All right. Good morning, everyone. I'm Jeff Meuler, Baird's Information Solutions Analyst. Thanks for joining us. Pleased to be with Gartner this morning. Gartner is the world's leading subscription-based Insights and advisory firm across enterprise function, with $5.3 billion of Contract Value, with great long-term growth. With me on stage is the company CFO, also longtime CFO and company employee , Craig Safian. He's overseen much of that growth. Craig, maybe to just start out, your Insights or Research business, it's the key value driver of the company, nearly 90% of consolidated gross profit. Just to help investors understand the value proposition for an Insights subscription, things like what does it cost, what's included, how do clients engage, et cetera.
Yeah, happy to. Thanks for having me. Good morning, everyone. Thanks for joining us. As Jeff mentioned, our Insights business is largely a recurring revenue annual subscription license to our Insights. I'll start with what we do and who we do it for. We are targeting the top of the organization chart, so the C-level and their teams across every major enterprise function. You may know Gartner, we were built around serving technology professionals, technology leaders, chief information officers, and their teams. Over time, through a combination of acquisitions and some of our own organic development, we actually now serve all of the major functions within the enterprise. Finance, HR, supply chain, sales, marketing, legal, customer service, et cetera, et cetera, et cetera.
Essentially, the way we operate and the way we think about delivering value to our clients is every one of those operating executives and their teams have a core set of what we call Mission-Critical Priorities, or MCPs. What MCPs are essentially the big things that they need to accomplish for the enterprise. For example, for a CFO, it might be a finance transformation. For a marketing organization, it might be how do we optimize ad spend and yield of marketing investment in an AI world, things like that. Those are not one-time questions that have a definitive answer. They're actually multi-year journeys. Our job and our goal is to make sure that we are providing the operating executives we serve across every major function with the insights, tools, assets, intelligence, et cetera, they need to meet those Mission-Critical Priorities.
We do that through a variety of different ways, and I'll talk about our product tiering and also talk about how we deliver some of those Insights. I think it's core to remember that the core of our business is we develop Insights that help our operating executive clients make the right decisions around their Mission-Critical Priorities. We've got about 2,400 experts on staff. These are deep domain experts in the specific functions and domains that they serve, who are not just, quote-unquote, "researchers." These are experts. These are world-class. These are former practitioners. These are people from academia. These are people from major Consulting organizations. These are people from the major technology companies, et cetera.
They come in because of their expertise, and they're actually able to augment that expertise because of a lot of the, I call it a network effect that we have from all the operating executives that we serve, and I'll get back to that in a second. Think about essentially three tiers of service that we have for our clients. Our least expensive offering, which is our digital-only offering, basically gives clients the opportunity to interact with all of our Insights through gartner.com, and through our mobile application. The core thing to remember, though, is even with our digital clients, the primary way they get connected to our Insights is not by going to gartner.com and typing in a question or a search or a question in AskGartner.
The primary way they actually get to the insights and the assets is we are proactively pushing them the things that we think are most important and most relevant to them. We're able to do that because we know who they are, we know the corpographics of who they work for, industry, company size, all the dynamics around their company, and we also know what their Mission-Critical Priorities are. Before they even think about a problem or have a question, we're actually proactively pushing them information that draws them in to gartner.com or our mobile application, and then they're actually able to explore all of our other assets and things like that. Again, the digital-only offering runs about $25,000 per licensed user per year. As you step up the tiering, we have what we call an advisor product next.
That's probably $45,000-$50,000 per licensed user per year. You get all the stuff and things and assets that you get from a digital subscription with two primary differentiators. Differentiator one is you get a conference ticket to attend one of our destination Conferences, which hopefully we'll talk a little bit about later, because that's enormous value to our licensed users. The second major thing they get is the ability to talk to an expert. We call it an inquiry. Essentially, it's a 30 or 45-minute call with one or multiple of our experts so that you can go deeper. You can provide the context of your specific situation. You can get Insights and thoughts from our experts around what they're seeing with other clients who may be in similar spaces. You get to do it on an unlimited basis.
The average client does it five or six times a year, it's enormous value when they do it. The third tier of service is what we call guided service. On average, let's just say around $100,000 per licensed user per year. You get all the things that an advisor-level entitlement gives you also get two additional things beyond that. One is a premium experience at our destination conferences, two is you have actually a named senior-level service person, we call it an executive partner, who is a former C-level practitioner who acts as your guide, consultant, concierge, if you are a professional golfer or watch professional golfing, your on-course professional caddy.
They only have 25- 30 clients that they serve, and so they're actually able to really get to know the individual, serve as a sounding board, and act as an entry point into all the insights that we have. Again, that's about $100,000 per licensed user per year. Again, at all levels, the main thing is helping operating executives accomplish their Mission-Critical Priorities by connecting them to the right assets and insights and tools and peers at the right time so they can actually move those Mission-Critical Priority journeys along.
Helpful. Contract Value is the golden metric, I think, for a lot of investors with Gartner. The long-term growth's been great, 12% 10-year CAGR, I think around 10% organic. 2023 and 2024 were +8%. 2025 was +1% or +4% if you exclude U.S. federal government headwinds. Just what's your perspective on what's driving that? The elephant in the room, how do you measure if AI is having an impact, or what gives you confidence if it's not?
Obviously, I'd rather spend more time talking about the 12% CAGR. I will address the question directly. I think there's been a handful of rolling macro and geopolitical challenges that have certainly impacted our growth rate over the last few years. In 2022 and 2023, it was really tech vendor driven as a lot of the air got let out of that balloon, if you will, with VC funding sort of seizing up, Silicon Valley Bank going belly up, and mass layoffs across the tech industry as they were recalibrating their OpEx bases coming out of the pandemic. When that sort of leveled out and normalized, we then ran into the headwinds of challenges with our U.S. federal business. Put it in perspective, we entered 2025 with around $280 million of U.S. federal Contract Value.
That is CV licenses with civilian defense and intelligence agencies across the entire U.S. federal government, which was about 5% of CV at the time. The DOGE activity started in earnest, really, call it back half of March and really picked up Q2, Q3, Q4, and we took a lot of hits there. As you noted, it was almost a 300 basis point impact on our overall growth rate in 2025. We are now starting to lap those challenges, and we do expect to get the mechanical benefit of lapping those challenges as we move through 2026. Then the third sort of major thing that impacted our results, I would say, obviously, it was not the best macroeconomic or selling environment, but we pride ourselves on tuning and adjusting so that we can be successful in any environment.
That said, I think the volatility in trade policy had a significant impact on our results as well. Because we're selling globally and because we're industry agnostic, size agnostic, and market agnostic, about 40% of our Contract Value sat with clients who rely on supply chains and importation and exportation to make their money or make their products. What we saw post Liberation Day last year was it wasn't the amount of the tariff that was the problem, it was sort of the whipsawing volatility around them that caused companies to really seize up on decision-making.
I put myself in the shoes of a CFO at a Daimler-Benz or a John Deere or whatever it may be, and when you don't know if you're solving for a tariff that's 10% or 50%, you kind of just say, "Hey, until we know what this is, we're not taking on any incremental investment." We saw that impact our clients who rely on importation or exportation. I think the last several quarter or last few quarters, I should say, we've seen much more stability in trade policy, and we should start lapping those again.
Sort of leads into our expectation for 2026, which is through a combination of lapping the U.S. Fed challenge, lapping the trade policy challenge, and continuing to transform and adapt our business to be successful in any environment, we fully expect Contract Value, both the Fed piece and the non-U.S. Fed piece, to accelerate over the course of this year.
AI? Just how do you measure it, and what are the proof points that give you confidence or can give investors confidence it's not having an impact?
Yeah. The interesting thing is, from the outside, you say there's a 1.0 correlation between AI disruption and CV performance. Correlation is not causation, as many like to say. When we look at the business, I'd say three things. One is we track this religiously. We track any sort of disruption or competitive activity. We're just not hearing it from our sellers. We're asking and analyzing and looking at every deal. We're just not seeing it as the reason why people are deferring growth or not renewing or what have you. The second thing I'd say is a lot of our indicators that we look at below sort of the headline and below even that on our operational dashboards, you would expect would be going sideways or down if AI was really disrupting it or not. I'll give you two examples.
One is engagement. We measure engagement both from a digital engagement perspective, so how often and how frequent are people interacting behind our firewall, gartner.com or our mobile app? We look at human interactions because that's a big piece of our value proposition as we talked about a little bit earlier as well. If AI was really disrupting the way our clients operate and the way our clients used us, we would see declines in engagement. As we talked about coming out of our Q1 earnings call, we've seen quite the opposite. We've driven significant improvements in engagement, both from a digital perspective and from a human interaction perspective. Second thing I'd say is Conferences have continued to perform exceptionally well. The reason Conferences continue to perform exceptionally well is people really value our Insights.
The reason they come to Conferences is to interact with our experts. It's to really live what they can learn from Gartner, to network with our peers, all the other elements of the value proposition, but the primary reason they're there is because of the Insights. The third thing I'd say is our new business and new business pipelines, while the velocity of the way things are moving through the pipeline is a little slower than normal, largely because of the macro overhang and some of the challenges there, we are still generating huge amount of opportunities, adding to the pipeline every month, every quarter. We've talked about for the last several quarters, factory pipelines are up at a double-digit growth rate. There's still a lot of demand in the market as well.
As we look at everything, we feel really good that AI is not disrupting us, and that we will accelerate our Contract Value over the course of this year. I think, fundamentally, a client may come to us and say, "Can I do that with Copilot or Claude or whatever?", and I think it's a fundamental misunderstanding of the way we help people. I alluded to this a little bit earlier, but we are not a question-and-answer engine. We have never been a question-and-answer engine, and we do not aspire to be a question-and-answer engine. We are a Insights company that proactively pushes things to our operating executive clients before they even think about it. Think about addressing blind spots, knowing the unknowns to some extent, mitigating risk. All those things we're able to do where it's great.
We say, "Look, you should use the LLMs for X, Y, and Z, but that is not a replacement for Gartner. It's a very different thing, and Gartner's got a very differentiated value proposition to help you accomplish your Mission-Critical Priorities.
We always love to hear about a healthy and resilient Conferences and Insights business here. The way you interact with customers, you do have a LLM overlay on your digital platform called AskGartner. What impact is it having, or how important is it even if a lot of the interaction is pushing content to them and people coming to Conferences and other forms of interaction?
Yeah. Look, I think it's table stakes in terms of the way we deliver our product digitally, right? We need to follow what our users' experience is outside of the Gartner ecosystem, so they have a similar experience when they come in. Clearly, having a language model on top of the corpus of Gartner information is incredibly important. The one thing I will say is the proactive pushing is what brings them in. Once they're in, using AskGartner versus traditional search is significantly better for our clients. What we've been seeing as we've sort of brought everybody on board and watched usage is when people do get drawn in from the proactive pushing of Insights, when they do then go to AskGartner, we are seeing that they actually ask more questions than searches, so more engagement there.
They read more documents than when using traditional search, more engagement there. They're actually interacting with a larger diversity of our assets, more engagement there. My view or our view on this when we launched it was, worst case, it's a better search experience. Best case, it actually does the things I'm talking about. I think we're seeing nearer to the best case. Again, fundamentally, the primary way that people come in is because of the proactive pushing.
If a client wants to incorporate Gartner's data content and Insights with their own first-party data, maybe with some other third-party data sources, is there a mechanism to do that? Is there a future roadmap where you'd be able to do that in AskGartner? I would think that would be of value.
Yeah. Yes, it would be of value, and we're staying very close to our clients around what they want and what they need. I think there's two thoughts or cautions there. One is, it's not data. Predominantly, it's not data, it's insights, right? I think with data integrations, it's much more logical and makes a lot more sense because you're sort of building it into a workflow, a spreadsheet, whatever it may be. It is harder to do that with Insights. The second thing I'd say is everything we have is proprietary to us, and we have to be very careful and diligent about ensuring we protect all that IP. As we've talked about on the last several earnings calls, it's terabytes and terabytes and terabytes of proprietary information that actually feeds into the thousands of proprietary insight documents that we have.
We just need to make sure that whatever solution we come up with absolutely walls those things off and protects them going forward.
What about in your environment, like where you could do a connector where you're going to get access to a client's Workday or something to help inform the CHRO that has a Gartner seat? Is that an opportunity?
Are you looking for a product management job at Gartner?
Potentially.
You're making a good pitch there. Yeah, those are all things that we are looking at and considering. Again, we do a significant amount of market research, also because of the level of engagement of our clients, we're getting live feedback literally on a day-to-day basis from our clients, they're very happy to share those kind of product development ideas with us as well. Those may be on the future roadmap. For now, the way we're operating is we want you to come into our ecosystem and do all that. Maybe at some point you'll be able to drop in assets from your own company, your IT architecture, your IT roadmap, your finance roadmap, whatever it may be, actually then query AskGartner for all that stuff. For now, it is essentially uniquely the Gartner experience when you come behind our firewall.
Q1 Contract Value accelerated a very little bit. You had some comments about in-quarter trends, because obviously there was a flare-up in March in a geopolitical situation. Just talk us through the shorter-term trends and given that it at least feels like we're not as hot in Iran right now as we were in March, is it your experience that things slipped out of March and then subsequently closed?
Yeah. We talked about this in early May, around Q1, the commentary was really around January and February new business were actually trending really positively. Full disclosure, January and February are a lot smaller months than March, right? The third month of each quarter tends to be significantly larger for us than the first two months. Nevertheless, we were trending really positively through the first two months of the year. We did see, with the onset of the war in Iran, a lot of decision-making, particularly with companies and industries that can be impacted by oil prices and with markets directly in the line of fire, that decision-making did get slowed down. We did see a lot of new business opportunities push, not close in March.
Commentary on the call is a lot of them did close in April, which I think is very positive. I do think your commentary on the challenges related to the war being a little less hot right now is true. Could change tomorrow, feels a little bit less risky and less exposure right now, compared to what we saw in the back half of March.
Okay. This is a short-term question, but rev rec flows off of Contract Value. Q1 is seasonally weaker, typically, for Contract Value, and it's a more tough or more challenging environment right now. Contract Value took a sequential step down.
Yes.
Consensus has revenue modeled flattish for Insights. That seems kind of illogical based upon more Contract Value. Just any comment on if there's any unusual dynamics that could inflate it or how we should think about modeling?
Yeah, no.
off of CV?
It's a great question. Generally speaking, the simplest way to run the model is you look at what the NCVI was in the quarter, and you either step up or step down one quarter of that in the following quarter from a rev rec perspective. FX rates constant in that scenario. I think last year the revenue didn't do that, and I think that was largely because of foreign exchange. I think, I haven't gone through.
Foreign exchange benefit,
Benefited us.
played into-
Yes, exactly.
the bigger figure.
You didn't see the step down sequentially in revenue that you would expect with a negative NCVI quarter last year because foreign exchange offset it. I don't know everyone's model specifically, but generally speaking, the way to do it is if you generate, I'll make it up, $20 million of positive NCVI in the quarter, you would expect the next quarter's revenue to be $5 million higher. The inverse as well.
Got it. Fed government, as you alluded to, it's down to like 2% of total. Mathematically, your total Contract Value is going to start to benefit from anniversarying the headwinds. You are now coming up on some of that business that was signed or renewed in the DOGE era. As you come up at the second opportunity on that, just what are you seeing? Is it now stable? Are you seeing win backs? What's going on with government?
Yeah, definitely more stable. The renewal rates we achieved in the first quarter were obviously significantly better than last year. Not quite all the way back to our all-time highs in that space, but significantly better. The way we've thought about that business is in two ways. One is we've modeled this year to be essentially flat, right? We have not assumed growth in the U.S. federal business for us in 2026 in all of our Contract Value growth assumptions for this year. That all said, we fully expect to get back to growth. Our U.S. federal team across sales and services and Insights are amongst our strongest teams. Even though it was very chaotic from a contract signing, retention, and growth perspective last year, the team still stayed really close to the operating executives that we serve.
The reason we renewed 40%-45% of the business last year is because people were willing to stick their necks out and go to bat for how valuable Gartner is. We fully expect even the ones that we lost last year to come back over time. Maybe this year, may not be this year, but we feel really good about the business and being able to grow that business from a new base going forward.
Most of the business is the Insights business. You mentioned how well Conferences is doing and why. You also have a Consulting business. You meaningfully reduced the business outlook for Consulting when you reported Q1. Maybe not surprising, but what in your view is driving the weakness? Is there anything that's AI related that's structural? Anything that's unusual from a timing factor that we should consider for Consulting this year?
Yeah. I think a couple of things there. One is, similar to what we saw with our Insights business and some decision-making getting deferred, we did see that from a bookings perspective in Consulting in the first quarter as well. I'd say we de-risked that business so that even if we don't see a pickup in bookings, we're protected and covered from an annual guidance perspective within that particular revenue line. I think pipelines are strong. Q2, we believe will be a good bookings quarter. That will put us back in position to get back on track in Q3 and Q4, because obviously we book it in Q2, and then we don't start working it until Q3 or Q4. I'd say, we de-risked the line. On top of that, our Contract Optimization business is coming off of two record years.
As you know, you've been following us for a very long time, that tends to be an extremely volatile business, and 100% reliant on clients making the decision to purchase something. When there's uncertainty in the market, it can flow through onto the Contract Optimization side as well.
You've long had this 12%-16% Insights growth and a variety of other intermediate term financial targets. Your Q1 supplement, I think, removed the medium-term guidance section. Does that still hold over the longer term? What type of environment do you need? The follow-on is you kind of inserted a 12% three-year EPS CAGR. If you can talk through how you came to that target or what the goalpost is now.
Yeah, sure. You can still find the medium-term objectives in our Gartner 101 materials on our investor website. By and large, I think we've got to get through mid-single digit, high single digit, et cetera, before we start having the conversation again about the 12%-16% growth, and we're obviously very focused on making sure that we accelerate our CV growth rate this year so that we can hopefully start having those conversations again soon. We still believe in a normal operating environment. There's no reason why we can't grow at strong double-digit rates consistently. That's sort of that medium-term objective. In terms of the EPS CAGR, we just thought it was important for people to know that, I guess, two or three things. One is, revenue does lag CV growth.
While we expect CV growth to accelerate, the revenue is going to lag that a little bit. While that is happening, we are very actively, and I'd argue, effectively managing our operating expense base so that we deliver consistent profitability and perhaps most importantly, consistent free cash flow. We're doing something with all that free cash flow and returning significant amounts of capital to our shareholders through our buyback programs. If you were to say to me, "Craig, EPS CAGR of 12%, you took out 4% of your share count in Q1. Your math is terrible. It's terrible," I would be willing to concede that.
That all said, we feel very confident that laying out a 12% compound or at least on the EPS is a good positive signal that not only are we confident in our ability to accelerate the growth, but we're also confident in our ability to make sure that we're managing profitability, managing margins, and most importantly, managing free cash flow.
Just in the final wrap, 30 seconds, you have four kind of dimensional initiatives in the business to drive improvement. Which ones are you most excited for? Where do you see an impact? Where do you expect impact to build?
I'm excited for all of them. I think our new leader of Insights who's a long-term Gartner Insights leader, is doing all the right things to drive the business. All the elements of the transformation are important. They're overlapping. They're not unique and discrete amongst themselves. Everything we're doing there, I am super excited about because we're an Insights company, and that's what drives the business.
Excellent. With that, we will wrap. Please join me in thanking Craig for his Insights on Gartner. Craig will now be available in a breakout session in the Rockefeller Foyer near the.