Shares of Gartner (IT -0.17%) cratered this week, finishing down 30.3% from last Friday's close. The drop came as the S&P 500 and Nasdaq-100 gained 2.4% and 3.7%, respectively.
Gartner, an IT- and tech-focused business insights company, reported its Q2 earnings earlier this week. Though its current quarter performance met Wall Street's expectations, investors are concerned about future growth.
Gartner's contract growth slows
The company posted earnings per share (EPS) of $3.11 on $1.7 billion in sales, as well as repurchasing $274 million worth of company stock. However, investors are concerned by what they see in the pace of the company's contract growth.
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The company's total contract value rose just 4.9% year over year, a slowdown in its growth trajectory for the critical measure of the company's health. Investors are rightfully concerned about what it means for Gartner's future.
Gartner hopes its AI tool will help
The company announced its new "AskGartner" tool, an AI-powered research aid designed to empower clients and reduce friction in an attempt to capitalize on the demand for AI. It remains to be seen how effective this tool is, but it could end up being too little too late as the business competes with AI-first intelligence companies. At the same time, companies also have powerful tools they can build internally using OpenAI or Anthropic's backends.
While the company's stock trades at one of its lowest multiples in decades, it's for good reason. Trends in AI and the broader market are severely eating into Gartner's business model.
