Gartner Stock Crashes 27.6% Amid Slowing Contract Growth and AI Competition.

Gartner's Q2 report shows slowing contract growth, leading to a 27.6% stock drop. The research and intelligence company faces competition from AI-native firms. Despite beating expectations on sales and EPS, investors are disappointed with the deceleration in growth. Gartner has introduced an AI-powered research tool, but it may be too late to reverse the trend.

Gartner Inc. (NYSE: IT) reported its second-quarter 2025 earnings, with shares plummeting 27.6% following the announcement. Despite beating expectations on sales and earnings per share (EPS), the company faced investor disappointment due to slowing contract growth and concerns over competition from AI-native firms.

The company's revenue rose 5.7% year-over-year to $1.7 billion, while adjusted EPS increased 9.6% to $3.53. However, the total contract value grew by just 4.9% year-over-year, indicating a slowdown in growth trajectory [2].

Investors were particularly disheartened by the deceleration in contract growth, which they view as a sign of reduced demand for Gartner's services. The company's Global Technology Sales (GTS) contract value increased by 3.6%, while Global Business Sales (GBS) contract value rose by 9.2%. However, the U.S. federal government business, which accounts for approximately 4% of contract value, renewed only about half of its contracts, contributing to the overall slowdown [3].

In response to these challenges, Gartner introduced "AskGartner," an AI-powered research tool designed to enhance client engagement and reduce friction. The tool aims to leverage AI to provide real-time insights and improve client satisfaction. However, the effectiveness of this initiative remains to be seen, and some investors question whether it is too little too late [1].

The company's stock trades at one of its lowest multiples in decades, reflecting investor concerns about the broader market trends and the impact of AI on Gartner's business model. While the company's financial discipline, as evidenced by a $274 million share repurchase, signals confidence in its cash flow, the long-term impact of AI on its growth trajectory remains uncertain.

Gartner's ability to navigate the AI-driven landscape and maintain its competitive edge will be crucial for its future success. The company's strategic pivot to AI and its strong balance sheet position it as a potential long-term winner in the IT services sector. However, investors should remain vigilant and monitor the company's contract value growth and AI tool adoption rates in upcoming quarters.

References:

[1] https://www.nasdaq.com/articles/why-gartner-stock-cratered-276-today
[2] https://www.ainvest.com/news/gartner-q2-2025-earnings-outperformance-sustainable-edge-ai-driven-services-sector-2508/
[3] https://theoutpost.ai/news-story/gartner-s-q2-earnings-beat-overshadowed-by-slowing-growth-and-ai-integration-18692/