Information Services Group (NASDAQ: III) reported second-quarter 2026 results that exceeded guidance, with revenue and adjusted EBITDA both surpassing expectations. Revenue increased 6.4% year-over-year to $65.5 million, while adjusted EBITDA rose 13% to $9.4 million, resulting in an 80 basis point margin expansion to 14.3%. This performance underscores ISG's ability to convert improving demand, pricing power, a higher-value advisory mix, and AI-enabled delivery efficiencies into stronger operating leverage.
A standout highlight was the acceleration of AI-related revenue, which surged 64% year-over-year to $26 million, with nearly half of ISG's clients now generating AI-related revenue. This growth is not just a single segment; it is permeating across governance, sourcing, research, and advisory services, simultaneously enhancing delivery efficiency and supporting margin expansion. The company also achieved a record $30 million in recurring revenue, up 7% year-over-year, which adds greater visibility to its traditionally project-oriented model.
Geographically, growth broadened across both the Americas and Europe, even as enterprise decision-making remained measured. Management noted that the pipeline is probably as strong as it has ever been, though client decision timing remains the primary constraint on visibility. Despite this, the strength of the pipeline and improving regional trends support a constructive outlook for the second half of 2026.
Stonegate Capital Partners, which updated coverage on ISG, highlighted that the quarter reinforces the view that AI is strengthening both sides of ISG's earnings model. The combination of AI-driven demand and record recurring revenue expands visibility and sets up a favorable forward trajectory. Key areas to watch include AI governance expansion, conversion of larger opportunities, recurring revenue mix, and the return to growth in the Asia-Pacific region.
For the third quarter, management guided to continued year-over-year growth and margin expansion, building on the momentum from the second quarter. The underlying growth, excluding foreign exchange and the Martino acquisition, remained in the mid-single digits, indicating organic strength.
Investors and industry watchers should note that ISG's strategic focus on AI and recurring revenue is paying off, positioning the company to navigate uncertain enterprise spending while capitalizing on secular trends. The record recurring revenue and robust pipeline suggest that ISG is well-positioned for sustained growth, even as broader economic conditions remain unpredictable.
For more details, the full announcement is available at [Stonegate Capital Partners' press release](http://www.stonegateinc.com).
