Gartner, Inc. Q1 FY2026 earnings call

Gene Hall mentioned that First Quarter Insights Revenue, EPITA, Adjusted EPS and free cash flow were ahead of expectations. New business with enterprise leaders was strong in the first two months of the quarter but slowed somewhat in March. Gartner's strategy is to guide executives on their mission-critical priorities. They have a vast pool of highly proprietary data, conduct numerous conversations and briefings, and leverage various data sources to deliver independent and objective insights. They are transforming their business and technology insights organization processes in terms of impact, volume, timeliness, and user experience. AI is a highly requested topic, and Gartner is well-positioned to guide leaders on their AI journeys. Craig Safian noted first quarter contract value grew 1% year over year, insights revenue, EBITDA, adjusted EPS, and free cash flow were better than expected. They are increasing EBITDA, adjusted EPS, and free cash flow guidance for the full year. They reduced share count by about 4% buying back $535 million of stock. First quarter revenue was $1.5 billion, up 2% year-over-year as reported and down 1% FX-neutral. Total contribution margin was 72%. EBITDA was $395 million, up 6% as reported and 1% FX-neutral. Adjusted EPS was $3.32, up 11% from Q1 of last year. Free cash flow was $371 million, up 29% year-over-year. Rolling for a quarter return on invested capital was about 27%.

First quarter contract value (CV) grew 1% year over year. Insights revenue grew 3% year-over-year as reported and was about flat FX neutral. First quarter insights contribution margin was 78%, up about 120 basis points versus last year. Contract value was $5.3 billion at the end of the first quarter, up 1% versus the prior year, and an acceleration from year end. Excluding the U.S. federal government, CV growth was 3.5%. Global technology sales contract value was $4 billion at the end of the first quarter, up versus the prior year. GTS CV for both enterprise leaders and tech vendors increased by more than 3% year-over-year ex-fed. Wallet retention for GTS was 97% for the quarter. Ex-fed wallet retention was 99%. Global business sales contract value was $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. Wallet retention for GBS was 98% for the quarter. Conferences revenue for the first quarter was $78 million. On a same conference basis, revenue growth was around 9% FX neutral. Contribution margin was 39%. Q1 consulting revenue was $119 million compared with $140 million in the year-ago period. Consulting contribution margin was 31% in Q1. Labor-based revenue was $90 million. Backlog at March 31st was $201 million. In contract optimization, we had $147 million of revenue on an LTM basis, about flat compared with Q1 of 2025. On a two-year CAGR basis, revenue was up about 15%.

They expect contract value will accelerate. They will continue to drive strong free cash flow to drive incremental shareholder value. They expect to deliver adjusted EPS on a compound annual basis above 12% over the next three years. They updated full-year guidance to reflect recent performance and trends, including FX. For Insights revenue in 2026, the revenue outlook is operationally unchanged. They increased the outlook for FX. For conferences, they are basing guidance on the 56 in-person destination conferences planned for 2026. For consulting, they reflected a prudent view for the balance of the year based on Q1 results. They expect consolidated revenue at or above $6.405 billion, which is FX neutral growth of 1%. They now expect full-year EBITDA at or above $1.545 billion, up $30 million from prior guidance. They expect 2026 adjusted EPS at or above $13.25. They expect 2026 free cash flow at or above $1.16 billion. They expect to accelerate CV growth in 2026 and deploy capital on stock repurchases and strategic value-enhancing tuck-in M&A.

Q: So it makes sense that the selling environment would be tougher in March. Can you give any perspective on if that has started to convert in April, the things that kind of slipped out of March? By some indications, maybe the environment is getting a little bit better. And then just any differentiation on new business sales trends between new logo versus upselling in the base, which I think had been lagging.

A: As Gene said, they had a really good January and February. March, decisions slowed down. By and large, clients and prospects told them they still want to buy but couldn't make a decision today. As they roll into April, many of those deals are closing. On the mix between new logo and existing client growth, what they saw through the first two months was broad-based across both new logo and existing clients, and in March, it was also broad-based across new logo and existing clients.

Q: On good to hear overall engagement of both in person and digital, just anything you can give us on the evolution of Ask Gartner, either usage statistics or any meaningful changes in user experience, either from something new with the foundational models and underpin it, or any adjustments that you've been making to it?

A: AskGartner is part of their value proposition. Client usage continues to increase. They do a new release every two weeks. They've added support for 25 languages, can create PowerPoints directly from within Ask Gartner, and there are a whole series of other upgrades. The upgrades are a combination of feature enhancements and incremental proprietary data.

Q: I wanted to follow up on the geopolitics comment, and I'm curious if you could give us some regional color. Did you see, you know, slowing sort of across the board, or if there was any differentiation regionally? I'm assuming maybe you saw some, you know, slower decision-making outside the U.S., but just would love some additional color there.

A: There was a slowdown across the board by industry. It was worse in some places than others. It was worse in the Gulf Cooperation Council countries than in the U.S.

Q: I'm curious if you're, you know, reevaluating any pricing strategies, maybe just thinking about the overall price point, just as you know, virtually every company is trying to figure out AI, but you know, maybe they can't afford, you know, your services at or your subscription at the price point that it is. So just curious how you're thinking about, you know, any changes around pricing?

A: They talk to clients a lot about pricing. The feedback is their pricing is very appropriate. They have different price points. If a client has price sensitivity, they can go for a different level of service. They feel they're price appropriate. They benchmark with clients and look when clients say they're not going to buy, which tends to be broader cost cutting rather than price issues. They target the top of the org chart where there's less price sensitivity.

Q: On the U.S. federal government business in particular, I think it was 250 basis point headwind in the quarter, maybe a little bit more than I would have thought because I thought you had laughed most of that. Can you just level set for us where you sit in that kind of renewal cycle post kind of some of the government approach changes early last year? And maybe at what point would you expect that headwind to alleviate as we move through 26?

A: On the U.S. federal side, the DOGE impacts really didn't start feeling until March of last year. Jan and Feb were semi-normal. They exited Q1 with about $114 million worth of U.S. federal CV. They start to lap the significant challenges starting in Q2 with U.S. fed clients.

Q: For the ex-federal government CV, did that accelerate from the 3.5% that you reported for 1Q in April? And how are you expecting that to trend through the year? Do you expect an acceleration in ex-federal government CV growth?

A: They're not giving stats on April yet. They expect the whole CV base to accelerate over the course of 2026, which is a combo of U.S. Fed recovery and non-U.S. Fed base accelerating.

Q: When looking ahead and we think about the acceleration in CV growth, any code there where you can maybe disaggregate the drivers? Is the expectation maybe a bit more new business development or should we expect wallet retention to continue to improve and maybe a bit more upsell at existing clients and then Maybe I assume it's also underpinned by just normalized annual price increases that are normally embedded.

A: The reason they're expecting CB to accelerate is they're making changes in business, driving engagement which has been rising. They're making changes in BTI, expecting more and better insights leading to more engagement and new business growth. They expect new business growth and retention to improve as they go through the year based on the changes they're making.

Q: On the management of costs, Can you maybe provide a bit more color there just relative to your expectations versus just kind of normally being conservative when you initially guide? Just any update where maybe there's a bit more benefits from even if it's AI or just other things that are going on and the opportunity for a potential structural change in the outlook for margins at this point or is it just one small step forward each quarter at this point?

A: They're very focused on delivering on EBITDA profitability and free cash flow perspective. Tuning OpEx model as they go. Focused on keeping run rates aligned with CV growth expectations. Always focused on continuous innovation and improvement, leveraging AI and other technologies. Making investments that will drive future growth while driving operational efficiencies in other areas.

Q: As we think about sort of the selling environment on a year-over-year basis, it's obvious that in Q1 it was worse than last year. But as we go into Q2, you know, your liberation day in the prior year, et cetera, how do you think about the year-over-year selling environment comparison as we kind of go through the rest of the year?

A: It depends on how the world evolves. A lot of deals that clients in March said to revisit closed in April. Selling cycles are longer but they're still buying. They pride themselves on adapting, arming sales and service people with the right tools to be successful in any environment.

Q: Can you talk about the drivers behind that 12% EPS CAGR outlook?

A: Over a three-year period where CV growth will reaccelerate, driving future revenue growth. They're committed to delivering strong margins and margin expansion. They have significant capital to put to use on behalf of shareholders, having bought back a lot of stock reducing the share count.

Q: A number of the other info services firms have been starting to use large LLM providers as like an additional distribution channel. And I know your business is different being more weighted towards advisory, but you still have proprietary data that people want. And so I was wondering if, is there a sort of broader data distribution that you would consider or Do you think that that dilutes your value proposition too much because, you know, obviously a lot of the value isn't talking to the research analysts and the network and everything like that?

A: Clients rely on them to be proactive and provide human components like executive partners, analysts, conferences, etc. That's not how clients work with them. The human component is a big part of their value proposition. The portion related to LLM is a small piece of their overall value proposition.

Q: I wanted to take a step back on CV performance. Can you provide more details on the reasons why CV growth is coming below historical levels in the high single, low double-digit range? Specifically, can you outline how much of the slower growth is due to tariff-affected industries, government spending, the macro environment, and other potential unnamed factors?

A: The most dominant headwind is the U.S. federal business. They fully expect CV growth rate to accelerate over the course of 2026, including U.S. Fed growth rate improving as they lap challenging areas and non-U.S.-fed business accelerating.

Q: You've mentioned a couple times your goal to have compounded adjusted EPS growth, I think, at or above 12% over the next three years. What kind of headcount growth do you need to get there, both from a Salesforce perspective and an analyst perspective?

A: It's all baked into their ability to drive margin and get desired results. Their operating model with QBH or sales headcount is unchanged. On the analyst side, it's demand driven. The combination of those three things gives them the opportunity for the 12% EPS CAGR.

Q: Again, I know you don't guide for CV, but我 think you mentioned on a couple earlier questions that CV should reaccelerate both total and ex-fed through the year and, you know, helpful context to around the seasonal payments of renewals and new business. I just wanted to clarify, like, do you think we see a reacceleration in the ex-fed CV growth number next quarter, or maybe are we still a little bit further away from the reacceleration in ex-fed CVs?

A: They expect CV growth rate to accelerate over the course of the year but won't get into details of expectations by segment of business per quarter. They'll talk about it when reporting Q2 results.

Q: I think there was some speculation entry quarter if sales teams had made offers to sign on below the normal 50,000 ASP for new LUs. I guess, can you just clear up kind of in response to that, like if there's anything that changed on your approach to pricing or offering discounts?

A: They do not offer discounts. Their pricing strategy and focus are unchanged. They put through normal annual price increase on November 1 of last year and there's no change in discounting posture or philosophy.

Q: Just wondering if you can talk a little bit about just the puts and takes on client versus wallet retention in the quarter with client retention ticking down a little bit, but wallet retention ticking up. Just wondering if there was any incremental, I guess, price realization or upsells that drove that expanding wallet retention while client retention ticked down?

A: It's largely a function of rolling four-quarter numbers. Q1 is a heavy renewal quarter and smallest new business quarter. There's churn within small tech clients which impacts client retention but not as much on wallet retention. They are lapping challenges from last year and holding on to more dollars, balancing out upgrades and downgrades.

Q: I just wanted to focus on the tech vendor conversation. I was wondering if you could provide any color on that front, how's that trending, and also if you could talk about some of the challenges that software companies are facing. Has that influenced any of that conversation?

A: On the tech vendor side, business with software companies and services companies is growing at high single-digit growth rate. Hardware providers and telecom carriers are not performing as well. The bulk of CV sits with software and services.

Q: On an earlier remark, you talked about sometimes clients and budgets are tied. Maybe the selling environment is much longer than expected. How would你 classify the customers that want to keep a garden subscription but may consider downselling or using a different user experience? Are you seeing a huge influx of that?

A: In all times, there are clients upgrading and some downgrading. Any time there's clients doing well and some not. Upgrades and downgrades tend to balance out almost exactly.