Good day, and welcome to Gartner's Third Quarter 2025 Earnings Conference Call. This call may be recorded. I would now like to turn the call over to David Cohen, Senior Vice President of Investor Relations. Please go ahead.

Good morning, everyone. Welcome to Gartner's Third Quarter 2025 Earnings Call. I'm David Cohen, SVP of Investor Relations. 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. Please be advised that today's conference is being recorded. This call will include a discussion of third quarter 2025 financial results and Gartner's outlook for 2025, 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 EBITDA are for adjusted EBITDA with the adjustments as described in our earnings release and supplement. All contract values and associated growth rates we discuss are based on 2025 foreign exchange rates. All 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 may 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 2024 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, and thanks for joining us today. Gartner's Q3 financial results were ahead of expectations. The macroeconomic environment remains dynamic, with ongoing changes in the federal government and evolving tariff policies. We made operational adaptations that are starting to yield results. We continue to deliver great value to our clients. Enterprise client retention remains strong, and contract renewal rates improved from the second quarter. Finally, we repurchased more than $1 billion of stock in the quarter, reducing share count by 6% year-over-year. 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 helping tens of thousands of clients in thousands of enterprises across every function, every size enterprise, every geography and every industry determine how best to use AI. We've developed indispensable AI insights that are captured in more than 6,000 documents, and our insights are growing every day. To put this into perspective, if you read 10 documents per day, it would take about 2 years just to get through our current library. While enterprise leaders are excited about the prospects of AI, they continue to chase returns on those investments. We've cataloged more than 1,000 AI use cases, spanning roles and industries that outline which have the highest ROIs and why. These are indispensable insights. In addition, our entire client base has access to our AI-driven tool, AskGartner. AskGartner enables quick access and generates in-depth summaries of our business and technology insights. We continue to accelerate and enhance AskGartner's capabilities at a rapid pace. Our insights are derived from Gartner's vast pool of proprietary data that is unique, highly differentiated, and not available in the public domain. This includes data from Gartner IT Key Metrics, which is the industry's largest key metrics database, our vast online peer network of more than 139,000 unique users, our more than 500,000 one-on-one client discussions annually, and our more than 3 million ratings and reviews of technology and software services. All of this and more uniquely positions Gartner as the best source for helping clients determine the right AI tools, applications, and benefits. We're also leveraging AI to improve productivity and effectiveness internally. Gartner's data science team is using our sophisticated proprietary AI model to quickly and systematically determine the topics of greatest interest to our clients. We've provided our experts with advanced proprietary AI tools for content production. The amount of content published per analyst is up 31% year-over-year. Over time, we expect this will have a meaningful impact on retention, and we've reduced our average publishing time by 75% compared to last year. This allows us to respond to changes in the market faster than ever. Our service delivery teams are leveraging our AI tools to be better prepared for client discussions, and our sales teams are using AI to hone their selling skills. As we continue to navigate the dynamic external environment, our adaptations are beginning to yield results. Client engagement is a leading indicator of future retention. Client engagement was up in the quarter. Client retention is higher than last year. Productivity of our business development executives who sell to new enterprises is strong. And across GTS and GBS, our new business pipeline is up double digits. Gartner Conferences is also an important indicator of client value. Licensed users who attend our conferences retain at higher rates. Prospects who attend our conferences convert to clients at higher rates. Attendee ratings of our conferences are reaching all-time highs. I recently returned from our 35th Annual IT Symposium/Xpo in Orlando, Florida. We hosted more than 7,000 technology leaders over the 4-day in-person conference. You can't find this many senior technology executives gathered together anywhere else. Attendance at the conference was up 8% year-over-year, excluding the U.S. federal government in Canada. Attendees gave the conference a very strong Net Promoter Score of 75. About 1/3 of the nearly 600 sessions on-site covered the topic of AI. Our opening keynote framed the AI journey across 2 dimensions: AI readiness and human readiness. Gartner analysts discussed how CIOs can navigate vendor choices, reimagine the workforce, and redefine organizational identities to be agents of change. It was our highest-rated keynote ever. Looking ahead, advanced exhibitor bookings for our 2026 conferences are strong. In summary, while the macroeconomic environment remained dynamic, Gartner's Q3 financial results were ahead of expectations. We made operational adaptations that are starting to yield results. We continue to deliver great value to our clients. Enterprise client retention remains strong, and contract renewal rates improved for the second quarter, and we repurchased more than $1 billion of stock in the quarter. AI will be one of the most innovative and pervasive technologies in history. Gartner is the best source for clients to determine the right tools and applications for their environments. And of course, we continue to help in other mission-critical priorities such as cybersecurity. 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. With that, I'll hand the call over to our Chief Financial Officer, Craig Safian.

Thank you, Gene, and good morning. Third quarter contract value, or CV, grew 3% year-over-year. Excluding the U.S. federal government, CV grew 6%. Financial results in the third quarter were better than expected, and we are increasing our guidance for the full year. Our client value proposition is unique and compelling. Our Insights products are subscription-based. They help senior operating executives make better decisions on their journeys to address their strategic priorities. Because we sell to leaders across all major enterprise functions in every geography, industry, and company size, we have a long runway for growth in a large addressable market. We see a unique opportunity to create long-term value for our shareholders by repurchasing our stock at an attractive price point. In the third quarter, we bought $1.1 billion of stock. We will generate more free cash flow and have fewer shares outstanding over the course of the next several years. This, coupled with accelerating growth in 2026 and beyond, will create significant value for shareholders. Third quarter revenue was $1.5 billion, up 3% year-over-year as reported and 1% FX neutral. In addition, the total contribution margin was 69%, up 90 basis points from last year. EBITDA was $347 million, up 2% as reported. FX was a 3-point benefit in the quarter. Adjusted EPS was $2.76, up 10% from Q3 of last year. Free cash flow was $269 million as our year-to-date performance remains strong. During the quarter, we made a change in our segment reporting structure. Most of the Insights non-subscription revenue is now reported as other revenue in the P&L. Insights, which is almost 100% recurring subscription revenue, remains our largest, most profitable operating segment. In the earnings supplement, we provided several quarters of historical data for the new Insights segment. Insights revenue in the quarter grew 5% year-over-year as reported and 4% FX neutral. Third quarter Insights contribution margin was 77%, up 30 basis points versus last year. Contract value was $5 billion at the end of the third quarter, up 3% versus the prior year. Excluding the U.S. federal government, CV growth was about 270 basis points faster at around 6%. Global NCVI in the quarter, excluding the U.S. federal government, was positive $62 million, a sequential increase of $49 million from Q2. This $49 million improvement is larger than the sequential improvement from Q2 to Q3 last year. CV growth was broad-based across practices, industry sectors, company sizes, and geographic regions. Across our combined practices, all the industries, except public sector, grew at mid-single-digit rates. Energy, transportation, and banking led the growth. CV grew at high single-digit or mid-single-digit rates across all commercial enterprise sizes. We drove double-digit or high single-digit growth in more than half of our top 10 countries. We had more than $240 million of new business in the quarter, which is down about 4% year-over-year, excluding U.S. Fed. Outside of U.S. Fed contracts, in-quarter renewal rates improved from Q2. This largely reflects benefits from the adaptations we've been making. Nearly all of our U.S. federal contracts will come up for renewal during 2025, with more than 85% having transacted in the first 3 quarters of the year. Dollar retention year-to-date was around 46%. At September 30, we had approximately $165 million of U.S. federal CV. Global Technology Sales contract value was $3.8 billion at the end of the third quarter, up 2% versus the prior year. Excluding the U.S. federal government from both periods, GTS CV grew about 300 basis points faster or 5% in the quarter. Tech vendor CV increased mid-single digits, with small tech vendor growth continuing to improve. For tech subsectors unaffected by tariffs such as software and services, the CV growth was low double-digit or high single digits. Wallet retention for GTS was 98% for the quarter. Excluding the U.S. federal business, wallet retention was more than 100%. In-quarter contract renewal rates improved from Q2 to Q3. GTS new business was down 12% compared to last year and down about 4%, excluding the U.S. federal government. GTS quota-bearing headcount was up 1% year-over-year as we continue to optimize our territories. Our regular full set of GTS metrics can be found in our earnings supplement. Global Business Sales contract value was $1.2 billion at the end of the third quarter, up 7% year-over-year. Excluding the U.S. federal government, GBS CV grew about 160 basis points faster at around 9%. Half of the major GBS practices grew at double-digit or high single-digit rates. Growth was led by the sales, legal, and finance practices. GBS NCVI was positive $17 million in the third quarter. Excluding the U.S. federal government, GBS NCVI was positive $25 million. Wallet retention for GBS was 102% for the quarter. In-quarter contract renewal rates, excluding the U.S. federal government, improved from Q2 to Q3. GBS new business was down 10% compared to last year. Excluding the U.S. federal government, new business was down about 4%. GBS quota-bearing headcount was up 5% year-over-year. As with GTS, our regular full set of GBS metrics can be found in our earnings supplement. Conferences revenue for the third quarter was $75 million. On a same conference basis, revenue growth was around 6% FX neutral. Contribution margin was 37%. We held 10 destination conferences in the third quarter as planned. Q3 consulting revenue was $124 million compared with $128 million in the year-ago period. FX was a benefit of about 200 basis points in the quarter. Consulting contribution margin was 29% in Q3. Labor-based revenue was $94 million. Backlog at September 30 was $195 million. We had one large project which slipped out of Q3, affecting revenue and backlog. In contract optimization, we delivered $30 million of revenue in the quarter, up 12% versus Q3 of last year and 11% FX neutral. Our contract optimization revenue is highly variable. Consolidated cost of services was about flat year-over-year in the third quarter as reported and down 1% FX neutral. SG&A increased 7% year-over-year in the third quarter as reported and about 6% on an FX-neutral basis. SG&A increased in the quarter compared with 2024 as a result of headcount growth and 2025 merit increases. EBITDA for the third quarter was $347 million, up 2% from last year's reported. FX contributed almost 3 percentage points. We outperformed in the third quarter through modest revenue upside, effective expense management, and a prudent approach to guidance. Depreciation in the quarter of $31 million was up 6% compared to 2024. Net interest expense, excluding deferred financing costs in the quarter, was $15 million. This is favorable by $2 million versus the third quarter of 2024 due to lower interest expense and higher interest income on our cash balances. The Q3 adjusted tax rate, which we use for the calculation of adjusted net income, was 23% for the quarter. This compares to last year's rate of 26%. The tax rate for the items used to adjust net income was 14% for the quarter. Adjusted EPS in Q3 was $2.76, up 10% compared to Q3 last year. We had 75 million shares outstanding in the third quarter. This is an improvement of about 3 million shares or approximately 4% year-over-year. We exited the third quarter with 73 million shares on an unweighted basis. Operating cash flow for the quarter was $299 million. This compares with $291 million in Q3 2024, adjusting for last year's $300 million of conference cancellation insurance proceeds. CapEx was $29 million, up about $4 million year-over-year. This was primarily due to real estate-related costs and in line with our expectations. Third quarter free cash flow was $269 million. This compares with $265 million in Q3 2024, adjusting for last year's insurance proceeds. Free cash flow on a rolling 4-quarter basis was 137% of GAAP net income and 76% of EBITDA. As we previously noted, there were several items that affect rolling 4-quarter net income and free cash flow, including cash taxes on the insurance proceeds in Q4 of 2024, 2 real estate lease termination payments, and tax planning benefits. We also had a noncash goodwill impairment charge in Q3 2025. This relates to the Digital Markets business, which now sits in the Other segment. Adjusting for these items, free cash flow on a rolling 4-quarter basis was 20% of revenue, 83% of EBITDA, and 154% of GAAP net income. At the end of the third quarter, we had about $1.4 billion of cash. Our September 30 debt balance was about $2.5 billion. Our reported gross debt to trailing 12-month EBITDA was well under 2x. Our expected free cash flow generation, available revolver, and excess cash remaining on the balance sheet provide ample liquidity to deliver on our capital allocation strategy. Our balance sheet is very strong with $2.1 billion of liquidity, low levels of leverage, and almost 90% fixed interest rates. We repurchased $1.1 billion of stock during the third quarter. Year-to-date through the end of September, we have purchased around $1.5 billion of our stock. Our repurchase authorization is about $1.3 billion. We expect the Board will refresh the authorization as needed. As we continue to repurchase stock, we create value for shareholders through EPS accretion and increasing returns on invested capital. We are increasing our full year guidance to reflect recent performance and trends. Based on October FX rates, we expect revenue growth to benefit by about 80 basis points and EBITDA growth to benefit by about 165 basis points for the full year. As a reminder, about 1/3 of our revenue and operating expenses are denominated in currencies other than U.S. dollars. For Insights revenue in 2025, our guidance reflects Q3 contract value, which provides very high visibility for the fourth quarter. For conferences, we are basing our guidance on the 53 in-person destination conferences we have planned for 2025. We have good visibility into current year revenue with the majority of what we've guided already under contract. For Consulting, we have more visibility into the next quarter or 2 based on the composition of our backlog and pipeline as usual. Contract optimization has had several very strong years, and the business remains highly variable. Our updated 2025 guidance is as follows: we expect Insights revenue of at least $5.06 billion, which is an increase from last quarter and is FX-neutral growth of about 4%. We expect Conferences revenue of at least $630 million, which is an increase from last quarter and is FX-neutral growth of about 6%. We expect consulting revenue of at least $575 million, which is growth of about 2% FX neutral. This is unchanged from last quarter. We continue to expect at least $210 million of other revenue. The result is an outlook for consolidated revenue of at least $6.475 billion, which is an increase from last quarter and is FX-neutral growth of 3%. We now expect full year EBITDA of at least $1.575 billion, up $60 million from our prior guidance. This reflects full year margins of 24.3%, up from last quarter. We expect 2025 adjusted EPS of at least $12.65, an increase from last quarter. For 2025, we expect free cash flow of at least $1.145 billion. This reflects a conversion from GAAP net income of 165%. Our guidance is based on 76 million fully diluted weighted average shares outstanding, which incorporates the repurchases made through the end of the third quarter. We exited Q3 with about 73 million fully diluted shares. For Q4, we expect adjusted EBITDA of at least $400 million. Our financial results in Q3 were ahead of expectations, and we've increased the guidance for 2025. Contract value, excluding U.S. federal business, grew 6% in the quarter. Third quarter contract renewal rates, excluding the U.S. federal government, improved from Q2, and we saw a year-over-year increase in our sequential NCVI improvement. We are positioned to accelerate CV growth in 2026 on a path to long-term sustained double-digit growth in 2027 and beyond. We'll also deploy our capital on share repurchases, which will lower the share count over time 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 to take your questions.

Our first question comes from Jeff Meuler with Baird.

I heard positive callouts, I think, on business development, productivity to new enterprises, in-quarter contract renewal rates, and pipeline. Can you just comment, I guess, on upselling and downselling ex federal government trends? And are you starting to see improvement there? Or are there challenges from elevated seat-based churn as we look to the 2026 expected acceleration in CV?

Jeff, it's Gene. So what I would say is that the selling environment has improved modestly. And you mentioned the areas that I think are the most impacted. So if you look at new sales to new enterprises, those we've been doing quite well. And there are other parts of the business that are also doing well, as you mentioned. If you look at our business, a lot of it comes from upselling existing enterprises. That's the place that we've been hurt the most where we have existing enterprise clients; instead of getting growth there, we may lose a seat. But I'd say overall, the selling environment improved as we moved to Q3.

But are you starting to see any sort of change in some of the leading indicators for upselling to existing?

I think we are seeing changes. I'd say, first, as I mentioned on the call, our engagement is going up. So the amount of documents people are reading, the amount of one-on-one conversations with our experts that we're having, conference attendance, conference ratings, we look at all those as leading indicators of future demand, and all those indicators are up significantly. We're very happy to see that. I think it does bode well for the future.

Sorry, Jeff. The one other thing I'd add is the other key indicator that aligns with and correlates to upsell is retention. As we noted on the call a few times, the in-quarter retention rates improved from Q2 to Q3. And I'll state the obvious: it's much easier to upsell an account when they're renewing than when they're not. I think very positive also that we saw an in-quarter improvement in the renewal rates.

Our next question comes from Andrew Nicholas with William Blair.

It sounds like the selling environment is a little bit better than last quarter, some positive trends. I think last quarter, you talked about the tariff-impacted industries specifically. Can you give an update on maybe CV growth there relative to the rest of the business?

Andrew, so the non-tariff affected industries, as we track them, continue to perform about 200 basis points faster from a CV growth perspective than the tariff affected. So maybe a little smidge better than the gap we saw in Q2, but by and large, about the same performance-wise compared to Q2.

Okay. I guess just as a follow-up to that, does that give you any pause in terms of your expectation for improvement next year? I think part of the ramp back up to high single-digit plus in contract value growth in '26 is kind of alleviation of that headwind. Just kind of curious how you're thinking about that or if we should be applying some conservatism to that number given how things have trended over the past couple of months.

I'd say the selling environment with tariff impacted companies is starting to improve. When there was more uncertainty with tariffs, if we went back a few months, companies were reluctant to make purchase decisions. Now we see more certainty regarding tariffs in certain geographies. Because of that, our clients are starting to make decisions they were unable to make before. I'd characterize the tariff impacted industries as actually expected to do better next year because there's more tariff certainty, and clients still need help with AI, cybersecurity, data analytics, all that kind of stuff. There's marked improvement in the tariff impacted industry's ability to make decisions to buy.

Our next question comes from Faiza Alwy with Deutsche Bank.

I wanted to follow up on the improvement in the renewal rate. And I'm curious if you think that's just a function of the macro environment or is it more a function of if you're selling differently, or some of the new sort of strategies or services that you talked about like cost optimization last time. So yes, I would love some additional color around what drove the improvement.

Yes. I think it's two factors primarily. One is that we have made a lot of adaptations in terms of accelerating the pace of our research, the quantity of our research, etc. A lot of it comes down to how we're selling and how we're training our salespeople. We've made several adaptations that I think improve our ability to sell to those clients. On top of that, as I mentioned, especially in the tariff impacted industries, there’s less uncertainty in certain geographies, and for those areas, clients are now making decisions about buying from us.

Understood. Okay. And then just a follow-up around sort of it sounds like you've had pretty good expense management. So curious if you can talk a bit more about that and sort of how sustainable that is and how you're sort of balancing investments versus cost optimization?

Faiza, it's Craig. Thanks for that question. On the expense side, we've been ensuring that we are appropriately balancing both the OpEx in-year and the exit run rate for next year while also making sure that we are investing in core areas that we know are ingredients that support, catalyze, or lead to double-digit growth in the future. We've been very disciplined on the expense side. We're looking to drive productivity in a lot of areas, automating wherever possible, and leveraging lower-cost geographies where possible. All those elements have been part of our strategy that we've been implementing for a long time. We've increased efforts to ensure we can afford to invest in key areas. We fully expect next year to accelerate our CV growth while continuing to invest to sustain that growth into the future.

Our next question comes from Toni Kaplan with Morgan Stanley.

I actually wanted to follow up on that last question. Just in light of the environment, what are your expectations for sales headcount growth in '26 for both of the segments, please?

We're in the midst of hardcore operational planning for next year. There's obviously a wide range of scenarios and outcomes that we are planning around, and we've got a wide range of potential investment scenarios that come out of that as well. The base-level assumption should be that we'll grow our headcount 3 to 4 points slower than our expected CV growth. That said, we fully expect to reaccelerate CV growth based on the current staffing and the investments we make next year, which will ensure that growth continues into '27, '28, and beyond.

That's great. And then just as a sort of broader question, in an environment where we're seeing some large headcount reductions at corporations and also AI possibly driving efficiency, does that change your view on the seat-based model? Would you ever consider moving more towards an enterprise-based model? I know that's not been the preference in the past, but just given those dynamics, I wonder your views on that.

Toni, if you look at who our clients are, we sell to C-level executives that report to the CEO — the Chief Information Officer, Chief Financial Officer, Chief HR Officer, and so forth. If you think about the Head of Data and Analytics, IT department, and so on, that’s who we target. As companies have headcount reductions, they still have CFOs, CIOs, and other senior roles. The staff reductions don't directly affect our clients. In fact, many clients want help figuring out how to get more effective out of technology, which plays into our strengths in assisting customers in achieving those broader headcount reductions.

Our next question comes from George Tong with Goldman Sachs.

I want to see if you can elaborate on what your expectations are for how the trajectory of CV improves, and if you expect essentially a bottoming in the fourth quarter and then the reacceleration across all of 2026 exiting the year in the high single digits. Just some additional color on the trajectory and pacing of improvement would be great.

George, it's Craig. So we'll provide more color on 2026 in February when we do our Q4 earnings and initial guidance. You're right from a headline perspective in terms of our expectations, which is to reaccelerate over the course of 2026 into the high single-digit growth rates. Our job is not just that 1 year, but to continue to accelerate the CV beyond into double-digit growth and ultimately into our medium-term objective range. As we've discussed in the past, growth can be lumpy. The math and ups and downs in that business can certainly shift forecasts. But we fully expect to accelerate over the course of 2026 into the high single-digit range.

Got it. That's helpful. And then sticking with CV, could you give some details on how tech vendors performed?

Yes, George, I'll start. We are observing two trends within our tech vendor business. If you look at tech vendor broadly, there are subsectors unaffected by tariffs like software and services, and there are those impacted by tariffs. Our CV growth for the software and services side is high single-digit to low double-digit growth rates, and that's been improving. We’ve seen improvement across that portfolio, particularly in small tech software growth. However, this has been muted by performance from tariff-affected segments such as hardware and semiconductors.

Our next question comes from Jason Haas with Wells Fargo.

I'm curious as I know it's early, but as your clients start to use AskGartner, I'm curious if that's changing the types of reports that they're consuming. And then do you plan to change how your analysts are writing reports? Are there certain reports that do better and are more suited for an environment where you're seeing more of your customers use AskGartner?

Yes, Jason. I think the main impact of AskGartner is not changing what content clients are reading but rather increasing the amount of content they are consuming. We know that greater readership results in higher retention. So, it's driving not different readership but more readership. And regarding how we write, we continually assess how clients want to consume documents, including structure and length. We're always fine-tuning that, so AskGartner will influence this evolving process.

Got it. That makes sense. And then as a follow-up, if you could comment on the nonsubscription business. You mentioned and we've seen in the release that it's been moved to the other segments. If you could discuss your plans to reaccelerate that, that would be very helpful.

Yes. So that business helps small businesses identify the right software for their needs. There are literally millions of small businesses in the U.S. and many millions more outside, and we serve both those markets. Think about things like funeral homes and their ERP systems. These businesses need help figuring out the right software since they aren't technology experts. Conversely, it is challenging for software vendors to find suitable clients. We add value by writing software evaluations and helping end users find the best fit, benefiting both groups.

Our next question comes from Surinder Thind with Jefferies.

Following up on the earlier question about just the enterprise model and your target clients, what would be the downside of trying to move to an enterprise model where you can potentially get more penetration or if there would be broader usage within the firm making it stickier?

As previously mentioned, our target market includes C-level executives that report to the CEO and their direct reports. This is a small group of people, so if you've got a large IT department, our target audience wouldn't include all employees, just those specific roles. That doesn't mean we couldn't develop products for that larger group in the future; that's certainly a potential growth avenue we're open to. However, currently, our focus remains on senior executives since our content is directed at those individuals. Even if we secured an enterprise license, it wouldn't necessarily add value because the content is highly tailored to specific roles.

Yes, and to add to that, Surinder, with the ongoing adjustments and operational plans we have implemented, we believe that we can efficiently support our current model. We're constantly analyzing our client interactions and seeing what is most effective and profitable. Our current structure is working well, and we are focusing on optimizing efforts towards our best opportunities.

Our next question comes from Manav Patnaik with Barclays.

My first question, Craig, was to understand the growth in the non-tariff impacted area being better than the tariff impacted. Can you clarify what portion of your total business is influenced by tariffs? Additionally, regarding tech vendors, can you provide more insight on that as well?

Yes, sure. Manav. So about 40% of our contract value falls into the intersection that we've identified as tariff affected. So about 40% of the CV. On the tech vendor side, I don't have that number completely handy. It's probably in the 20% to 30% range that would be on the tariff affected side. Obviously, several hardware, semi, etc., companies are long-standing great clients of ours, but the bulk of the business is in software and services.

Got it. You mentioned that pipelines are up significantly and showing improving trends. However, new business has decreased by 4%. Can you help explain that discrepancy?

Yes, sure. As we discussed, the pipeline signifies new business performance, but it's not a guarantee. Being in a position where our new business pipeline is up significantly year-over-year reinforces that there's significant demand. These are factored pipelines with named opportunities where our sellers have had multiple conversations with potential clients. However, we are facing a challenging selling environment, even if it's modestly better than before, with longer sales cycles and higher levels of approval needed. If we keep building that pipeline, we are confident that a significant portion will convert to new business. Additionally, this quarter supports our busiest conference season, which we leverage for retention, branding, awareness, and new business.

Our next question comes from Josh Chan with UBS.

So jumping off of the last comment that you made, Craig, about Q4, usually, it is a big selling season for you guys. Could you just compare the environment now to a normal year or last year? What similarities or differences do you see in the selling environment in this particularly large quarter of selling for you guys?

As we've previously discussed, there are still challenges with the U.S. federal government, and those haven't changed. There are still challenges with tariff-impacted industries. Overall, I would say it's better than earlier in the year, worse than last year, but better than it was earlier this year because there's more certainty in certain geographies with tariffs, which allows companies to make decisions now. However, some companies not directly impacted by tariffs are indirectly affected and are being cautious regarding their spending. Overall, compared to earlier in the year, we see a better environment, which is reflected in our increased pipeline.

I would just like to add, Josh, that the adaptations we've made will yield benefits, and we've started to see those in Q3. The fourth quarter is our largest new business quarter and our largest NCVI quarter, correlating with our sales year-end. We have an amazing sales force, and they are all very driven to finish the year strong.

That's great color on that. And then I guess if you think about the reacceleration in 2026 and the different components that drive that, I know some of it is just math. But for those that are not math, which ones are you more or less confident in at this point in driving acceleration in CV in 2026?

Yes, Josh. We wouldn't keep emphasizing our high confidence unless we had a high degree of confidence in both the mechanical aspects and adaptations. Regarding reacceleration, it's the same four categories we discussed last quarter. The more speculative adaptations we mentioned previously did start to show some benefits in the third quarter. It’s still a challenging selling environment; that's a macro situation. But the blend of mechanical improvements like U.S. Fed, continued acceleration of our tech vendor business, and the increasing performance from the tariff-affected segments gives us confidence in the expected reacceleration next year.

Our next question comes from Jeff Silber with BMO Capital Markets.

I just was wondering if you can talk about the pricing environment, if you can remind us when you institute pricing increases in terms of expectations of pushback, etc.

The bulk of our price increase globally went into effect on November 1. Historically, our normal price increases have been about 3% to 4%. We've been higher when inflation was significantly greater. Now we're more normalized, so we anticipated around a 3.5% increase this week.

We don't face much pushback on price increases. With clients spending $200,000 a year, an increase of 3% to 4% would be around $6,000 or $7,000. Their decision-making isn’t about this small sum but revolves around the value they receive from Gartner.

Okay. I appreciate that. I know you broke out ex-federal government, but we've had a government shutdown in the past month or so. Have things gotten worse, and has business slowed down because of that?

Yes, it's a little bit. Obviously, we're still conducting business with the federal government, signing deals during the government shutdown in October. It requires that the people on the other side be deemed as essential employees for us to get things done. We're hopeful this resolves itself. The good news is it's our smallest renewal quarter. We just came off the federal fiscal year-end, which was Q3, so only about 15% of our CV remains in the fourth quarter. We've secured renewals and new business during October, but it depends on whether the agency staff is classified as essential or not.

Our next question comes from Jasper Bibb with Truist Securities.

Hoping to get an update on AskGartner. Can you share some early indications on customer engagement there? And I just wanted to confirm whether that's going to be part of normal license access and not a separate charge, because I got a few questions on that this morning, and I just wanted to clarify.

Yes, AskGartner has rolled out to all of our licensed users; 100% of our license users have access. There are no additional fees; it’s included in the base package. Its key impact has been on overall content usage and engagement, which we believe will help with retention due to increased client engagement.

Got it. And then the client count ticked down a little bit quarter-over-quarter again. Is that primarily from the small tech vendor piece? And do you expect client count to stabilize or increase in '26 if small tech vendor picks up?

Jasper, it's Craig. The story regarding the client count remains primarily due to small tech vendor churn. We're still adding many small tech vendors, but some are churning due to factors like going out of business or losing funding. Over the medium term, achieving double-digit CV growth and ultimately reaching 12% to 16% growth will likely require stabilization and modest growth in the enterprise count. While we have historically generated significant growth in new business through existing clients, we would expect that number to tick upward over time.

Our next question comes from Scott Wurtzel with Wolfe Research.

I just wanted to get a little bit more color on the quota-bearing headcount trends, just seeing kind of the increase quarter-over-quarter in GTS and a decrease quarter-over-quarter in GBS. I see GBS as being a stronger growth engine. Just wondering if you can talk about the dynamics going on there.

Yes, sure, Scott. On a quarter-by-quarter basis, I wouldn't read too much into the numbers. It's really dependent on when people leave and when new people come on board to replace them, creating some choppiness. I want to highlight that when analyzing these numbers, we’re looking at net numbers. For example, we recalibrated our U.S. federal sales force, aligning it with the new reality of that business. Excluding the U.S. fed, the headcount growth would be higher. We also continually optimize where that quota-bearing headcount is allocated. So when we have turnover, we assess the territory vacated to determine the best course of action for that territory. In some cases, we replace like-for-like, and in others, we reallocate within our portfolio to pursue our most fruitful growth opportunities.

And our last question comes from Ashish Sabadra with RBC Capital Markets.

Just a broader question. As you've had more conversations with customers and prospects, how often does LLM, if any, come up in those conversations as an alternative to Gartner?

When we talk to clients, the primary concern regarding AI is helping them derive value and ROI from it. If you look at individual deals where a client might say I'm considering using AI instead of Gartner, that happens very rarely. We track these instances, and they come up as a very small number of transactions.

That's great color. And then as we think about the different insight access, reference adviser versus guided, have you seen a difference in retention trend or new business growth across any of those tiers?

Historically, different levels of retention in reference adviser and guided have held. These traditional trends remain consistent, so no significant changes compared to what we’ve seen in the past.

There are no further questions at this time. I'd like to turn the call back over to Gene Hall for closing remarks.

Here's what I'd like you to take away from today's call. While the macroeconomic environment remained dynamic, our Q3 financial results were ahead of expectations. We made operational adaptations that are starting to yield results. We continue to deliver great value to our clients. Enterprise client retention remains strong, and contract renewal rates improved in the second quarter, and we repurchased more than $1 billion of stock in the quarter. AI will be one of the most innovative and pervasive technologies in history. Gartner is the best source for clients to determine the right AI tools and applications for their environments. And of course, we continue to help on other mission-critical priorities such as cybersecurity. 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. Thanks for joining us today, and we look forward to updating you again next quarter.

Thank you for your participation. You may now disconnect. Everyone, have a great day.