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Gartner Hikes 2025 Profit Outlook Despite Revenue Trim, Citing Cost Discipline

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Gartner Inc. (IT.N) on Tuesday raised its 2025 profit forecast after posting better-than-expected Q1 earnings, thanks to strict cost-cutting measures and resilient demand for its subscription research services. The company now expects adjusted EPS of at least $11.70, up from its prior estimate of $11.45.

The technology research and advisory firm, which serves clients like Accenture and Cognizant, reported Q1 adjusted earnings of $2.98 per share, surpassing analyst expectations of $2.72, according to LSEG. Despite macroeconomic headwinds such as tariff-driven volatility, Gartner’s research segment, its largest, grew 4.2% year-on-year, helping cushion softness in other areas.

Total Q1 revenue came in at $1.53 billion, a 4.2% year-over-year increase but slightly below analysts’ forecast of $1.54 billion. The company revised its full-year 2025 revenue guidance slightly downward to $6.53 billion, from the earlier $6.56 billion estimate.

Costs rose by just 4.7%, a marked slowdown from the 8.8% increase in the prior quarter, signaling effective cost management. Gartner operates in three core business units:

  • Research (subscription-based insights)

  • Consulting (custom advisory services)

  • Conferences (networking and executive events)

While the company anticipates modest revenue growth, its higher earnings guidance highlights confidence in margin stability driven by efficiency improvements and robust retention in recurring services.

Indian IT Sector’s Fiscal 2026 Outlook Dimmed by Weak US Demand and Trade Tensions

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India’s information technology (IT) sector, one of the worst-performing industries this year, is unlikely to see a strong recovery in fiscal 2026, according to analysts. The outlook remains uncertain, following recent warnings from Accenture, the world’s largest IT services firm, which cited weak discretionary spending and lackluster demand from its clients.

Accenture’s quarterly report flagged that client budgets remained flat, with little growth in discretionary project spending. The company also noted that global trade tensions, exacerbated by new U.S. tariffs, have further dampened prospects in the United States, a key market for Indian IT firms.

Amit Chandra from HDFC Securities noted that the last few months have heightened uncertainty about the first half of fiscal 2026 and how this will affect the overall recovery rate for the year. As of now, India’s IT index has dropped 15.3%, marking its worst performance since June 2022. Major firms such as TCS, Wipro, Infosys, and HCLTech have seen losses ranging from 11.2% to 18.1% this year.

Analysts from Kotak Institutional Equities warned that a soft recovery in demand and fewer mega deals in fiscal 2025 will result in slower revenue growth in fiscal 2026 for Indian IT companies. The impact of early-stage adoption of generative AI is also expected to present challenges, they added.

Research from Citi and Morgan Stanley forecast modest growth, with Citi estimating 4% revenue growth for IT companies in fiscal 2026, similar to fiscal 2025, and Morgan Stanley highlighting subdued client spending as a key factor limiting growth. However, sectors like banking, financial services, insurance (BFSI), and healthcare have shown some signs of recovery, although many clients are currently in a “wait-and-watch mode,” potentially leading to further reductions in spending.

Accenture’s report also indicated that U.S. clients have delayed or canceled new contracts, partly due to the Trump administration’s policies, which could increase competitive pressures in other segments, despite Indian IT companies having limited exposure to these delays.

Accenture Faces Federal Contract Slowdown Amid U.S. Spending Cuts

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Accenture reported delays and cancellations of federal contracts due to the Trump administration’s cost-cutting measures, leading to a more than 6% drop in its share price on Thursday. The administration’s Department of Government Efficiency (DOGE), led by Elon Musk, has been aggressively reducing spending and shrinking the federal workforce, impacting consulting firms like Accenture.

The U.S. General Services Administration has directed agencies to review and cancel non-essential contracts, slowing down new procurement actions and negatively affecting Accenture’s sales and revenue. The company’s federal services unit, which made up 8% of its total revenue in 2024, has been hit particularly hard by these measures.

DOGE’s aggressive policies—including rapid workforce reductions and contract cancellations—have sparked criticism, lawsuits, and uncertainty about the long-term impact on government operations. Meanwhile, President Trump is set to sign an executive order to shut down the Department of Education, a move that has already affected IBM, a key vendor for the department, causing its shares to drop 4%.

Accenture’s new bookings, a key indicator of future revenue, fell 3% to $20.9 billion in Q2. Its consulting services segment, which contributes 59% of revenue, posted $8.3 billion, missing analyst expectations of $8.54 billion. However, the company slightly raised its annual revenue growth forecast to 5%-7%, up from 4%-7%.