Sustainable Growth Advisers (SGA) Global Growth Strategy has announced its decision to divest its entire stake in Gartner, Inc. (IT) during the first quarter of 2026. This significant move was detailed in the firm's recent investor letter, highlighting a growing concern over Gartner's performance and strategic direction. The investment management company's Global Growth Portfolio experienced a -13.6% (Gross) and -13.8% (Net) return, underperforming the MSCI ACWI and MSCI ACWI Growth benchmarks. The market environment, characterized by AI disruption narratives and geopolitical tensions leading to oil price spikes, fostered caution among investors. SGA emphasized its commitment to businesses with robust financial health and diversified markets to withstand such volatilities.

Gartner, Inc., established in 1979, is a prominent research and advisory firm offering critical business and technology insights. However, the first quarter of 2026 saw Gartner's shares closing at $142.24, reflecting a -10.24% one-month return and a substantial 64.38% decline over the preceding 52 weeks, bringing its market capitalization to $9.52 billion. SGA's decision to exit its position was primarily driven by what it described as a "disappointing quarter" and a series of unsatisfactory interactions with Gartner's management. The core issue, according to SGA, was a fundamental divergence in strategic vision.

SGA's investor letter explicitly stated that Gartner's priorities and actions did not align with the strategic direction the advisory firm had championed. Over the past year, Gartner's growth decelerated, which SGA initially attributed to broader political and macroeconomic factors, including disruptions related to tariffs. However, Gartner consistently failed to meet its Contract Value targets, leading SGA to become increasingly concerned about market saturation. SGA actively engaged with Gartner's management and Board, advocating for a shift away from a primary focus on Contract Value—even suggesting changes to management compensation metrics—towards prioritizing free cash flow. This strategic reorientation, SGA believed, would unlock significant shareholder value through enhanced margin improvement and stronger profit and free cash flow growth.

Despite SGA's recommendations, Gartner's earnings guidance for the quarter indicated no such strategic shift. Instead, the company appeared to reaffirm its commitment to reinvestment in pursuit of what SGA deemed "unrealistic growth targets," rather than adopting a more balanced approach to growth and profitability. Consequently, in light of the persistent financial underperformance and the company's unwavering strategic stance, SGA made the definitive decision to divest from Gartner. The company has since been removed from SGA's Qualified Company List, signaling a complete withdrawal of confidence from the investment management firm.

The exit from Gartner underscores SGA Global Growth Strategy's rigorous investment philosophy, which prioritizes companies demonstrating strong balance sheets, sustainable cash flows, and diversified market exposure. This incident serves as a clear illustration of SGA's willingness to disengage from holdings when a company's leadership and strategic direction deviate from the firm's long-term value creation principles, especially in volatile market conditions influenced by technological advancements and global events.