Gartner Inc (IT) — Q4 2025 Earnings Call Transcript

Good morning. Thanks for joining us today. Fourth quarter revenue, EBITDA, margins, EPS, and free cash flow were ahead of expectations; we continue to deliver great value to our clients. We were agile in managing expenses, and we repurchased more than $2 billion of Gartner stock in 2025. 2025 was a unique year due to a range of external market forces. Department of government efficiency or dose-related initiatives affected our U.S. federal clients. Evolving trade policies created complexity for tariff-impacted enterprises. Funding changes affected our state and local government and education clients; tech companies that are not in or adjacent to AI experienced a shifting landscape. Additionally, there were country-specific factors in several geographies. These external market forces led to increased scrutiny, elevated deal approval authority, and extended buying cycles. Over the past few years, including 2025, the rate of change and volatility in the external environment has increased significantly. Executives have responded to this by slowing and deferring everything possible. This makes for a much tougher selling environment. The value bar is higher, but it also represents a huge opportunity for us. Clients know they need help with these issues. Gartner is an insights business. Our high-value, forward-looking insights help clients on their journeys to achieve their mission-critical priorities. The key to capturing our opportunity, while operating under deferred decision-making and higher value standards, is to help clients engage more frequently with our insights. Clients who engage frequently with our insights receive greater value and retain at higher rates. This was true in 2025 and every year prior; it is still true today. Client engagement increased modestly throughout 2025, but in today's world, client engagement levels need to be even higher because the rate of change is faster than ever. Driving incremental improvements on our standard practices wasn't enough. To achieve step change improvements, we needed to rethink many of our processes and practices. Thus, we've been driving transformation across business and technology insights. We covered some aspects of this transformation on previous earnings calls. Today, I'll share a comprehensive view of what we're doing. We're transforming business and technology insights along four dimensions: impact, volume, timeliness, and user experience. Beginning with impact, our insights provide tremendous value to clients today, and we know we can get even better. Our objective is to ensure insights are always on the topics our clients care about most right now. The biggest example today is AI. AI is transforming the world; it's our highest demand topic. During 2025, we expanded our AI insights. We have more than 6,000 AI-related documents in our library. We've documented more than 1,000 unique use cases. In 2025, we conducted more than 200,000 in-depth client conversations on AI and answered more than 500,000 AI-related questions through AskGartner. Based on our analytical measures, the impact of our insights is improving at a rapid pace. By increasing the impact of our insights, we can ensure our clients get even more value on the topics they care most about at any given time. The second dimension is volume. We serve clients of every size in every industry and every enterprise function in 90 countries. This diverse set of clients has different mission-critical priorities. Our objective is to increase the number of insights to accommodate the broadest range of client priorities. To achieve this, we're applying automation, streamlining processes, and upgrading and upscaling our analyst teams. We developed a neural network AI model to quickly and systematically determine the topics our clients care about most. As of the end of 2025, our Active Insights library has grown by approximately 50%. By increasing volume, we can better accommodate the full range of our clients' mission-critical priorities. The third dimension is timeliness. The pace of the world continues to accelerate. Some say the rate of change will never be this slow again. We're ensuring our insights keep pace with the ever-accelerating pace of the world. We've introduced insight types that are produced the same day as important events occur in the world, such as a major security breach, where clients need immediate guidance, or in the rapidly evolving world of AI, where major changes happen every day. To support this, we've made two other innovations. First, we introduced new processes to create insights as quickly as the same day. Second, for insight types that are highly valued by our clients, such as Magic Quadrants, we reduced our average insight creation time by 75% compared to 2024. So we'll continue to ensure our insights keep pace with the ever-accelerating pace of the world. The fourth element is user experience. If we produce great insights, but our clients can't find them, they won't receive value from them. Historically, the single biggest feedback from our clients was, Gartner produces tremendous insights, but I can't always find them. We're ensuring our clients can easily access the insights that are most relevant to them when they need them the most. As Gartner leverages AI to quickly identify and summarize the right high-value insights across our vast library. It leverages role, function, mission-critical priorities, insight viewership histories, and more to make user responses even more relevant to each licensed user. We began rolling out AskGartner in August of last year; we completed the rollout in October. Licensed users who use AskGartner had substantially higher renewal rates than those who did not, even with the same levels of engagement. We'll continuously improve and innovate AskGartner's capabilities. Separately, we're identifying role-specific insights each week that are particularly valuable and broadly applicable. Our goal is to ensure clients have every opportunity to engage with these uniquely valuable insights. We're also changing how we deliver insights in terms of format and access to meet today's client preferences. Conferences are an important way clients engage with our insights. Destination conferences provide high value to clients. However, not all our clients can attend our destination conferences. For these clients, we launched Gartner C-level communities. Gartner C-level communities are local, peer-driven one-day events where C-level executives can gain access to our insights. We're continuing to expand both our destination conferences and Gartner C-level communities in 2026 and beyond. We'll continue to improve the user experience to ensure our clients can access the insights they need to achieve their mission-critical priorities. So we're driving transformation across business and technology insights along four dimensions: impact, volume, timeliness, and user experience. We began driving these transformational improvements during 2025 and will continue during 2026 and beyond. We believe this transformation will provide a step change in the value to our clients over the next few years. In addition, we'll drive continuous improvement and innovation across the rest of the business. During 2025, we also took several shareholder value-enhancing actions, including repurchasing $2 billion of Gartner stock and increasing leverage with a successful inaugural investment-grade bond offering to support even more share repurchase capacity, adding two new directors who bring unique and valuable skills to our Board, rotating our Board committee chairs, and entering into a definitive agreement to sell our digital markets business. In summary, the world is changing more than ever before; this represents a huge opportunity for us. Gartner is an insights business that guides the leaders who shape the world. The key to capturing our opportunity while operating under a challenging selling environment is to help clients engage more frequently with our insights. In 2025, we began transforming business and technology insights along four dimensions: impact, volume, timeliness, and user experience. These transformations will allow us to thrive in a world with greater change and uncertainty than ever. We expect to see the impact over the next few years, and we'll continue to keep you updated on our progress. With our unparalleled value proposition, continued transformation in business and technology insights, and responsible reinvestment in our business, contract value will accelerate. As contract value accelerates, our P&L and free cash flow conversion will follow; we will continue to create value for our shareholders by generating free cash flow in excess of net income and returning capital to our share repurchase program. With that, I'll hand the call over to our Chief Financial Officer, Craig Safian.

Thank you, Gene, and good morning. Today, I'm going to walk you through fourth quarter and full year 2025 results, and I will introduce our 2026 guidance. Financial results in the fourth quarter were better than expected. For the full year, revenue increased from 2024, and EBITDA margins finished well ahead of our initial guidance from last February. Our return on invested capital continues to be above 20%, highlighting the strength of our business model and our ongoing ability to create long-term value. We increased leverage with a successful bond offering, our first as an investment-grade rated credit. We generated significant free cash flow and bought back about $2 billion of stock. And last week, we entered into a definitive agreement to sell the digital markets business, which allows us to focus even more on delivering insights to help our clients address their mission-critical priorities. Fourth quarter revenue was $1.8 billion, up 2% year-over-year as reported and unchanged FX neutral. For the full year, revenue was $6.5 billion, up 4% as reported and 3% FX neutral. Fourth quarter contract value or CV grew 1% year-over-year. Outside the U.S. federal government, CV grew 4%. In the quarter, the total contribution margin was 67%, up 85 basis points from last year. EBITDA was $436 million, up 5% as reported and 1% FX neutral. Adjusted EPS was $3.94, and free cash flow was $271 million. For the full year, EBITDA was $1.6 billion. EBITDA margins were 24.8%, well above the initial guidance we gave at the start of the year. Adjusted EPS was $13.17. Free cash flow was $1.2 billion, and ROIC was strong at around 24%. The Insight segment is our largest, most important business. It's subscription-based with strong retention, recurring revenue, and excellent contribution margins. We get paid upfront, which allows us to generate strong free cash flow well in excess of net income. Insights revenue in the quarter grew 3% year-over-year as reported and 1% FX neutral. Fourth quarter Insights contribution margin was 77%, up 59 basis points versus last year. Full year Insights revenue increased 5% as reported and 4% FX neutral. For 2025, Insight's contribution margin was 77%, up 14 basis points from 2024. Contract value was $5.2 billion at the end of the fourth quarter, up 1% versus the prior year. Outside the U.S. federal government, CV growth was about 330 basis points faster at around 4%. Global NCVI in the quarter outside the U.S. federal government was positive $147 million. The vast majority of our U.S. federal contracts came up for renewal during 2025. At December 31, we had $126 million of U.S. Federal CV. Outside the U.S. Fed, we delivered CV growth across practices, industry sectors, company sizes, and geographic regions. By sector, energy, banking, and technology led to growth. CV grew at high single-digit or mid-single-digit rates across all commercial enterprise sizes. All but 2 of our top 10 countries grew in 2025, with one growing double digits. And we had more than $400 million of new business in the fourth quarter. Global Technology Sales contract value was $3.9 billion at the end of the fourth quarter, about flat compared with the prior year. GTS CV outside the U.S. federal business grew 4% in the quarter. Tech vendor CV increased mid-single digits, with services and software growing low double digits or high single digits. Wallet retention for GTS was 96% for the quarter. GTS new business of more than $300 million was down about 5% outside the U.S. federal government. The change in GTS quota-bearing headcount was consistent with our expectations. We managed our territory changes and investments based on the balance of expense discipline and opportunities to invest for growth. We've optimized territories with growth directed towards business developers and new logo and new business opportunities. BD productivity has remained strong, which is a foundation for our investment in adding BDs. 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 fourth quarter, up 3% year-over-year. Outside the U.S. federal government, GBS CV grew about 200 basis points faster at around 6%. Growth was led by the sales, supply chain, and legal practices. CBS and CVI was positive $16 million in the fourth quarter. Outside the U.S. federal government, GBS and CVI was positive $21 million. Wallet retention for GBS was 99% for the quarter; outside the U.S. federal business, wallet retention was over 100%. CBS new business of more than $100 million was down 4% compared to last year. The change in GBS quota-bearing headcount was consistent with our expectations. Similar to GTS, we managed our territory changes and investments based on the balance of expense discipline and opportunities to invest for growth. BD productivity has remained strong, which is a foundation for our investment in adding BDs. As with GTS, our regular full set of GBS metrics can be found in our earnings supplement. As we do each year at this time, we've also provided quarterly historical contract value data updated to 2026 FX rates on Page 21 of the earnings supplement. As you build your 2026 models, please remember to use the updated data as the baseline for your forecasting. The U.S. dollar weakened significantly over the course of 2025, causing this adjustment to be larger than most years. We've also provided several quarters of historical data to reflect the updated financials for the digital markets divestiture on Page 22 of the earnings supplement. Conference revenue for the fourth quarter was $286 million. On a same-conference basis, revenue growth was around 8% FX neutral. Contribution margin was 51%. We held 14 destination conferences in the fourth quarter as planned. Full year conference revenue grew 11% to $645 million. FX-neutral growth was 9%. Contribution margin was 50%. Q4 consulting revenue was $134 million compared with $153 million in the year-ago period. FX was a benefit of about 300 basis points in the quarter. Consulting contribution margin was 27% in Q4. Full year consulting revenue was $552 million compared to $559 million in the prior year. Contribution margin was 34%. Consolidated cost of services on a GAAP basis was $573 million in the quarter or 32.7% of revenue. For the full year, the cost of services was $2 billion or 31.6% of revenue. SG&A on a GAAP basis was $798 million in the quarter or 45.5% of revenue. For the full year, SG&A was $3 billion or 47.2% of revenue. We continue to balance disciplined cost management while ensuring we can invest in key areas such as expert talent, AI, the customer experience, and frontline sellers. As a percentage of revenue, our costs are well below historical highs. EBITDA for the fourth quarter was $436 million, up 5% from last year's reported and 1% FX neutral. We outperformed in the fourth quarter through modest revenue upside, effective expense management, and a prudent approach to guidance. EBITDA margins were 24.9%, up about 60 basis points from last year's Q4. Full-year EBITDA was $1.6 billion, up 4% as reported and 2% FX neutral. EBITDA margins were 24.8%, consistent with last year. Depreciation in the quarter was $28 million. Full-year depreciation was up 5%. Net interest expense before deferred financing costs in the quarter was $18 million, increasing by $7 million versus the fourth quarter of 2024 due to lower interest income on our cash balances. The full-year net interest expense before deferred financing cost was $56 million, favorable by $10 million versus 2024 due to lower interest expense and higher interest income on our cash balances. The Q4 adjusted tax rate, which we use for the calculation of adjusted net income, was 20% for the quarter. This compares to last year's benefit of 25%. The tax rate for the items used to adjust income was 3% for the quarter. The full-year tax rate for the calculation of adjusted net income was 22%, in line with our expectations. The prior year tax rate benefited from favorable tax planning. Adjusted EPS in Q4 was $3.94. Full-year adjusted EPS was $13.17. We had 72 million shares outstanding in the fourth quarter. This is an improvement of about 6 million shares or approximately 8% year-over-year. We exited the fourth quarter with 71 million shares on an unweighted basis. Operating cash flow for the quarter was $295 million. This compares with $335 million in Q4 2024. CapEx was $24 million, flat year-over-year. Fourth quarter free cash flow was $271 million. This compares with $311 million in Q4 of 2024. For the full year, operating cash flow was $1.3 billion. CapEx was $115 million, and free cash flow was $1.2 billion. Free cash flow on a rolling 4-quarter basis was 161% of GAAP net income and 73% of EBITDA. As we previously noted, there were two items that affect rolling fourth quarter net income and free cash flow, including a real estate lease termination payment in Q2 2025, and we also had a noncash goodwill impairment charge related to the digital markets business in Q3 2025. Last week, we signed a definitive agreement to divest digital markets. Adjusting for these items, free cash flow on a rolling 4-quarter basis was 18% of revenue, 74% of EBITDA, and 136% of GAAP net income. At the end of the fourth quarter, we had about $1.7 billion of cash. Our December 31 debt balance was $3 billion, about $500 million from Q3 as a result of our most recent bond offering. Our reported gross debt to trailing 12-month EBITDA was 1.9x. 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 $2.7 billion of liquidity, low levels of leverage, and 100% fixed interest rates. We repurchased about $500 million of stock during the fourth quarter and $2 billion during the full year. Last week, the Board refreshed our authorization, bringing the total to about $1.2 billion. We expect the Board will continue to 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. Before providing the 2026 guidance details, I want to discuss our base level assumptions and planning philosophy for the year. We've not included the digital markets business in the outlook. For Insights revenue, our guidance reflects Q4 2025 contract value and our CV growth rate accelerating over the course of 2026. First quarter and first half NCVI are important inputs to calendar 2026 revenue growth. We have taken a prudent view of NCVI phasing because Q1 is a seasonally important quarter for renewals. As always, we have high visibility into our Insights revenue based on our ending 2025 contract value. For conferences, we are basing our guidance on the 56 in-person destination conferences we have planned for 2026. We expect similar seasonality to what we saw in 2025 with Q4 being the largest quarter, followed by Q2. We expect gross margins in the second quarter to be the highest of the year for the Conferences segment. We had a strong advanced bookings quarter in Q4, which provides very good visibility into 2026 revenue. We have a majority of what we've guided already under contract. This is ahead of where we were at the same time last year. For consulting, we have more visibility into the next quarter or two 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 base level assumptions for consolidated expenses reflect the run rate from the fourth quarter and merit increases scheduled to go into effect on April 1 as usual. We recommend thinking about expenses sequentially with notable seasonality driven by the conferences calendar and annual merit increases. For GTS, we expect low single-digit QBH growth in 2026 with a focus on growth in our business developers. For GBS, we plan to grow QBH mid-single digits this year with an emphasis on growth in business developers. We have the recruiting capacity to go faster depending on how the year plays out. We continue to prudently manage our expenses, in part to create alignment with recent CV trends, and we are driving efficiencies wherever we can through automation, process improvements, and leveraging technology. We are also prioritizing sensible investments to drive future growth and returns, which include key areas like business and technology insights analysts, artificial intelligence, customer experience, and sales capabilities, efficiencies, and QBH. These investments are fully reflected in our 2026 guidance. Based on January FX rates, we expect revenue growth to benefit by about 110 basis points, and EBITDA growth to benefit by about 170 basis points for the full year. As a reminder, about one-third of our revenue and operating expenses are denominated in currencies other than U.S. dollars. Our 2026 guidance is as follows: we expect Insights revenue of $5.9 billion or more, which is FX-neutral growth of about 1%. We expect Conferences revenue of $695 million or more, which is FX-neutral growth of about 7%. We expect consulting revenue of $570 million or more, which is growth of about 3% FX neutral. The result is an outlook for consolidated revenue of $6.455 billion or more, which is FX-neutral growth of 2%. We expect full-year EBITDA of $1.515 billion or more. This reflects full-year margins of 23.5% or more. As we move through the year, our strong visibility will get even better. For net interest expense, we expect higher interest costs as a result of the increase in leverage. Interest income will be affected by interest rates and the deployment of cash for repurchases made during 2025. In addition, we have not assumed interest income on excess cash that could be deployed on share repurchases. Notably, however, our share count for 2026 only assumes repurchases to offset dilution, meaning in the adjusted EPS guidance, we effectively assume both less cash on the balance sheet and more shares outstanding than we are likely to have. We expect 2026 adjusted EPS of $12.30 or more. As I just noted, EPS would see a significant positive impact through a combination of fewer shares and/or greater interest income. For 2026, we expect free cash flow of $1.135 billion or more. This reflects a conversion from GAAP net income of 140%. Our guidance is based on about 71 million shares outstanding, again, only reflecting share repurchases to offset dilution. For Q1, we expect adjusted EBITDA of $370 million or more. Our financial results in Q4 were ahead of expectations. In particular, margins were strong and better than we guided at the start of 2025. We had another year of very strong free cash flow. ROIC continues to be excellent. We made significant accretive share repurchases, reducing our shares outstanding by 8% in the year. Contract value outside the U.S. federal business grew 4% in the quarter, and we are positioned to accelerate CV growth throughout 2026. As Gene detailed, in 2025, we began driving transformation across business and technology insights along four dimensions: impact, volume, timeliness, and user experience. The investments to continue the transformation through 2026 are fully reflected in our guidance. Finally, we'll continue to deploy our capital to drive shareholder value and contribute to strong ROIC. Our capital allocation strategy remains focused on share repurchases, which will lower the share count over time, and 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.

On the expected contract value acceleration as '26 unfolds, I guess there's going to be a mathematical benefit from moving past the peaking and lessening federal government headwind. Are you expecting acceleration beyond that on an ex-government or federal government basis? And I imagine you expect some benefit from the step function operational changes. But just if you can give us an update on what you're seeing in terms of any leading indicator KPIs. You had talked about a lot of things last quarter like in-quarter renewal rates. Just wondering if those have continued to make progress.

Yes, Jeff. We anticipate that CV will accelerate throughout the year, not just due to reduced headwinds from the U.S. federal government. As you mentioned, we implemented more changes in the latter half of last year as part of our transformation program, and we expect those changes to start making an impact throughout 2026 and into 2027. This is what is driving the acceleration of CV over this period.

And on some of the leading indicators and what you were seeing on things like in-quarter renewal rates?

So leading the way that we're approaching the transformation is, we know that if our clients engage with us more, they renew at higher rates. And so we're looking at leading indicators that say they're going to engage more with our content. So there are things like again, the importance I talked about. We've changed our content. One of the indicators we have is the conferences where we presented those new content. In our conference scores, we ask clients to rate each of the presentations, as well as the overall conference. And those conference orders were up significantly and more than we've ever seen in the past for the conferences held in the second half and particularly in Q4 of last year. We have a lot of conferences. So that's kind of one of the immediate indicators that we see. As I mentioned also, engagement actually has been rising. And as the engagement rises, when engagement goes up, it doesn't affect you today. But when that client comes up for renewal over the next, depending whether it's a single or multi-year contract, when they come up over the next 12 or 24 months, they're much more likely to renew. So we see a positive impact from that as well. And there are indicators like that that are telling us both our transformation we're meeting BPI in terms of driving more engagement is working. In fact, we're seeing the beginnings of higher engagement as well. I mentioned another one as well, which is the uptake of AskGartner, much better access to content that they've been able to do in the past. And as I mentioned, we only rolled it out to all of our clients in October of last year. So our clients didn't have much cash to use it. But for those clients that used it and then renewed last year, their renewal rates were actually significantly higher. I think it's a combination of both better access and also a transformation changes that we talked about earlier. So if we look at leading indicators, we think that actually we're on a good track. These things will take time; they have to use the content, they have to renew, and that renewal takes place over a 12- to 24-month period. It's going to take a while for all these gains. But I'd say the leading indicators we view as very positive.

Just want to follow up on the same kind of line of questioning. A couple of quarters ago, you talked about your hopes to kind of get back to the high single-digit range in terms of CV growth here in 2026. Just wondering, now a couple of quarters past that, how you're thinking about that line of thinking? And the factors that you outlined at that time between the federal government business, tech vendors accelerating, tariff-related industries or tariff-impacted industries normalizing some, and your own internal adaptations; is there any changes to the magnitude of those benefits that you would speak to today versus six months ago?

Andrew, it's Craig. So sort of headline answer, I'd say, is, and just reiterating what Gene just said, with the prior question is, we do expect CV and the CV growth rate to accelerate over the course of 2026, and that’s obviously within our U.S. Fed portion of the business. Just lapping the significant headwinds and also the balance of the business accelerating as well. As you know, our normal course practice is not to guide specifically to CV. But we do fully expect all the factors that we've been discussing in the details, Gene provided to support driving that CV growth and also all the factors we talked about are those different buckets. We expect to have an impact as well into 2026. And so I think part of this is the environment still remains pretty chaotic. And we want to see what the environment looks like as we move our way through 2026.

So just to follow up on that, Craig, I think you talked about the quarterly phasing of CV growth. I'm curious if you expect sort of that quarterly phasing to be similar to what we have seen historically? Or could you put a finer point on that? I imagine you're expecting that some of the internal initiatives that you're taking will help more towards the back half of the year, but any further perspective would be helpful.

Yes, great question, Faiza. Thank you. And so as we look at the way our exploration SKU looks like for 2026, it looks pretty consistent with what we've seen historically. It's a little bit overweighted in terms of coming up for renewal in Q1 and Q4. So a little bit more than 25% in each of those quarters and obviously a little bit less than 25% in the middle quarters, Q2 and Q3. Our sort of NCVI build as we think about it, we believe should be roughly consistent with what we've seen over the last several years. That said, the revenue guide is obviously most sensitive to where we ended 2025, net contract value amount as we roll into 2026 and then the phasing of the NCVI. To your point, we tend to generate much more of our NCVI in the second half of the year historically. And to emphasize your point and Gene's points too, the transformation that we've been doing, again, these are not just started on Gen 1—we've been working through these for the last few quarters. But certainly, we'll have more of an impact on the second half of the year than on the first half of the year.

I guess stepping back from the numbers, it seems like in recent months, you have taken some more kind of strategic steps, including the divestiture of the non-sub business. I think we understand you had an organizational realignment perhaps. So could you just talk about what drove these kind of more longer-term types of actions and kind of how you're thinking about those actions versus kind of the environment that you're sitting in?

Josh, great question. The last year, there were a lot of changes. In fact, over the last two or three years, there's been a lot of changes between what's happened with AI, the U.S. federal government, tariffs, all the factors I mentioned in my talk. During the first half of last year, we came to the conclusion that we should assume that the world is going to be like this forever—that there's going to be a lot more disruption and chaos. We don't know what those things are going to be, but we need to be prepared for them. So to do that, we decided the best way to impact our business was to focus on our core BTI business. On top of that, and within that, the way to optimize that business is to get more client engagement. As I mentioned in my remarks, the more clients engage with us, the higher the retention is. High retention is obviously, the faster the business grows. We're driving engagement and retention through a transformation program. We did a lot of analysis to understand what drives engagement, which are the four things I talked about: impact, volume, timeliness, and user experience. The changes we made in the second half of last year were more than we've done at Gartner. I've been here 20 years, and it's more significant than we've ever done. It's in reaction to position the business so that even if the world does get better, we can reach the kind of growth rate that we've had historically—namely, double-digit growth, even in a really bad environment because we've enhanced our BTI business so much. As a result, two of the things you mentioned were the result of that. One was the decision that our digital markets business didn't fit into that vision, so we made that decision after careful analysis. The second was some staff changes. As we assessed the BTI transformation, in any transformation, you find that people who don’t have the skills needed going forward will unfortunately need to move on. This was a key part of the transformation but wasn't about costs—it was about ensuring we had the skills to address the impact, volume, timeliness, and user experience that we need as a business to thrive in any economic environment.

And then, Josh, one last thing I'd add is, you know we're obviously very focused on doing shareholder value-enhancing initiatives. The number one way we do that is to drive value for our clients, which then translates through the P&L and free cash flow statement. But obviously, we're focused on timing and maximizing shareholder value as well. Our capital allocation strategies are centered around buybacks and potential value-enhancing M&A. As Gene outlined, we've come to the conclusion that through deep analysis, we recognized that digital markets was not core to our business. So we look to drive value by selling it to a more natural owner and with the proceeds focusing on the core, which is driving value out of the BTI business.

I'm curious, as part of some of the internal improvements you're making, are there any changes to institutionalize some of the processes that your analysts go through to collect proprietary insights from your customers? Because our understanding is there's a treasure trove of data that your analysts are collecting. I'm curious how much of that is coming through just informal questioning or is there really a process around that to drive the questioners' insights?

Jason, it's a great question. That is actually a core part of the BTI transformation as well. To your point, we have hundreds of thousands of conversations with our clients every year. We also engage with technology vendors, which adds to our body of knowledge. One challenge we have is with our 2,400 analysts; how do we get all the right information to them? As part of this transformation, we've developed very sophisticated systems that let us provide the insights that matter most to the analysts working on particular topical areas like cybersecurity. It starts with the neural network-based system I talked about before. One of the most important decisions we make is determining which content we write on and what insights we want to focus on. This neural network-based system utilizes all of that input and continually updates to show what's trending and what our clients are most interested in. Your point is key to the transformation: the way we used to work would involve analysts in a room discussing what they heard. With thousands of analysts and hundreds of thousands of conversations, we can't work that way anymore. We've leveraged technology, including AI, to actually focus on the right topics by using the model I mentioned, enabling the right tools to get the necessary insights into the hands of the right people. This is indeed a core part of our transformation.

Wanted to get a sense of in the fourth quarter if AI sort of entered the renewal conversations a little bit more in terms of client decision-making around adding or removing seats and things like that? I know you've got a lot of feedback from your clients. I just wanted to hear sort of what you're hearing from them. Is the environment getting maybe a little bit better? I just wanted to get a sense of the client environment and feedback.

Yes, Toni. The single biggest issue we are helping our clients with is AI across every function. Our clients really understand. They know they have challenges with it. Again, it's our single highest demand item. As I've talked about in the past with our salespeople, we ask each salesperson to document any concerns clients have. One specific concern we ask them to track is if a client mentions using AI as a substitute. In addition to that, we have a help desk; any salesperson can report that a client mentioned considering AI instead of Gartner. We attempt to document those instances to train salespeople and keep them informed. We're trying to monitor that closely. I should point out that we've faced a lot of challenges with clients in terms of their internal budgets, but one that we do not hear frequently is, 'They're thinking about using AI in some way as a substitute for Gartner.' If anything, Q4 was less of an issue or less confirmed than even before. But we try to track it very carefully. We're trying to get eyes open about it, and we don't see it as something that is restraining our growth as opposed to clients that have tariffs and budget problems; those are real issues we see every day.

Do you see those problems getting better: the budget and tariff problems and things like that?

So we'll approach it two ways. In terms of the U.S. federal government contracts, as we touched about earlier, all of our federal government clients, U.S. federal government contracts, virtually all of them are one-year contracts. So any client that wanted to cancel because of the situation after Q1 will have already had the chance to cancel. We believe—there's still tremendous demand. What's going on with the government is that we provide valuable services. The clients actually using our services like Chief Information Officers are highly inclined to continue using our services. They do have tight budgets, and they’re getting direction from above. In some cases, they cancel our contracts, which is why you've seen renewal rates affected. We believe that the ones that are going to cancel will have done so after Q1 and that going forward, it will be closer to a normal environment with the U.S. federal government. Therefore we have a lot of clients who want to buy our services from us. That's kind of what we're expecting there. Outside of the federal situation, the tariff industries feed into the BTI transformation I talked about earlier. Again, we've made more changes in the second half of last year than we ever have, and the entire idea is that we need to increase the value we provide to our clients. We’ll do that by increasing engagement—more engagement leads to higher value, and consequently, more renewals. If we can increase engagement rates, even modestly, it has a material impact on renewal rates and growth rates. For the federal government, we hope to get through all the contracts with clients who are going to cancel. For everyone else and for the federal government going forward, we are increasing the value we deliver to our clients at a much higher rate through the transformations I discussed.

Gene, could you maybe talk about your willingness to kind of maintain the medium-term guidance here? It seems like we've had a number of challenging years where there's always something that disrupts your ability to hit that medium-term guidance. Given the pace of change, what gives you confidence that you can achieve medium-term guidance? It just seems like disruption is in the air at this point. So beyond the current narrative here?

Yes. As I mentioned earlier, we take the view that the world is always going to be more challenging than it was prior to a couple of years ago. Because of that, we needed to significantly increase the value we provide clients. So we have a program in place to do it. I mentioned earlier in the call that early indicators are positive. It will take time because, again, clients need to utilize our insights, then come up for renewal, which takes time. It can take a couple of years before we get the full benefit of programs that we’ve just implemented. But I have confidence that our CV will continue to accelerate over that time period due to the changes we’re making.

To add to that, Surinder—if you retrospectively look at every way we assess it, there is still a very large addressable market that we continue to uncover ways to target. The value we provide to our clients is unparalleled and unmatched. Again, all the things Gene outlined will allow us to continue to enhance and increase that value proposition. If you think about the four elements that Gene mentioned, all of those things we believe will allow us to better penetrate and retain that grand market opportunity. So there's really no change in our view of the market. We know our value proposition for clients; we’re focused on continuing to enhance it. With continued reacceleration, we believe we can drive lots of incremental shareholder value over the short, medium, and long term.

That's helpful. Just a quick clarification here. I think Gene, you mentioned this idea that realizing the full benefit of the investments that you're making may take a few years. So is that the time frame then for getting to your medium-term guidance targets? I just wanted to clarify that.

So basically, as I mentioned, the way we're going to get the benefits is we make the changes. Again, we made a lot of change last year. It's not going to stop; we're going to continue making changes this year and the same for future periods. Then, clients have to use and benefit from those insights before they can renew. It’s just the nature of our subscription-based business; it can take a couple of years until we see the full benefits of everything we're discussing.

To follow up, Surinder, the guidance contains contract value growth rate that reacceleration is expected to happen over the course of 2026. We don't expect to be finished with it in 2026. What we're doing ensures we prioritize the right types of investments, which we believe will drive reacceleration and strong returns on those investments in the future. So as we mentioned, there is no change in our view of the market. We're doing all the right things, and we believe this will enhance the value we deliver to clients and drive incremental shareholder value.

This is Brendan on for Manav. I just want to ask for some more clarity. You talked about some of the rapid changes internally. I also noted you mentioned this 75% time reduction for insights. So I guess just any clarity on what exactly that means? And anything else on the internal changes to drive this better retention?

Yes, Brendan. As I mentioned, we're making these internal changes on impact, volume, timeliness, and user experience. One important part of timeliness is actually how fast we can produce insights. As we did this in-depth analysis of how we produce insights, we found that we needed to accelerate our processes. Beginning in July of last year, we looked into ways to take time out of the process. This involved a few factors. First is new content types. We're producing content types like 'First Take' that allows us to provide immediate insights on current events that require prompt client decisions. The second area was changing the process; we found we had too many people involved in the latter part of the insight creation process. We downsized that part. The third factor was automation, including AI. Combining these three approaches—different content types, process restructuring, and increased automation—has allowed us to drastically reduce production time, which is crucial in today’s fast-paced world. We’ve been implementing these changes since mid-2025, and they are part of a broader transformation that we've undertaken.

You've talked a lot about sort of expanding the breadth of your offerings, the velocity of insights, and the ease of use improvements as well. Just wondering if you can maybe talk about any changes to your sales strategy, your go-to-market strategy that you're thinking about for this year. If you can also help us with how we should think about the phasing of your quota-based headcount, quota-bearing headcount growth across GTS and GBS for '26.

Yes, Scott. I didn't focus as much on sales because the BTI transformation is such a step and a huge change for us. We’ve always done a lot of innovation in sales; we continue to innovate. For example, our salespeople typically don’t engage with C-level clients. Therefore, we ensure they have the necessary skills and confidence. We offer intensive training programs. One initiative that has worked out better than expected is the use of AI-based role-play tools, allowing salespeople to engage with AI simulations of client meetings, helping them prepare for real discussions about value and potential client questions. Additionally, we’re now taking the extensive content we produce each week and determining which pieces will be most valuable for specific sales roles—whether they are targeting CHROs, CIOs, or CFOs. Each week, we provide our sales team with this content and details on how to leverage it in discussions with clients. This equips them to be more substantive and confident. We’re also expanding the role of business developers. Despite a challenging environment last year with existing clients, we found that selling to prospects—what business developers do—was particularly strong, leading us to modestly increase our sales force for 2026. There are numerous other changes I can discuss, but that provides you with a flavor of the innovations occurring in sales and services.

You guys always provide us a lot of data, specifically on the retention side. I know there's a lot of noise in that number because of the federal government, etc. But I'm just curious, are you seeing clients keeping their relationships with you but maybe cutting back on seats or taking a lower level of service? If that's happening, how do you counter that?

Yes. So let me start. What you said is exactly right. We see very few clients actually cut out. Of course, we lose clients due to factors like acquisitions or some small companies going out of business. When we look at '24 to '25, most of the retention issue we had came from clients saying that due to budget concerns, they would reduce their seats. That’s the primary retention issue we faced. Clients have been inclined to reconsider their involvement. In many instances, if a key person leaves a job—say, if someone retires—the position may not be filled immediately, leading clients to cut back on the total number of seats they have temporarily. That’s the most common situation we are running into these days.

On the metric side of that, you can see client retention rates are up about 100 bps year-over-year. We're holding on to more clients than before, year-over-year. The challenges stem from the factors Gene highlighted. We believe all the initiatives we’re implementing around the insights transformation will help improve retention outcomes. The investment in business developers that Gene discussed, and the broader strategy for improving engagement—all of these initiatives support our commitment to boosting contract value growth moving forward.

You mentioned the tougher selling environment. I was just wondering based on what you've seen in January, any thoughts based on the feedback that you might have received from the salespeople? How do you think about the sales environment in '26? What in particular do you see in terms of the demand environment and the budgets? How are they shaping up? Any color on external market forces by industry? Do you see any lessening of pressure on tariff-affected industries?

We're certainly assuming that this year, 2026, the selling environment is going to be no better than we anticipated for 2025. There are still many challenges ahead. What I will say is that there are areas that have worsened. For example, we sell to various industries, including oil producers. As oil prices have declined, they’re facing a tougher environment than last year with lower prices. However, many tariff-impacted industries are stabilizing. Companies that previously faced turnover due to tariffs might be more flexible now. Overall, it’s a mixed bag in every sector of the economy. Some areas may be improving while others may be getting worse. We're looking at 2026 with no expectations that conditions will necessarily improve.

This is Sami on for George. Your margin guidance suggests a step down from 2025. Is this the new baseline for the business since the incremental investments seem structural? Or do you view the decline as temporary, and margins should return to that 25% level fairly quickly?

As we built the plan for 2026, I'd say a couple of things. First, we've been managing our run rate into 2026 throughout 2025. We've talked about ensuring our cost base is aligned with CV growth and corresponding revenue growth. Some of the actions we took in 2025 will provide benefits in '26. Second, our operating expense plan for 2026 is expected to grow at about 5% year-over-year, with a bit of FX involved—so growing around 4% year-over-year on a net basis. This aligns with our merit increases and some selected investments. Third, yes, we do believe that 23.5% is the new baseline, and we should be able to expand our margins going forward. The faster CV growth, as Gene highlighted, will certainly help with revenue growth, EBITDA flow-through, free cash flow perspective, and margins. However, that will naturally lag overall revenue.

Here's what I'd like you to take away from today's call. Q4 financial results were ahead of expectations. Margins and free cash flow were strong. We reduced our shares outstanding by 8% in the year. In 2025, we began transforming business and technology insights on four dimensions: impact, volume, timeliness, and user experience. These transformations will allow us to thrive and will provide greater change and uncertainty. We expect to see the impact over the coming years, and we'll keep you updated on our progress. Looking ahead, we're well-positioned to accelerate CV growth throughout 2026. We will continue to create value for our shareholders by providing timely, objective insight, guidance, and tools for our clients. We will responsibly invest for future growth, generate free cash flow well in excess of net income, and return capital to our shareholders through our repurchase program. Thank you for joining us today, and we look forward to updating you again next quarter.