Gartner (IT) Faced Challenges due to Concerns Over Government Spending Cuts

Baron Funds, an investment management company, released its “Baron Small Cap Fund” first-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the first quarter of 2025, the fund was down 9.07% (Institutional Shares) compared to the Russell 2000 Growth Index’s (the Index) -11.12% return. Small-cap stocks continued to underperform larger market caps meaningfully, so the Fund lagged the Russell 3000 Index, which fell 4.72% in the quarter. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first-quarter 2025 investor letter, Baron Small Cap Fund highlighted stocks such as Gartner, Inc. (NYSE:IT). Established in 1979, Gartner, Inc. (NYSE:IT) is a research and advisory company that operates through research, conferences, and consulting segments. The one-month return of Gartner, Inc. (NYSE:IT) was 5.42%, and its shares lost 0.15% of their value over the last 52 weeks. On May 23, 2025, Gartner, Inc. (NYSE:IT) stock closed at $438.36 per share with a market capitalization of $33.739 billion.

Baron Small Cap Fund stated the following regarding Gartner, Inc. (NYSE:IT) in its Q1 2025 investor letter:

“Shares of Gartner, Inc. (NYSE:IT), a provider of syndicated research, fell on uncertainty around the impact of government spending reductions on the business. We estimate U.S. federal exposure is about 5% of Gartner’s total research contract value, with about half from the Department of Defense and Intelligence organizations and half from civilian agencies. While Department of Government Efficiency-driven cost scrutiny is high, we believe Gartner’s services deliver significant value to users, including the potential for hard dollar savings. The private sector business appears well positioned for sustained growth, and management is adept at exercising cost controls to sustain or enhance margins and free cash flow. The company’s balance sheet is in excellent shape, and we expect management to take advantage of this drawdown with aggressive share repurchases.”

Gartner, Inc. (NYSE:IT) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 51 hedge fund portfolios held Gartner, Inc. (NYSE:IT) at the end of the first quarter which was 57 in the previous quarter. Gartner, Inc.’s (NYSE:IT) first quarter revenue was $$1.5billion, representing an 4% year-over-year increase. While we acknowledge the potential of Gartner, Inc. (NYSE:IT) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered Gartner, Inc. (NYSE:IT) and shared TimesSquare Capital U.S. Focus Growth Strategy’s views on the company. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.