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01/11 11:07
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary presents a mixed outlook: strong AI initiatives and AskGartner rollout suggest potential growth, but financial projections show modest growth rates. The Q&A revealed management's vague responses on CV improvement and AI impact, raising uncertainties. Despite operational improvements and revenue growth, the lack of detailed guidance and muted growth in key areas like non-subscription revenue and consulting tempers optimism. Therefore, the overall sentiment is neutral, expecting a stock price movement between -2% and 2%.
Revenue Third quarter revenue was $1.5 billion, up 3% year-over-year as reported and 1% FX neutral. The increase was attributed to modest revenue upside and effective expense management.
Total Contribution Margin Total contribution margin was 69%, up 90 basis points from last year. This improvement reflects effective cost management.
EBITDA EBITDA was $347 million, up 2% as reported. FX was a 3-point benefit in the quarter.
Adjusted EPS Adjusted EPS was $2.76, up 10% from Q3 of last year. The increase was driven by improved financial performance and share repurchases.
Free Cash Flow Free cash flow was $269 million, compared to $265 million in Q3 2024, adjusting for last year's insurance proceeds. The increase reflects strong year-to-date performance.
Insights Revenue Insights revenue in the quarter grew 5% year-over-year as reported and 4% FX neutral. The growth was driven by subscription-based products.
Contract Value (CV) Contract value was $5 billion at the end of the third quarter, up 3% versus the prior year. Excluding the U.S. federal government, CV grew 6%. Growth was broad-based across practices, industry sectors, company sizes, and geographic regions.
Global Technology Sales (GTS) CV Global Technology Sales contract value was $3.8 billion at the end of the third quarter, up 2% versus the prior year. Excluding the U.S. federal government, GTS CV grew 5%. Growth was led by tech subsectors such as software and services.
Global Business Sales (GBS) CV Global Business Sales contract value was $1.2 billion at the end of the third quarter, up 7% year-over-year. Excluding the U.S. federal government, GBS CV grew 9%. Growth was led by sales, legal, and finance practices.
Conferences Revenue Conferences revenue for the third quarter was $75 million. On a same conference basis, revenue growth was around 6% FX neutral. The growth reflects strong attendee ratings and increased attendance.
Consulting Revenue Consulting revenue was $124 million compared with $128 million in the year-ago period. The decline was due to a large project slipping out of Q3.
AI-driven tool, AskGartner: Provides quick access and generates in-depth summaries of business and technology insights. Enhanced capabilities have been accelerated, leveraging Gartner's proprietary data.
AI insights and use cases: Cataloged over 1,000 AI use cases with high ROI potential. Developed more than 6,000 AI-related documents for client use.
Client engagement and retention: Client engagement increased, retention rates improved, and new business pipeline grew double digits.
Conferences: Attendance at the 35th Annual IT Symposium/Xpo increased by 8% year-over-year, with strong exhibitor bookings for 2026.
Internal AI productivity tools: AI tools increased content production per analyst by 31% year-over-year and reduced publishing time by 75%.
Operational adaptations: Adaptations led to improved client engagement, retention, and productivity of business development executives.
Stock repurchase: Repurchased over $1 billion in stock, reducing share count by 6% year-over-year.
Long-term growth strategy: Positioned for double-digit growth in 2027 and beyond, with a focus on strategic M&A and share repurchases.
Macroeconomic Environment: The macroeconomic environment remains dynamic, with uncertainties such as changes in the federal government and evolving tariff policies, which could impact operations and financial performance.
AI Investment Returns: While there is excitement about AI, enterprise leaders are still chasing returns on their investments, indicating potential challenges in achieving expected ROI.
U.S. Federal Government Contracts: Contract value growth excluding the U.S. federal government was higher, but nearly all U.S. federal contracts will come up for renewal in 2025, posing a risk to revenue stability.
New Business Decline: New business was down 4% year-over-year excluding U.S. federal government, indicating challenges in acquiring new clients.
Consulting Revenue Variability: Consulting revenue is highly variable, with a large project slipping out of Q3, affecting revenue and backlog.
Headcount and SG&A Costs: SG&A costs increased 7% year-over-year due to headcount growth and merit increases, which could pressure margins.
Digital Markets Business Impairment: A noncash goodwill impairment charge was recorded for the Digital Markets business, indicating underperformance in this segment.
Revenue Growth: Gartner has increased its full-year 2025 revenue guidance to at least $6.475 billion, reflecting FX-neutral growth of 3%. Insights revenue is expected to grow by 4% FX-neutral, Conferences revenue by 6% FX-neutral, and Consulting revenue by 2% FX-neutral.
EBITDA and Margins: Full-year 2025 EBITDA is projected to be at least $1.575 billion, reflecting a margin of 24.3%, which is an increase from prior guidance.
Adjusted EPS: 2025 adjusted EPS is expected to be at least $12.65, an increase from prior guidance.
Free Cash Flow: Free cash flow for 2025 is projected to be at least $1.145 billion, with a conversion from GAAP net income of 165%.
Contract Value Growth: Contract value (CV), excluding U.S. federal business, grew 6% in Q3 2025. Gartner expects to accelerate CV growth in 2026, aiming for long-term sustained double-digit growth by 2027 and beyond.
Share Repurchases: Gartner plans to continue repurchasing shares, which will lower the share count over time and create value for shareholders through EPS accretion.
Market Trends and AI: Gartner anticipates AI to be one of the most innovative and pervasive technologies in history, driving unprecedented demand. The company is leveraging AI to improve internal productivity and client engagement, which is expected to positively impact retention and growth.
Stock Repurchase: Gartner repurchased more than $1 billion of stock in the third quarter of 2025, reducing share count by 6% year-over-year. The company views this as a unique opportunity to create long-term value for shareholders by repurchasing stock at an attractive price point. Year-to-date through the end of September, Gartner has purchased around $1.5 billion of its stock. The repurchase authorization is about $1.3 billion, and the Board is expected to refresh the authorization as needed. This strategy is expected to generate more free cash flow and result in fewer shares outstanding over the next several years, creating significant value for shareholders.
The earnings call summary presents a mixed outlook: strong AI initiatives and AskGartner rollout suggest potential growth, but financial projections show modest growth rates. The Q&A revealed management's vague responses on CV improvement and AI impact, raising uncertainties. Despite operational improvements and revenue growth, the lack of detailed guidance and muted growth in key areas like non-subscription revenue and consulting tempers optimism. Therefore, the overall sentiment is neutral, expecting a stock price movement between -2% and 2%.
The earnings call summary shows a mix of positive and negative indicators. While there is strong demand for optimization services and a robust pipeline in AI and cybersecurity, there are concerns about tariffs affecting business and stretched selling cycles. The Q&A section reveals management's evasiveness on AI's cost impact and tariff details, adding uncertainty. Guidance is optimistic, but operational challenges and client behavior shifts temper enthusiasm. Overall, the sentiment is balanced, leading to a neutral stock price prediction.
The earnings report shows moderate growth in revenue and financial metrics, but the Q&A reveals concerns about U.S. federal contracts and a downward revision of research revenue outlook. Positive elements include strong free cash flow and a share repurchase program. However, the lack of clarity in management responses and the cautious guidance suggest a mixed sentiment, likely resulting in a neutral stock price movement.
The earnings call summary indicates strong financial performance with revenue growth and a robust pipeline, despite some challenges in consulting revenue. The Q&A section reveals positive sentiment from analysts, especially regarding future growth and a strong value proposition. The share repurchase program and positive free cash flow also contribute to a positive outlook. Although there are some concerns, the overall sentiment is positive, likely leading to a stock price increase of 2% to 8% over the next two weeks.
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