What Happened?

Shares of research and advisory firm Gartner (NYSE: IT) fell 7.5% in the morning session after the company reported third-quarter 2025 financial results that revealed a significant plunge in profitability and cash flow, overshadowing an earnings beat. 

While the company's revenue of $1.52 billion was in line with Wall Street's expectations and its adjusted earnings per share (EPS) of $2.76 beat estimates by 13.7%, investors appeared to focus on signs of deteriorating business health. The company's operating margin contracted sharply, falling to 5.7% from 16.6% in the same quarter last year, indicating that expenses grew much faster than revenue. Furthermore, cash generation weakened considerably, with the free cash flow margin dropping to 17.6% from 38.1% a year ago. These steep declines in key profitability metrics signaled underlying operational challenges, outweighing the positive headline numbers.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Gartner? Access our full analysis report here.

What Is The Market Telling Us

Gartner’s shares are not very volatile and have only had 8 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

The previous big move we wrote about was 28 days ago when the stock dropped 3.3% on the news that broader macroeconomic concerns, including an ongoing government shutdown and anticipation of commentary from Federal Reserve officials, began to weigh on investor sentiment. After reaching new record highs, major U.S. indices like the S&P 500 and Nasdaq experienced a slight retreat. This pause came as investors grappled with the potential economic impact of a partial government shutdown, which had dampened consumer confidence and delayed the release of key economic data, such as September's nonfarm payrolls. The market appeared to be in a holding pattern as traders anticipated signals from Federal Reserve officials, looking for clues on future monetary policy. The caution in the broader market suggests that wider economic anxieties are currently overriding recent sector-specific optimism.

Gartner is down 53.3% since the beginning of the year, and at $225.49 per share, it is trading 59.1% below its 52-week high of $551.80 from November 2024. Investors who bought $1,000 worth of Gartner’s shares 5 years ago would now be looking at an investment worth $1,585.

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