Gartner (IT) beat across the board in Q2, while the selling environment improved sequentially, with artificial intelligence remaining the key demand driver for clients, Morgan Stanley said in a note emailed Wednesday.

Mid-size enterprises drove mid-single-digit contract value growth, with downsell beginning to stabilize, the firm noted. Client engagement increased by 140 basis points, with digital engagement and human interactions rising 110 basis points and 150 basis points, respectively, as wallet retention improved on quarter and traction grew within new and existing clients, according to the note.

Management believes stronger engagement will lead to higher retention rates, providing an opportunity for spend growth within existing customers via upsell opportunities, the note added.

While Gartner sees an improving selling environment, Morgan Stanley said it remains skeptical about performance accelerating meaningfully in the near-term, and expects low-single-digit growth levels.

Morgan Stanley kept an equal weight rating on Gartner and raised its price target to $177 from $173.

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