Q3 2024 Earnings Summary
- Gartner delivered financial results ahead of expectations, with 9% contract value growth with enterprise function leaders and accelerating tech vendor contract value growth.
- The company is investing in its sales force to drive sustained double-digit revenue growth over the long term, effectively attracting and retaining high-quality salespeople with low turnover and increasing tenure.
- Gartner has strong pricing power, implementing price increases of about 4% for 2025 to offset wage inflation, maintaining margins and supporting future growth.
- New sales hires take approximately 3 years to reach full productivity, meaning recent sales force expansions will not contribute significantly to revenue growth in the near term.
- The company is not providing guidance for 2025 yet, indicating potential uncertainty about future performance.
- Management expects a significant year-over-year decrease in Q4 non-subscription revenue, which may impact overall financial results.
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Adjusted EBITDA | Q3 2024 | At least $295 million | ~$297 million (245.82+ 51.25From EBIT + D&A) | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Contract Value (CV) Growth | Q2 2024: 7% growth; Q1 2024: 7%; Q4 2023: 8%. | 7% growth to $5B in Q3 2024, GTS +6% and GBS +12%, with Q1 2024 reaffirmed as the bottom. | Recurring with mid-high single-digit growth. |
Global Business Sales (GBS) Momentum | Q2 2024: GBS new business +16%; Q1 2024: +7%; Q4 2023: CV +13%. | New business +10% year-over-year, CV +12%, strong broad-based performance but mid-single digits in marketing & sales. | Recurring with consistently strong double-digit growth. |
Global Technology Sales (GTS) Momentum | Q2 2024: +6% CV, +8% new biz; Q1 2024: +5% CV, -1% new biz; Q4 2023: +6% CV. | CV +6% to $3.9B, new business +8%, continued improvement in tech vendor portion. | Recurring with slight reacceleration post-Q1 slowdown. |
Tech Vendor Segment | Q2 2024: Market remained tough; Q1 2024: Layoffs, reduced VC funding; Q4 2023: CV flat, new biz up high single digits. | Small vendors renewing at lower rates; new business rebounded to historical levels. | Recurring challenges but showing signs of improvement. |
Consulting Contribution Margin | Q2 2024: 38%; Q1 2024: 40%; Q4 2023: 27%. | 33% in Q3 2024, down year-over-year due to fewer high-margin contract optimization deals. | Recurring slight decline from peak levels. |
New Business Sales Growth | Q2 2024: GBS +16%, GTS +8%; Q1 2024: GBS +7%, GTS -1%; Q4 2023: GTS +12%, GBS +13%. | GBS +10%, GTS +8% year-over-year, broad-based. | Recurring with stable to improving execution. |
Client Retention & Renewals | Q2 2024: Retention declining but stabilizing, mostly strong in GBS; Q1 2024: Renewals skewed toward tech vendors; Q4 2023: Pressure on small vendors. | 4% price increase for 2025, 50% NCVI in Q4, small vendor renewals dragging growth. | Recurring with some improvement, small vendor issues persist. |
Volatile Macroeconomic Environment | Q2 2024: Emphasized volatility; Q1 2024 & Q4 2023: Similar geopolitical/economic uncertainties. | Environment remains complex, but demand solid; no major shift in client spending. | Recurring concern, Gartner remains resilient. |
Multi-year Contracts & Price Escalators | Q2 2024: Mostly 2-year deals, no new info on escalators; Q1 2024: 70% CV multiyear, 3–5% annual escalators; Q4 2023: 4% price hike noted. | Multiyear deals with 4% price increase going into 2025. | Recurring consistent pricing approach. |
Decline in Non-subscription Revenue | Q2 2024: Lowered guidance; Q1 2024: Similar yoy decline; Q4 2023: 6% of revenue, pressured by pricing. | Still guiding $305M for 2024, Q4 expected to be down year-over-year. | Recurring negative trend, stable outlook. |
Dependence on Q4 Performance | Q2 2024: Q4 largest revenue quarter; Q1 2024: Q4 big for Conferences; Q4 2023: No mention. | 50% of NCVI and 40% of new biz in Q4, key driver of 2025 revenue. | Recurring emphasis on Q4’s critical role. |
AI, Cybersecurity, Data Analytics, Cost Optimization | Q2 2024: GenAI topic of focus; Q1 2024, Q4 2023: All four discussed as major areas. | High interest in AI, alongside cybersecurity and cost focus; seen as critical issues in Q3 2024. | Recurring with consistent importance, AI especially prominent. |
Client Expectations for 2025 vs. 2024 | Q2 2024: Growth in 2024 drives 2025 revenue; Q1 2024 & Q4 2023: No direct mention. | Clients explicitly see 2025 as better than 2024. | Newer clarity on more optimism for 2025. |
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Tech Vendor Growth Outlook
Q: When will tech vendor CV growth meaningfully improve?
A: New business with tech vendors has rebounded nicely, but some small vendors facing financial challenges are dragging growth. As these challenges pass, we expect continued acceleration, with new sales returning to historical levels. -
2025 Client Budgets
Q: What are clients saying about their 2025 budgets?
A: Clients are expecting a better year in 2025 than in 2024, which is positive for our selling environment next year. -
GBS Contract Value Deceleration
Q: Why is GBS CV growth stepping down sequentially?
A: While our new GxL products in GBS are growing above our 12–16% target range, legacy products are renewing at lower rates due to economic factors, impacting overall GBS growth. -
Consulting Business Variability
Q: What's driving trends in the consulting business?
A: Our consulting helps clients secure better deals on large contracts, but results are variable due to the timing of big deals. This quarter we faced tough comparisons against last year's 98% Q3 growth. -
Expenses and Margin Outlook
Q: Is 2024 a good baseline for adjusted EBITDA margins?
A: Yes, 2024 is a relatively good baseline for operating expenses. However, back-end loaded hiring in GTS and GBS will impact full-year expenses next year as we continue investing in sales force growth. -
Sales Force Retention and Tenure
Q: How are sales force retention and hiring progressing?
A: We attract top talent with 200 applicants per job, have low turnover within our target range, and tenure is rising. We're expanding our sales force to pursue our significant market opportunity. -
Contract Value Recovery Path
Q: Why did you say CV recovery may be uneven?
A: Quarterly CV growth can vary due to the timing of renewals and deals. Even a $3.5 million change can swing results by 10 basis points, but overall, we're pleased with our progress. -
New Business Growth Drivers
Q: What drove new business growth in GTS and GBS?
A: GBS new business grew 10%, and GTS grew 8% year-over-year, driven by our strong value proposition and broad-based performance across practices.
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