Research and advisory firm Gartner (NYSE:IT) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 4.2% year on year to $1.53 billion. Its non-GAAP profit of $2.98 per share was 9.7% above analysts’ consensus estimates.
Revenue: $1.53 billion vs analyst estimates of $1.54 billion (4.2% year-on-year growth, in line)
Adjusted EPS: $2.98 vs analyst estimates of $2.72 (9.7% beat)
Adjusted EBITDA: $385 million vs analyst estimates of $371.2 million (25.1% margin, 3.7% beat)
Operating Margin: 18.1%, in line with the same quarter last year
Free Cash Flow Margin: 18.8%, up from 11.3% in the same quarter last year
Market Capitalization: $32.9 billion
Gene Hall, Gartner’s Chairman and Chief Executive Officer, commented, “First quarter financial results were ahead of our expectations. Contract value grew 7%. In a dynamic world, we are managing our costs to deliver Adjusted EBITDA Margin ahead of our initial guidance while also investing for future growth. We continue to provide significant value to our clients and will emerge from the current environment even stronger.”
Company Overview
With over 2,500 research experts guiding organizations through complex technology landscapes, Gartner (NYSE:IT) provides research, advisory services, and conferences that help executives make better decisions about technology and other business priorities.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years.
With $6.33 billion in revenue over the past 12 months, Gartner is one of the larger companies in the business services industry and benefits from a well-known brand that influences purchasing decisions.
As you can see below, Gartner grew its sales at a solid 8.1% compounded annual growth rate over the last five years. This is an encouraging starting point for our analysis because it shows Gartner’s demand was higher than many business services companies.
Gartner Quarterly Revenue
We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. Gartner’s annualized revenue growth of 6.1% over the last two years is below its five-year trend, but we still think the results were respectable.
Gartner Year-On-Year Revenue Growth
This quarter, Gartner grew its revenue by 4.2% year on year, and its $1.53 billion of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 5.2% over the next 12 months, similar to its two-year rate. This projection is above the sector average and implies its newer products and services will help sustain its recent top-line performance.
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Operating Margin
Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Gartner has been a well-oiled machine over the last five years. It demonstrated elite profitability for a business services business, boasting an average operating margin of 18.7%.
Analyzing the trend in its profitability, Gartner’s operating margin rose by 4.2 percentage points over the last five years, as its sales growth gave it operating leverage.
Gartner Trailing 12-Month Operating Margin (GAAP)
In Q1, Gartner generated an operating profit margin of 18.1%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Gartner’s EPS grew at an astounding 25.6% compounded annual growth rate over the last five years, higher than its 8.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Gartner Trailing 12-Month EPS (Non-GAAP)
We can take a deeper look into Gartner’s earnings to better understand the drivers of its performance. As we mentioned earlier, Gartner’s operating margin was flat this quarter but expanded by 4.2 percentage points over the last five years. On top of that, its share count shrank by 13.6%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.
Gartner Diluted Shares Outstanding
In Q1, Gartner reported EPS at $2.98, up from $2.93 in the same quarter last year. This print beat analysts’ estimates by 9.7%. Over the next 12 months, Wall Street expects Gartner’s full-year EPS of $14.15 to shrink by 12.2%.
Key Takeaways from Gartner’s Q1 Results
Revenue was just in line while EPS beat expectations this quarter. The market seemed to be hoping for more, and the stock traded down 2% to $419 immediately following the results.
