Gartner (IT) Q3 2025: $1.1B Buyback and 6% Ex-Fed Contract Value Growth Signal Reacceleration Path
Gartner’s Q3 results outpaced expectations as operational adaptations and a $1.1 billion share buyback underscored management’s confidence in medium-term growth. Excluding the U.S. federal government, contract value growth and renewal rates accelerated, while AI-driven productivity gains and client engagement metrics signal improved retention and future upsell potential. Management’s raised guidance and visible pipeline improvement, despite persistent tariff and federal headwinds, position Gartner for a return to high single-digit contract value growth in 2026.
Summary
- AI-Driven Productivity Surge: Internal and client-facing AI tools are driving faster research output and higher client engagement.
- Contract Value Momentum: Ex-federal contract value growth and improved renewal rates point to a stabilizing core business.
- Capital Allocation Leverage: Aggressive buybacks and disciplined expense management set up for EPS accretion and sustained margin strength.
Performance Analysis
Gartner’s Q3 2025 results reflected broad-based operational and financial improvement, with consolidated revenue reaching $1.5 billion, up 3% YoY, and total contribution margin expanding to 69%. The company’s core Insights segment, nearly all recurring subscription revenue, delivered 5% reported growth and a 77% contribution margin. Excluding U.S. federal government, contract value (CV) growth accelerated to 6%, outpacing the headline 3% and marking a sequential improvement in net contract value increase (NCVI).
Segment dynamics reveal diverging trends: Global Technology Sales (GTS) CV climbed 2% overall and 5% ex-federal, with tech vendor growth strongest in software and services. Global Business Sales (GBS) CV grew 7% overall and 9% ex-federal, led by sales, legal, and finance practices. Conferences revenue rose 6% on a same-conference FX-neutral basis, and consulting revenue was modestly lower, impacted by project timing. Free cash flow remained robust at $269 million, and disciplined cost management offset SG&A growth from merit increases and headcount investment.
- Ex-Fed Contract Value Acceleration: CV growth of 6% ex-federal outpaced the overall business and was broad-based across industries, geographies, and company sizes.
- Renewal Rate Improvement: In-quarter contract renewal rates improved sequentially, a leading indicator for future upsell and retention.
- Buyback Impact: The $1.1 billion repurchase reduced share count by 6% YoY, supporting EPS growth and ROIC expansion.
Despite new business softness (down 4% YoY ex-federal), the double-digit pipeline growth and strong conference engagement signal a healthier demand environment heading into Q4 and 2026.
Executive Commentary
"AI will be one of the most innovative and pervasive technologies in history. We're seeing unprecedented demand for help with AI, and we're meeting that demand. We're also leveraging AI to improve productivity and effectiveness internally. Compelling client value, strong demand, operational adaptations, and modest normalization of the external environment give us a clear path back to long-term, sustained, double-digit growth over the medium term."
Gene Hall, Chairman and Chief Executive Officer
"Financial results in the third quarter were better than expected, and we are increasing our guidance for the full year. We see a unique opportunity to create long-term value for our shareholders by repurchasing our stock at an attractive price point. This, coupled with accelerating growth in 2026 and beyond, will create significant value for shareholders."
Craig Safian, Chief Financial Officer
Strategic Positioning
1. AI as Both Client Solution and Internal Catalyst
Gartner’s rapid AI integration is reshaping both client value and internal execution. The Ask Gartner tool, now available to all licensed users at no extra cost, is increasing content consumption and engagement—historically a precursor to higher retention. Internally, proprietary AI models have cut publishing time by 75% and boosted analyst output by 31%, allowing faster response to market shifts and more relevant, timely research.
2. Contract Value Focus and Segment Realignment
Management’s intensified focus on contract value growth—especially ex-federal—reflects a deliberate pivot to higher-visibility, recurring revenue streams. The new segment reporting structure highlights Insights as the profit engine, while non-subscription businesses are now grouped under “Other,” clarifying strategic priorities. GBS and GTS both delivered mid-to-high single-digit CV growth ex-federal, with tech subsectors unaffected by tariffs (software, services) growing at double-digit rates.
3. Expense Discipline and Capital Allocation
Gartner’s cost management and capital allocation discipline are central to its value creation thesis. SG&A rose 7% YoY, but management offset this through automation, productivity initiatives, and leveraging lower-cost geographies. The $1.1 billion buyback, representing 6% of shares, underscores confidence in long-term free cash flow and EPS accretion, while maintaining a strong balance sheet and ample liquidity for tuck-in M&A.
4. Navigating Tariff and Federal Headwinds
Roughly 40% of contract value remains exposed to tariff-impacted industries and federal government clients, both of which continue to lag the rest of the business. However, management sees signs of stabilization as tariff certainty improves and expects these segments to contribute to the 2026 reacceleration.
5. Pipeline and Engagement as Leading Indicators
Double-digit pipeline growth and record-high conference engagement underpin management’s confidence in sustained demand. Client engagement metrics—document reads, expert interactions, and conference attendance—are all up, supporting the outlook for improved retention and future upsell.
Key Considerations
Gartner’s Q3 was defined by operational adaptation, disciplined capital deployment, and a clear focus on AI-driven client value. The company is proactively positioning itself for a return to higher growth, but execution risks remain tied to macro and segment-specific headwinds.
Key Considerations:
- AI Content and Engagement Expansion: Internal AI tools are boosting analyst productivity and client content usage, setting up for improved retention and upsell.
- Ex-Federal Growth Outpaces Headline: Excluding U.S. federal, CV growth and renewal rates are improving, supporting a more stable core business.
- Expense Flexibility and Productivity: Automation and process improvements are offsetting SG&A pressure, helping to sustain margins amid modest revenue growth.
- Tariff and Federal Drag Remains: 40% of CV is still exposed to tariff and federal headwinds, but management expects improvement as uncertainty recedes.
- Capital Allocation Focus: Aggressive buybacks and readiness for opportunistic M&A signal confidence in long-term free cash flow and market positioning.
Risks
Persistent headwinds in tariff-impacted and federal segments could delay the anticipated growth reacceleration, especially if macro or policy volatility resurfaces. Longer sales cycles, cautious client spending, and lingering uncertainty in key verticals remain material risks. While AI is a differentiator, competitive dynamics and evolving client needs could pressure retention or upsell if Gartner’s offerings lag market expectations.
Forward Outlook
For Q4 2025, Gartner guided to:
- Adjusted EBITDA of at least $400 million
For full-year 2025, management raised guidance:
- Consolidated revenue of at least $6.475 billion (3% FX-neutral growth)
- Insights revenue of at least $5.06 billion (4% FX-neutral growth)
- Conferences revenue of at least $630 million (6% FX-neutral growth)
- Consulting revenue of at least $575 million (2% FX-neutral growth)
- Full-year EBITDA of at least $1.575 billion (margin up to 24.3%)
- Adjusted EPS of at least $12.65
- Free cash flow of at least $1.145 billion
Management highlighted several factors that support the outlook:
- Ex-federal contract value growth and improved renewal rates as leading indicators
- Double-digit pipeline growth and strong conference engagement as demand signals
Takeaways
Gartner’s Q3 signals a business emerging from macro and segment-specific headwinds, leveraging AI-driven productivity, and executing disciplined capital allocation to drive shareholder value.
- Ex-Fed Contract Value and Renewal Rates Improve: The core subscription business is stabilizing, with leading indicators pointing to a healthier 2026.
- AI Integration Drives Productivity and Engagement: AI-powered tools are accelerating research output and boosting client content usage, setting up for future retention gains.
- Watch for Tariff and Federal Recovery: Investor focus should remain on the pace of recovery in tariff-impacted and federal segments, and on the conversion of pipeline to new business in Q4 and 2026.
Conclusion
Gartner’s Q3 2025 results and management’s increased guidance reflect a business regaining momentum through operational adaptation, AI leverage, and disciplined capital deployment. The path to high single-digit contract value growth in 2026 is visible, but execution in challenged segments remains critical for the medium-term double-digit growth narrative.
Industry Read-Through
Gartner’s experience highlights several sector-wide themes for information services and research providers: AI integration is now table stakes for both client value and internal productivity, and those able to leverage proprietary data and tools will differentiate. Segment-specific headwinds—such as tariffs and government budget uncertainty—continue to create uneven performance, emphasizing the need for flexible cost structures and diversified revenue streams. The success of conference-led engagement as a pipeline and retention engine is a notable signal for peers. Finally, aggressive capital return and disciplined expense management are becoming baseline expectations as investors demand visible free cash flow and margin expansion in a still-uncertain environment.