ISG's AI-Driven Growth and Record Recurring Revenue Signal Stronger 2H26 Outlook

Information Services Group, Inc. (NASDAQ: III) reported second-quarter 2026 results that exceeded guidance, with revenue increasing 6.4% year-over-year to $65.5 million and adjusted EBITDA rising 13% to $9.4 million. The adjusted EBITDA margin expanded by 80 basis points to 14.3%, reflecting the company's ability to convert improving demand, pricing, higher-value advisory mix, and AI-enabled delivery efficiencies into better operating leverage.

AI-related revenue accelerated, growing 64% year-over-year to $26 million, with nearly half of clients now generating AI-related revenue. This growth is not only driving demand across governance, sourcing, research, and advisory services but also supporting delivery efficiency and a higher-value mix, which contributes to margin expansion. The company also achieved a record $30 million in recurring revenue, up 7% year-over-year, adding greater visibility to its traditionally project-oriented model.

Growth broadened across the Americas and Europe, with underlying growth remaining mid-single digits excluding foreign exchange and Martino. Despite measured enterprise decision-making, management described the pipeline as "probably as strong as it has ever been," although client decision timing remains the primary visibility constraint. This strength, combined with improving regional trends, supports a constructive outlook for the second half of 2026.

Management guided to continued year-over-year growth and margin expansion in the third quarter, reinforcing the view that ISG is well-positioned to capitalize on the growing demand for AI governance and other advisory services. The company's focus on AI governance expansion, larger opportunity conversion, and the return to growth in APAC will be key areas to monitor.

According to Stonegate Capital Partners, which updated coverage on ISG, the differentiated read-through is that AI is strengthening both sides of ISG's earnings model. It is generating demand across governance, sourcing, research, and advisory while also improving delivery efficiency and margin expansion. The record recurring revenue further enhances visibility beneath the project-oriented advisory work.

ISG's results underscore the importance of AI as a growth driver in the consulting industry. The company's ability to leverage AI across its service lines not only attracts new business but also enhances operational efficiency, leading to improved profitability. As enterprises continue to navigate digital transformation, ISG's expertise in AI governance and sourcing positions it as a key partner.

The company's performance in the second quarter indicates that it is successfully executing its strategy to capitalize on the AI opportunity. With a strong pipeline and broadening growth across regions, ISG appears poised for continued success in the coming quarters. Investors and industry observers will be watching closely to see if the company can maintain this momentum and convert its pipeline into sustained revenue growth.

For more details on ISG's second-quarter results and outlook, refer to the official announcement.