Shares of research and advisory specialist Gartner (IT 21.36%) plunged on Tuesday, following a strong earnings report.
Wait, what?
Yep, Gartner beat Wall Street's estimates on both the top and bottom lines, but the stock still took a beating after the report due to disappointing guidance. Gartner's shares opened Tuesday's trading session 31.2% lower. By 2:15 p.m. ET, it had recovered slightly to a 21.6% decline from Monday's close.
NYSE: IT
Key Data Points
Solid earnings, bad vibes
Let's start with the reported financials. Gartner's Q4 2025 revenue rose 2% year over year, landing at $1.75 billion. That's right in line with the consensus analyst view. Further down the income statement, adjusted earnings fell 28% to $3.94 per diluted share. Here, the Street view had called for $3.51 per share. So the fourth quarter wasn't terrible.
Looking ahead, Gartner's management expects 2026 sales of at least $6.46 billion, which would be 0.6% below the full-year 2025 result. Uh-oh. Adjusted earnings were aimed at $12.30 per share for the next year. That's 6.6% below the $13.17 per share Gartner collected in 2025.
As of this writing, the analyst consensus calls for full-year 2026 earnings of roughly $13.48 per share on revenues near $6.7 billion. There's your answer. Gartner's stock fell due to gloomy management projections.
Image source: Getty Images.
So why isn't this a buying opportunity?
At this point, Gartner's stock has dropped 71% in 52 weeks. The stock trades at deep-discount valuation ratios such as 13.8 times trailing earnings or 9.3 times free cash flow. At the same time, the percentage of Gartner shares on loan to short-sellers keeps rising -- an unusual trend for a falling stock.
It's hard to whip up demand for business advice in this shaky economy, especially since clients have easy access to artificial intelligence tools. Gartner must prove its worth by delivering value-added services amid painful macro headwinds, and it may take a while to revamp its marketing message. Gartner is a show-me story, and I don't mind watching its progress from the sidelines.
