Information Services Group, Inc. (NASDAQ: III) reported second-quarter 2026 results that exceeded guidance, with revenue and adjusted EBITDA surpassing expectations. The company's performance underscores a pivotal shift: artificial intelligence is now strengthening both sides of its earnings model, fueling demand across governance, sourcing, research, and advisory services while also improving delivery efficiency and margin expansion.
Revenue increased 6.4% year-over-year to $65.5 million, while adjusted EBITDA rose 13% to $9.4 million, with margins expanding 80 basis points to 14.3%. These results reflect improving demand, pricing power, a higher-value advisory mix, and AI-enabled delivery efficiencies. Underlying growth remained in the mid-single digits when excluding foreign exchange impacts and the Martino business, with broadening growth across the Americas and Europe despite cautious enterprise decision-making.
A key highlight was AI-related revenue, which surged 64% year-over-year to $26 million, with nearly half of clients now generating AI-related revenue. This growth is not just a tailwind but a transformative force, as AI governance creates incremental demand across existing client relationships. Additionally, recurring revenue reached a record $30 million, up 7% year-over-year. This record recurring revenue provides greater visibility beneath ISG's traditionally project-oriented advisory work, a significant advantage for investors seeking predictability.
Management expressed strong optimism about the future, describing the pipeline as "probably as strong as it has ever been." However, they noted that 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. The company guided to continued year-over-year growth and margin expansion in the third quarter.
The implications for the industry are profound. ISG's performance suggests that AI is not just a technology trend but a fundamental driver of consulting and advisory services. The surge in AI-related revenue indicates that enterprises are increasingly seeking guidance on AI governance, sourcing, and implementation. This trend is likely to persist as companies across sectors grapple with AI adoption and its regulatory and operational complexities.
Moreover, the rise in recurring revenue is a strategic shift for ISG, moving away from purely project-based engagements toward more stable, ongoing relationships. This could signal a broader industry trend where advisory firms build more durable revenue streams, enhancing their financial stability and attractiveness to investors.
Stonegate Capital Partners, which updated coverage on ISG, highlighted key areas to watch: AI governance expansion, conversion of larger opportunities, recurring-revenue mix, and APAC's return to growth. These factors will be critical in determining ISG's trajectory in the coming quarters.
As enterprises continue to navigate the complexities of AI, ISG's position as a leader in AI-related advisory services positions it well to capitalize on this secular growth trend. The company's ability to convert its strong pipeline into revenue will be a key metric to monitor, especially given the lingering uncertainty around enterprise decision timing.
Overall, ISG's second-quarter results demonstrate that AI is reshaping the consulting landscape, offering both growth opportunities and operational efficiencies. For business and technology leaders, this underscores the importance of integrating AI into their own strategies and the value of seeking expert guidance to navigate this transformative era.
