Gartner (IT): Margin Decline Undermines Bull Narratives Despite Strong Historic Earnings Growth

Gartner (IT) posted a net profit margin of 13.7%, a decrease from last year’s 17.3%, signaling a dip in profitability. Despite a solid five-year earnings growth rate of 19.8% per year, the company faced negative earnings growth over the past twelve months and both projected revenue and earnings growth lag behind the broader US market. However, with a price-to-earnings ratio of 19.3x, well below industry and peer averages, and a share price trading at $237.12 compared to an estimated fair value of $284.56, Gartner’s valuation is catching investor interest even as profit margins narrow.

See our full analysis for Gartner.

The next section compares these results with the market’s most popular narratives for Gartner, highlighting where perceptions match the numbers and where they are put to the test.

See what the community is saying about GartnerNYSE:IT Revenue & Expenses Breakdown as at Nov 2025

Margin Pressure Set to Intensify

Analysts predict Gartner's profit margins will decline from 19.7% today to just 11.1% in three years, pointing to a substantial margin squeeze even as the company maintains positive earnings. According to the analysts' consensus view, margin compression is expected due to factors such as slowing subscription growth and cost pressures from client centralization and procurement headwinds.

While Gartner's investments in proprietary AI tools and recurring revenue streams could support margins over time, the near-term risk is that as generative AI and open-source alternatives proliferate, clients may seek lower-cost options. This could challenge Gartner's ability to defend profitability. This creates a tension: consensus expects margin decline even as bulls believe current investments will enable a long-term rebound. However, recent contracting margins mean investors will look for evidence that new product rollouts are having their desired effect.

To find out how analysts are weighing Gartner’s long-term prospects and profitability risks, read the full consensus narrative. 📊 Read the full Gartner Consensus Narrative.

Cash Returns Despite Shrinking Profits

Gartner's share count is projected to decline by 1.81% per year over the next three years, signaling a disciplined capital allocation strategy through ongoing share repurchases. Consensus narrative highlights how steady free cash flow generation and share buybacks help offset slowing earnings, sustaining shareholder value even when net income growth falters.

This supports the idea that Gartner is more resilient than headline profit metrics suggest and provides a foundation for long-term value as revenue expansion moderates. However, critics note that continued buybacks rely on healthy cash flows. These could come under pressure if margin and revenue headwinds persist as anticipated in analyst forecasts.

Story Continues

Trading Below DCF Fair Value

At $237.12, Gartner's share price is currently 16.7% below its DCF fair value of $284.56, and its price-to-earnings ratio of 19.3x remains well under the US IT industry average of 28.9x. This frames the stock as undervalued by traditional valuation measures. Consensus narrative notes that, despite only modest forecast growth in revenue (4.8% per year) and earnings (6.8% per year), analysts set their price target 20% above the current share price. This indicates a belief that market pessimism about Gartner's longer-term prospects may be overdone.

This suggests analysts are betting on a recovery in growth drivers such as AI adoption and subscription renewal rates, which could outweigh the risks from customer consolidation and sector headwinds over the medium term. Ultimately, the valuation gap means investors must decide whether short-term margin and growth pressures are already priced in or whether further downside risk still exists despite the lower multiples.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Gartner on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

Have a different take on the numbers? Share your analysis and shape your own perspective on Gartner's story in just a few minutes with Do it your way.

A great starting point for your Gartner research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

See What Else Is Out There

Gartner is grappling with shrinking profit margins and slowing growth, raising questions about its ability to sustain earnings momentum over the next few years.

If you prefer the reassurance of businesses that deliver reliable expansion through all environments, use our stable growth stocks screener (2074 results) to discover companies consistently growing revenue and earnings when others slow down.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include IT.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

View Comments