smaller vendors are accelerating just at a slower pace than the larger vendors. That business is I think quite healthy. With enterprise functional leaders, again sort of being separate into the federal government, which we talked about, and then all the other all the enterprise functionally or business that we have, which I think is more in trend with local patterns.

[George Tong, Sr. Research Analyst - Equity Research at Goldman Sachs]

Got it. Very helpful. Thank you.

[Operator]

Thank you. Our next question comes from the line of Josh Chan with UBS. Your line is now open.

[Joshua Chan, Director, Equity Research Analyst at UBS Group]

Hi, good morning Gene and Craig. Thanks for taking my questions. I was wondering if you could talk about the selling environment outside of federal. It seems like you're saying that the environment became more volatile, but I guess if I add back your NICV impact that you gave for the federal government, it seems like the CV ex federal was fairly similar to what you had in Q4. So I'm just trying to triangulate the comment about volatility and then the relatively good ex federal CV growth.

[Eugene Hall, CEO & Chairman at Gartner]

Yeah, Josh. So the selling environment for the federal government we talked about, and that was the main thing that impacted our results in Q1. Outside of federal government, it's not completely uniform in terms of the impact. So there are some companies that are more impacted, for example, by tariffs than others. By the way, both US as well as non US companies.

[Eugene Hall, CEO & Chairman at Gartner]

And so the companies that don't have a lot of tariff impact or other kinds of impact for policy changes, it's kind of business as usual in terms of decision making. The ones that are more directly impacted, decision making has slowed. They're still buying, they're still renewing, but decision cycles have extended compared to what they were say Q4 of last year. So we still see the value. Pipeline is actually very robust, but decisions are taking longer to get than they did in Q4 or at all last year, basically.

[Joshua Chan, Director, Equity Research Analyst at UBS Group]

Okay. That's great, Carl. Thank you for that. And then I guess, how are you thinking about your cost structure going forward because you clearly raised the guidance despite lowering the revenue. So could you kind of talk to I guess how the lower revenue but then offset by your more prudent cost management is factoring into your increased margin guidance for the year?

[Craig Safian, Executive VP & CFO at Gartner]

Yeah, Josh. So the way to think about that is we've proven over the last several years, given all the things Gene outlined in his prepared remarks about the craziness in the macro and geopolitical environment and just how challenging it has been, that we've been very agile in managing our expenses. And what I'd say now is given the US Fed results and the impact that's having on the contract value growth,

[Craig Safian, Executive VP & CFO at Gartner]

and then some of the

[Craig Safian, Executive VP & CFO at Gartner]

things Gene just outlined as well in terms of longer selling cycles and things like that, we're taking the opportunity to make sure that we are managing our operating expense base super prudently and super carefully, but also making sure that we're investing in areas that we know support and drive future growth. We're in a period right now where our CV is growing mid to high single digits. Obviously, we firmly believe that we can be a 12% to 16% grower on the research business, a double digit grower on the overall top line. And we want to make sure that we don't do anything that damages or impedes our ability to get back there when the economic situation is more quote unquote normal. And so what we're doing is, I call it like a slight belt tightening across the board as we're seeing a little bit of pressure in some areas, but also making sure that we're growing our selling capacity because we know that's a key ingredient going forward.

[Craig Safian, Executive VP & CFO at Gartner]

So we're not chopping anything. We're not slamming on the brakes on anything. We're just being thoughtful and prudent and careful and also making sure that we're investing in areas that we know drive and support future growth.

[Joshua Chan, Director, Equity Research Analyst at UBS Group]

That makes a lot of sense. Thank you both for the time and the color.

[Operator]

Thank you. Our next question comes from the line of Faiza Alwy with Deutsche Bank. Your line is now open.

[Faiza Alwy, Managing Director, US Company Research at Deutsche Bank]

Yes, hi. Thank you. I wanted to talk about the clients that you mentioned are anticipated or impacted by tariffs, for example, where you've seen slower decision making. How have you seen that play out historically? Because I will think that, as you mentioned in your script, these clients can certainly benefit from Gartner Insights during this time.

[Faiza Alwy, Managing Director, US Company Research at Deutsche Bank]

And so, is there this initial period where folks are evaluating the situation, and are you leaning in harder with these clients to explain proposition? So how should we think about those clients going forward?

[Eugene Hall, CEO & Chairman at Gartner]

Great question. So basically, what we've seen historically is when there's a lot of uncertainty, clients slow their decision making. And then after a few months, they then say, well, we're in this world. We have to decide what to do. Gartner's a big help.

[Eugene Hall, CEO & Chairman at Gartner]

And then we actually have a burst of business from that. We continue to maintain relationships, continue to build pipeline, and clients know the value. But when there's this kind of sort of shock of uncertainty, the first reaction from some companies is to sort of say let's slow or stop decision making for a period of time.

[Eugene Hall, CEO & Chairman at Gartner]

And then but that period of

[Eugene Hall, CEO & Chairman at Gartner]

time goes by and then they know they need to get they need help with cybersecurity. They need help with AI. They need help with cost optimization. All the things that are software selection. So all those things that are sweet spots are things that they know they need.

[Eugene Hall, CEO & Chairman at Gartner]

And so there's a slowdown that picks up over time is the historical pattern.

[Faiza Alwy, Managing Director, US Company Research at Deutsche Bank]

Understood. And then just on capital allocation and share buyback, I know you mentioned sort of your eagerness to buy back shares a couple of times. Is there any other perspective around that, just given what's happened with the stock and the market overall? How are you viewing the opportunity to buy back stock? And could we expect a more elevated level of share repurchases this year, just given the amount of cash that you have on the balance sheet?

[Craig Safian, Executive VP & CFO at Gartner]

Yeah, good morning Faiza. I think our long term capital allocation strategy is using our balance sheet, our cash flow, and excess cash to return capital to shareholders through our buyback programs and also to look for strategic value enhancing tuck in M and A. And we continue to believe that we can do both of those things with our balance sheet and our capital allocation. From a buyback perspective, as we've talked about historically, our strategy is to be price sensitive, opportunistic, and disciplined. And we're looking to optimize returns on our buybacks, not in a quarter or two, but over the long term.

[Craig Safian, Executive VP & CFO at Gartner]

And so we are always looking at combinations of what's happening with the price of the stock, what's happening with overall multiples, what's happening with the market, what's happening with our stock individually, what is intrinsic value. All of those things are inputs into how we look to be price sensitive, opportunistic. This you rightly point out that we have $2,100,000,000 of cash on our balance sheet. We expect to generate another order of magnitude $800,000,000 of free cash flow over the course of this year. And then we'd expect to generate well over $1,000,000,000 of free cash flow each and every year.

[Craig Safian, Executive VP & CFO at Gartner]

So what that means is we have a lot of capital that we can put to use on behalf of our shareholders behind either buybacks or strategic tuck in M and A. And we continue to monitor the situation very closely, but we're going to stick to our guns and our sort of approach of being price sensitive, opportunistic and disciplined with a real focus on optimizing returns over the long term.

[Faiza Alwy, Managing Director, US Company Research at Deutsche Bank]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Jason Haas with Wells Fargo. Your line is now open.

[Jason Haas, Director & Senior Equity Research Analyst - Business & Information Services at Wells Fargo]

Hey, good morning and thanks for taking my questions. I believe previously you were guiding the GBS quarter earned headcount to grow double digits this year. And I believe you said that you're now expecting it to grow mid single digits. Can you just talk about what's the reason for the reduction in that segment specifically? Thanks.

[Craig Safian, Executive VP & CFO at Gartner]

Morning. Yeah, I think it's part of our sort of normal agile planning around the business. Obviously, we do have US federal footprint with our GBS business as well. And that has been impacted in the first quarter as we described in our prepared remarks. We're also dealing with a more challenging macro environment, gene reference, longer sales cycles, things of that nature.

[Craig Safian, Executive VP & CFO at Gartner]

And so we're always tweaking what we want and expect from a quota bearing headcount growth perspective over the course of the year. What I would say is what we've got dialed into our outlook right now is mid single digit growth in both GTS and GBS. But if the end market improves or the demand environment improves or sales cycles reduce, we have plenty of recruiting capacity to be able to go faster if we want to. But essentially right now it's just a reflection of what we're seeing in the market and modest tapping of the brakes there just to make sure that we keep our cost structure in line with our CV growth expectations and our revenue and CV growth expectations rolling forward in 'twenty six and 'twenty seven.

[Jason Haas, Director & Senior Equity Research Analyst - Business & Information Services at Wells Fargo]

Got it. Thank you. That's helpful. And then as a follow-up, I appreciate the commentary on how you're leveraging AI. I'm curious if you put any thought to rolling out any sort of, like, chat, functionality driven by AI, if that's something that your customers are asking for or if there's any potential to use that to, maybe make it a little bit easier for your customers to access and utilize all the primary insights from your research.

[Jason Haas, Director & Senior Equity Research Analyst - Business & Information Services at Wells Fargo]

Thank you.

[Eugene Hall, CEO & Chairman at Gartner]

Hey, Jason, as I mentioned in my remarks, we're really experts on AI. We know it really well. We use AI internally. So we have an application, much like you described, where internally our associates can use AI to help them navigate through our very large content base. We're planning to release that to clients.

[Eugene Hall, CEO & Chairman at Gartner]

Because of the problems like hallucinations and things like that, we want to make sure that we get the bugs worked out. Because our clients it count on us not to have any hallucinations and things like that that can happen with AI. So we've developed it. We're using it internally. You can think about it as piloting it, but it's very broad among thousands of our associates.

[Eugene Hall, CEO & Chairman at Gartner]

And it's working very well, but we want to make sure that it is bulletproof before we roll it out to clients.

[Eugene Hall, CEO & Chairman at Gartner]

And our

[Eugene Hall, CEO & Chairman at Gartner]

clients understand that they know we understand that they want it bulletproof.

[Jason Haas, Director & Senior Equity Research Analyst - Business & Information Services at Wells Fargo]

Got it. That makes sense. Thanks.

[Operator]

Thank you. Our next question comes from the line of Andrew Nicholas with William Blair. Your line is now open.

[Andrew Nicholas, Equity Research Analyst at William Blair]

Hi, good morning. Thanks for taking my questions. First on the government side, just curious if you could provide any additional color on the timing of renewals throughout the remainder of this year. I believe I caught 40% in the first quarter, but just curious if there's anything unique about kind of the cadence throughout the rest of the year. And relatedly, I think you said half or roughly half of those contracts were renewed.

[Andrew Nicholas, Equity Research Analyst at William Blair]

Is there any reason for us to think that renewal rates will get better or worse from that level as the year goes on, maybe as you get more comfortable selling back into that group or anything like that that I'm not thinking of?

[Craig Safian, Executive VP & CFO at Gartner]

Yeah, Andrew, thanks. So over the next three quarters, Q1 was the largest, as we mentioned and you referenced. Q2 is less than half of what we saw in Q1. In Q3, which aligns with the US Fed fiscal is our next largest quarter. But it's probably three quarters the size of what we saw in Q1.

[Craig Safian, Executive VP & CFO at Gartner]

Then Q4 is really small in terms of the expirations there. So bulk is actually in Q3, which again aligns with the US federal fiscal. In terms of what we've modeled in is what you highlighted, essentially what we experienced during the first quarter, which is nearly half dollar retention around 50%. We've modeled that forward. I do think and Gene made this point earlier as well we're intent on making sure and really helping our US federal clients achieve their most important mission critical priorities.

[Craig Safian, Executive VP & CFO at Gartner]

And so we're not just abandoning our clients if the contract doesn't renew. We are there, and we want to make sure that we are there when they are ready to buy again, which we have a high degree of confidence that if they are still there, they will want to buy our services because we provide so much value. That's not baked in because again, haven't seen it yet. And so our philosophy generally is not to build forecasts, plans, and outlooks based on what we hope is going to happen, but more along what we've seen. But that is certainly a possibility.

[Craig Safian, Executive VP & CFO at Gartner]

And again, we're organizing our teams to make sure we take advantage of that. Probably more of a '26 and '27 dynamic than a '25 dynamic. But if we are able to get people back and turned on during 2025, great. And that would be that upside to what we're looking at.

[Andrew Nicholas, Equity Research Analyst at William Blair]

Understood. Thank you. And then kind of changing gears for my follow-up. I just wanted to ask about the conservatism of the OpEx guide. I understand and you gave some great reminders on the flexibility of the cost base and how you're kind of thinking about the cost structure.

[Andrew Nicholas, Equity Research Analyst at William Blair]

But you've also, over the past several years, given a pretty prudent outlook in terms of spend. Just wondering if some of the cost actions that you've started to take and tightening of the belt, over the past month plus maybe lower some of the conservatism on that front, or if we should think about it being relatively consistent with previous approaches? Thank you.

[Craig Safian, Executive VP & CFO at Gartner]

Yeah, it's great question. I mean, the environment is dynamic as we discussed. And so we are rolling with that dynamism and attempting to have as much agility around our operating expense base as possible. The reality is we're obviously managing the 25 P and L to make sure that we're investing for the future and protecting profitability and free cash flow. But in reality, as you know, we run this business for the long term and we're making sure that our OpEx base is right sized for '26 that we're investing in the right areas during 2025 so that we can reaccelerate CV into the future.

[Craig Safian, Executive VP & CFO at Gartner]

And so I wouldn't characterize the guidance as or the OpEx guidance as any more prudent or conservative than normal. I would say it's sort of our normal approach to how we build our outlook and how we build our guidance. And as we mentioned earlier, we're prepared to invest more if we see positive changes in the environment and we're prepared to tighten the belt maybe one more notch if we have to as well. And so we're very focused on making sure we're doing the right things for the business over the long term. But we're also going to make the right decisions in the short term as well to make sure that we are, again, making the right investments, but also protecting profitability and free cash flow.

[Andrew Nicholas, Equity Research Analyst at William Blair]

Understood. Thank you.

[Operator]

Thank you. Our next question comes from the line of Jeff Silber with BMO Capital Markets. Your line is now open.

[Jeffrey Silber, Senior Analyst at BMO Capital Markets]

Thanks so much. I just wanted to go back to some of the mechanics regarding a cancellation of contracts. I know on the federal government side, most of your contracts, if not all of them are one year. But I think you have a number of multiyear contracts outside of that. Can a client let's say I have a two year contract, can we, as a client, cancel ahead of that?

[Jeffrey Silber, Senior Analyst at BMO Capital Markets]

How much notice do I have to give you? Does it have to be around the anniversary date? Some of the specifics around that, if you can provide, would be great.

[Craig Safian, Executive VP & CFO at Gartner]

Yeah, generally, Jeff, a multi year contract is a multi year commitment with no out clauses or term for convenience rights within that contract. And so our multi year contracts are true multi year contracts. They can be two, three, four, five years at some points, but the bulk of them are actually two year contracts. And so when a client and again, your point is right. The US federal contracts are almost exclusively one year contracts.

[Craig Safian, Executive VP & CFO at Gartner]

But our multi year contracts are multi year with no true out clauses in them. And again, we've been very focused on continuing to increase the proportion of multi year contracts in our contract value base, specifically for challenging macroeconomic times. And again, that's part of the resilience we've baked into our business or engineered into our business so that short term challenges from a macro perspective have a more muted impact on our overall results because of a focus on operational best practices like selling multi year contracts.

[Jeffrey Silber, Senior Analyst at BMO Capital Markets]

Okay, that's helpful. And then you were kind enough to give us kind of the finality on renewals for the federal government. Can we get some similarity for the non federal government contracts? I know they vary, but any helpful would be great.

[Craig Safian, Executive VP & CFO at Gartner]

So I'd say, again, you can see this in the external metrics as well. So client retention is holding up really well and looks pretty good. And would look even better or modestly better if we excluded US federal from it. So retention rates broadly continue to look pretty good. I think that the challenge and Gene alluded to this earlier is our sales cycles from both a new logo perspective and also from an upsell perspective have lengthened and that impacts the lot retention numbers.

[Craig Safian, Executive VP & CFO at Gartner]

And so you're seeing a little bit of that new business velocity impacting the lot retention numbers. But overall, the retention numbers are holding up pretty well. And again, you can see that in both the GTS and GBS client and while retention numbers.

[Jeffrey Silber, Senior Analyst at BMO Capital Markets]

And is there a specific quarter where most of these contracts renew?

[Craig Safian, Executive VP & CFO at Gartner]

Our two biggest quarters are Q1 and Q4 from an expiration perspective. Q2 and Q3 tend to be lighter quarters. But one of our practices is to when we have the opportunity to early renew things. And so that can move things around. But you just look at the pure contract term dates or end dates, overweighted to Q1 and Q4, think like 26% or 27%.

[Craig Safian, Executive VP & CFO at Gartner]

And then a little underweighted in Q2 and Q3, think in the 22% to 23% of total range.

[Jeffrey Silber, Senior Analyst at BMO Capital Markets]

That's really helpful. Thanks so much.

[Operator]

Thank you. And I'm currently showing no further questions at this time. I'd like to turn the call back over to Gene Hall for closing remarks.

[Eugene Hall, CEO & Chairman at Gartner]

Well, here's what I'd like you to take away from today's call. Gartner delivered financial results ahead of expectations. Our tech vendor CV growth continues to accelerate. We have a vast addressable market opportunity. We have a strong and compelling client value proposition.

[Eugene Hall, CEO & Chairman at Gartner]

Looking ahead, we're well positioned to drive sustained double digit revenue growth over the long term. We'll continue to create value for our shareholders by providing actual objective insight, guidance, and tools to our clients, by prudently investing for future growth, by generating free cash flow well in excess of net income, and by returning capital to our shareholders through our repurchase program. Thanks for joining us today. We look forward to updating you again next quarter.

[Operator]

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Participants

Executives

• David Cohen, Senior Vice President, Investor Relations
• Eugene Hall, CEO & Chairman
• Craig Safian, Executive VP & CFO

Analysts

• Jeffrey Meuler, Analyst at Robert W. Baird
• Toni Kaplan, Executive Director, Senior Equity Research Analyst at Morgan Stanley
• George Tong, Sr. Research Analyst - Equity Research at Goldman Sachs
• Joshua Chan, Director, Equity Research Analyst at UBS Group
• Faiza Alwy, Managing Director, US Company Research at Deutsche Bank
• Jason Haas, Director & Senior Equity Research Analyst - Business & Information Services at Wells Fargo
• Andrew Nicholas, Equity Research Analyst at William Blair
• Jeffrey Silber, Senior Analyst at BMO Capital Markets