Gartner Q2 2026 Earnings Call Transcript

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Provided by Quartr
August 4, 2026

Key Takeaways

  • Positive Sentiment: Q2 results exceeded expectations, with revenue of $1.7 billion, EBITDA of $466 million, adjusted EPS of $4.37, and free cash flow of $378 million; adjusted EPS rose 24% year over year.
  • Positive Sentiment: Contract value growth accelerated for the second consecutive quarter to 2% overall and 3.3% excluding the U.S. federal government, while engagement, retention, mid-sized enterprise performance, and government business improved.
  • Positive Sentiment: Gartner raised its 2026 EBITDA guidance to at least $1.57 billion, adjusted EPS guidance to at least $14, and free cash flow guidance to at least $1.185 billion, citing expense discipline and stronger performance.
  • Positive Sentiment: The company repurchased $547 million of stock in Q2, reducing its share count by more than 5% sequentially, and increased its buyback authorization to approximately $1.2 billion.
  • Negative Sentiment: Macroeconomic and geopolitical uncertainty continues to pressure clients, causing tighter budgets, delayed decisions, and down-selling—particularly among large enterprises—while Consulting revenue declined to $142 million from $156 million a year ago.
AI Generated. May Contain Errors.
Earnings Conference Call
Gartner Q2 2026
00:00 / 00:00

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David Cohen
David Cohen
SVP of Investor Relations at Gartner

Good morning, everyone. Welcome to Gartner's second quarter 2026 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'll be a question-and-answer session. We ask that you limit yourself to one question in order to give all our analysts a chance to participate in the call. Please be advised that today's conference is being recorded. This call will include a discussion of second quarter 2026 financial results and Gartner's outlook for 2026, 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 revenue are for adjusted revenue, and all references to EBITDA are for adjusted EBITDA.

David Cohen
David Cohen
SVP of Investor Relations at Gartner

In each case, excluding the divested operation and with the adjustments as described in our earnings release and supplement. All contract values and associated growth rates we discuss are FX neutral. 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.

David Cohen
David Cohen
SVP of Investor Relations at Gartner

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 2025 annual report on Form 10-K 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. Now, I will turn the call over to Gartner's Chairman and Chief Executive Officer, Gene Hall.

Gene Hall
Gene Hall
Chairman and CEO at Gartner

Good morning. Thanks for joining us today. Second quarter revenue, EBITDA, adjusted EPS, and free cash flow were ahead of expectations. Return on invested capital was 31%. Client engagement improved again, up 140 basis points compared to last year. Contract value growth accelerated compared to the first quarter. Mid-size enterprise clients across both GTS and GBS grew mid single-digits year-over-year. We saw positive NCVI with our government clients. Wallet retention across both GTS and GBS improved sequentially. We delivered above-average growth in several of our end markets, we remained agile in managing expenses. We have a strong enduring value proposition. Gartner proactively guides C-level executives and their teams across every major enterprise function in every major geography, industry, and market sector on their journeys to achieve their mission-critical priorities. Our insights help clients in four critical areas.

Gene Hall
Gene Hall
Chairman and CEO at Gartner

We identify blind spots, see around corners, fill critical information gaps, and prepare for the future. First, we leverage our vantage point across about 13,000 diverse enterprises to help leaders identify blind spots and avoid common pitfalls. Second, we help leaders see around proverbial corners. We guide leaders to understand how today's decisions can impact future performance. Third, we help clients fill critical information gaps. For example, most clients have data on their own performance but lack comparative data that helps them understand how their performance compares to others. Gartner provides access to highly detailed proprietary information, such as fast pricing databases, maturity models, and cost benchmarks that are not available through public sources. Finally, using our extensive knowledge of end-user needs and vendor capabilities, we help our clients determine what the future might look like and how best to prepare.

Gene Hall
Gene Hall
Chairman and CEO at Gartner

There's no other alternative where clients can get this kind of value on the full breadth and depth of their mission-critical priorities. AI remains the single most requested topic, including with Chief Information Officers, Chief HR Officers, Chief Sales Officers, Chief Marketing Officers, and more. Demand for support on AI continues to grow. Gartner proactively covers the full range of AI technologies and priorities, AI strategy, domain and multimodal models, AI cybersecurity, physical AI and robotics, AI cloud to edge processing, AI adoption cases, and best practices, and more. Gartner is at the center of the three critical constituencies. We connect more than 80,000 business leaders looking to get value from AI, more than 10,000 CIOs and IT organizations implementing AI, and about 5,000 technology providers building out their AI strategies. In today's world, it's difficult for executives to know which sources they can trust for critical decisions.

Gene Hall
Gene Hall
Chairman and CEO at Gartner

Our analysts have deep expertise. They're independent and objective. Clients trust Gartner. We're seeing strong demand for help with AI. We also have strong demand for support on other essential priorities, such as cybersecurity, cost optimization, data and analytics, and more. In today's environment, persistent macroeconomic and geopolitical challenges are creating new and shifting budget pressures. As a result, executives are scrutinizing expenses, escalating approval processes, and delaying decisions. We're taking steps to further strengthen our value proposition to thrive in persistently challenging environments and return to historical growth rates. As we've discussed before, the heart of this change is our Business and Technology Insights transformation. We continue to make progress on this transformation in four key areas: volume, impact, timeliness, and user experience.

Gene Hall
Gene Hall
Chairman and CEO at Gartner

The number of documents in our Insights library is up 18%, which allows us to cover a broader range of mission-critical priorities. The number of higher-impact documents is also up double digits. With the rapid pace of change in AI and other areas, it's essential for clients to stay current. To meet this need, the insights we produce immediately after important events are up significantly. Making it easier for clients to access our insights increases the value they receive from us. To address this, we continue to enhance the Gartner digital experience, and we're improving our sales, services and analyst capabilities to deliver value to our clients. With the strong demand we're seeing for help on mission-critical priorities such as AI, a vast and growing library of high-impact, timely insights, and the transformational improvements we're making in our ability to deliver unparalleled client value, we remain optimistic about our future.

Gene Hall
Gene Hall
Chairman and CEO at Gartner

We expect contract value growth to continue to accelerate. We will continue to drive strong free cash flow that we can put to use to drive incremental shareholder value. We expect to deliver adjusted EPS on a compound annual basis above 12% over the next three years. With that, I'll hand the call over to our Chief Financial Officer, Craig Safian.

Craig Safian
Craig Safian
CFO at Gartner

Good morning. Before updating you on the results of the quarter, I'm going to follow up on several points Gene just made. We are making significant progress on our BTI transformation with a focus on delivering even more value to our clients. Macro dynamics and AI are driving uncertainty and affecting enterprises around the world. The data we see across engagement, retention, and growth in multiple end markets reinforces the enduring value of Gartner's expert-led insights. This gives us confidence that this cycle will normalize and CV growth will continue to re-accelerate. Client engagement continues to improve meaningfully, increasing 140 basis points versus last year across both digital and human interactions, underscoring the relevance and the value of our expert insights. Digital engagement improved by more than 110 basis points year-over-year.

Craig Safian
Craig Safian
CFO at Gartner

Human interactions increased more than 150 basis points year-over-year, including through improvements in the usage of analyst consultations. Wallet retention continues to improve as down-sell activity stabilizes and overall retention rates improve. In-quarter retention rates increased in Q2, providing another important leading indicator of future growth. We continue to win new business with both existing clients and new enterprises. Our clients have conviction in the value we can deliver for them. We are seeing multiple areas of above-average growth, reinforcing the value our clients place on expert insights and guidance. Core GBS subscription products grew 7% in the quarter. The sales practice grew double-digits. Finance and legal grew mid single-digits. Conferences revenue increased 12% year-over-year on an organic FX-neutral basis. Mid-sized enterprise delivered mid single-digit CV growth in the quarter.

Craig Safian
Craig Safian
CFO at Gartner

Government CV returned to positive NCVI in the quarter and was an important contributor to overall acceleration. We see this as a leading indicator for the broader client base navigating different but analogous spending constraints. Tech vendors, which are among the organizations closest to AI-related advancements, continue to rely on Gartner for timely and actionable insights. Software and services were again our strongest-performing tech vendor subsectors. While some parts of this market are reprioritizing spending as they adapt to a rapidly evolving landscape, demand for our expertise remains healthy. Taken together, these trends demonstrate the resilience of our business model. Even as clients navigate budget pressures and evaluate AI-related investments, total company CV growth accelerated in the quarter. Second quarter contract value, or CV, grew 2% year-over-year. This was the second consecutive quarter of acceleration.

Craig Safian
Craig Safian
CFO at Gartner

Revenue, EBITDA, adjusted EPS and free cash flow in the second quarter were better than expected. We are increasing our EBITDA, adjusted EPS and free cash flow guidance for the full year. In the second quarter, we reduced our share count by another 5%, buying back $547 million of stock. Rolling four-quarter return on invested capital was 31%, and we expect to generate significant free cash flow and have fewer shares outstanding over the course of the next several years. Second quarter revenue was $1.7 billion, up 3% year-over-year as reported and 2% FX neutral. In addition, total contribution margin was strong at 71%. EBITDA was $466 million, up 6% as reported and 4% FX neutral. Adjusted EPS was $4.37, up 24% from Q2 of last year. Free cash flow was $378 million, up 9% year-over-year.

Craig Safian
Craig Safian
CFO at Gartner

Insights revenue in the quarter grew 2% year-over-year as reported and 1% FX neutral. Second quarter Insights contribution margin was 77%, up about 140 basis points versus last year. Contract value was $5.3 billion at the end of the second quarter, a sequential increase of 30 basis points from Q1. Year-over-year, CV was up 2%, which is a 70 basis point acceleration from last quarter. Excluding the US federal government, CV growth was 3.3%. At June 30th, we had approximately $125 million of U.S. Federal CV. We had about $240 million of new business in the second quarter as there continues to be considerable interest in Gartner's proprietary unbiased Insights. Across GTS and GBS, we saw new business dollars increase by about 10% from Q1. As you may have seen in the earnings supplement, we implemented a minor update to how we present FX neutral KPIs.

Craig Safian
Craig Safian
CFO at Gartner

The details are in the supplement, our investor relations team can answer any questions you may have. Global Technology Sales contract value was $4 billion at the end of the second quarter, about flat sequentially and up 1% versus the prior year, a 70 basis point acceleration from Q1. Excluding the U.S. Federal business, CV grew 3%. Tech vendor year-over-year growth accelerated from Q1. While retention for GTS was 97%, an improvement from the first quarter. Ex-Fed, while retention was 99%. GTS new business was up 2% compared to last year and up sequentially from Q1 of this year. Global Business Sales contract value was $1.3 billion at the end of the second quarter, up 1% from Q1 and up 3% year-over-year. Ex-Fed GBS CV grew 4%. Growth was led by the sales, legal, and finance practices.

Craig Safian
Craig Safian
CFO at Gartner

Within GBS, about 90% of the CV is from core subscription products. CV from these products grew about 7% year-over-year in the quarter, with even faster growth from our offerings for C-level leaders. While retention for GBS was 99% for the quarter. GBS new business was down 5% compared to last year. Q2 new business was around 20% higher than Q1. The Conferences business continues to perform well. We're seeing strong demand for our Insights as clients and prospects want to hear from our experts and interact with one another. Conferences revenue for the second quarter was $244 million. On a same conference basis, revenue growth was around 12% FX neutral. Contribution margin was 59%. We held 18 destination Conferences in the second quarter as planned. Q2 Consulting revenue was $142 million, compared to $156 million in the year-ago period. Consulting contribution margin was 38% in Q2.

Craig Safian
Craig Safian
CFO at Gartner

Labor-based revenue was $96 million. This was about in line with our expectation. Second quarter bookings increased 17% over the prior year. Backlog at June 30th was $214 million, up about 9% year-over-year. This was the first year-over-year backlog increase since Q1 of 2025. In contract optimization, we had $148 million of revenue on an LTM basis, consistent with Q1 of this year. The two-year revenue CAGR was up about 9%. As you know, our contract optimization revenue is highly variable. The performance in Q2 was better than we had expected. EBITDA for the second quarter was $466 million, up 6% from last year as reported and 4% FX neutral. We outperformed expectations in the second quarter through revenue upside, effective expense management, and a prudent approach to guidance. Adjusted EPS in Q2 was $4.37, up 24% compared to Q2 last year.

Craig Safian
Craig Safian
CFO at Gartner

We had 67 million shares outstanding in the second quarter. This is an improvement of about 11 million shares or approximately 14% year-over-year. We exited the second quarter with 64 million shares on an unweighted basis. Free cash flow remained strong in the second quarter, up 9% year-over-year. Free cash flow on a rolling four-quarter basis was $1.3 billion. Adjusting for several items detailed in the earnings supplement, free cash flow was 20% of reported revenue, 78% of adjusted EBITDA, and 140% of GAAP net income. At the end of the second quarter, we had about $1.5 billion of cash. This includes about $500 million for running the business and around $1 billion available to deploy on behalf of shareholders. Our June 30th debt balance was about $3 billion. Our reported gross debt to trailing 12-month EBITDA was under 2x.

Craig Safian
Craig Safian
CFO at Gartner

We repurchased $547 million of stock during the second quarter, reducing our share count by more than 5% sequentially. Last week, the board increased the buyback authorization to about $1.2 billion. We expect the board will continue to evaluate and refresh the amount as needed. We are updating our full year guidance to reflect recent performance and trends. The update includes the effect of foreign exchange rates, reflecting a stronger U.S. dollar compared with our prior guidance from three months ago. For Insights revenue in 2026, our guidance is operationally unchanged. We revised the outlook to account for the stronger dollar. For Conferences, we are basing our guidance on the 55 in-person destination Conferences we have planned for 2026. We have good visibility into current year revenue, with a majority of what we've guided already under contract. For Consulting, we have maintained the outlook for the full year.

Craig Safian
Craig Safian
CFO at Gartner

Contract optimization has had several very strong years. The business remains highly variable. For 2026, we expect revenue at or above $6.375 billion, which is updated from last quarter and is FX neutral growth of 1%. With positive NCVI in Q2, we expect Insights revenue in Q3 to be up sequentially on an FX neutral basis. Reported results will reflect the effect of the stronger dollar. We now expect full year EBITDA at or above $1.57 billion. Compared with our prior guidance, this is up $40 million on an operational basis and up $25 million net of the effect of a stronger dollar. This reflects full year margins at or above 24.6%, also up from last quarter. We expect 2026 adjusted EPS at or above $14, an increase from last quarter that primarily reflects the increase in the EBITDA outlook and a lower share count.

Craig Safian
Craig Safian
CFO at Gartner

For 2026, we expect free cash flow at or above $1.185 billion, also an increase from the prior guidance. This reflects a conversion from GAAP net income of 136%. Our guidance is based on 66 million fully diluted weighted average shares outstanding, which incorporates the repurchases made through the end of the second quarter. We exited Q2 with about 64 million fully diluted shares. For Q3, we expect EBITDA at or above $315 million. Our revenue, profit, and cash flow results in Q2 were ahead of expectations. We've increased the EBITDA, adjusted EPS, and free cash flow guidance for 2026. Contract value ex-Fed grew 3.3% in the quarter, and total CV year-over-year growth improved by 70 basis points from Q1 of 2026. We are making progress on our BTI transformation with a focus on delivering even more value to our clients.

Craig Safian
Craig Safian
CFO at Gartner

Macro dynamics and AI are driving uncertainty and affecting enterprises around the world. The data we see across engagement, retention, and growth in multiple end markets reinforces the enduring value of Gartner's expert-led Insights. This gives us confidence that this cycle will normalize and CV growth will continue to re-accelerate. Gartner's return on invested capital is strong at 31% on a rolling four-quarter basis. We continue to generate significant amounts of free cash flow. We expect the conversion of GAAP net income will improve as CV accelerates. We believe this offers a durable and compelling value proposition for our shareholders.

Craig Safian
Craig Safian
CFO at Gartner

We are positioned to accelerate CV growth in 2026, and we expect to deliver adjusted EPS on a compound basis above 12% over the next three years. Over time, we'll opportunistically deploy our capital on stock repurchases, which will lower the share count, and on strategic value-enhancing tuck-in M&A. With that, I'll turn the call back over to the operator, and we'll be happy to take your questions. Operator?

Operator

Thank you. If you'd like to ask a question, please press star one one. If your question has been answered and you'd like to remove yourself from the queue, please press star one one again. Our first question comes from Faiza Alwy with Deutsche Bank. Your line is open.

Faiza Alwy
Faiza Alwy
Analyst at Deutsche Bank

Yes. Hi, good morning. Thank you so much. I wanted to ask about how your thoughts have evolved around the role of macro and AI kind of impacting your business, because I feel like this is the first time that you've mentioned sort of AI as a factor. Historically, we've been talking more about the macro factors like tariffs. Just curious, what's kind of driven the change in messaging around there?

Gene Hall
Gene Hall
Chairman and CEO at Gartner

Yeah. Faiza, what I'd say is that during Q2, the selling environment improved, and I'd say many of the factors that we talked about were modestly better. The most notable one obviously being part of the public sector, but other sectors as well. AI actually for us is something we get a lot of demand for. It's the single biggest demand from our clients, it's actually quite valuable to our clients. Again, we see the single biggest driver of demand from helping clients with AI.

Operator

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

Tom Rush
Tom Rush
Analyst at William Blair

Hi, good morning. This is Tom Rush in for Andrew Nicholas. I wanted to ask about the AskGartner solution, I was wondering if you could provide some color on how renewal rates for users of AskGartner compare to those who don't, also any type of benefits you're seeing, like in revenue, renewals, retention, any of those numbers to this point. Thank you.

Craig Safian
Craig Safian
CFO at Gartner

Hey, good morning. I think the way to think about AskGartner, and Gene referenced this in the BTI transformation, is it is just a piece of all the things we are doing to enhance the user experience, both from a digital user experience perspective and also the experience when people do interact with our analysts and our experts. AskGartner for us is table stakes because that is the way a lot of people are now when they are behind a firewall or working through information, they are leveraging a large language model. Our core value is really both driving people there to our site proactively because we know what their mission-critical priorities are, and we know what their interests are, and we know what they should be thinking about many times before they even know what they should be thinking about. They really put a huge premium on that proactivity.

Craig Safian
Craig Safian
CFO at Gartner

When they do come, they are proactively brought in behind the firewall. Then AskGartner is one of our many digital tools that they can utilize to further enhance their experience, their insights, their intelligence moving forward on their MCPs. It is all positive. Again, I would highlight the broader digital experience as being the more important thing and actually the broader overall engagement experience across all the elements that Gartner delivers value is really what we are focused on. AskGartner is obviously a piece of that, but not the biggest piece of it. It is an important piece, but more broadly, we are enhancing the overall experience, making it more effective and more efficient for our clients to connect with the insights they need to accomplish their mission-critical priorities.

Operator

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

Jason Haas
Jason Haas
Analyst at Wells Fargo

Hey, good morning, and thanks for taking my question. I am curious if you are still expecting the ex federal government CV growth to accelerate to 4%+ by the end of this year.

Craig Safian
Craig Safian
CFO at Gartner

Hey, good morning, Jason. Yeah. Along with overall CV growth continuing to accelerate this year, it is our expectation that the ex-Fed CV growth will be a part of that. Short answer is yes. We do expect the entire business to continue to accelerate, ex-Fed being a piece of that re-acceleration as well.

Jason Haas
Jason Haas
Analyst at Wells Fargo

Thank you.

Operator

Thank you. Our next question comes from Jeff Meuler with Baird. Your line is open.

Jeff Meuler
Jeff Meuler
Analyst at Baird

Yeah. Thank you. Good morning. Could you go into more detail, I guess, on your takeaway from the midsize client base growing mid-single and what's different relative to large enterprise? One thing that would come to my mind that I'd be curious on your thoughts on is if large enterprise just has more downselling of number of seats. I don't know if there's any other takeaways from you because I would think the initiatives that you've been implementing would benefit both client sizes generally. Thank you.

Gene Hall
Gene Hall
Chairman and CEO at Gartner

Hey, Jeff, it's Gene. Great question. I think what's going on with midsize enterprises is these are enterprises that are, again, they're typically revenues of $100 million or more. These are not small enterprises, but they're smaller than the very largest enterprises, the level of complexity in their environment is lower. When they're tackling things like AI It's easier for them to actually get to what are the big areas that they can get a good return on, how they track costs. All that stuff's much easier to control with a midsize enterprise.

Gene Hall
Gene Hall
Chairman and CEO at Gartner

I think large enterprises, these very large enterprises, they're extremely complicated. I think it's very hard for leaders to sort out all of the puts and takes in terms of both where the value is and in terms of how you manage cost. I think that's the big difference is, in the smaller enterprises, actually, it's easier to manage all the stuff they're making more progress. In the larger enterprises, it's a much more complex problem that they're still wrestling with how you actually get that ROI and control cost and risk and things like that.

Craig Safian
Craig Safian
CFO at Gartner

I think, Jeff, the other thing I would add is, in the larger enterprises, they tend to be more global in nature, more impacted by all of the uncertainty that exists out there. The one thing I would say is, again, I would echo your point, all the things we're doing from BTI transformation and across the board, will benefit all clients of all sizes, across GTS, the end user piece, the tech vendor piece, and across GBS. We did note that we are seeing down sell stabilize in the 2Q, which again, is largely a larger company phenomenon.

Craig Safian
Craig Safian
CFO at Gartner

We're actually seeing some improvement there. We noted also that we are seeing in-quarter retention rates improve. That's a phenomenon across the entire portfolio as well. Back to Jason's question a little bit, with ex-Fed accelerating, we need the entire portfolio to accelerate, and that would be inclusive of mid-size enterprises, large enterprises, and our largest clients across the board as well.

Jeff Meuler
Jeff Meuler
Analyst at Baird

Thank you.

Operator

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

Josh Chan
Josh Chan
Analyst at UBS

Hi. Good morning, Gene, Craig. Thanks for taking my question. I guess, on Gene's comment about the selling environment improving, I was wondering if you could make a comment about the ex-Fed selling environment. Do you see that improving as well through the quarter and, for you to get to the target of acceleration for the year, what kind of needs to happen on an ex-Fed environment basis, I suppose? Thank you.

Gene Hall
Gene Hall
Chairman and CEO at Gartner

I'd say, on the ex-Fed selling environment, there are areas where it's gotten better and there's areas where it's gotten worse. I'd say there's a mix of that. The areas where the macro has gotten better, I think that's performed very well, and the areas where it's gotten worse has been a little bit more challenging. I'd say that's what's going on kind of under the covers. Again, as Craig said, we expect that to accelerate over time.

Craig Safian
Craig Safian
CFO at Gartner

Josh, I think what it comes down to is, our belief, and I think a lot of people believe this, that this kind of environment is sort of the new normal to some extent. All the transformations we're doing and all the ways we are improving the business and focusing on execution and all of those things are meant to be able to accelerate the business in the current environment. Again, we don't need a radical shift in the environment, for the CV to continue to accelerate.

Craig Safian
Craig Safian
CFO at Gartner

We don't need a radical shift in the environment for the ex-U.S. Federal CV, to accelerate. We just need to execute better, and we've got all the things in line. Again, as I've mentioned and Gene mentioned in our prepared remarks, as we look under the covers at a lot of our KPIs, they are definitely trending positively. When we see those things trend positively, generally it results in improved performance over time.

Josh Chan
Josh Chan
Analyst at UBS

Great. Thank you for the color.

Operator

Thank you. Our next question comes from Manav Patnaik with Barclays. Your line is open.

Manav Patnaik
Manav Patnaik
Analyst at Barclays

Thank you. Good morning, guys. I was just hoping you could help understand the new business number. I think you said it was +2% in GTS and down 5% in GBS, kind of square that off with your commentary around increased engagement, new sales, and so forth. I guess within that and maybe overall, just how is price tracking?

Craig Safian
Craig Safian
CFO at Gartner

Yeah. Good morning, Manav. I'll start off, Gene can fill in any blanks. I think there's a few things I'd highlight on the new business. One is, as you know, and many of those who follow us for a while, we generally see new business dollars build from Q1 to Q2 to Q3 to Q4. Each quarter, we generally generate more new business dollars than the previous quarter. As I noted in my prepared remarks and highlighted for both GTS and GBS, we did see a nice progression from Q1 to Q2 in new business dollars, which we view as very positive. When we look under the covers at sales pipelines and new business pipelines, they are also trending positively.

Craig Safian
Craig Safian
CFO at Gartner

As you know, having new business pipelines doesn't immediately translate into growing new business, but certainly it gives us a much better shot of continuing to drive that build from Q2 to Q3 and then Q3 to Q4 from a new business perspective and drive gains in new business as well. When we look under the covers at things like engagement, and things of that nature, that's really about future retention rates. What I would say is obviously future retention is also a good predictor of future new business. If you're not driving strong retention rates, it's really hard to grow those clients. The more that we can drive higher retention rates within our existing clients, the more new business opportunities we have as well.

Craig Safian
Craig Safian
CFO at Gartner

Again, you saw while retention increased sequentially, that you should see build as well over time as we both drive stronger retention rates with our existing clients, and then with more clients retaining, we have more at-bats, if you will, to drive new business with existing clients as well. I think it's a combination of all those things. Primarily the engagement gives us confidence about the retention rates. The retention rates give us confidence about being able to drive new business from existing clients. Then you flip over to the new business pipelines, which remain very strong and positive. That gives us confidence around a new logo contribution moving forward as well.

Operator

Thank you. Our next question comes from Surinder Thind with Jefferies. Your line is open.

Surinder Thind
Surinder Thind
Analyst at Jefferies

Thank you. I was hoping maybe you can provide a bit more color on the wallet retention. Obviously, things got a little bit better quarter-over-quarter, but I think there was also commentary around continued down-sell pressure within the large enterprises. Maybe just how you think about where down-sell pressure is versus maybe where you would like it to be and just some of the things that are the factors that you think are driving it in the near term versus structurally, where we think we are longer term on that. That would be helpful.

Craig Safian
Craig Safian
CFO at Gartner

Hey, Surinder, good morning. I think the commentary is really that we're seeing down-sell stabilize, and so it didn't get worse Q1 to Q2. It is stabilizing. And if you think about when a contract comes up for renewal, there are one of three or four things that can happen. And so when there is down-sell, it means we lose the up-sell opportunity. And while our retention is really a function of the combination of renewing the base, obviously there are a small amount of clients that will cancel. But you see client retention rates are improving and are at or near certain historical highs. And so that's really not a challenge for us. But when a client decides to either hold spend or reduce spend, that is a missed opportunity for us to increase the spend, which generally translates into those higher wallet retention rates.

Craig Safian
Craig Safian
CFO at Gartner

We believe that over time, with the better engagement levels, all the improvements we're making that Gene highlighted on BTI, that will lead to stronger retention rates. That stabilizes the wallet retention and gives us more opportunities to grow that going forward. It could be just growth through price, it could be growth through upgrading people to higher level services, or it could be growth from finding new licensed users or finding new buying centers within those existing enterprises. But we view wallet getting more back to normal over time as we drive all these improvements in BTI and engagement, which stabilizes the retention base and then just gives us more opportunity to grow that existing client base.

Surinder Thind
Surinder Thind
Analyst at Jefferies

Thank you.

Operator

Thank you. Our next question comes from Jasper Bibb with Truist Securities. Your line is open.

Jasper Bibb
Jasper Bibb
Analyst at Truist Securities

Hey, good morning, guys. I just wanted to ask how you're thinking about managing quota-bearing headcount in the context of this re-acceleration in the second half and then into 2027. Do you expect to add more salespeople in the second half to support that CV re-acceleration, or do you think you'd get there on productivity gains? Thanks.

Gene Hall
Gene Hall
Chairman and CEO at Gartner

Jasper, we basically want to add sales headcount when we have great productivity. Right now we look at it as we have a lot of capacity that is underutilized, and that with the changes we're making, like the BTI transformation I talked about, the increased engagement that Craig talked about, we think that will actually drive our productivity up, and we'll get a nice lift there. As that comes up, we will expect to accelerate our headcount growth. It really depends on how we see this improvement in productivity developing over time.

Craig Safian
Craig Safian
CFO at Gartner

Jasper, I'd just add, we're actively managing our operating expense base so that we can remain agile and ensure we can deliver on our profit expectations, free cash flow expectations, et cetera. Then just, I would reiterate what Gene said, which is we have plenty of capacity to significantly re-accelerate CV. Even getting to half or three-quarters of our historical productivity levels, that would provide significant uplift to the CV growth. Again, that return to productivity would give us the confidence that Gene highlighted to reignite investment in QBH. Again, it's all about balanced managing of our OpEx space, making sure we're getting productivity out of our existing cost base. Then when we see that's the signal to go faster on the QBH side.

Jasper Bibb
Jasper Bibb
Analyst at Truist Securities

Makes sense. Thanks. Taking the question.

Operator

Thank you. Our next question comes from George Tong with Goldman Sachs. Your line is open.

George Tong
George Tong
Analyst at Goldman Sachs

Hi. Thanks. Good morning. You talked about CV growth continuing to accelerate from current levels and highlighted several drivers. Can you rank order the key drivers you expect to fuel CV growth acceleration and what you see as a reasonable medium-term target for CV growth?

Gene Hall
Gene Hall
Chairman and CEO at Gartner

What I'd say, George, is the thing that's going to drive CV growth the most are two factors. The first is as engagement with our clients increases, that strengthens retention. As our client retention increases, obviously, if we retain a client, just as Craig explained earlier, our opportunity to grow in that client increases. I think the first thing we'll see is increased engagement leads to higher retention. Higher retention actually leads to more new business with our existing clients. On top of that, as we make the changes, get higher engagement, that also makes it easier to sell new clients too. It makes their value proposition more transparent to new opportunities as well. That will kick as well. I think those are the three key factors that impact.

Craig Safian
Craig Safian
CFO at Gartner

George, I would just add, obviously, in the near term, the biggest impact is a combo of lapping the U.S. Federal and that business actually getting back to growth as well. Again, I know that's baked into a lot of the way people are thinking already, and so that's fine. Mathematically, that will provide a nice lift this year. Again, we believe that that business, and again, both Gene and I noted on our prepared remarks that we actually drove NCVI in that space in the second quarter. That's another piece of it as well that sort of gets rolled into the total and will behave exactly the way Gene highlighted. Obviously, we won't have the same challenges we had in 2025 from the U.S. Federal business going forward.

George Tong
George Tong
Analyst at Goldman Sachs

Thanks. A reasonable medium-term target for CV growth?

Craig Safian
Craig Safian
CFO at Gartner

George, you should know us better than that we do not provide CV guidance or medium-term growth. I think the short answer is we expect CV growth to continue to re-accelerate. We've got to continue through the low single-digits to get to mid single-digits, and then get through mid single-digits, and beyond. We look forward to updating everyone each quarter, but we're not going to provide a medium-term target on the CV growth as is our normal practice.

George Tong
George Tong
Analyst at Goldman Sachs

Got it. Thanks very much.

Operator

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

Toni Kaplan
Toni Kaplan
Analyst at Morgan Stanley

Thanks very much. You mentioned in the prepared remarks, clients are reprioritizing their tech budgets. I imagine a lot of them are putting more expense dollars towards utilizing large LLMs and related expenses. Is that largely what you were referring to? Are you seeing any impact in the amount that they're willing to spend with you as a result of the reprioritization? Thanks.

Gene Hall
Gene Hall
Chairman and CEO at Gartner

Hey, Toni. You're correct in that clients are reprioritizing their IT spending to shift more towards AI. LLM is one piece of it, but more towards AI. What I'd say is that doesn't impact us in a negative way directly, because if you look at the amount they spend with us relative to their IT budgets, we're very small. Think a tenth of a percent or less for typical clients. As they reprioritize, actually, as I mentioned before, the biggest single driver demand for us for our clients, including IT, is help with AI.

Gene Hall
Gene Hall
Chairman and CEO at Gartner

We're actually helping them figure out how do they reprioritize. In that sense, it's actually driving demand for our products as we help them reprioritize. Again, across both within IT and across the business, typically, companies are trying to reprioritize to free up more money for AI, and we're helping them with that.

Toni Kaplan
Toni Kaplan
Analyst at Morgan Stanley

Thank you.

Operator

Thank you. Our next question comes from Scott Wurtzel with Wolfe Research. Your line is open.

Scott Wurtzel
Scott Wurtzel
Analyst at Wolfe Research

Hey, good morning, guys. Thank you for taking my question. Craig, just wondering if you can talk a little bit more about some of the OpEx efficiencies that you're recognizing in the context of you're excluding FX, you're raising your revenue outlook by $5 million, even up by $40 million. Just wondering if you could talk a little bit more about the OpEx efficiencies. Thanks.

Craig Safian
Craig Safian
CFO at Gartner

Scott, good morning. Thanks for the question. I think it's ongoing best practice around making sure that our in-quarter OpEx rates align with the revenue, but more importantly, that our run rates align with our revenue CV expectations rolling forward. We continue to manage the business to ensure that we are delivering on our profit targets, and also delivering on our free cash flow targets. What I would say is a lot of the reprioritization is to make sure that we are investing in key areas that we know will drive short-term, medium-term, and long-term growth.

Craig Safian
Craig Safian
CFO at Gartner

There's a lot of reprioritization happening on a quarterly basis. It's not always in the name of driving profitability. It is often in the name of making sure that we're able to double and triple down in the places that we think are most important for delivering value for our clients, and that we think are most important for delivering long-term value for the company, and our stakeholders as well.

Scott Wurtzel
Scott Wurtzel
Analyst at Wolfe Research

Great. Thanks, guys.

Operator

Thank you. Our next question comes from Daniel Zocco with BMO Capital Markets. Your line is open.

Jeff Silber
Jeff Silber
Analyst at BMO Capital Markets

Hi, this is actually Jeff Silber with BMO. Other companies in this space have talked about potentially changing economics, maybe a faster move to enterprise pricing or a consumption-based model. Is that something you're contemplating? If not, why not?

Gene Hall
Gene Hall
Chairman and CEO at Gartner

We talk to our clients and do market research on a pretty much continual basis to understand how they want to work with us and how they feel about our pricing. What I'd say is if you look at who we're targeting with our research, it's typically the C-level, like the CIOs, CFO, their direct reports, and maybe one level down. An organization that might have 1,000 people or 10,000 people or 15,000 people, we're targeting a handful of those people. When we go back to talk to clients about how they want to pay for it, how they want to structure their contracts, they like the way we do it today as seat-based because they don't see a need to have it with all 10,000 of their associates.

Gene Hall
Gene Hall
Chairman and CEO at Gartner

If I could contrast that, there's some software purchases where they'd say, if you buy a lot of packaged software, you say, well, I need it for each of my associates. We're not in that kind of a business. It's really focused on the top really three levels in the organization, our core clients. When we ask them how they want to pay, they don't say, we want enterprise licenses. They actually like the way that we're working today.

Craig Safian
Craig Safian
CFO at Gartner

Jeff, just to add to that, again, if you look at the average spend on the GTS side, it's probably about six licenses per enterprise. On the GBS side, it's a little bit lower than that. Again, we are really targeting, to echo Gene's point, the top of the org chart, that person's direct reports, and in larger organizations, a level or two down from that. We are not targeting the enterprise. We are targeting the C-level, because those are the people that have significant enterprise-wide mission-critical priorities that we can drive the most value for, that's where we're going to continue to focus and drive a lot of our growth of value.

Jeff Silber
Jeff Silber
Analyst at BMO Capital Markets

Okay, thanks for the color.

Operator

Thank you. Our next question comes from Ashish Sabadra with RBC Capital Markets. Your line is open.

Ashish Sabadra
Ashish Sabadra
Analyst at RBC Capital Markets

Thanks for taking my question. Maybe a quick clarifying question. Can we know what the ex-Fed NCVI was in the quarter? We get around $11 million from fed and $3 million from ex-Fed NCVI. Just wanted to confirm that. Just a follow-up on prior responses. I was just wondering, can you talk about which areas are you seeing continued pressure? Are there certain industries or, for example, tariff-impacted industries were impacted last year. Do you see easy comps going into this year? Thank you.

Craig Safian
Craig Safian
CFO at Gartner

Hey, Ashish. I'll start with the computational stuff, then we can dive into the more macro question. Ex-Fed NCVI in the quarter was about positive $4 million. That's the math on that. Do you want to cover tariff-impacted?

Gene Hall
Gene Hall
Chairman and CEO at Gartner

Yeah. In terms of industries, again, companies that have tariffs imposed have much tighter cost constraints for that company than ones that don't. That's clearly a macro factor that continues to impact just for those companies that, tariffs. As I mentioned before, Craig mentioned this as well, we're assuming that the world is going to be like that for the go forward basis. We're restructuring our business, especially with the BTI transformation, so that our value goes up, so that even in industries where there's a big macro dislocation, that actually they see the value in our products and are going to want to buy and grow with us.

Craig Safian
Craig Safian
CFO at Gartner

Ashish, just the one thing I'd also just highlight is it's really the uncertainty. There are lots of different macro factors that are popping up on a daily, weekly, monthly basis. They ebb and flow, but it's causing just lots of uncertainty around the enterprises that we serve globally. We're adapting and transforming so that we can perform better given all that uncertainty.

Ashish Sabadra
Ashish Sabadra
Analyst at RBC Capital Markets

That's very helpful, color. Thank you.

Operator

Thank you. Our next question comes from Curtis Nagle with Bank of America. Your line is open.

Curtis Nagle
Curtis Nagle
Analyst at Bank of America

Thanks so much for taking the question. Switching gears a little bit, on Consulting, I think you said the backlog is $214 or so, first increase in about a year or so. I guess, where are you seeing incremental demand? What's driving that improvement?

Craig Safian
Craig Safian
CFO at Gartner

Good morning, Curtis. I think it's a little bit better execution across the board, a little bit of just driving better focus with our core anchor clients. There's no one thematic around, we sold a lot of this kind of project or this kind of engagement. I think the team has just been laser-focused on, one, delivering on the backlog that we have, and two, generating the pipeline and turning that into bookings so that we've got more backlog to burn in the future. Obviously, in Q2, we had a very strong bookings quarter. Again, no Uber trend among the type of business that we did end up selling.

Craig Safian
Craig Safian
CFO at Gartner

It's just a matter of staying close to our clients, understanding where they have needs, and then our Consulting team diving in to meet those demands and meet those needs. We feel good now about the full-year outlook, particularly on the labor base side, given the strong bookings quarter. We need to follow it up with another strong bookings quarter so that we can keep the backlog growing so that we can return that business to growth over the medium term.

Curtis Nagle
Curtis Nagle
Analyst at Bank of America

Okay. Thank you.

Operator

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

Gene Hall
Gene Hall
Chairman and CEO at Gartner

In closing, with the strong demand we're seeing for help on mission-critical priorities such as AI, our vast and growing library of high-impact, timely insights, and the transformational improvements we're making in our ability to deliver unparalleled client value, we remain optimistic about our future. We expect contract value growth to continue to accelerate. We will continue to drive strong free cash flow that we put to use to drive incremental shareholder value. We expect to deliver adjusted EPS on a compound annual basis above 12% over the next three years. Thanks for joining us today, and I look forward to updating you again next quarter.

Operator

Thank you for your participation. This does conclude the program. You may now disconnect. Everyone, have a great day.

Executives
    • David Cohen
      David Cohen
      SVP of Investor Relations
    • Gene Hall
      Gene Hall
      Chairman and CEO
    • Craig Safian
      Craig Safian
      CFO
Analysts
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