Shares of Gartner plunged 28% on August 5, according to Google Finance, culminating in a wipe out of half the company’s market value since the beginning of 2025.
That one-day plunge followed a second quarter earnings report that beat revenue and growth expectations – but featured disappointing revenue guidance for 2025.
Investors seemed frustrated with management’s failure to acknowledge the company’s competitive disadvantages. Executives blamed macroeconomic forces for the slower growth and avoided direct discussion of competitive risks – such as the rise of peer review networks – and did not supply hard data, according to Gartner’s Q2 earnings call.
Does Gartner’s lower stock price represent a buying opportunity? Here are four reasons to avoid the stock:
- Slowing contract growth,
- Economic caution among clients,
- Rapid advances by competitors in AI, and
- Cultural and cognitive roadblocks to adopting an effective growth strategy.
Gartner could grow faster by making the following changes:
- Shift its business model.
- Deploy and integrate AI into its services.
- Focus on specific areas of expertise.
Due to cultural barriers and cognitive biases – most notably an elitist “Magic Quadrant” mentality which impedes acknowledging the company’s competitive weaknesses and a “toxic sales culture” that results in high turnover — I question whether Gartner will be able to make the changes needed to revive double digit growth.
Gartner touted its second quarter performance and envisions a brighter future. “Second quarter Revenue, Adjusted EBITDA, Adjusted EPS, and Free Cash Flow were ahead of expectations,” Gartner Chairman and CEO Gene Hall said in a statement.
“Contract value grew 5%. Since the end of the first quarter, we have accelerated our stock buybacks to increase shareholder value. As we continue to rollout AskGartner, our new AI-powered tool that provides faster access to trusted, proprietary Gartner business and technology insights, clients will realize even more value from their licenses,” Hall added.
I requested comment from Gartner and will update this post if I receive a response.
Gartner’s Mixed Second Quarter Performance And Prospects
Gartner – a Stamford, Conn.-based provider of researcher reports, conferences, and consulting to companies, government agencies, and investment firms – beat revenue and earnings targets in the June 2025-ending quarter and offered revenue guidance that fell short.
Here are some key numbers:
- Second quarter 2025 revenue: $1.7 billion – up 5.7% and slightly above the Zacks Consensus Estimate, Zacks reported.
- Q2 adjusted earnings per share: $3.53 – up 9.6% and 4.4% above the Zacks Consensus Estimate, noted Zacks.
- 2025 revenue forecast: $6.46 billion – $110 million below the Zacks Consensus Estimate, according to Zacks.
- 2025 adjusted earnings per share guidance: $11.75 – 90 cents below the Zacks Consensus Estimate, Zacks reported.
Why Gartner’s Stock Fell 28%
Gartner’s stock fell sharply because the company significantly lowered its growth forecast for the core Insights business line and failed to offer a compelling explanation for why and what Gartner would do to revive its double digit growth.
The slower contract value growth forecast – from 5.1% to 2.5% shocked investors — prompting UBS to downgrade the company’s stock. With +3% organic growth in 2026 — down from +6%, the slowing CV growth presents “limited near-term upside,” UBS analysts led by Joshua Chanas wrote, according to SeekingAlpha.
Gartner executives attributed the slowdown to macroeconomic pressures and client spending constraints. Management cited clients pulling back on IT research and advisory services due to due to caution about the global economy, according to Stocktwits.
More significantly, clients are getting insights from AI for which they previously paid Gartner. Companies are developing in-house tools and analysis — using OpenAI and Anthropic models. This powerful substitution effect creates uncertainty about future demand for Gartner’s consulting and research services, noted The Motley Fool.
Executives did not acknowledge market share losses or strategic vulnerabilities when conversing with investors Tuesday.
For instance, in response to questions about AI disruption and competitive threats, Gartner’s CFO stressed the company’s “proprietary insights behind firewalls” which customers view as less valuable since they are increasingly using peer insights such as G2, TrustRadius, Capterra, and Gartner’s own Peer Insights, according to Big Valley Marketing.
Gartner’s failure to offer a root cause analysis of its slowing growth and a compelling vision of how the company will adapt and restore growth in the face of changing customer needs and competitor strategies may have left investors looking for more, according to the Q2 earnings call.
What Gartner Must Do To Revive Growth
While recently introducing AskGartner – a generative AI tool to enable clients to access the company’s “trusted, proprietary business and technology insights” – Gartner lags rivals. Gartner must find a niche where it can compete with McKinsey’s emphasis on human-AI collaboration, Deloitte’s focus on ethical AI governance, and Forrester’s data quality risk service, about which I wrote in Brain Rush.
Here are three growth initiatives the company could take to restore growth:
- Shift its business model. Gartner must shift from making clients dependent on buying the firm’s time to enabling client self-reliance by helping them achieve tangible outcomes.
- Deploy and integrate AI into its services. To surpass competitor capabilities, Gartner must deploy and integrate AI into the firm’s research, analysis, and client interactions processes.
- Focus on specific areas of expertise. Rather than compete as a generalist, Gartner should develop industry-leading capabilities in high growth niches such as AI governance, sustainability consulting, and digital transformation.
Unfortunately, Gartner faces significant cultural barriers to changing its strategy. Most notably, these hurdles include:
- High dependence on high priced services that some clients do not value. While Gartner’s fees are high, some companies subscribe if their competitors are in Gartner’s Magic Quadrant and they are selling to large enterprises, according to Envy. Yet not all subscribers see a good return on investment. “They are a staggering waste of money. We paid something like £50k a year for consultancy and every single time we had a session with them they knew barely any more than us,” posted Mr_Oujamaflip on Reddit. Due to the potential loss in revenue from abandoning these high priced subscriptions, Gartner could resist the three growth initiatives outline above.
- A high pressure sales culture that contributes to high turnover. Multiple employee reviews reveal a “boiler room sales culture” that prioritizes short-term revenue over customer value. A former account executive described it as “a very old school style approach to treatment of employees. Burn out is frequent there with a lot of turnover in sales,” according to Indeed.com. Gartner’s emphasis on short-term revenue could make it difficult to shift its business model to one focused on long-term customer value creation.
Where Will Gartner Stock Go Next?
Wall Street analysts see enormous upside in Gartner stock. Nine Wall Street analysts set an average 12 month price target of $453.63 – meaning the stock has 86% upside, according to TipRanks.
As generative AI substitutes for its high priced subscription. can Gartner’s management adapt to the change in customer needs and competitor strategies?
If the answer is yes, those analysts will be right. But those cultural barriers could make the growth strategy outlined above very difficult for Gartner to execute.