Gartner reported Q2 2025 earnings that topped expectations but issued a weaker full-year outlook, leading to a 27% drop in its stock—the sharpest decline in the S&P 500 on the day.
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Key Financial Results
Revenue: $1.686 billion, up 5.7% year-over-year
Adjusted EPS: $3.53 vs. ~$3.38 consensus
GAAP EPS: $3.11, up from $2.93 last year
Free Cash Flow: $347 million, up 1.8%
Adjusted EBITDA: $443 million, up 6.6%
Revenue slightly missed high-end estimates, but earnings exceeded expectations due to margin strength and cost control.
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Segment Highlights
Insights (formerly Research): $1.32 billion, +4.2% YoY
Conferences: +13.6% YoY
Consulting: +8.8% YoY
While non-subscription segments grew well, the core Insights business—which generates 78% of revenue and 84% of gross contribution—showed decelerating growth.
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Red Flags and Risks
1. Declining Deferred Revenue
Deferred revenue fell 2.6% YoY to $2.69 billion. This forward-looking metric suggests softer bookings and potential future revenue pressure.
2. Slowing Contract Value Growth
Total contract value rose just 4.9% (FX-neutral), with:
GTS (Global Tech Sales): +3.6%
GBS (Global Business Sales): +9.2%
Growth deceleration—especially in GTS—is a concern for the company’s subscription-driven model.
3. Heavy Reliance on Insights
Insights accounts for a disproportionate share of revenue and profit. Slower growth here limits overall expansion potential unless other units scale meaningfully.
4. Aggressive Buybacks
Gartner repurchased $437 million in shares in the first half of 2025. An additional $600 million was authorized in July. While EPS benefits from these buybacks, it raises questions about allocation as topline growth slows.
5. Tax Uncertainty
Management flagged potential impacts from new U.S. tax law (OBBBA) and OECD Pillar Two rules. While effects aren't quantified yet, future profitability could be pressured.
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Updated Guidance
Full-Year Revenue: Trimmed to $6.535 billion
Insights Revenue Growth: Expected to be ~4% FX-neutral
Full-Year Adjusted EPS: Updated to at least $11.70 (street was near $12.50)
The revenue outlook was revised down due to softness in U.S. federal renewals, which saw ~$135 million in annual contract value cuts.
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AI Initiatives
Gartner launched AskGartner, its new generative AI research assistant. However, the company did not share any early adoption metrics or monetization details. Without traction data, the impact remains speculative.
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Stock Performance
Close (Aug 5): $243.93
Change: −$92.84, down 27.57%
52-week high: $584.01
Intraday low: $231.26
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Investor Takeaways
Bookings weakness and flat deferred revenue point to slower future growth.
Gartner's heavy use of buybacks to support EPS could face limits if revenue pressures mount.
The AI narrative has yet to translate into quantifiable results.
Federal contract headwinds are likely to persist near term.
This quarter revealed operational discipline—but also cracks in Gartner’s long-term growth engine.