Grade: C — Some Red Flags, Investigate
Framework: Schilit *Financial Shenanigans* + Beneish M-Score + forensic accounting principles
Data: SEC EDGAR 10-K (Filed 2026-02-12) + Yahoo Finance
Auditor: KPMG LLP — Clean opinion
One-line verdict: Gartner is a high-quality subscription business — Insights (research) generates 78% of revenue at 77% gross margins, contract value reached $5.2B, and the company produced $1.3B in operating cash flow. But FY2025 was messy: net income fell 42% from $1.3B to $729M due to a $150M goodwill impairment on the Digital Markets (formerly TalentNeuron) business, the loss of a $135M gain from event cancellation insurance that boosted FY2024, and higher taxes. The balance sheet carries $3.1B of goodwill on $320M of equity — a 962% ratio — because Gartner has spent $7.0B buying back stock. The M-Score of -2.89 is very clean, cash conversion is excellent at 1.77x, and free cash flow of $1.2B is strong. The sole red flag is the intangible-to-equity ratio; the rest of the profile is healthy.
| Metric | Result |
|---|---|
| Red Flags | **1** (financial 1 + management 0) |
| Watch Items | **1** (financial 1 + management 0) |
| Checks Completed | **22/23** (financial 17/18 + management 5/5 G1-G5) |
| Beneish M-Score | **-2.89** (clean) |
| F-Score (Fraud Probability) | **1.19** (0.44% probability) |
| Altman Z-Score | **3.66** (safe zone) |
| Auditor | KPMG LLP — Unqualified opinion |
| Fiscal Year | 2025 (ended December 31, 2025) |
| Report Date | 2026-04-05 |
Revenue: Insights Driving Steady Growth
Per the consolidated statements of operations:
| Metric | FY2025 | FY2024 | FY2023 |
|---|---|---|---|
| Insights (Research) | $5,073M | $4,829M | $4,516M |
| Conferences | $645M | $583M | $505M |
| Consulting | $553M | $559M | $515M |
| Other | $227M | $297M | $371M |
| **Total Revenue** | **$6,497M** | **$6,267M** | **$5,907M** |
| Cost of Services | $2,054M | $2,023M | $1,903M |
| SG&A | $3,068M | $2,885M | $2,702M |
| Goodwill Impairment | $150M | — | — |
| Operating Income | $1,024M | $1,257M | $1,117M |
| Net Income | $729M | $1,254M | $882M |
| Diluted EPS | $9.65 | $16.00 | $11.01 |
Total revenue grew 4% (3% ex-FX). The filing explains: "Insights revenues increased to $5.1 billion in 2025, an increase of 5% compared to 2024. Contract value was $5.2 billion at December 31, 2025, an increase of 1% compared to December 31, 2024 on a foreign currency neutral basis."
Conferences grew 11% ($645M) as Gartner held 53 in-person events vs 51 in FY2024. Consulting revenue was essentially flat at $553M, with the filing noting that "Consulting engagements typically are project-based and non-recurring."
The "Other" segment declined 23% from $297M to $227M — this includes the Digital Markets business that is being divested.
The $150M Goodwill Impairment and Divestiture
Per Note 3 in the financial statements:
"The Company recognized an impairment loss of $150.0 million during the year ended December 31, 2025."
The goodwill rollforward shows this impairment was allocated to the "Other" segment ($197M at start of year, $150M impaired, $49M reclassified to held-for-sale). Per Note 19 (Subsequent Events), the company is divesting the Digital Markets business. This was the former TalentNeuron operation.
The goodwill balance decreased from $2.9B to $2.7B — the $150M impairment plus $49M reclassification, partially offset by $10M in FX translation gains.
Cash Flow: Excellent Quality
Per the consolidated statements of cash flows:
| Metric | FY2025 | FY2024 | FY2023 |
|---|---|---|---|
| Net Income | $729M | $1,254M | $882M |
| D&A | $200M | $202M | $191M |
| SBC | $156M | $155M | $130M |
| Goodwill Impairment | $150M | — | — |
| Operating Cash Flow | $1,290M | $1,485M | $1,156M |
| CapEx | -$115M | -$102M | -$103M |
| **Free Cash Flow** | **$1,175M** | **$1,383M** | **$1,053M** |
| CFFO/NI | 1.77x | 1.18x | 1.31x |
Cash conversion is strong — $1.77 of operating cash per $1 of earnings. The higher ratio in FY2025 partly reflects the $150M non-cash goodwill impairment that reduced net income without affecting cash. Stripping out the impairment, the adjusted CFFO/NI would be approximately 1.47x — still healthy.
Deferred revenue declined $42M (from $2.76B to $2.81B in total, but the timing movements were negative), which the filing does not explain in detail. This is a mild negative signal for a subscription business where deferred revenue growth typically tracks contract value growth.
Balance Sheet: Buyback-Compressed Equity
Per the consolidated balance sheet:
| Item | FY2025 | FY2024 |
|---|---|---|
| Cash & Equivalents | $1,723M | $1,933M |
| Fees Receivable, net | $1,685M | $1,696M |
| Total Current Assets | $4,066M | $4,197M |
| Goodwill | $2,741M | $2,930M |
| Intangible Assets, net | $336M | $410M |
| Total Assets | $8,085M | $8,535M |
| Current Debt | $0M | $5M |
| Long-term Debt | $2,977M | $2,460M |
| Deferred Revenue | $2,810M | $2,763M |
| **Stockholders' Equity** | **$320M** | **$1,359M** |
| Treasury Stock (at cost) | -$9,040M | -$7,043M |
| Accumulated Earnings | $6,722M | $5,993M |
Stockholders' equity collapsed from $1.4B to $320M — a 76% decline driven by $2.0B in share repurchases during FY2025 (7.0M shares at an average of ~$285/share). Treasury stock of $9.0B now exceeds total assets.
Long-term debt increased $517M to $3.0B. The filing's debt table shows:
The company issued the 2031 and 2035 notes in FY2025 ($800M total), using proceeds partly to fund accelerated buybacks.
The 18-Point Screening
| # | Check | Result | Detail |
|---|---|---|---|
| A1 | DSO Change | PASS | DSO 95 days, -4 days YoY. Improving |
| A2 | AR vs Revenue Growth | PASS | AR -0.7% vs revenue +3.7%. Clean |
| A3 | Revenue vs CFFO | PASS | Revenue +3.7%, CFFO -13.1%. CFFO declined but timing |
| B1 | Inventory vs COGS | PASS | No material inventory (services business) |
| B2 | CapEx vs Revenue | PASS | CapEx +13.2% vs revenue +3.7%. Normal absolute level |
| B3 | SG&A Ratio | PASS | SG&A/Gross Profit = 69.0%. High but typical for Gartner's model |
| B4 | Gross Margin | PASS | 68.4%, +0.7pp. Stable |
| C1 | CFFO vs Net Income | PASS | CFFO/NI = 1.77. Excellent |
| C2 | Free Cash Flow | PASS | FCF $1.2B, FCF/NI = 1.61 |
| C3 | Accruals Ratio | PASS | -6.9%. Strongly negative — excellent quality |
| C4 | Cash vs Debt | WATCH | Cash $1.7B covers 51% of debt $3.3B |
| D1 | Goodwill + Intangibles | **FAIL** | $3.1B = 962% of equity. Over threshold |
| D2 | Leverage | PASS | Debt/EBITDA = 2.6x. Manageable |
| D3 | Soft Asset Growth | PASS | Other assets +4.9% vs revenue +3.7%. Normal |
| D4 | Asset Impairment | N/A | No write-off data |
| E1 | Serial Acquirer FCF | PASS | FCF after acquisitions positive |
| E2 | Goodwill Surge | PASS | Goodwill -8% YoY. Declining (impairment + divestiture) |
| F1 | Beneish M-Score | PASS | M-Score = -2.89 (< -2.22). Very clean |
| **G1-G5** | **Management signals (new)** | **✅✅✅✅✅** |
Management Signals (New G1-G5 Framework)
**Why separate management signals?** Schilit's *Financial Shenanigans* treats abrupt executive, auditor, and director departures as important early-warning signals. 8-K Item 5.02 executive/director changes and auditor-change filings help separate clean financial statements from governance or continuity risk.
| # | Check | Result | Detail |
|---|---|---|---|
| G1 | CEO change | ✅ | No abnormal signal in the last 18 months |
| G2 | CFO / key financial officer change | ✅ | No abnormal signal in the last 18 months |
| G3 | Independent director / audit committee departure | ✅ | No abnormal signal in the last 18 months |
| G4 | Key operating or legal leader departure | ✅ | No abnormal signal in the last 18 months |
| G5 | Auditor change | ✅ | No abnormal signal in the last 18 months |
Data source: SEC EDGAR 8-K filings filtered for Item 5.02 + management-signals-by-ticker.json
Key Risks from the 10-K
1. Contract Value Growth Slowing
Contract value grew just 1% on a constant-currency basis to $5.2B. For a subscription business trading at a premium valuation, this deceleration is significant. The filing notes that Consulting's Dollar-Based Net Retention Rate for non-platform products has dropped below 100% (97% as of September 2025), indicating contraction within existing accounts.
2. Digital Markets Impairment and Divestiture
The $150M goodwill impairment and subsequent reclassification to held-for-sale signals a failed diversification attempt. The Digital Markets business is being divested, and the remaining $49M goodwill reclassified as held-for-sale will likely be written down further.
3. Equity Approaching Zero
At $320M equity and $2.0B/year in buybacks, Gartner will have negative equity within one year. While this is a deliberate capital allocation choice (similar to FICO), it eliminates the balance sheet cushion and could affect credit terms.
4. Revenue Concentration
The filing warns: "We depend on renewals of subscription-based services and their related revenues, and our failure to renew at historical rates could lead to a decrease in our revenues." Insights retention rates drive the business model — any deterioration would compound quickly given the subscription nature of revenue.
Key Financial Trends (4-Year)
| Metric | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|
| Revenue | $5,476M | $5,907M | $6,267M | $6,497M |
| Net Income | $808M | $882M | $1,254M | $729M |
| Gross Margin | 69.1% | 67.8% | 67.7% | 68.4% |
| Net Margin | 14.8% | 14.9% | 20.0% | 11.2% |
| CFFO | $1,101M | $1,156M | $1,485M | $1,290M |
| FCF | $993M | $1,053M | $1,383M | $1,175M |
| Cash | $698M | $1,319M | $1,933M | $1,723M |
| Total Debt | $3,158M | $3,070M | $2,900M | $3,348M |
Summary
Grade: C. One red flag and one watch item. A clean subscription business with a buyback-driven balance sheet distortion.
Gartner's FY2025 is operationally sound despite the headline earnings decline. The $150M goodwill impairment and loss of FY2024's one-time insurance gain explain most of the net income drop. Underlying subscription revenue grew 5%, cash flow quality is excellent (CFFO/NI = 1.77x), and the M-Score of -2.89 is very clean. There is no evidence of earnings manipulation.
The sole red flag — goodwill plus intangibles of $3.1B at 962% of equity — is a structural consequence of aggressive buybacks. Treasury stock of $9.0B dwarfs total assets. Gartner spent $2.0B repurchasing shares in FY2025 alone (funded partly by $800M in new debt), which is 170% of free cash flow. This is the same pattern seen in FICO — a quasi-monopoly franchise using financial engineering to maximize per-share metrics.
The watch item — cash covering 51% of debt — reflects the new $800M debt issuance. At 2.6x Debt/EBITDA, leverage is manageable, and the $1.0B undrawn revolver provides backup liquidity.
The real concern is slowing growth: contract value up just 1%, Consulting DBNRR below 100%, and the Digital Markets business being divested after impairment. Gartner's premium valuation depends on consistent mid-single-digit organic growth — any further deceleration would pressure the stock and make the debt-funded buyback strategy look less compelling.
**Disclaimer**: This report is based on Gartner, Inc.'s fiscal year 2025 10-K filed with the SEC on February 12, 2026. This is NOT investment advice.
**About EarningsGrade**: We screen earnings reports for financial red flags using an 18-point forensic framework. Grade C means some red flags were detected that warrant investigation before investing.