The IT services sector faces persistent weakness as clients cut contracts due to efficiencies enabled by AI and business challenges stemming from economic headwinds.
Gartner (IT) shares slipped 27.6% on Tuesday, their worst single-day slide since October 1999, after the information technology research and advisory firm trimmed its forecast for the current year.
Gartner shares, which have seen modest gains over the decades, are up just 28% since 1993 — the earliest available data, according to Koyfin. The Stamford, Connecticut-based company went public on the Nasdaq in 1986.
The sharp decline highlights the widely recognized slowdown in the IT services sector, as enterprise clients scale back spending, driven by workforce efficiencies enabled by AI tools and broader business challenges in an uncertain economy.
Tata Consultancy Services (TCS.NSE), India’s largest IT services firm and heavily reliant on North American clients, recently announced a 3% reduction in its workforce, affecting approximately 12,000 employees.
On Stocktwits, the retail sentiment for IT shifted to ‘bullish’ from ‘neutral’ the previous day. One user said that the stock would rebound on Wednesday, “at the latest, by Friday.”
Gartner now expects 2025 revenue of at least $6.45 billion, down from its previous forecast of $6.53 billion or more. The company also lowered its core earnings outlook to at least $1.52 billion from a previous estimate of at least $1.54 billion.
The company’s tech-related research and advisory contracts grew 3.6% on a constant currency basis, while those related to HR, finance, legal, and supply chain rose 9.2%. That is lower than the 5.5% and 10.8% growth in those segments, respectively, in the first quarter.
The forecast overshadowed higher-than-expected revenue and adjusted profit for the second quarter. Gartner shares were flat in premarket trading on Wednesday.
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