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 the growing impact of artificial intelligence on both demand generation and operational efficiency, positioning ISG for continued margin expansion and a robust pipeline for the remainder of the year.
Revenue increased 6.4% year-over-year to $65.5 million, while adjusted EBITDA rose 13% to $9.4 million, with margin expanding 80 basis points to 14.3%. These results reflect improving demand, pricing power, a higher-value advisory mix, and AI-enabled delivery efficiencies. The company's AI-related revenue surged 64% year-over-year to $26 million, with nearly half of its clients now generating AI-related revenue. This growth is driven by increasing demand for AI governance, sourcing, research, and advisory services, which are strengthening both sides of ISG's earnings model.
Recurring revenue reached a record $30 million, up 7% year-over-year, providing greater visibility beneath ISG's traditionally project-oriented advisory work. This record recurring revenue, combined with the acceleration in AI-related revenue, is a key differentiator for the company, as it enhances the predictability of its financial performance. Management noted that the pipeline is probably as strong as it has ever been, although client decision timing remains the primary constraint on visibility.
Geographically, growth broadened across the Americas and Europe, while the Asia-Pacific region is expected to return to growth. The company guided to continued year-over-year growth and margin expansion in the third quarter of 2026, supported by the strength of the pipeline and improving regional trends. Management's commentary suggests a constructive outlook for the second half of the year, despite the near-term challenges of enterprise decision-making timelines.
The company's focus on AI governance is creating incremental demand across existing client relationships, while recurring revenue adds stability to its business model. As AI continues to transform the consulting landscape, ISG's ability to capitalize on these trends is likely to drive sustained growth and profitability. Investors will be watching for further expansion of AI-related revenue, conversion of larger opportunities, and the mix of recurring revenue as indicators of the company's long-term trajectory.
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