Gartner Shares Sink on Q4 Misses and Outlook Disappointment, Confirming DeepValue Concerns

What happened

Gartner's shares fell to a 52-week low after its Q4 2025 earnings release missed revenue targets and provided a weak 2026 outlook, triggering a legal investigation announcement. This decline aligns with the DeepValue report's prior warnings about structural risks, including AI-driven substitution and public-sector contract softness, particularly in U.S. federal Insights renewals. The company's high-margin Insights franchise, while recurring, has shown vulnerability with federal renewals retaining less than half and some terminations, as noted in recent filings. Despite a 55% share-price reset over the past year, the stock trades only modestly below intrinsic value, offering limited margin of safety amid these headwinds. The added legal overhang from Levi & Korsinsky's investigation exacerbates governance and reputational risks, compounding the existing challenges.

Implication

The revenue and outlook misses signal that Gartner's growth challenges, especially in the public sector, are persisting and may worsen. AI disruption remains a critical threat, and the company's adaptation efforts might not fully mitigate competitive pressures from AI-native tools. Legal scrutiny could lead to additional costs and reputational damage, potentially impacting client trust and retention rates. With valuation still near fair value, the margin of safety is thin, limiting potential upside from current price levels. Management's aggressive, debt-funded buyback strategy could amplify downside if growth continues to disappoint, increasing financial risk.

Thesis delta

The Q4 earnings miss and weak 2026 outlook validate the DeepValue report's concerns about growth headwinds and valuation, confirming the 'WAIT' recommendation. No fundamental shift is warranted, but the increased legal scrutiny and ongoing public-sector weakness slightly tilt the risk-reward balance more negative. Investors should continue to monitor contract value trends and AI adaptation closely before considering a position.