Gartner Q2 Earnings Call Highlights

Key Points

• Gartner exceeded second-quarter expectations: Revenue rose 3% year over year to $1.7 billion, while adjusted EBITDA increased 6%, adjusted EPS grew 24% to $4.37 and free cash flow rose 9% to $378 million.
• AI is driving client demand despite continued macroeconomic uncertainty, with improving engagement, retention and contract value growth. Consulting revenue declined, but bookings increased 17% and backlog rose 9%.
• Gartner raised its 2026 outlook for adjusted EBITDA to at least $1.57 billion, adjusted EPS to at least $14 and free cash flow to at least $1.185 billion. The company also repurchased $547 million of stock during the quarter and expanded its buyback authorization to roughly $1.2 billion.

Gartner NYSE: IT reported second-quarter results that exceeded its expectations, with revenue, adjusted EBITDA, adjusted earnings per share and free cash flow all ahead of plan. The company also raised its full-year outlook for EBITDA, adjusted EPS and free cash flow, citing revenue upside, expense management and share repurchases.

Second-quarter revenue totaled $1.7 billion, up 3% year over year as reported and 2% on an FX-neutral basis. Adjusted EBITDA rose 6% to $466 million, while adjusted EPS increased 24% to $4.37. Free cash flow grew 9% to $378 million. Gartner said rolling four-quarter return on invested capital was 31%.

Contract value, a closely watched measure of future subscription revenue, reached $5.3 billion at June 30, rising 2% year over year and accelerating by 70 basis points from the first quarter. Excluding the U.S. federal government business, contract value increased 3.3%. Chief Financial Officer Craig Safian said the company expects both total and ex-federal contract value growth to continue accelerating during 2026.

Engagement, Retention and AI Demand

Chairman and Chief Executive Officer Gene Hall said Gartner continued to see stronger client engagement, which rose 140 basis points from a year earlier. Digital engagement improved by more than 110 basis points, while human interactions rose more than 150 basis points, including increased use of analyst consultations.

Safian said improving engagement, stabilizing down-sell activity and higher in-quarter retention rates are important indicators for future growth. Wallet retention improved sequentially across Global Technology Sales and Global Business Sales, according to the company.

Hall described artificial intelligence as Gartner's largest single source of client demand. He said the company is advising clients on AI strategy, models, cybersecurity, robotics, cloud-to-edge processing, adoption cases and best practices. Gartner said it connects more than 80,000 business leaders seeking AI value, over 10,000 CIOs and IT organizations implementing AI, and roughly 5,000 technology providers developing AI strategies.

While AI-related spending is prompting enterprises to reprioritize technology budgets, Hall said Gartner's spending represents a small portion of a typical client's IT budget. He said the budget shifts are creating demand for Gartner's help in determining how to allocate spending toward AI initiatives.

Management also pointed to ongoing macroeconomic and geopolitical uncertainty. Hall said clients continue to scrutinize expenses, add approval processes and delay decisions. However, he said the selling environment improved during the second quarter, particularly in the public sector, though conditions remained mixed across other end markets.

Segment Performance

• Insights: Revenue increased 2% as reported and 1% FX-neutral. Contribution margin was 77%, up about 140 basis points from the prior year.
• Global Technology Sales: Contract value was $4 billion, up 1% year over year and approximately flat sequentially. Excluding federal business, GTS contract value rose 3%. Retention was 97%, or 99% excluding federal business.
• Global Business Sales: Contract value was $1.3 billion, up 3% year over year and 1% sequentially. Excluding federal business, GBS contract value grew 4%. Core GBS subscription products, which account for about 90% of GBS contract value, grew about 7%.
• Conferences: Revenue was $244 million, with same-conference revenue growth of approximately 12% on an FX-neutral basis. Gartner held 18 destination conferences during the quarter, and the segment posted a 59% contribution margin.
• Consulting: Revenue declined to $142 million from $156 million a year earlier. However, bookings rose 17%, and backlog increased 9% to $214 million, marking the first year-over-year backlog gain since the first quarter of 2025.

Management said midsize enterprise clients delivered mid-single-digit contract value growth in the quarter. Hall said smaller enterprises can be less complex than the largest global organizations when managing AI investments, costs and returns. Gartner also reported positive net contract value increase from government clients during the period.

Transformation and Capital Allocation

Hall said Gartner's Business and Technology Insights transformation is focused on expanding the volume, impact and timeliness of research and improving the client experience. The company's insights library grew 18%, while the number of higher-impact documents increased by double digits. Gartner also said it has increased the production of research released immediately after important events.

In response to a question about AskGartner, Safian said the tool is one component of a broader digital experience strategy rather than the central element of the transformation. He said Gartner is focused on helping clients access relevant insights proactively, as well as improving interactions with analysts and other experts.

Gartner repurchased $547 million of stock in the second quarter, reducing its share count by more than 5% sequentially. The company ended the quarter with approximately $1.5 billion in cash and about $3 billion in debt. Its board increased the share-repurchase authorization to roughly $1.2 billion.

Raised 2026 Outlook

For 2026, Gartner now expects revenue of at least $6.375 billion, representing 1% FX-neutral growth. The company said its Insights revenue outlook is operationally unchanged, though reported results will reflect the stronger U.S. dollar.

The company raised its full-year adjusted EBITDA outlook to at least $1.57 billion, an operational increase of $40 million from its earlier forecast. It expects adjusted EBITDA margin of at least 24.6%, adjusted EPS of at least $14, and free cash flow of at least $1.185 billion. Gartner expects third-quarter adjusted EBITDA of at least $315 million.

Hall said the company expects adjusted EPS to compound at more than 12% annually over the next three years. He added that Gartner plans to deploy capital opportunistically through stock repurchases and strategic tuck-in acquisitions.

About Gartner (NYSE:IT)

Gartner, Inc is a global research and advisory firm that provides insights, advice and tools for leaders in IT, finance, HR, customer service and other business functions. Founded in 1979 and headquartered in Stamford, Connecticut, Gartner specializes in helping organizations make informed decisions about technology, operations and strategy through a combination of published research, advisory services, consulting, executive programs and events.

The company's offerings include proprietary research reports, market forecasts, and analytical frameworks that are widely used by technology buyers and vendors.

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