Information Services Group, Inc. (NASDAQ: III) reported second-quarter 2026 results that surpassed expectations, with revenue and adjusted EBITDA exceeding guidance. The company's AI-related revenue accelerated, and recurring revenue reached a record high, underscoring the transformative impact of AI on its business model.
Revenue increased 6.4% year-over-year to $65.5 million, while adjusted EBITDA rose 13% to $9.4 million, resulting in a 80 basis point expansion in adjusted EBITDA margin to 14.3%. These results reinforce the view that ISG is converting improving demand, pricing power, higher-value advisory mix, and AI-enabled delivery efficiencies into better operating leverage.
A key highlight was the 64% year-over-year increase in AI-related revenue to $26 million, with nearly half of clients now generating AI-related revenue. Additionally, recurring revenue grew 7% year-over-year to a record $30 million. This combination is crucial for the forward setup, as AI governance is creating incremental demand across existing client relationships, while recurring revenue adds greater visibility to ISG's traditionally project-oriented model.
Growth broadened across the Americas and Europe, and management described the pipeline as potentially the strongest it has ever been. They guided to continued year-over-year growth and margin expansion in the third quarter. Although enterprise decision timing remains a near-term constraint, the strength of the pipeline and improving regional trends support a constructive outlook for the second half of 2026.
The company's performance is particularly notable given the broader economic environment. Underlying growth remained mid-single digits excluding FX and the impact of Martino, with growth broadening across regions despite measured enterprise decision-making. The record recurring revenue enhances visibility beneath ISG's project-oriented advisory work, which is a positive signal for investors.
Management emphasized that the pipeline is probably as strong as it has ever been, though client decision timing remains the primary constraint on visibility. They are keeping an eye on AI governance expansion, larger opportunity conversion, recurring-revenue mix, and APAC's return to growth.
These results highlight how AI is strengthening both sides of ISG's earnings model. On the demand side, AI is generating demand across governance, sourcing, research, and advisory services. On the supply side, AI is supporting delivery efficiency, a higher-value mix, and margin expansion. This dual benefit is a differentiated read-through from the quarter's results.
For more details, the full announcement, including downloadable images and bios, can be accessed at Stonegate's website. Stonegate Capital Partners, a leading capital markets advisory firm, provides investor relations, equity research, and institutional investor outreach services for public companies. Its affiliate, Stonegate Capital Markets, offers a full spectrum of investment banking and capital raising services.
