Gartner, Inc.

Good morning, everyone. Welcome to Gartner's first 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 Safian, Gartner's Chief Financial Officer, there will be a question and answer session. We ask that you limit yourself to one question and a brief follow-up 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 first 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 supplements. All contract values and associated growth rates we discuss are based on 2026 foreign exchange rates. All growth rates in Jean'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. 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. Due to changes in the geopolitical environment, client decisions slowed somewhat in March. Year-over-year contract value growth accelerated in the first quarter. We were agile in managing expenses, and we continued to deliver unparalleled value to our clients. Gartner's strategy is to guide executives on their journeys to achieve their mission-critical priorities. Our clients are the senior-most executives and their teams who lead every major enterprise function. For example, chief information officers and senior IT leaders, chief supply chain officers and heads of logistics, chief financial officers and corporate controllers, and more. These roles are enduring regardless of change in the world. The executives who lead these roles will always have priorities that are mission critical to the success of their enterprise, their functions, and their personal careers. Priorities that are mission critical tend to be long, complex journeys. They take time and effort to achieve. Executives want and need help. In today's environment, most executives face information overload. It can be challenging to differentiate authoritative sources from others. Trust is at a premium. Gartner is the best, most trusted source for the health executives' need to achieve success. We proactively deliver insights that guide smarter decisions and stronger outcomes on mission-critical priorities. Gartner insights are derived from a vast pool of highly proprietary data. Every year, we hold more than a half million two-way conversations with more than 80,000 executives across every major function and in every industry. We conduct more than 27,000 briefings with executives from technology providers. We also leverage data from proprietary surveys, tools, models, benchmarks, and more. This gives us a deep understanding of what executives care about most, what's working, and what isn't. Our insights are independent and objective. They reflect the latest information and situations our clients are experiencing. They're continually updated. and they're available exclusively from Gartner. A large part of our value comes from helping clients see around corners. We help leaders understand issues and approaches they're often not aware of. We help them identify blind spots, prioritize issues, and avoid costly mistakes. Our insights are forward-looking. We guide clients on how the world is likely to change and what they should do to thrive in uncertain environments. We deliver unparalleled client value, through both digital and human interactions. Clients can access our written insights, major quadrants, type cycles, critical capabilities, ignition guides, toolkits for procurement and governance, and many more. In addition, through inquiry, clients can tap into the deep expertise of our world-class analysts that goes beyond what's in our written insights. They can get personalized support from experienced practitioners. Through our conferences, Clients can interact in person with analysts, peers, and technology providers. They can validate decisions through the Gartner peer community, which has more than 100,000 executives from nearly every enterprise function. And of course, they can use Ask Gartner to go even deeper into specific topics. No one else does what we do at our scope and scale. Retention is foundational to our success. Clients who engage frequently with our insights receive greater value and retain at higher rates. To support more frequent client engagement, we've been transforming our business and technology insights organization and processes. I covered the dimensions of this transformation on last quarter's earnings call. They are impact, volume, timeliness, and user experience. Today, I'll give you an update on how we're doing. We measure progress in a number of ways. I'll highlight just a few examples for simplicity's sake. Starting with impact. Our objective is to ensure insights are always on the topics our clients care about most right now. We've increased the number of high impact documents by 22%. The second dimension is volume. The number of documents in our insights library is up 19%. The third dimension is timeliness. With the accelerating rate of change in the world, we've introduced insights that are published the same day important events occur. The number of these documents has more than doubled. A recent example includes recommendations for heads of software engineering in response to the dramatic change in the security landscape posed by Anthropix mythos. And of course, we continue to make improvements on the user experience. For example, we've added the ability to create downloadable PowerPoint presentations directly from within Ask Gartner. Clients can ask questions in 25 languages, and we continue to integrate additional proprietary data sources. The programs we have underway are driving increased client engagement, which should result in higher retention and additional new business. AI continues to be one of the most requested topics across all the roles we serve. Gartner sits at the nexus of CIOs and IT organizations, business leaders, and AI technology providers. This gives us a full proprietary perspective that includes all the major players. We also have comprehensive independent and objective guidance on all aspects of AI, strategy, ROI, ethics and governance, workforce readiness, and more. We cover the full range of issues leaders need to address to be successful with AI. And we are world-class users of AI internally. No one is more capable or better positioned to guide leaders along their AI journeys than Gartner. Our people drive our success. I just returned from one of our sales recognition events. where I had the opportunity to spend time with hundreds of our most successful salespeople. They continue to demonstrate unwavering dedication to their clients and are incredibly excited at the future of our business. In closing, Gartner has an unparalleled and enduring value proposition. We're transforming our business and technology insights organization processes to deliver even more client value. Clients who engage frequently with our insights receive greater value and retain at higher rates. Gartner is the best source for clients looking to achieve success on their AI journeys, and our teams are incredibly optimistic about our future. Looking ahead to the rest of the year, we expect contract value will accelerate. We will continue to drive strong free cash flow that we can put to use to drive incremental shareholder value, and we expect to deliver adjusted EPS on a compound annual basis above 12% over the next three years. With that, I'll hand the call over to our Chief Financial Officer, Craig Sapien. Thank you, Gene, and good morning. First quarter contract value, or CV, grew 1% year over year. This was an acceleration from the fourth quarter. Insights revenue, EBITDA, adjusted EPS, and free cash flow in the first quarter were better than expected. We are increasing our EBITDA, adjusted EPS, and free cash flow guidance for the full year. In the first quarter, we reduced our share count by about 4%. buying back $535 million of stock. And we expect to generate significant free cash flow and have fewer shares outstanding over the course of the next several years. First quarter revenue was $1.5 billion, up 2% year-over-year as reported and down 1% FX-neutral. In addition, 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. And free cash flow was $371 million, up 29% year-over-year. Rolling for a quarter return on invested capital was about 27%. Insights revenue in the quarter 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%. At March 31st, we had approximately $114 million of U.S. federal CV. Q1 is normally a higher-than-average renewal quarter and our seasonally lowest new business quarter. The second quarter is a smaller renewal quarter and a larger new business quarter than Q1. We had more than $200 million in new business in the first quarter as there continues to be considerable interest in Gartner's proprietary, unbiased insights. As you recall, new business dollars increase each quarter as we move through the year. Driving engagement is critically important to retention. As she discussed, through both digital and human interactions, we understand our clients' mission-critical priorities, and we are proactive in helping them to address those priorities. This ongoing engagement helps drive client success and strong retention. We've increased licensed user engagement levels over time. In each month of the first quarter, they are higher than they've been in any of the same months over the past three years, with consistent engagement improvements in both digital and human interactions. Derived from analyzing monthly active users, overall engagement in Q1 was up over 170 basis points compared to the prior year quarter. Digital engagement improved by more than 160 basis points year-over-year. Human interactions increased more than 80 basis points year-over-year through improvements in the usage of analyst inquiries. 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%. GTS new business was down 4% compared to last year and down about 3% ex-fed. As Gene noted, new business was tracking ahead of the prior year through February and was affected a bit in March due to the geopolitical environment. 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. GBS new business was down 2% compared to last year. Again, as Gene noted, new business was tracking very favorably through February, with some client decision-making slowing down in March. 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%. We held 10 destination conferences in the first quarter as planned. 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%. As you know, our contract optimization revenue is highly variable. EBITDA for the first quarter was $395 million, up 6% from last year as reported and 1% FX neutral. We outperformed expectations in the first quarter through effective expense management and a prudent approach to guidance. Adjusted EPS in Q1 was $3.32, up 11% compared to Q1 last year.

We had 70 million shares outstanding in the first quarter.