Gartner at TD Cowen’s Conference: Strategic Growth Insights

On Wednesday, 28 May 2025, Gartner Inc. (NYSE:IT) presented a comprehensive overview of its strategic direction at TD Cowen’s 53rd Annual Technology, Media & Telecom Conference 2025. The company highlighted its robust growth strategy, emphasizing both its recurring revenue model and the operational challenges it faces. While Gartner’s financial performance remains strong, the company is focused on expanding its sales force and leveraging AI to maintain its competitive edge.

Key Takeaways

• Gartner’s recurring revenue model and high retention rates are central to its growth strategy.
• The company’s contract value has grown at a 14% CAGR over ten years, reaching approximately $5.1 billion.
• Gartner plans to use its free cash flow for strategic acquisitions and share repurchases.
• AI is a key focus area, enhancing both client services and internal efficiencies.
• The company is targeting EBITDA margins of at least 23.5% for the year.

Financial Results

• Contract Value:

- Achieved a 14% compound annual growth rate over the past decade.

- Currently stands at approximately $5.1 billion.

• Free Cash Flow:

- Expected to exceed $1 billion annually, with a 16% CAGR over ten years.

• EBITDA Margins:

- Projected to be at least 23.5%, an increase from the historical range of 18-19%.

• Revenue Model:

- Driven by recurring revenue and high client retention rates.

• Price Increases:

- Typically increase by 3% to 4% annually.

Operational Updates

• Sales Force Expansion:

- Growth constrained by the pace of sales force expansion.

- Plans to grow the sales force in the high single to low double-digit range.

• Segments:

- Research: Largest segment with contribution margins in the low to mid-70%.

- Conferences: Functions as an engagement and sales tool, with about 50% gross margins.

- Consulting: Offers IT labor-based strategy and project management services.

• AI Initiatives:

- Utilizing AI to drive efficiency and support client AI strategies.

Future Outlook

• Growth Strategy:

- Focused on expanding the sales force and increasing client wallet retention.

- Aiming to acquire new clients and expand geographically.

• Margin Expansion:

- Expecting modest annual increases in EBITDA margins through a shift towards the Research segment.

• Capital Allocation:

- Free cash flow will be used for tuck-in acquisitions and share repurchases.

• Leverage Target:

- Aiming for a gross debt to EBITDA ratio of two to two and a half times.

Q&A Highlights

• AI Expertise:

- Gartner boasts some of the world’s leading AI experts.

• Subscription Tiers:

- Products range from $20,000 to $80,000, catering to various client needs.

• Addressable Market:

- Focused on capturing more of the $200 billion market by delivering valuable insights.

Readers are encouraged to refer to the full transcript for a detailed understanding of Gartner’s strategic initiatives and financial performance.

Full transcript - TD Cowen’s 53rd Annual Technology, Media & Telecom Conference 2025:

Operator: All right. Well, good afternoon, everyone. Thank you for joining us today. I would like to introduce next on stage Gartner.

For those of you not aware, Gartner is a leading global research and advisory firm that helps organizations make smarter, faster decisions. They provide expert insights, strategic advice, and practical tools across IT, finance, HR, and more. Known for their trusted research like the Magic Quadrant, that help guide businesses through complex challenges and emerging trends, empowering leaders to succeed in a rapidly changing world. I’m pleased to invite David Cohen up on stage, SVP and Head of IR at Gartner. David?

David Cohen, SVP and Head of IR, Gartner: Great. Thanks very much. Can everybody hear me Okay? Good? Okay, good.

Some forward looking statements. I might say something. I’ve got a safe harbor here. So Gartner provides actionable objective insight to help operating executives make better decisions when addressing their most important mission critical priorities. We help the operating executives and their teams save time, save money, and manage risk.

Investors value Gartner for three main points: a long term experience of delivering double digit top line growth, modestly expanding margins, and generating very strong free cash flow. The double digit growth is due to a model that includes strong recurring revenue, high retention rates, and a very large addressable market. Gartner is a growth company and a people business. You can see the growth here, contract value with a 14% CAGR over ten years, and free cash flow a 16% CAGR. So we start with contract value at the top, and it works its way down to the free cash flow.

Contract value is our most important metric because it’s the start of that process of generating cash. Contract value measures the annualized revenue under contract at a point in time. People are the heart of everything that we do at Gartner. People are the foundation of the insights that we provide for our clients. You can see here we’ve got 10 critical aspects to our culture at the company.

I’m not going go through all of them, but they’re really foundational for everything that we do in terms of serving our clients. We serve our clients through a very compelling client value proposition. Operating executives have many challenges that they face. Those challenges can shift and change. They can evolve over time.

But they’re always going to have a short list of the most important challenges they want to solve. Today, they could relate to AI, information security, the future of work, supply chain and business resiliency, and more. These operating executives know they can turn to Gartner for help addressing those priorities. Gartner offers a compelling proposition at a relatively low price compared to the impact that we can help our clients have as well as any potential economic alternatives. We deliver indispensable insights so that at the end of the engagement with our research, with our analysts, our clients are going to be able to make more effective decisions addressing those mission critical priorities.

As I mentioned, we’re helping our clients save time, save money, manage risk, gain expertise, and gain confidence. Our offering is highly differentiated, the moat that we have, if you will. So we have our research experts deliver insights based on unmatched breadth and depth of experience, expertise, knowledge. We leverage proprietary data and information. We benefit from network effects across a large client base throughout the world and across industries and across company sizes.

We’re also independent and objective. This is a very important differentiator because our clients know that they can count on Gartner to provide insight that’s going to be targeted to helping the clients make the very best decisions in their own best interest. We’re also highly instrumented. What I mean by this is that we’ve got proprietary processes through which we create the insights that we offer to our clients. We deliver the insights to executives in every major function across all geographies and industries.

This is something that’s somewhat different because a lot of organizations are targeted towards specific verticals. But Gartner is focused on horizontal solutions. So we’ve got seven major practices where we serve executives. So you can see technology is our heritage area for research. And we’ve, over the years, added finance, HR, legal marketing sales, and supply chain.

We deliver the actionable objective insights through the work of 2,500 plus experts that are Gartner associates, often former practitioners. Our clients engage with both our written research product as well as through speaking with our experts. And they speak with our experts more than 500,000 times during the course of the year. So that’s a lot of impact and a lot of value that we’re having, and it also supports the network effect where our experts are getting perspectives across a very wide range of operating executives. We go to market with three reportable segments.

Research is our largest, most profitable segment. Research is the part of the business where we emphasize providing the actual objective insight that I’ve described. The contracts are a minimum of one year. The majority are multi year. And so it’s essentially a subscription model where the operating executive gets access to all of the information and insights that are relevant and appropriate for their role.

You can also see we’ve got very strong contribution margins running in the low to mid 70%. The way research grows is through our sales force. And our algorithm works so that contracts come up for renewal in any given period. Some portion of those won’t get renewed. Some will get renewed lower, and many will get renewed higher.

So this is an illustrative diagram. If we had $100 a year ago, if there’s $18 of churn, which is probably a little bit lower than where it actually is, we increase prices, and that realizes about three points. We generally increase prices 3% to 4% per year. It generally tracks roughly in line with wage inflation. So when wage inflation was a little bit higher a few years back, the price increases were higher as well.

And then we sell a lot of additional licenses into our existing client base. So the net of that performance within the existing clients gets us to, in this example, about $104 So in other words, that’s wallet growth. It corresponds to a metric that we publish every quarter called wallet retention. And so we’re going to get 4% growth before new logos. And then we have business developers who are responsible for what we call zero contract value accounts or new logos.

And that’s going to add typically about eight additional points to growth. So this is going to get around 12%, which is the low end of our medium term outlook. To get to the high end of 16%, it’s going to be some combination of lower attrition, selling more into the existing enterprises, and then selling more new logos. We go to market through two sales organizations that we call Global Technology Sales, or GTS, and Global Business Sales, or GBS. GTS is focused on selling to both the vendors and the consumers of technology.

So think about this as chief information officers and their direct reports, and their direct reports direct reports. And then global business sales, which is the smaller of the two sales organizations today, within GBS, our sellers sell supply chain insights to supply chain leaders and marketing insights to marketing leaders, and finance insights to finance leaders. So in other words, we’re going to market by function in parallel. When we’re selling, we’re selling to individuals we call licensed users. So we’re not selling enterprise licenses.

We’re selling by design to the sea level, and it’s a land and expand strategy. So after we’ve sold to the c level, who’s the senior most functional leader, think the CIO or the chief supply chain officer, we’re then looking to identify opportunities to sell licenses down a few levels to the organization. We’re serving the clients, selling to individuals within specific roles so CIO, chief data analytics officer, chief information security officer within functions. So I think this is an important point. Again, it’s about selling to those individuals within the roles, within the functions that we serve.

One of the benefits of selling to individual users is that we understand their mission critical priorities, and we can make sure that we’re articulating how the breadth and the depth of our expertise can help them address their individual challenges. So while the insight creation is highly scaled on the back end, the value proposition can become highly individualized. Another advantage of selling to individual licensed users is that it gives us a significant market opportunity just within the enterprises that we serve. So as I showed earlier with the illustrative algorithm, about twothree of our gross growth is going to come from those existing enterprises. Not only do we have a large addressable market within the enterprises that we serve, we also have a vast market opportunity in aggregate.

So while we’ve got contract value of around $5,100,000,000 we’ve got an addressable market that we’ve identified at around $200,000,000,000 There’s a brief video at investor.gartner.com that goes into a little bit more detail about the bottom up and how we’ve approached assessing the size of the addressable market. As you can see, it crosses all of the major enterprise functions that we serve. And we’ve got a very long runway such that if we were to grow our contract value at a 14% CAGR for fourteen years, we’d have only captured a little bit more than 14% of the addressable market. Beyond the research segment, our Conferences segment provides an opportunity for clients to immerse themselves in Gartner research, engage with peers, and interact with technology vendors. Our goal with the Conferences business is to produce must attend conferences for the leaders across the enterprise.

So we’ll have conferences for chief information officers and conferences for chief information security officers, and the conference strategy is to align with the roles we serve. The conference business is seasonal, as you can see from the revenue chart, and from the margins as well. So this is a great platform that we have for clients to come and for prospects to come. And so it’s an engagement tool, and it’s a sales tool. And we’re doing this almost a marketing function with, on an annualized basis, around 50% gross margins.

Our consulting segment allows clients to go on a deeper extended project basis than is possible with the research subscription. So here, we’re primarily providing IT labor based strategy and project management services. So we’re not doing anything related to software development or system integration. It’s really much more high level in terms of what we’re providing. So that introduces the revenue.

From a margin perspective, our guidance for this year is EBITDA margins of at least 23.5%. Margins are structurally higher than they’ve been in the past. So the margins had historically run sort of between 1819%. After a large acquisition in 2017, we invested in the business. The margins were a little bit lower for a period.

But now they’re structurally higher, running in the mid to low to almost mid 20% range. We’ve got as you can see, our EBITDA CAGR over the ten year horizon is faster than the revenue CAGR because of the margin expansion. And our expectation is that in a normal environment, when we’re growing the top line double digits, we’ll be growing EBITDA a little bit faster, expanding the margins as we go. Broadly, we’ve got cost of services, which should be growing a little bit slower than revenue. At a minimum, we’re going to see margin expansion from mix.

So over time, as the research segment grows faster with higher incremental margins, the gross margins at a consolidated level will increase. We’ve got an ability to generate operating leverage from G and A, G and A growing a little bit slower than revenue. And then our sales costs, we expect to grow about in line with revenue. The sales expenses, the sales teams are the biggest way we invest for future growth. We’re selling a product that’s it’s an intangible and it’s not a replacement.

And so it’s a consultative sale. So it takes feet on the street to go out and engage with a prospect and articulate the value proposition. Given the size of the addressable market at $200,000,000,000 a natural question might be, well, so why aren’t you growing faster? The operational constraint to our growth comes from how fast we can build the sales force. We’ve got a core capability in terms of attracting and retaining talent.

And so we can hire sellers, train them, deploy them, and support them. But operationally, we found that there diminishing returns beyond a certain point of growth in the sales organization. So we’re built for growth. And we’re very comfortable that we could be growing the sales force in the high single to low double digit range. With the benefit of price increases, that translates into 12% to 16% CV growth.

But so on balance, sales costs growing in line, the net of all this is that we expect EBITDA margins to go higher over time modestly on a year by year basis. So as we start to put all this together, we’ve got a business model that drives very strong free cash flow. I’ve talked about briefly the recurring revenue nature of the business. So it’s subscription, contracts, multi year agreements, very good retention rates. And so we’ve got very high visibility into the revenue outlook, and we’ve got high contribution margins.

In addition, because our clients pay us upfront, we get a durable working capital benefit related to the upfront invoicing. It’s also a low capital intensity model. So generally, we would expect CapEx as a percentage of revenue to run at around 2%. Beyond this, we’re able to reinvest for growth even before we generate very strong free cash flow. So free cash flow on an annual basis is going to be north of $1,000,000,000 And we’re going to use the free cash flow primarily for tuck in strategic value enhancing M and A and for share repurchases.

We’ve got a very strong balance sheet. We temporarily have excess cash on the balance sheet. We’ve got about $2,100,000,000 We need about 300 to $500,000,000 to run the business. And our target for leverage is for gross debt to EBITDA of about two to two and onetwo times. We’re comfortably below that.

So there are no acquisitions out there that fit the business of size or scale. There had been one, and we did that back in 2017. So the acquisitions are likely to be tuck ins to support the research business. That leaves most of the free cash flow for buying back shares. And as we’ve noted on our recent earnings calls, we are eager to buy back stock.

Our approach to buybacks has been consistent for a long period of time. We look to optimize returns for shareholders by being price sensitive, opportunistic, and disciplined. So we measure the performance of the buyback program over a multi year horizon. We run the business with a long term perspective. And so we manage the buyback program with a long term orientation as well.

We’re going to factor in valuation. We’re going to factor in the stock price. We’re going to look to buy more when the stock price is lower and less when the stock price is higher. So overall, five years from now, we expect that we’ll have a lot more free cash flow and we’ll have a lot fewer shares. And so you can see our track record going back over many years, very strong growth profile, revenue, adjusted EBITDA, margins, and free cash flow.

And with that as an introduction, I’m happy to take a few questions. Anyone in the audience is welcome to ask a question. Yeah, it’s a great question. So in case people couldn’t hear it, the question was about AI and how that might affect our business. So Gartner has experts some of the world’s leading experts when it comes to AI.

And so it’s an area where, first and foremost, we’re helping our clients. So as you might imagine, AI is an important topic across all the major enterprise functions. And so it’s an area where we’re able to engage and help our clients as they think through their strategy, the opportunities, the challenges. They can benchmark how far along they are. They can understand best practices in thinking through pilots and rollouts and all of those kinds of areas.

In addition, we’re leveraging AI within Gartner. That’s not something that’s new, although obviously generative AI is a newer version of AI. And so there are a number of use cases that we’ve got from an AI perspective where we’re looking to drive a little bit more efficiency within our research organization, within our services team. We’re leveraging AI for things like helping to make our sales training processes more efficient. And then from a large language model perspective, I talked earlier briefly about the Gartner differentiators.

So we’ve got proprietary information, proprietary data, proprietary processes. And all of these are inside the firewall and unavailable to the public large language models. Perhaps more important, the kinds of problems we’re helping our clients solve don’t lend themselves well to sort of a Q and A with the large language models, even with the latest iteration of things like deep research. For example, if a CIO is thinking about information security, we’re able to help them as they look at, do they have the right size of a security organization? Do they have the right skill set within their security organization?

Is their security architecture best in class? How does it compare to any possible alternatives? Those are questions that the large language model based chat bots aren’t able to answer.

Operator: The

David Cohen, SVP and Head of IR, Gartner: question was what’s the percentage of clients on each subscription tier? So we’ve got, broadly speaking, three levels of products. There’s a reference product. There’s an advisor product, which comes with access to the written research as well as to speak with our analysts. And then we have a service tier where we have a guided product that, in addition to the research and the analysts, comes with the ability to have an executive partner who is a former practitioner in the role that works for Gartner that can be their concierge for all things Gartner.

So the most commonly purchased product is that middle one. The price point on the reference is probably around 20 ks. The price point for the mid tier, again, most common one, is probably 45 to 50 ks. And then at the higher end, there are different variations. They could 75 to 80 ks, in some cases a little bit higher than that.

Other questions?

Operator: As you think about the total addressable market, there’s still a sizable penetration opportunity. How do you think about the key drivers for growth? Obviously, the you mentioned sales force and everything to go out and sell. But what are the core drivers beyond that? Is it functional?

Is it domestic, international? Yeah.

David Cohen, SVP and Head of IR, Gartner: The question is, how do we think about the opportunity to capture more of the addressable market to drive growth? So it’s about continuing to generate valuable insights, productize them, go out and sell them, and then deliver value to the clients over time. About twothree of our contract value is in North America. But unlike some companies where they’re fully penetrated in a home market and they’re growing internationally, We’ve been global for a very long time. And we see opportunities for growth both in North America as well as in geographic markets outside.

So it really comes down to expanding the number of territories that we have over time, hiring sellers, deploying sellers into those territories. We have business developers who go after new logos. And then we have our account executives who are driving retention and growth within the existing. And so most of it is about execution, so continued strong performance across all of our sales best practices. There is going to be a macro component.

So when the macro environment is more challenging, it’s often going to translate into a more difficult selling environment. We’ll be resilient relative to the macro environment, but not completely immune. If there are no more questions, we’ll wrap it up. Thank you very much for your time. We’ll be around after if you have follow-up questions

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.