RBC Capital Markets initiated coverage of Gartner with a Sector Perform rating and a $263 price target, saying the company faces near-term pressure from weaker tech spending. There are also concerns whether generative AI tools could disrupt its business model.
“CV growth has moderated to mid-single digits driven by DOGE headwinds and slowdown in IT spending by companies impacted by tariffs,” analysts wrote, referring to contract value, a key measure of recurring business.
RBC said Gartner expects growth to reaccelerate in 2026 and return to double digits in 2027, but investors are doubtful.
“We believe CV growth is more likely to improve to MSD in FY26 and MSD-HSD in FY27,” it said.
The brokerage said investors remain concerned about the impact of large language models on Gartner’s competitive position.
“Additionally, the company’s seat-based license model could face pressure, with businesses potentially scaling back on licenses, which could impact the land-and-expand strategy,” analysts said. RBC added that Gartner’s own AskGartner service could encourage some customers to switch to cheaper products.
Margins have also come under pressure in recent years as growth slowed, though management expects profitability to improve over time.
“We expect margin expansion over the mid-term, as CV growth is anticipated by management to outpace growth in sales headcount,” the note said.
RBC highlighted positives including Gartner’s $2.2 billion in cash and steady free cash flow, which support ongoing share buybacks. It also said the stock trades at about 20 times estimated 2026 earnings, below its five-year average multiple of 36.5.
“Gartner’s proprietary and unbiased research, coupled with its strong network effect, provides a differentiated value proposition,” the analysts said, but added they want to see clearer signs of growth before turning more positive.
Source :
https://www.investing.com/news/stock-market-news/rbc-starts-gartner-at-with-neutral-view-amid-ai-risks-and-slower-growth-4231718
