IT Q3 2026 earnings call transcript, November 3, 2026

Good morning, everyone. Welcome to Gartner's third quarter 2026 earnings call. I'm David Cohen, SVP of Investor Relations. At this time, all participants are in a listen-only mode. After comments by Gene Hall, Gartner's Chairman and Chief Executive Officer, and Craig Safey and Gartner's Chief Financial Officer, there will be a question-and-answer session. We ask that you limit yourself to one question in order to give all our analysts a chance to participate in the call. Please be advised that today's conference is being recorded. This call will include a discussion of third quarter 2026 financial results and Gartner's outlook for 2026, as disclosed in today's earnings release and earnings supplement, both posted to our website, investor.gartner.com. On the call, unless stated otherwise, all references to revenue are for adjusted revenue, and all references to EBITDA are for adjusted EBITDA, in each case, excluding the divested operation and with the adjustments as described. in our earnings release and supplement. All contract values and associated growth rates we discuss are FX neutral. Any growth rates in Gene's comments are FX neutral, unless stated otherwise. All references to share counts are for fully diluted weighted average share counts, unless stated otherwise. Reconciliations for all non-GAAP numbers we use are available in the Investor Relations section of the Gartner.com website.

As set forth in more detail in today's earnings release, certain statements made on this call might constitute forward-looking statements. Forward-looking statements can vary materially from actual results and are subject to a number of risks and uncertainties, including those contained in the company's 2025 annual report on Form 10-K and quarterly reports on Form 10-Q, as well as in other filings with the SEC. I encourage all of you to review the risk factors listed in these documents. Now, I will turn the call over to Gartner's Chairman and Chief Executive Officer, Gene Hall.

Good morning. Thanks for joining us today. Third-quarter revenue, EBITDA, adjusted EPS, and free cash flow were once again ahead of expectations. Contract value growth accelerated for the third quarter in a row. We drove sequential improvement in total net contract value increase, or NCVI. This is consistent with typical seasonality. We again saw positive NCVI with our government clients. Demand in our U.S. federal... continued to normalize. Wallet retention across both GTS and GBS improved sequentially. Free cash flow on a rolling four-quarter basis is strong in outpacing EBITDA growth, and return on invested capital was more than 30%. Our value proposition is stronger than ever, even as we continue to operate in a persistently dynamic external environment. We continue to improve our client value proposition through our BTI transformation. As we've discussed... on previous calls, we're transforming our insights across four dimensions. Impact, timeliness, quantity, and client experience. AI continues to be the most requested topic across our client base. We're delivering unparalleled client value on the subject. Our insights proactively guide within 75,000 senior executives on the best way to get value from AI. We guide within 10,000 chief information officers and their teams on how to... implement AI effectively, and we guide more than 5,000 technology enterprises on how to build out their AI strategies. Our clients rely on us to determine the best actions in response to the unprecedented rate of change in AI. The number of higher impact documents in our body of insights is up mid-single digits, and we continue to grow the total number of documents at double-digit rates. This allows us to provide powerful coverage across a broader range of mission-critical priorities. With the rapid...

of change in the world, it's essential for our clients to stay current. To meet this need, we produce insights immediately after important events occur. The number of these insights is up significantly. Finally, we continue to enhance the Gartner client experience both digitally and through human interactions. Clients highly value our proactive engagement. We're making continual improvements to our platform to be even more proactive. Gartner conferences are also an important driver of client experience. ICEN's users who attend our conferences retain at higher rates. Prospects who attend our conferences convert your clients at higher rates. Each year, we host more than 50 technology and business conferences in key destinations around the world. IT Symposium Expo is our flagship conference series. I recently returned from our 36th annual IT Symposium Expo in Orlando, Florida. We hosted more than 7,500 technology leaders over the four-day in-person conference. Attendance at the conference was up double digits year over year. Our analysts covered a wide array of technology topics. 325 of our sessions addressed AI. Our opening keynote continued to guide leaders on their AI journeys in terms of value and risk and safety and governance. Attendees described the keynote as powerful, engaging, and thought-provoking. We also recently held our North American HR Symposium Expo. Thousands of chief HR officers and their teams joined us for in-depth...

conversations on the pivotal opportunity to lead transformation in the workplace. C-level attendance and total attendance were both up. In closing, we continue to see strong demand for our services. Our vast and growing body of high-impact timely insights are delivering unparalleled client value, especially on the topic of AI. Our conferences continue to be highly rated and highly valued by our attendees, and the number of executives who attend our conferences continues to grow. Third quarter, contract value growth accelerated. Retention improved. We drove sequential improvements in NCBI. EBITDA, adjusted EPS, and free cash flow were once again ahead of expectations, and we're grazing our annual guidance. With that, I'll hand the call over to our Chief Financial Officer, Craig Safian. Craig, good morning. Contract value growth accelerated for the third consecutive quarter, underscoring the resilience of the business.

CV is the most important measure for our business and the key driver of revenue growth, profitability, and free cash flow. In Q3, we expanded margins compared with last year. We continue to deliver strong free cash flow. And over the past four quarters, we have repurchased $1.7 billion of our stock, a benefit to the share count of close to 15% over the past year. Senior enterprise leaders continue to deal with external factors that influence their budget. and spending decisions. The business remains resilient. As Gene discussed, we are focusing on driving even greater value for our clients by delivering more insights with higher impact faster than ever before. Q3 and CVI dollars increased sequentially from Q2, about in line with historical seasonality. Wallet retention continues to improve as downsell remained relatively stable for the second quarter in a row. In-quarter retention rates increased in Q3. on a year-over-year basis, providing another important data point on the value we deliver to clients. We continue to win new business with both existing clients and new enterprises. This remains an important opportunity for us to drive stronger performance in the coming quarters. We are seeing multiple areas of above-average growth, reinforcing the value our clients place on expert insights and guidance. For example, core GBS subscription products grew 7% in the quarter with the sales and finance

practice. Growing high single digits. Software and services within tech vendors grew mid to high single digits. Midsized enterprises again delivered mid-single-digit CV growth in the quarter. The U.S. federal part of the business delivered strong sequential performance, ending Q3 with about $15 million of NCVI, reflecting continued execution and client engagement across our sales, service, and analyst teams. As Gene discussed, we continue to make progress with the BTI. transformation. A key goal of the transformation is to proactively drive engagement. The most important measure of engagement is retention, which flows through to NCVI. Clients continue to engage at historically strong levels. We look at engagement in many ways across the organization. This quarter, I want to highlight the improvements we have seen with the Gartner mobile app. This has been a focus and support of the transformation. In the quarter, mobile engagement increased compared with the prior year as we improved usability, enabled faster response times, enhanced audio features, and embedded Ask Gartner capabilities. Across our platforms, usage of Ask Gartner has continued to grow sequentially and is up year over year. And as I mentioned, retention increased in the third quarter. Third quarter CV grew 2.5% year over year. As I mentioned, this was the third consecutive quarter of acceleration. Revenue, EBITDA, adjusted EPS, and free cash flow in the third quarter were better than expected.

We are increasing our full-year guidance across all of these measures. In the third quarter, we reduced our share count by around 1% sequentially, buying back $138 million of stock. Rolling for a quarter return on invested capital is 34%, and we expect to generate significant free cash flow and have fewer shares outstanding over the course of the next several years. Third quarter revenue was $1.5 billion, up 2% year over year as reported and 3% FX neutral. In addition, total contribution margin was strong at 71%. EBITDA was $364 million, up 8% as reported and 7% FX neutral. Adjusted EPS was $3.59, up 30% from Q3 of last year. And free cash flow on an LTM basis was $1.3 billion, up 6% year over year. Insights revenue in the quarter grew 2% year over year, both as reported and FX neutral. Third quarter insights contribution margin was 78%, up about 90 basis points versus last year. As we've discussed, we continue to hire analysts in the BTI organization, which will increase costs over time. The cost came out earlier in the year and will return over the next several quarters. Contract value was $5.3 billion at the end of the third quarter, a sequential increase of about 110 basis points from Q2. Year over year, CV was up 2.5%, which is an 80 basis point. acceleration from last quarter. Excluding the U.S. federal government, CV growth was 2.8%. We had about $240 million of new business in the third quarter as there continues to be considerable interest in Gartner's proprietary, unbiased insights. Across GTS and GBS, we saw new business dollars increase by about 1% sequentially from Q2. Global technology sales contract value was $4 billion at the end of the third quarter, up almost 1% sequentially.

and up about 2% versus the prior year, more than a 90 basis point acceleration from Q2. Excluding U.S. federal business, CV grew 2.5%. Tech vendor CV grew low single digits and above the overall company average. Software and services and small technology vendors grew mid to high single digits. Wall retention for GTS was 98%, an improvement from the second quarter. GTS new business was down 4% compared to last year and up modestly on a sequential. New business with enterprise leaders increased year-over-year in Q3. Global business sales contract value was $1.3 billion at the end of the third quarter, up 1.8% from Q2, and up 3.7% year-over-year. Of our six major practices, growth was led by sales and finance, which grew high single digits. Beyond the six major practices, we have several other smaller practices which collectively delivered double-digit CV growth. Within GBS, about 90% of the growth of GTS, the growth of GTS, the growth of GTS, the growth of GTS, the growth of GTS. and of the CV is from core subscription products. CV from these products continue to grow about 7% year-over-year in the quarter, with even faster growth from our offerings for C-level leaders. While retention for GBS was 99% for the quarter, GBS new business was down 3% in Q3 compared to last year, and up 1.5% sequentially. Our conferences business continues to perform well. We are seeing strong demand for our insights as clients and prospects want to hear from our experts.

and interact with one another. Conferences revenue for the third quarter was $86 million. On a same conference basis, revenue growth was around 8% FX neutral. Contribution margin was 35%. We held 13 destination conferences in the third quarter as planned. Q3 consulting revenue was $126 million, up 2% year-over-years reported, and 3% FX neutral. Consulting contribution margin was 34% in Q3. Labor-based revenue was $9. $94 million. Backlog at September 30th was $217 million, up about 9% year-over-year. This was the second consecutive quarter with a year-over-year backlog increase. In contract optimization, we had $150 million of revenue on an LTM basis consistent with Q2 of this year. The two-year revenue CAGR was up about 13%. As you know, our contract optimization revenue is highly variable. EBITDA for the third quarter was $364 million. Up 8% from last year's reported and 7% FX neutral. We outperformed expectations in the third quarter through revenue upside, effective expense management, and a prudent approach to guidance. Adjusted EPS in Q3 was $3.59, up 30% compared to Q3 last year. Upside in adjusted EPS was driven by better than expected EBITDA and a lower than expected adjusted tax rate of about 17%. We had 64 million shares outstanding in the third quarter. An improvement of about 11 million shares or approximately 15% year-over-year. We exited the third quarter with 64 million shares on an unweighted basis. Free cash flow in the third quarter was $275 million, up 2% year-over-year. Free cash flow on a rolling four-quarter basis was $1.3 billion, which was 20% of reported revenue, 78% of adjusted EBITDA, and 136% of GAAP net income. At the end of the third quarter, we had about 1.

$1.6 billion of cash. This includes about $500 million for running the business and around $1.1 billion available to deploy on behalf of shareholders. Our September 30th debt balance was about $3 billion. Our reported gross debt to trailing 12-month EBITDA was under two times. We repurchased $138 million of stock during the third quarter and $1.7 billion on an LTM basis. Our approach to repurchases continues to be price-sensitive, opportunistic, and disciplined. The buyback authorization is about $1.1 billion. We expect the board will continue to evaluate and refresh the amount as needed. We are increasing the full-year revenue outlook for each of our segments to reflect recent performance and trends. For 2026, we now expect revenue at or above $6.405 billion, which is an increase from last quarter and FX-neutral growth of 1%. We now expect full-year EBITDA at or above $1.615 billion. Paired with our prior guidance, this is up $45 million. This reflects full-year margins at or above 25.2%, consistent with 2025 adjusted for the divestiture. We expect 2026 adjusted EPS at or above $14.65, an increase from last quarter that primarily reflects the increase in the EBITDA outlook. For 2026, we expect free cash flow at or above $1.235 billion, also an increase from the prior guidance. This reflects a conversion from gap net income of 136%. Our guidance is based on 66 million fully diluted weighted average shares outstanding, which incorporates the repurchases made through the end of the third quarter.

We exited Q3 with about 64 million fully diluted shares. For Q4, we expect EBITDA at or above $390 million. Our revenue, profit, and cash flow results in Q3 were ahead of expectations. We've increased the guidance across these measures for 2026. Total CV year-over-year growth improved by 80 basis points from Q2 of 2026. We are transforming BTI to deliver even more client value. As we have seen in the past, the current macro and budget-driven cycle will normalize and CV growth will continue to re-accelerate. Gartner's return on invested capital is strong at 34% on a rolling four-quarter basis. We continue to generate significant amounts of free cash flow. We expect the conversion of gap net income. We'll improve as CV accelerates. We believe this offers a durable and compelling value proposition for our shareholders. We are positioned to accelerate CV growth, and we continue to expect to deliver adjusted EPS on a three-year compound basis from 2025 above 12%. Over time, we'll opportunistically deploy our capital on stock repurchases, which will lower the share count, and on strategic value-enhancing tuck-in M&A. With that, I'll turn the call back over to the operator, and we'll be happy.

Take your questions. Operator? Thank you. If you'd like to ask a question, please press star 11. If your question has been answered and you'd like to remove yourself from the queue, press star 11 again. Our first question comes from Fiza Allwey with Deutsche Bank. Your line is open.

Hey, Fiza. It's Greg, and then Jean will pop in in a moment as well. I think, you know, as we sort of think about the external factors, you know, there are a handful of things that we outline that are going well and, you know, with the business performing well, but there are still things like the war in the Middle East as a classic example of things that, you know, got a little bit worse from a selling environment perspective in the quarter. And so as we sort of think about what's happening, nothing is change structurally about, you know, our addressable market, the value we offer, the benefits we're seeing from the VTI transformation, et cetera, et cetera. That all said, tough environment, particularly in some very specific places. You know, the highlight I would say is Middle East where, you know, we had and still have a really nice and it had been a very fast growing business for us, but given what's been going on over there has been a more challenge. Selling and retention environment. Thank you. Our next question comes from Jeff Mueller with Baird. Your line is open.

Hey, Jeff. Obviously, sales capacity is really important to us and we've really tracked it a lot and managed it carefully. Right now, we feel like we have a lot, you know, plenty of sales capacity to grow for the next few quarters. When you look at kind of whether it goes up a little bit or down a little bit, to your point, it really is. It's kind of noise in that there are hiring cycles and things like that. And so, to your point, what you're seeing there is more noise. It's not indicative of anything systematic. And the other thing I'd add, Jeff, is, as always, we're managing with an eye towards the future, both from a cost of sale perspective and from a growth perspective and trying to strike the balance between having the right amount of capacity for today, but also having the right amount of capacity to continue our CV acceleration path.

Thank you. Our next question comes from Tony Kaplan with Morgan Stanley. Your line is open.

scrolling forward as we continue to reaccelerate the growth. And so I don't think there's any magic or any, you know, secrets in there. It's really just making sure that we have the right resources in the right places at the right time to fulfill our client demands, make sure we're keeping up with client demands, and also make sure that we are seeding around at least a little bit for future growth as well.

Our next question comes from Josh Chan with UBS. Your line is open.

Hey, good morning, Josh. Great question. I think it was largely timing within the quarter more than any sort of significant deviation from what our overall forecast for the quarter was for NCBI. So it was a good, solid, strong quarter from an NCBI perspective, but we got the NCBI a little earlier in the quarter than we had anticipated, and that just basically flowed through into the... the modest raise we did for Insights Revenue for the full year. Okay, great. Thanks for the color.

Thank you. Our next question comes from George Tong with Goldman Sachs. Your line is open.

It's the CFOs, the chief marketing officers, chief supply chain officers, et cetera. In fact, when we look at what is the most popular topic across every major role we serve, AI is the number one. And again, that's indicative of what's going on in the market. It's also indicative of it's the number one, but it's not the only one. So CIOs are worried about and dealing with the things Gene mentioned around AI, but they're also worried about something. They're also worried about all sorts of other things. And so AI is this pervasive thing. And we're obviously meeting that demand for our clients as it's the number one topic. And as you'd imagine, it's a great entry point for lots of prospect and new business conversations as well. It's usually not the only thing, but it's often a great entry point for really highlighting the uniqueness and the value of a Gartner license. Yeah, just to build on Craig's points again, for every role we serve, AI is the single biggest topic people are interested in. It's not the only one, but it's the single biggest. And if you went back a year ago, most roles, AI was the biggest. Now it's literally the biggest for every single role.

Very helpful. Thank you.

Thank you. Our next question comes from Jason Haas with Wells Fargo. Your line is open.

Hey, good morning. How are you? Thanks for the question. So what I'd say is, you know, while we continue to expect overall CV growth to continue to accelerate, it's unlikely that the expat CV is going to get to that 4% level at this point from everything we see. You know, as we talked about a little bit earlier, you know, NCBI and Q3 was roughly in line with the base case and what we expected. We've updated our expectations based on what we saw in Q3 and, you know, what we're seeing and expecting from Q4. We've got a lot of the business doing well, but, you know, from where we sit today, we do not expect that CV growth rate to get all the way back to 4% by the end of the year. But again, overall CV growth, we expect to continue to accelerate. Thank you. Our next question comes from Andrew Nicholas with William Blair. Your line is open. Hi, good morning. Thanks for taking my question. I just wanted to circle back to the selling environment.

That is, obviously, the selling market is impacted by, as an example, layoffs. And so you've seen, again, we've seen this over the last few years, large layoffs, particularly with large technology vendors. And that had quieted down for a little bit and obviously has picked back up again. And so that makes for more challenging selling. Renewing environment when you're attempting to renew a contract or sell growth in the face of that. And the other thing I'd say is sales cycles, as we've talked about the last couple of quarters, there's no real change, but are still longer than they have historically been because of all the craziness that our clients and prospects are dealing with. We're working through that. And again, our pipelines remain. There's still a lot of interest in understanding more about the Gartner value proposition. We are closing a lot of those new business deals as reflected in our overall new business numbers, but in a lot of cases, they are taking longer just given the increased scrutiny that comes from not having a normal sort of operating and selling.

Thank you. Our next question comes from Manav Patnik with Barclays. Your line is open.

We're also really excited our training cycles. We used to train our client-facing associates especially like once a month, and then we've moved it to once a week, and so we're moving it faster and faster over time so that our associates can keep up with all the changes according to the market. We also have a lot of clients to do consultations with our analysts, and one of the things we've found is that as the pace of the world's accelerated, some of those consultations, they would like to do a lot of clients. They would like to do much more quickly. So we're really setting processes in place for those clients that want to put consultation. In the next couple of days, we can actually arrange that where they really need it. And so that's the time of this piece of it. And then lastly, there's a user experience where, as you said, we continually enhanced our app, the Gartner app. Not all clients use it, but we're doing those that do really like it. We continue to enhance Gartner, continue to enhance the basic features on our website as well. And so those are kind of the major areas that we are focused on in terms of improving the overall value that clients get. Thank you. Our next question comes from Surrender 10 with Jeffries. Your line is open. Thank you. Gene, when I think about the current environment and

there's kind of no change as we kind of move forward, how should we think about what's realistic for wallet retention at this point? I mean, should we continue to think of maybe some modest improvement and then maybe it ebbs and flows around 100% or just any color of how we should think about the mechanics of wallet retention from here on out? So, Surrender, the way that we think about the wallet retention is, again, it starts with all of our content and the way we deliver value to clients. And so, the whole BTI transformation I just talked about a moment ago is part of making sure that clients get even more value from our content, both from the actual nature of the content itself, but also how timely it is, how they access it, and so forth. And so, the first piece in terms of deriving overall retention is making sure that that BTI transformation proceeds, as I said, we feel like it's proceeding good. As that continues, that will help retention. We believe more clients will retain. In addition to that, all those changes they make are just as good for new business, which helps with the wall of retention. And so, I see that the changes we're making in terms of BTI transformation is ultimately driving both retention and new business, but then in turn drives the wall of retention. And, Surinder, just to put a finer point on that point as well, the way to think about it is… All the improvements we're making, largely, you know, we can talk about different engagement measures and things like that. Ultimately, it's retention. That is the ultimate measure of, you know, is the BTI transformation delivering value or not? And as we continue to, you know, see improvements in retention, like we highlighted this quarter, obviously, you can't grow a client enterprise if they're not retaining. And so, the way we think about it, it's worked this way.

business for, you know, 25 years is, you know, when we have happy clients who are getting huge value and retaining year after year after year, that becomes easier to sell, you know, to take our price increase on it and to find incremental license users within the enterprise as well. And so, you know, we do expect as a part of that CV reacceleration while retention continuing to improve as well for all the reasons Gene highlighted. Got it. I guess just as a clarification, the idea is that you can trend towards historical. I guess that that was the question, which is, or is there something structural in the current environment that keeps us below historical? Like, I think that was the question I was trying to get to. Yeah, I mean, the way I think now, let it be. Yeah, I think that, you know, as we pivot to the future, you know, there have been a handful of. Things that have impacted that measure. Most notably, as we've talked about the last couple quarters, you know, had been downsell. As we've detailed the last two quarters, we've seen downsell. There's always downsell, but we've seen downsell stabilizing. That's a very positive structural change that we're seeing as we move forward. And then all the improvements we're making. Again, you know, I can't say. Exactly what, you know, while retention will look like, you know, two or three years from now, but we fully expect it to be a contributor, you know, to our CV reacceleration going forward.

Thank you. Our next question comes from Jasper Bibb with Truist Securities. Your line is open.

Hey, good morning, Jasper. You know, we have a longstanding, you know, practice of, you know, not really guiding around contract value. I mean, I think the moral of this. The story is we fully expect the CV growth rate in total to accelerate from where we are today. Fed makes up, you know, between 2% and 3% of the CV. And obviously, XFED makes up 97% to 98% of the CV. And so, you know, we fully expect the total to, you know, continue to accelerate through the end of this year.

Thank you. Our next question comes from Scott Wurzel with Wolf Research. Your line is open.

So it's a mix, basically. I don't have the exact mix in front of me, but it is a mix, which is we have some clients who, after going through what they went through, decided there's a lot of value with Gartner, made the business case to their organization and bought again. And then we also have demand from a cold new clients we had before. So it's actually a mix of both.

Thank you. Our next question comes from Jeff Silber with BMO Capital Markets. Your line is open.

And are you extending any terms or changing the terms in order to get some, you know, better? If it's on the pricing side? No. It is our longstanding practice. You know, we've built what we think to be a really strong business model. And a lot of that business model is reliant on sticking to the terms that reinforce and support that business model. And so, you know, we have a team that helps our sellers and works with our clients when there are challenges. But, you know, by and large, we are sticking to our standard terms and conditions on contracts because it's so important to the value we deliver not only to our clients, but to our shareholders as well. Thanks so much.

Thank you. Our next question comes from Ashish Sabhadra with RBC Capital Markets. Your line is open.

But I think it really comes down to, you know, as we sort of run our scenario. out where, you know, we're, where we see continued acceleration that would give us the confidence to, you know, go back to adding incremental territories going forward. I think, you know, while we've seen some nice sequential improvements in productivity, we obviously have a lot of latent productivity opportunity baked into the system. And we want to make sure that we're taking advantage of that and getting yield. On that investment, while we're looking at where the next best territories or incremental territories are to add going forward.

Thank you. Our next question comes from Curtis Nagel with Bank of America. Your line is open.

Here's what I'd like you to take away from today's call. Gartner has a powerful, enduring value proposition. We have a vast and growing body of high-impact, timely insights. These insights guide tens of thousands of leaders in their teams in achieving their mission-critical priorities, especially on the topic of AI. Our conferences continue to be highly rated and highly valued by our attendees. The number of executives who attend our conferences continues to grow. In the third quarter, contract value growth accelerated. Retention improved. We drove sequential improvements in NCBI. EBITDA, adjusted EPS, and free cash flow were once again ahead of expectations. We've raised our annual guidance, and we remain incredibly optimistic about our future. Thanks for joining us today, and I look forward to updating you again next quarter. Thank you for your participation. You may now disconnect. Good day.