Gartner Inc Q1 FY2026 Earnings Call

Good morning, everyone. Welcome to Gartner's First Quarter 2026 Earnings Call. I am David Cohen, SVP of Investor Relations. Operator instructions: 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. Operator instructions: 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 supplement. Our contract values and associated growth rates we discuss are based on 2026 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 may differ 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, EBITDA, 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 continue 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 help 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 0.5 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 the 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, Magic Quadrants, market 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 AskGartner 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 Anthropic's 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 AskGartner. 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 and 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 Safian.

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 four-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 31, 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 Gene 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 license 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 31 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. This is an improvement of about 8 million shares or approximately 10% year-over-year. We exited the first quarter with 68 million shares on an unweighted basis. Free cash flow remained strong in the first quarter, up 29% year-over-year. Free cash flow on a rolling four-quarter basis was $1.3 billion. Adjusting for several items detailed in the earnings supplement, free cash flow was 20% of reported revenue, 79% of adjusted EBITDA and 145% of GAAP net income. At the end of the first quarter, we had about $1.7 billion of cash. This includes about $500 million for running the business and around $1.2 billion available to deploy on behalf of shareholders. Our March 31 debt balance was about $3 billion. Our reported gross debt to trailing 12-month EBITDA was under 2x. We repurchased $535 million of stock during the first quarter, reducing our share count by more than 4%. Last week, the Board increased the buyback authorization to about $1.2 billion. We expect the Board will refresh the amount as needed. We are updating our full year guidance to reflect recent performance and trends, including FX. For Insights revenue in 2026, our guidance reflects Q1 contract value. The revenue outlook is operationally unchanged as we had modeled in the NCVI performance we saw in the quarter. We increased the outlook for FX. For conferences, we are basing our guidance on the 56 in-person destination conferences we have planned for 2026. We have good visibility into current year revenue with the majority of what we've guided already under contract. For consulting, we have reflected a prudent view for the balance of the year based on the Q1 results. Contract optimization has had several very strong years and the business remains highly variable. For 2026, we expect consolidated revenue at or above $6.405 billion, which is updated from last quarter and is FX-neutral growth of 1%. We now expect full year EBITDA at or above $1.545 billion, up $30 million from our prior guidance. This reflects full year margins at or above 24.1%, also up from last quarter. We expect 2026 adjusted EPS at or above $13.25, an increase from last quarter that primarily reflects the increase in the EBITDA outlook and a lower share count. For 2026, we expect free cash flow at or above $1.16 billion. This reflects a conversion from GAAP net income of 137%. Our guidance is based on 69 million fully diluted weighted average shares outstanding, which incorporates the repurchases made through the end of the first quarter. We exited Q1 with about 68 million fully diluted shares. For Q2, we expect EBITDA at or above $425 million. Our profit and cash flow results in Q1 were ahead of expectations, and we've increased the EBITDA, adjusted EPS and free cash flow guidance for 2026. Contract value ex Fed grew 3.5% in the quarter and total CV growth improved from the fourth quarter of 2025. We are positioned to accelerate CV growth in 2026, and we expect to deliver adjusted EPS on a compound basis above 12% over the next three years. We'll also deploy our capital on stock 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. Operator?

Operator instructions: First question comes from the line of Jeff Mueller with Baird.

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

Okay Jeff, it's Gene. I'll get started. So in terms of, again as I said in my prepared remarks, we had really good January and February, and March decision-making slowed down. By and large, clients and prospects told us they still want to buy from us, but they couldn't make a decision at that time. To your point, as a rule, into April we're seeing many of those deals actually close where clients delayed in March but came through and closed in April.

And then Jeff, on the mix between new logo and existing client growth, what we saw through the first two months where we did see nice year-over-year growth that was broad-based across both new logo and with existing clients. And then with the more challenging environment in March, it was also broad-based across new logo and existing clients. And so as we continue to see some of those things, as Gene just mentioned, come through, it's a mix of new logo growth and growth with existing accounts.

Got it. And then on—good to hear overall engagement of both in person and digital. Just anything you can give us on the evolution of AskGartner, either usage statistics or any meaningful changes in, I guess, user experience, either from something new with the foundational models that underpin it or any adjustments that you've been making to it?

Yes. So Gartner is just one part of our value proposition. Obviously, there are a whole lot of other pieces that people buy. We have a strong product and it's important we make it competitive. Client usage continues to increase and the amount of repeat client usage continues to increase. And so we're seeing increasing engagement with AskGartner. We do a new release every two weeks. Clients request features through our telesales teams, and we do market research. Every two weeks, we have new releases. As Craig and I mentioned in our remarks, we've added support for 25 languages. You can now create PowerPoints directly from within AskGartner, and there's a series of other upgrades. And we're upgrading every two weeks, so it's too numerous to actually talk about over the course of the quarter.

And Jeff, those upgrades are a combination of feature enhancements and incremental proprietary data that the tool is drawing from as well. We are very quickly rolling out new features, as Gene mentioned, every two weeks, and we'll continue to do that as there's demand for it, as the models improve and as our clients give us feedback on what they want from the tool.

Our next question is from Faiza Alwy with Deutsche Bank.

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

So there was a slowdown across the board by industry. It was worse in some places than others. If you could imagine, with airlines and transportation companies, it was worse, and in financial institutions, for example, it was worse. It was worse in countries directly impacted such as the Gulf Cooperation Council countries than it was in places that were less impacted like in the U.S.

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

We talk to our clients a lot about price and understand how they think about pricing, whether we're priced appropriately or not. The feedback we get from our clients today is that they feel our pricing is appropriate. We have different price points. If a client has price sensitivity, we give them an option to choose a different level of service. Same content with a different level of service, and that's what clients choose to do. Within each of those groups, we feel like we're priced appropriately. We also dig into situations where clients say price is a major issue. Often, when clients say they're not going to buy and price is cited, it's broader cost cutting across the organization rather than relative pricing of our service.

And Faiza, it's important to remember who we're targeting and focusing on from a go-to-market and strategy perspective, which is really the top of the org chart in each of the functions we serve. We target the CIO, the CFO or the Chief Supply Chain Officer and their teams. We're starting at the top of the pyramid where there tends to be much less price sensitivity around those services. And again, if there is price sensitivity, there are offerings that we can provide to clients at different service levels.

The other thing to think about is that Gartner spend is a very small part of a client's budget. Even our smallest clients have significant revenue, and the incremental difference in Gartner fees is typically a small fraction of their budgets. So price often isn't the primary factor for not buying; it's the broader budget decisions.

Our next question is from Andrew Nicholas with William Blair.

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

Andrew, on the U.S. Federal side, as we talked about through most of last year, the DOGE impacts, we really didn't start feeling them until March of last year. Jan and Feb were semi-normal from a selling environment perspective. When the DOGE activities kicked in, that was really March and April and then forward from there. As we roll into Q2, we start to lap the significant challenges that we had there. From a U.S. federal CV perspective, we exited Q1 with about $114 million worth of U.S. federal CV spread across GTS and GBS, the bulk of that in GTS. What we saw from a renewal rate perspective in the quarter was a significant improvement on a year-over-year basis. We are renewing a lot of business and writing new business, and we really do start to lap the significant challenges starting in Q2 with U.S. Fed clients.

Perfect. Very helpful. And then for my follow-up, I just kind of want to go to the headcount growth. I think you had outlined low single-digit growth for GTS and mid-singles for GBS as kind of your targets for this year. Is that still the case? And any color you could give us on the cadence of the slope of that ramp would be great.

Yes, Andrew. The targets still remain. You articulated them correctly. That is what we are aiming for over the course of the year. We typically see a little step back in the numbers in Q1 because we do many promotions in the first quarter from frontline seller to manager. We try to get ahead of that from a hiring perspective, but it often takes time to catch up on hiring. The hiring we're doing in 2026 is really about 2027 and 2028 and beyond. We've got ample capacity in 2026 to deliver on that CV acceleration we've been talking about. We are hiring more incremental new business developers than account executives. It's not one or the other, but we do have a bias toward hiring incremental business developers right now as opposed to incremental account managers. That's baked into the year-end numbers and into our OpEx guide as well.

Our next question comes from Jason Haas with Wells Fargo.

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

Jason, we're not giving any stats on April yet. We've barely closed the books on that, so I can't comment on that specifically. The answer on the CV trend is we expect the whole CV base to accelerate over the course of 2026 and continuing onward, which would be a combo of the U.S. Fed recovery and the non-U.S. Fed base accelerating as well.

Okay. Great. And then do your pre-existing long-term targets still hold? Or are those no longer in place?

There's no change to the medium-term objectives. Those objectives really apply to a normal operating environment, and you can still find those medium-term objectives in our Gartner 101 presentation on the Investor Relations site. As we think about where we are today, we expect CV growth to accelerate. We're committed to delivering compound annual adjusted EPS growth at or above 12%. We continue to have a large addressable market and compelling client value proposition. We've rebaselined the EBITDA margin based on our updated guidance of 24.1%, and we would expect our margins to expand from there over the medium term. With our strong free cash flow engine, we expect to generate significant free cash flow, and as CV growth accelerates, we'll move toward the higher end of our typical conversion levels of net income or EBITDA to free cash flow. We'll deploy that free cash flow on behalf of our shareholders as well.

Our next question comes from Surinder Thind with Jefferies.

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

The reason we're expecting CV to accelerate is we're making a bunch of changes we talked about. Craig talked about how we're driving engagement, and we expect engagement to go up. Engagement has been rising as Craig outlined. We expect that to continue because we've got a big focus on it. When we get more engagement, we expect retention will increase as well, and CV retention will increase with increased engagement. In addition, we're making a bunch of changes in our business and technology insights organization and processes, and we expect that will lead to more and better insights that again leads to even more engagement and help support new business growth. So as we look forward through the year, we expect that our new business growth and our retention both improve. Based on all the changes we're making and the leading indicators, which Craig and I discussed, those things are causing increased engagement with our clients, which ultimately should result in more business, more retention and higher growth.

Surinder, you should see that come through in the CV growth rate and also in the net retention number, which measures net growth from clients that stay with us. The more that clients stay with us, the more opportunity we have to expand the relationship. We would expect the CV acceleration to read through both to the top-line CV growth and to the net retention line as we will be selling more new business to existing clients over that time frame.

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

As we look at OpEx, a couple of things: one, we're focused on delivering on our commitments from both an EBITDA and free cash flow perspective, and we tune our OpEx model as we go. Two, we keep run rates aligned with CV growth expectations which drive future revenue. We want to deliver strong earnings and free cash flow in the current year while setting ourselves up for the future. Three, we're continuously focused on innovation, improvement and operational efficiencies, which can leverage AI and other technologies. Four, we're doing all that while making investments that drive future medium- and long-term growth. We'll harvest benefits and efficiencies in some areas and reinvest in places that drive value — for example, we need analysts in our business and technology insights business and we'll continue investing there. That may mean driving operational efficiencies elsewhere so we can free up resources to invest in value-driving areas.

Our next question comes from Josh Chan with UBS.

I guess, as we think about sort of the selling environment on a year-over-year basis, it's obvious that in Q1 it was worse than last year. But as we go into Q2, you lap Liberation Day in the prior year, et cetera. How do you think about the year-over-year selling environment comparison as we kind of go through the rest of the year?

What I'd say, Josh, is it depends on how the world evolves. As I sit here today, a lot of the deals that clients in March said, let's wait and revisit this in a couple of weeks actually closed in April. One thing that was interesting is that for companies like airlines, shipping companies and other energy-intensive industries, functional leaders like CIOs saw their decisions escalated in the organization during tough times. Those escalations often result in the company concluding the value is there and closing the deal — it just took longer to close. So what happens for the rest of the year depends on how the environment looks. Selling cycles are longer, but buying still occurs.

We pride ourselves on adapting. The environment remains somewhat chaotic, but we're making sure our sales and service people are armed with the right tools, contracts, etc., to be successful in any environment. We'll see how the world evolves, but we'll keep our sales and service teams equipped to deliver value.

To build on Craig's point, we've made more change in the last year than ever in terms of increasing value to clients. Selling cycles may be longer, but clients are still buying. January and February were robust for new business. Decisions took longer starting in March, but we see good signs overall for the selling environment, albeit with potentially longer decision cycles if uncertainty persists.

Sure. That makes a lot of sense. And I appreciate the color there. And then maybe on your EPS CAGR outlook, can you talk about the drivers behind that 12%? I mean, obviously, revenue growth, at least currently is not probably at that level, so you're going to need some margins or buybacks. Can you just talk about what contributes to that level of EPS growth?

Over a three-year period, our expectation is CV growth will reaccelerate, which will drive future revenue growth. We're committed to driving margin expansion over time as well. On top of that, we have significant capital to deploy for buybacks. Over the last 12 months, we've bought back roughly $2.4 to $2.5 billion of stock, reducing the share count significantly. Our intention is to continue share repurchases, which is one of the bigger drivers of that EPS CAGR in addition to revenue and margin expansion.

Our next question comes from Toni Kaplan with Morgan Stanley.

Gene, just a strategic question. A number of other information services firms have been starting to use large LLM providers as an additional distribution channel. I know your business is different being more weighted towards advisory, but you still have proprietary data that people want. Is there a broader data distribution that you would consider? Or do you think that dilutes your value proposition too much because a lot of the value isn't talking to analysts and the network and everything like that?

Toni, you're on the nail. Clients rely on us to proactively tell them what they're not seeing, help them see around corners and forecast how the world will evolve so they can be successful. That proactive advisory role doesn't fit well with simply feeding our proprietary data into an LLM that answers questions. There's also a big human component: executive partners, analysts, in-person conferences and peer interaction. Our published content is only a portion of what our analysts know — inquiries and analyst access unlock much more. So distributing our data broadly via third-party LLMs would not align well with our core value proposition, which is proactive, human-centered advisory and insight.

That makes sense. I wanted to shift to consulting. I know both the labor-based and contract optimization was down a bit year-over-year, and contract optimization can be volatile. But on the labor base, do you just attribute the slowdown there to normal macro slowdown? You mentioned March was slower, or do you think there's something structurally worse going on right now given AI?

Toni, I don't think there's something structurally worse. This is different behavior than we saw in Q4. It's a near-term effect due to the environment changing and affecting both labor-based consulting and contract optimization because clients postponed decisions. If a client pushes a big software deal or consulting engagement, our revenue recognition is delayed. So it's more timing-related than structural.

Our next question comes from the line of Keen Fai Tong with Goldman Sachs.

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

Keen, the first obvious headwind is the U.S. federal business, which was a 250-basis-point headwind in the quarter. We believe that business is rebaselined and expect it to be flat in 2026 and grow from there. That has been the dominant headwind. Beyond that, it's a combination of macro challenges over recent quarters, geopolitical impacts and other events that affected certain industries and geographies. We fully expect CV growth to reaccelerate over 2026 across the board: U.S. Fed recovery and non-U.S. Fed acceleration, including tariff-affected and non-tariff-affected segments, software companies and IT services companies. From where we sit today, we expect CV growth to reaccelerate over the course of 2026 which, combined with our operating expense management and investments, will allow us to drive significant free cash flow and the EPS growth we outlined.

Got it. That's helpful. Following up on CV growth expectations: you noted acceleration over the course of the year. What are your CV growth expectations exiting the year? And do you expect the improvement to be relatively linear from 1Q?

We don't guide to CV growth, and we will continue not to do that. What I can tell you is we expect to accelerate over the course of this year. Q1 is a heavy renewal quarter and our smallest new business quarter. As we roll into Q2 and Q3, we see increasing levels of new business dollars and we have less CV up for renewal in those quarters, which helps. CV is a rolling four-quarter number, and we expect continued improvements across the year. We're focused on driving engagement and delivering the transformations Gene outlined, and those things should lead to CV growth accelerating over the course of this year and into 2027.

Our next question is from Jasper Bibb with Truist Securities.

Again, I know you don't guide for CV, but you've mentioned that CV should reaccelerate total and ex Fed through the year and provided seasonal context. I just wanted to clarify: do you think we see a reacceleration in the ex Fed CV growth number next quarter? Or are we still a little bit further away from the acceleration in ex Fed CV?

Jasper, all I'll tell you is we expect the CV growth rate to accelerate over the course of the year. We're not going to get into quarterly expectations by segment. The headline is we expect CV growth to accelerate.

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

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

Jeff, it's all baked into our operating model. From a quota-bearing headcount perspective, the model is unchanged: quota-bearing headcount growth should grow roughly 300 basis points slower than our expected CV growth. That framework remains in place. On the analyst side, it's demand-driven. We have a strong grasp of client demand and can predict where that demand will be, ensuring the appropriate analyst levels. We'll do all that while driving efficiency across the business. The combination of those levers is what gives us the operating results to reach that 12% EPS CAGR over time.

Okay. That's great. And just to clarify something, the base here that you're talking about, is that 2025 or 2026?

That base year is 2025. It's a great question. Thanks for clarifying that, Jeff.

Our next question is from Scott Wurtzel with Wolfe Research.

Just one for me. Wondering if you can talk a little bit about the puts and takes on client versus wallet retention in the quarter with client retention ticking down a little bit, but wallet retention ticking up. Any incremental price realization or upsells that drove that expanding wallet retention while client ticked down?

Scott, those are rolling four-quarter numbers. Q1 is our smallest new business dollar quarter, which means fewer new enterprises added. There's always churn within our small tech clients — that has improved over the last couple of years but still impacts the client retention number most. Because those are typically lower-spending clients, client churn doesn't have as big an impact on wallet retention. Additionally, we are lapping some challenges from last year and holding on to more dollars than we did last year, which helps the modest improvement in the wallet retention number.

Our next question comes from Ashish Sabadra with RBC Capital Markets.

I just wanted to focus on the tech vendor conversation. Any color on that front, how is that trending? Also, if you could talk about some of the challenges that software companies are facing, has that influenced any of that conversation?

On the tech vendor side, our business with software companies and services companies is growing at a high single-digit rate, and other elements of the tech vendor universe are not performing as well — notably hardware providers and telecom carriers. But the bulk of our CV sits with software and services, and that business continues to grow at high single-digit rates.

That's helpful color. Then on quota-bearing headcount, you mentioned hiring more incremental new business developers than account managers. How should we think about overall QBH growth going forward, and how does that mix shift influence productivity?

It's not binary. As our BDs sell more new business, we need account managers to catch that business and retain it. We've driven productivity and efficiency in the account management teams by adding incremental clients to territories, and we've studied this to ensure we aren't overextending. Those productivity gains free up resources to invest in business developers. Given the addressable market — roughly 140,000 enterprises we think could be Gartner clients versus 14,000 we currently serve — the way to capture that incremental market is through business developer investment. The mix shift is slow and moderate, with a bias toward hiring BDs but balanced by the need to manage and grow the existing base. We'll continue updating investors on this mix and investment.

The vast majority of our sales force today are account executives who also do new business growth, and we expect that to continue. We change territories as demand shifts; if there's less demand in U.S. Federal, we'll reduce territories there and move resources to higher-demand areas. There is more under-the-covers change to improve productivity as well.

Our last question comes from Wahid Amin with Bank of America.

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

We always see a mix of upgrades and downgrades. Some clients are doing well and want to upgrade for more value; others face budget cuts and opt for lower service levels. Those moves tend to balance out — we see about as many upgrades as downgrades — which is why the net effect is modest and we don't emphasize it much.

Ladies and gentlemen, this will conclude the Q&A session. I will pass it back to Gene Hall for closing comments.

Well, here's what I'd like to take away from today's discussion. Gartner has an unparalleled and enduring value proposition. We're the best, most trusted source for executives who want to succeed with their mission-critical priorities. We're transforming our business and technology insights organization and processes to deliver even more client value. Clients who engage regularly 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. We are incredibly optimistic about our future. Looking ahead to the rest of the year, we expect contract value will accelerate. We will continue to generate 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. Thanks for joining us today, and I look forward to updating you again next quarter.

This concludes our conference. Thank you for participating, and you may now disconnect.