Gartner (IT) is likely to face a challenging growth environment next quarter amid economic uncertainty, pressure from artificial intelligence, and continued weakness in US federal contracts, Morgan Stanley said Tuesday in a report.
In Q3, Gartner's organic contract value grew 3%, below Morgan Stanley's estimate and the 3.7% market consensus. That marked a slowdown from 4.9% in Q2, a 190 basis point drop, echoing earlier deceleration trends, the report said.
Excluding federal contract cancellations, growth would have been 5.7%, still trailing Morgan Stanley's 5.9% estimate and down about 70 basis points sequentially.
The results "did little to quell the bear case that artificial intelligence is disrupting its business and driving seat cancels," Morgan Stanley said. Management attributed the slowdown to macroeconomic pressures, noting that sectors like software and services are seeing only modest growth, the report said.
Morgan Stanley lowered its price target on Gartner stock to $281 from $307 and kept its equal weight rating.
Gartner provides market research and advisory services for information technology.
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