Gartner, Inc. (IT) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call indicates positive sentiment with expectations of accelerating contract value growth, stable revenue projections, and expanding margins. Share repurchases and optimistic guidance contribute to a favorable outlook. Despite challenges in the consulting segment and uncertain selling environment, overall growth and strategic initiatives like business transformation and conferences support a positive stock price reaction.
Key Financial Performance
First Quarter Revenue $1.5 billion, up 2% year-over-year as reported and down 1% FX neutral. The increase was attributed to better-than-expected performance in Insights revenue, EBITDA, adjusted EPS, and free cash flow.
EBITDA $395 million, up 6% as reported and 1% FX neutral year-over-year. The increase was due to effective expense management and a prudent approach to guidance.
Adjusted EPS $3.32, up 11% from Q1 of last year. The increase was driven by improved financial performance and reduced share count.
Free Cash Flow $371 million, up 29% year-over-year. The increase was attributed to strong operational performance and effective cash management.
Contract Value (CV) $5.3 billion at the end of the first quarter, up 1% versus the prior year and an acceleration from year-end. Excluding U.S. federal government, CV growth was 3.5%. The growth was driven by strong new business and client engagement.
Insights Revenue Grew 3% year-over-year as reported and was about flat FX neutral. Contribution margin was 78%, up about 120 basis points versus last year. The growth was supported by increased client engagement and high-impact insights.
Global Technology Sales (GTS) Contract Value $4 billion at the end of the first quarter, up more than 3% year-over-year ex-Fed. Wallet retention was 97%, and ex-Fed wallet retention was 99%. The growth was driven by enterprise leaders and tech vendors.
Global Business Sales (GBS) Contract Value $1.3 billion at the end of the first quarter, up 3% year-over-year. Ex-Fed, GBS CV grew 5%. Growth was led by the sales, supply chain, and legal practices.
Conferences Revenue $78 million for the first quarter, with revenue growth of around 9% FX neutral on a same conference basis. Contribution margin was 39%. The growth was attributed to the successful execution of 10 destination conferences.
Consulting Revenue $119 million in Q1 compared with $140 million in the year-ago period. Contribution margin was 31%. The decline was due to variability in contract optimization revenue.
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Operating Highlights
AI Insights: AI continues to be one of the most requested topics across all roles served by Gartner. The company provides comprehensive guidance on AI strategy, ROI, ethics, governance, and workforce readiness. Gartner is also a world-class user of AI internally.
AskGartner Enhancements: Added the ability to create downloadable PowerPoint presentations directly from within AskGartner. Clients can ask questions in 25 languages, and additional proprietary data sources are being integrated.
Global Technology Sales (GTS): Contract value reached $4 billion, up more than 3% year-over-year excluding U.S. federal government. Wallet retention was 97%, and new business was down 4% compared to last year.
Global Business Sales (GBS): Contract value reached $1.3 billion, up 3% year-over-year. Growth was led by sales, supply chain, and legal practices. Wallet retention was 98%, and new business was down 2% compared to last year.
Client Engagement: Engagement levels increased significantly, with overall engagement up over 170 basis points year-over-year. Digital engagement improved by more than 160 basis points, and human interactions increased by over 80 basis points.
Retention and Insights Transformation: Retention is foundational to success. Gartner has increased high-impact documents by 22%, library volume by 19%, and introduced same-day insights for critical events, doubling the number of such documents.
Stock Buybacks: Repurchased $535 million of stock in Q1, reducing share count by over 4%. The Board increased buyback authorization to $1.2 billion.
Future Guidance: Updated 2026 guidance with increased EBITDA, adjusted EPS, and free cash flow expectations. Positioned to accelerate contract value growth and deliver adjusted EPS above 12% CAGR over the next three years.
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Risk or Challenges
Geopolitical Environment: Client decision-making slowed in March due to changes in the geopolitical environment, potentially impacting new business growth.
New Business Growth: New business was down 4% year-over-year for Global Technology Sales and down 2% for Global Business Sales, with client decision-making slowing in March.
Consulting Revenue Decline: Consulting revenue decreased from $140 million in Q1 2025 to $119 million in Q1 2026, reflecting challenges in this segment.
Contract Optimization Variability: Contract optimization revenue is highly variable, posing challenges for consistent revenue generation in this area.
Economic Uncertainty: The company noted the need to thrive in uncertain environments, indicating potential risks from broader economic conditions.
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Guidance & Outlook
Contract Value Growth: Looking ahead to the rest of the year, Gartner expects contract value will accelerate.
Free Cash Flow: Gartner expects to continue driving strong free cash flow that can be used to drive incremental shareholder value.
Adjusted EPS: Gartner expects to deliver adjusted EPS on a compound annual basis above 12% over the next 3 years.
Full Year Guidance for 2026: Consolidated revenue is expected at or above $6.405 billion, reflecting FX-neutral growth of 1%. Full year EBITDA is expected at or above $1.545 billion, with margins at or above 24.1%. Adjusted EPS is expected at or above $13.25. Free cash flow is expected at or above $1.16 billion, reflecting a conversion from GAAP net income of 137%.
Second Quarter Guidance: EBITDA is expected at or above $425 million.
Capital Deployment: Gartner plans to deploy capital on stock repurchases, which will lower the share count over time, and on strategic value-enhancing tuck-in M&A.
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Shareholder Return Plan
Share Repurchase Program: In the first quarter, Gartner reduced its share count by about 4%, buying back $535 million of stock. The Board has increased the buyback authorization to about $1.2 billion and is expected to refresh the amount as needed. The company plans to continue deploying capital on stock repurchases, which will lower the share count over time.
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Key Q&A
Q:Can you provide perspective on the selling environment in March and April, and differentiate new business sales trends between new logo versus upselling in the base?
A:The selling environment was tougher in March, with clients delaying decisions. However, many deals that were delayed in March closed in April. Growth was broad-based across both new logo and existing clients in January and February, but the challenging environment in March affected both segments.
Q:What updates can you provide on the evolution of AskGartner, including usage statistics or meaningful changes?
A:Client usage and repeat usage of AskGartner continue to increase. New releases are made every two weeks, incorporating client feedback and market research. Recent updates include support for 25 languages and the ability to create PowerPoints directly within AskGartner. Upgrades include feature enhancements and incremental proprietary data.
Q:Can you provide regional color on the impact of geopolitics and any differentiation regionally?
A:There was a slowdown across the board by geography and industry. It was worse in industries like airlines and transportation compared to financial institutions. Regionally, it was worse in Gulf Cooperation Council countries than in the U.S.
Q:Are you reevaluating any pricing strategies given the current environment?
A:No significant changes are being made to pricing strategies. Clients find the pricing appropriate, and there are different price points available based on service levels. Price sensitivity is addressed by offering options with varying levels of service.
Q:Can you provide an update on the U.S. federal government business and its renewal cycle?
A:The U.S. federal government business faced challenges starting in March of last year due to DOGE impacts. Renewal rates have improved year-over-year, and significant challenges are expected to be lapped starting in Q2. The business is expected to stabilize and grow beyond 2026.
Q:What are your targets for headcount growth in GTS and GBS, and how is the hiring ramp progressing?
A:Targets remain low single-digit growth for GTS and mid-single-digit growth for GBS. There is a focus on hiring more new business developers than account managers. Hiring in 2026 is aimed at supporting growth in 2027 and beyond.
Q:Did ex-federal government CV growth accelerate from the 3.5% reported for Q1 in April, and how is it expected to trend through the year?
A:No specific stats on April were provided. However, CV growth is expected to accelerate over the course of 2026, driven by both U.S. federal recovery and non-U.S. federal base acceleration.
Q:Do your pre-existing long-term targets still hold?
A:Yes, the medium-term objectives remain unchanged and apply to a normal operating environment. CV growth is expected to accelerate, margins are expected to expand, and significant free cash flow is anticipated.
Q:Can you disaggregate the drivers of CV growth acceleration?
A:CV growth acceleration is expected due to increased engagement, improved retention, and changes in the Business and Technology Insights (BTI) segment. Both new business growth and retention are expected to improve.
Q:What is the outlook for cost management and potential structural changes in margins?
A:Cost management focuses on aligning run rates with CV growth expectations, leveraging AI and other technologies for efficiencies, and investing in areas that drive future growth. Margins are expected to expand over the medium term.
Q:How does the selling environment compare year-over-year, and what are the expectations for the rest of the year?
A:The selling environment in Q1 was worse year-over-year due to longer decision cycles. However, many delayed deals closed in April. The environment is expected to remain uncertain, but Gartner is adapting to ensure resilience.
Q:What are the drivers behind the 12% EPS CAGR outlook?
A:The 12% EPS CAGR is driven by CV growth acceleration, margin expansion, and significant share buybacks. Free cash flow will also contribute to shareholder value.
Q:What is the impact of large language models (LLMs) on Gartner's strategy?
A:Gartner does not plan to use LLMs as a distribution channel, as its value proposition relies on proactive insights, human expertise, and a comprehensive service offering. LLMs do not align with Gartner's approach to delivering value.
Q:What is the outlook for the Consulting segment, particularly labor-based and contract optimization?
A:The Consulting segment faced challenges due to the macro environment. Contract optimization was affected by delayed client decisions, and labor-based consulting was impacted by broader economic conditions.
Q:Can you provide more details on the reasons for slower CV growth?
A:Slower CV growth is attributed to U.S. federal business challenges, a tough macro environment, and geopolitical issues. However, CV growth is expected to accelerate over the course of 2026.
Q:What are the expectations for CV growth exiting the year?
A:CV growth is expected to accelerate throughout the year, but specific exit growth rates are not provided. Improvements are anticipated across both U.S. federal and non-U.S. federal businesses.
Q:Has there been any change in pricing or discounting strategies?
A:No changes have been made to pricing or discounting strategies. The annual price increase was implemented as usual, and there is no change in the discounting posture.
Q:What are the puts and takes on client versus wallet retention in the quarter?
A:Client retention ticked down slightly due to churn among small tech clients, while wallet retention improved due to holding on to more dollars and lapping challenges from the previous year.
Q:What is the outlook for tech vendor conversations and challenges faced by software companies?
A:The tech vendor business is growing at high single-digit rates for software and services companies, while hardware providers and telecom carriers face more challenges. The overall outlook remains positive for software and services.
Q:What is the approach to quota-bearing headcount (QBH) growth and its impact on productivity?
A:QBH growth is aligned with CV growth expectations, with a focus on hiring more business developers. Productivity gains are being achieved by optimizing account manager territories, and the mix of roles will shift moderately over time.
Q:Review of Unclear Management Responses
A:Management avoided providing specific CV growth expectations for April or the rest of the year, citing that they do not guide to CV growth. Additionally, they did not provide detailed disaggregation of CV growth drivers by segment or quarter.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI ethic
AI journey
AI leader
Anthropic Mythos
AskGartner Clients
AskGartner topic
CIOs organization
Capabilities Toolkits
Chain Officers
Chief Supply
Clients Insights
Clients insight
Clients question
Community executive
Controllers role
Corporate
analyst
change world
client engagement
client executive
dimension
enterprise function
environment client
event
governance
information
issue
leader AI
number document
source
success
technology provider
user experience
world class
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Frequently Asked Questions
Where does this earnings call transcript come from?
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
