GARTNER INC (IT) stock intrinsic value fair value estimate & owner earnings analysis

Gartner sells research and advice to executives. Its Insights segment (about $5.07 billion of 2025's $6.50 billion of revenue, at a 77% gross contribution margin) is an annual subscription that gives clients access to syndicated research and to analysts; contract value stood at $5.2 billion at the end of 2025. The rest is Conferences ($645 million, 50% contribution margin), Consulting ($552 million) and a small Other line, which was the Digital Markets business (revenue $227 million, down from $371 million in 2023); a $150 million write-down was taken on it in 2025 and it was sold in February 2026 for about $110 million. Clients pay in advance, capital spending is only about $115 million a year against $1.3 billion of operating cash flow, and the company has been using nearly all of its cash to repurchase shares ($1.99 billion in 2025, $1.08 billion in the first half of 2026), which has cut the share count from about 92 million in 2018 to roughly 64.5 million today. What the business earns. We measure owner earnings as operating cash flow, less the year-to-year swing in working capital (deferred revenue, receivables and similar items), less stock compensation, less the part of capital spending needed just to stand still. Per diluted share that was $2.50 in 2016, -$0.56 in 2017 (the year of the CEB acquisition), $2.56, $3.65, $5.46 in 2020, $11.92, $11.77, $10.94, $16.31 in 2024 and $13.80 in 2025. We set aside 2020 and 2021 because pandemic cost cuts and virtual events flattered them, and we remove the $300 million one-time event-cancellation insurance settlement from 2024 (which would otherwise read $12.48). To value the business before its lenders, we add back cash interest paid (about $100 million a year). On that basis the cash the business throws off was $1.07 billion in 2022, $0.99 billion in 2023, $1.08 billion in 2024 excluding the settlement and $1.14 billion in 2025; the middle of those four years, about $1.07 billion, is our starting level. Growth check: that figure grew about 6% in 2025 on the same adjusted basis, while owner earnings per share rose about 11% (helped by fewer shares); we assume 0% for the next twelve months, below that pace, because contract value grew only 1% in 2025, retention of existing clients' spending fell below 100% (Global Technology Sales 96%, down from 102%; Global Business Sales 99%, down from 106%), and revenue was down about 1% in the first half of 2026. Offsetting that, first-half 2026 net income was $498 million against $452 million and operating cash flow was $789 million against $697 million, so the earnings level looks intact. The accounting adds back non-cash charges including the $150 million impairment and about $200 million a year of depreciation and amortization; intangible amortization is shrinking (down 9% in 2025), so we did not treat the earnings as a wasting asset beyond what the cases already carry. Bear case: $128 per share. Existing clients keep trimming spending, as they did in 2025, and public-sector business (which fell by double digits) does not recover: revenue slips about 3.5% a year for four years and, because the cost base is largely people, the cash the business generates falls 7% a year. In year three the events business is shut for a year as in 2020, costing roughly $200 million (Conferences' 2025 revenue of $645 million at a 50% margin). Cash flow troughs near $660 million, settles at about $800 million a year through year ten, and then declines 5% a year thereafter. The business is worth about $9.9 billion, net borrowings are about $1.66 billion, leaving about $8.3 billion, or $128 a share. Even at the trough the cash flow is more than five times the roughly $125 million annual interest bill. Base case: $281 per share. Flat in year one, 2% a year for years two to five and 1% a year for years six to ten, then flat. We credit only this small growth, well below the roughly 6% a year total revenue has grown since 2022, because Insights revenue has grown every year (to $4.52 billion, $4.83 billion and $5.07 billion over 2023 to 2025) and Conferences grew 11% in 2025, while contract value has slowed. After year ten we assume earning power simply continues, neither growing nor shrinking, because client retention has held at 84% to 87% and the subscription model, 77% margin and prepaid float are structural. We left out AskGartner (the AI tool launched in August 2025), new products, margin expansion and any recovery in public-sector spending because none has produced results yet. The business is worth about $19.8 billion, net borrowings are $1.66 billion, leaving $18.1 billion. Bull case: $351 per share. The levers already visible keep working: Global Business Sales grew 3% from new clients, Conferences exhibitor revenue grew 15%, and about half of industry sectors grew contract value at mid-single-digit rates or faster. We credit 2% in year one, 5% a year for years two to six (below the 5.9% revenue growth since 2022), 3% for years seven to ten, then flat. The business is worth about $24.3 billion, less $1.66 billion, leaving $22.6 billion. Debt. Gartner owes $3.0 billion in fixed-rate senior notes: $800 million at 4.50% (2028), $600 million at 3.625% (2029), $800 million at 3.75% (2030), $350 million at 4.95% (2031) and $450 million at 5.60% (2035), an average coupon of about 4.3%. Because that is cheaper than the long-run cost of money, we count the debt at about $2.85 billion. Against that, cash was $1.49 billion at June 30, 2026; we treated $1.19 billion as excess and kept $300 million for operations, giving net borrowings of about $1.66 billion on about 64.5 million shares. Office leases and deferred revenue are already paid for inside the earnings and are not subtracted. The 2028 maturity is the first to watch; in the bear case it coincides with the events shutdown, but excess cash alone covers it. What could make this wrong. A faster erosion of research subscriptions from AI substitution than our bear case, which is built on the 2025 retention slip and an events shutdown rather than a specific AI loss we can document. The company says only that third parties might use AI to reduce demand for its products. We tested whether the earnings level depends on working-capital inflows or the insurance settlement; neither does, because we removed both. The latest quarterly report text was not available, so first-half 2026 comments rely on its financial data. Previous estimates were made on a different basis and are not comparable. Margin-of-safety price: $85. We are quite sure of the earnings level, since four years of results sit between roughly $0.9 billion and $1.0 billion after interest and the first half of 2026 was better. We are much less sure of the next five to ten years of growth; the worst plausible outcome is that AI-driven substitution and weaker client spending shrink the subscription base, and the debt (fixed-rate, staggered 2028 to 2035, covered more than eight times by cash flow) would survive that, though shareholders would own much less. If we are wrong about flat earnings and they decline 3% a year forever, the shares would be worth roughly $150; if the bear case plays out, $128. The price assumes a holding period of about four years, during which the company converts nearly all its earnings into share repurchases rather than dividends. On today's share count, owner earnings after interest are about $15 a share; $85 is an earnings yield of roughly 18% before any growth, and the shares retired at that kind of price lift per-share earnings further, so flat earnings alone imply about a 20% annual return from that price, and the bear case value is above the margin-of-safety price.