Gartner (IT) Q3 2025 earnings review
Slowing Growth Masked by Record Buybacks; Management Bets on 2026 Reacceleration
Gartner's Q3 results showed a significant slowdown in its core growth metric, with Contract Value (CV) decelerating for the fourth consecutive quarter to 3% YoY (FX-Neutral). The top-line weakness, driven by a persistent drag from the U.S. Federal business, was offset by aggressive financial engineering. A record $1.1 billion share repurchase propped up Adjusted EPS, which grew 10%. Management raised its full-year EBITDA and EPS guidance on the back of cost controls and the lower share count, but the implied Q4 outlook points to further revenue deceleration and an outright decline in EBITDA. Despite the current trajectory, the company remains confident in a CV reacceleration in 2026.
🐂 Bull Case
Management executed a record $1.1 billion share buyback, demonstrating conviction in the stock's value and providing strong support for EPS. Diluted share count is down 4% YoY.
Management noted that client engagement is increasing and in-quarter renewal rates improved sequentially from Q2. If these leading indicators hold, it could support the narrative of a 2026 recovery.
Despite top-line weakness, the company raised its full-year EBITDA guidance, highlighting effective cost management that is protecting profitability through the slowdown.
🐻 Bear Case
The primary growth metric, Contract Value, continues to slow. Even excluding the troubled U.S. Federal segment, CV growth has decelerated from 8% in Q1 to 6% in Q3, indicating broader softness.
The updated full-year guidance implies Q4 revenue will grow only ~1% YoY and Q4 Adjusted EBITDA will decline ~4% YoY, suggesting the near-term trend is worsening, not improving.
New business declined 4% YoY (ex-Fed), indicating that despite a reportedly strong pipeline, converting opportunities into contracts remains a challenge due to elongated sales cycles.
⚖️ Verdict: 🔴
Bearish. The powerful tailwind from share buybacks is masking clear fundamental weakness. The steady deceleration in Contract Value, coupled with a weak implied Q4 outlook, contradicts the optimistic narrative for a 2026 reacceleration. Until organic growth metrics like CV and new business reverse their negative trend, the quality of earnings remains low.
Key Themes
Contract Value Growth Continues to Weaken
The company's primary leading indicator, FX-neutral Contract Value growth, decelerated for the fourth straight quarter, falling to 3.0% from a peak of 8.0% in 24Q4. The slowdown is broad-based. While the U.S. Federal business is a major drag, the ex-Federal business has also slowed from 8% growth in Q1 to 6% in Q3. This persistent deceleration is a direct contradiction to the narrative that underlying business is poised to rebound and poses the most significant risk to the 2026 outlook.
Record Share Buyback Fuels EPS Growth
Gartner repurchased a company-record $1.1 billion of stock in Q3, significantly accelerating its capital return program. This single action is the primary driver of the 10% Adjusted EPS growth and the raised full-year EPS guidance. The move reduced diluted weighted average shares by 4% YoY to 75.0 million. While providing strong support to the stock, it also highlights the lack of organic profit growth in the quarter.
U.S. Federal Business Remains a Major Drag
The issues in the U.S. Federal business continue to weigh heavily on results. Total CV growth of 3% would have been double at 6% excluding this segment. Year-to-date dollar retention for federal contracts was a mere 46%. While management has attempted to isolate this issue, its scale continues to mask the performance of the broader commercial business and creates a significant headwind to overcome.
AI Demand and Product Innovation
Management continues to position AI as a key long-term driver. The company highlighted unprecedented demand from clients for guidance on AI strategy and ROI. The rollout of 'AskGartner', an AI-powered tool giving clients faster access to proprietary insights, is now complete. Internally, Gartner is leveraging its own AI tools to boost analyst productivity, with content published per analyst up 31% YoY, which could improve retention and efficiency.
Weak New Business Conversion
Despite management citing a robust, double-digit new business pipeline, actual new business ex-Fed declined 4% YoY in Q3. This disconnect suggests that elongated sales cycles and increased deal scrutiny, themes from prior quarters, are still hampering the company's ability to close deals and convert interest into revenue.
Other KPIs
Reversing. GAAP results collapsed over 90% YoY, but this was driven by two large, non-operational items. The quarter included a $150 million non-cash goodwill impairment charge for the Digital Markets business. This compares to a prior-year quarter that was inflated by a $300 million pre-tax gain from event cancellation insurance. Investors should focus on adjusted metrics to gauge underlying operational performance.
Stable. The reported 52% YoY decline is misleading. The prior-year period included the $300 million insurance proceed. Adjusting for that, FCF in Q3 2024 was approximately $265 million, meaning the underlying cash generation this quarter was flat YoY. Year-to-date FCF remains strong.
Decelerating. The core Insights segment, which is nearly all recurring subscription revenue, saw growth slow to 5.1% from 5.7% last quarter. The smaller, more volatile Conferences and Consulting segments both contracted YoY, indicating broader spending caution from clients on non-essential services.
Guidance
Decelerating/Reversing. The full-year guidance implies a significant slowdown in Q4. Revenue growth is expected to fall to just 0.9% YoY (from +2.7% in Q3), and Adjusted EBITDA is expected to decline by 4.1% YoY (from +1.9% in Q3). This near-term outlook points to a worsening environment before any potential recovery in 2026.
Increased from prior guidance of $11.75. This increase is almost entirely attributable to the massive Q3 share repurchase program, which significantly reduces the full-year weighted average share count, rather than an improvement in the underlying business operations.
Stable. The FCF guidance was held flat from the prior quarter. This implies a conversion rate from GAAP Net Income of 165%, indicating strong cash discipline and working capital management continue to be a hallmark of the company's financial model.
Key Questions
Contract Value Reacceleration Path
CV growth has decelerated for four consecutive quarters to 3%. What specific leading indicators, beyond an improved renewal rate, give you confidence in a reacceleration to high-single-digits in 2026, especially as implied Q4 revenue growth is just 1%?
New Business Conversion
New business ex-Fed was down 4% YoY, yet you cite a double-digit pipeline. What is the primary bottleneck in converting this pipeline, and what concrete steps are you taking to shorten the sales cycles that have elongated?
Balancing Buybacks and Investment
You executed a record $1.1B buyback this quarter. How do you balance this aggressive capital return with the need for organic investment to drive growth, especially given the plan to resume sales headcount investment in 2026?