Competitive insight is difficult to glean from published company financials, because the detail is usually insufficient to meaningfully separate business components. Gartner Vendor Revenue Profiles show the diversification of a provider’s revenue and, at a high level, highlight the bright spots (or lack of) in the provider’s revenue streams. Also, they provide the checks and balances that the sum of individual segment revenue does not exceed the total revenue for a provider.
What Is a Gartner Vendor Revenue Profile?
Gartner Vendor Revenue Profiles represent Gartner’s analysis of a vendor’s reported (where applicable) revenue mapped to Gartner’s technology segmentation. The Gartner Vendor Revenue Profile provides a calendar-year view of a vendor’s merchant sales (that is, product and service sales to external customers) in U.S. dollars across IT, operational technology (OT) and component market segments. Vendor market segments featured in a Gartner Vendor Revenue Profile are nonoverlapping, meaning they can be mapped to only a single segment. These segments are reconciled with the consolidated view of the vendor’s public financial statements (when available). Note that revenue declared by vendors in financial reports excludes captive (intracompany) sales.
Gartner Vendor Revenue Profile estimates are important inputs to market share but are not the same and should not be used to construct a vendor’s market share. Instead, leverage the Gartner Market Share Navigator.
Gartner Vendor Revenue Profiles provide insight into the sources of revenue across a vendor’s technology product and service portfolio and the competitive landscape within various market segments. This insight can be used in business planning, investment prioritization and competitive benchmarking.
However, Gartner does not provide financial investment advice, is not a registered financial investment advisor or broker-dealer, and is not affiliated with a registered financial investment advisor or broker-dealer. The IT research that Gartner provides should not, in any way, be construed or viewed as investment-related guidance.
How Gartner Uses Vendor Revenue Profiles to Develop Market Share Research
The vendor revenue estimates developed for the Gartner Vendor Revenue Profile provide an important input into our Market Share research but are not the same as market share estimates because they measure different things. Gartner Vendor Revenue Profiles provide a mapping of vendor revenue as reported to Gartner segmentation and are designed to be used for product and service portfolio analysis.
Market share estimates provide a total available market (TAM) view of the competitive environment within a market segment. This view is linked to the Gartner Vendor Revenue Profile by making adjustments to account for items such as some intercompany sales, intracompany transfers and sell-through sales.
Therefore, vendor revenue estimates in Gartner Market Share reports correspond to, but are not equal to, vendor revenue estimates in Gartner Vendor Revenue Profiles.
The vendor revenue estimates in Gartner Vendor Revenue Profiles are only one of the inputs used to create Gartner Market Share research. For example, when developing market share revenue estimates from Gartner Vendor Revenue Profiles, the following adjustments may be required:
Addition of vendor revenue for products embedded in higher-value products/services — Vendor revenue for products embedded in higher-value products/services might be reported in more than one Market Share report. But it is reported in only one segment of its Gartner Vendor Revenue Profile. For example, in the case of a server vendor reporting sales revenue for servers including operating system (OS) licenses, the total revenue would be accounted for solely under the server segment of its Gartner Vendor Revenue Profile. However, in Market Share reports, not only is the total revenue included in the Gartner server Market Share report, but also a separate estimate is made to account for OS revenue in the Gartner enterprise software Market Share report.
Removal of sell-through revenue — Market Share reports do not account for sell-through revenue. “Sell-through revenue” is defined as revenue recognized when distributors resell products to end customers. For example, a communications service provider (CSP) reports sales revenue for mobile devices; this revenue would be included in a Gartner Vendor Revenue Profile but excluded from a Market Share report.
Addition of captive revenue — Market Share reports may include captive revenue, whereas Gartner Vendor Revenue Profiles do not. “Captive revenue” corresponds to a vendor’s internal sales channel (that is, when a vendor sells products or services to itself). Consolidated revenue declared by companies in their financial reports often eliminates captive sales (usually called “intersegment revenue” in income statements). For example, a multimarket vendor might supply servers to itself for bundling as part of its IT services solution; these captive sales would be accounted for in the server Market Share report.
The Structure of a Gartner Vendor Revenue Profile
The Gartner Vendor Revenue Profile tool allows clients to either select a named Gartner Vendor Revenue Profile or compare Gartner vendor revenue estimates in a named market segment.
Technology segments featured in a Gartner Vendor Revenue Profile are nonoverlapping and are reconciled with the consolidated view of the vendor’s public financials. All data is a Gartner estimate.
The Gartner Vendor Revenue Profile tool includes basic information associated with the vendor:
Location of the vendor’s operational headquarters
Type of company (that is, private versus public)
Name of the Gartner Vendor Revenue Profile lead analyst responsible for creating the Gartner Vendor Revenue Profile
The Gartner Vendor Revenue Profile tool does not provide analysis beyond our assessment of revenue by segment.
Frequently Asked Questions
For conglomerates or holding companies, we typically do not create a Gartner Vendor Revenue Profile. Instead, we aggregate the relevant vendors to create a “vendor group” if we need to analyze the overall IT revenue for a large, complex company. Note that Gartner is initially publishing a Gartner Vendor Revenue Profile for each of the vendors named in its Market Share reports and not for vendor groups. Gartner Vendor Revenue Profiles cover IT, OT and components. Any other revenue will be mapped to “other non-IT” revenue.
In a Gartner Vendor Revenue Profile, Gartner aligns its vendor revenue estimates with the most recently available financial reports when the merger and acquisition (M&A) activity completes. Gartner generally does not adjust the revenue history of vendors based on pro forma guidance after M&As. However, if, as a result of an M&A, the vendor restates its financial reports and materially changes its reported revenue, then Gartner may choose to update its historical estimates.
For market share, Gartner estimates the revenue under the acquiring company name as of the first day of the calendar quarter in which the acquisition is completed. We make best efforts to compensate for misalignment with company financial reporting. Gartner does not adjust the financial history of vendors that are acquired by another company.
In Gartner Vendor Revenue Profiles, Gartner aligns with the most recently available financial reports when the divestment activity completes. Gartner does not generally adjust the revenue history of vendors based on pro forma guidance after divestment. However, if, as a result of a divestment, the vendor restates its financial reports and materially changes its reported revenue, then we may choose to update its historical estimates.
When Gartner creates its vendor revenue estimates, it uses the most recently available information. If subsequent information is released after we publish Gartner Vendor Revenue Profile data, Gartner will note any changes and incorporate them in the next research cycle — generally, the following year. If Gartner has made an error (for example, has failed to take into account publicly available information), Gartner’s normal correction policies apply.
Gartner publishes “calendarized” market sizing revenue estimates (that is, January through December of a given year). If a vendor’s fiscal year is different from the calendar year, Gartner adjusts the vendor’s fiscal year to align with the calendar year. If a vendor’s fiscal quarter breaks across a calendar quarter, Gartner splits the quarters into months and recalculates estimates for calendar quarters and years accordingly. We assume equal distribution of revenue across the three months of a given quarter.
Gartner creates and maintains average exchange rates on a calendar quarterly basis (see Table 2). These are then applied to vendor quarterly financial reports in local/native currency to generate U.S. dollar revenue estimates.
Vendors are not implementing compliance with ASC 606 in the same way (that is, full retrospective, modified retrospective or cumulative catch-up transition methods) or at the same time. In addition, the Gartner Vendor Revenue Profile estimates are based on calendar-year time periods.
The majority of vendors in Gartner Market Share have adopted the new ASC 606 (FASB)/IFRS 15 (IASB) accounting standards using the modified approach. This means they did not restate history. Gartner has established the following policy to treat all providers as equitably as possible in our statistical research:
Gartner captures revenue numbers reflecting the new accounting standard starting only from the date of adoption by the company.
We have not restated our 2017 estimates of individual vendor revenue in instances where a provider adopted the new accounting standard only from 1 January 2018. This applies even where a provider has adopted the full retrospective approach and restated history.