Information Services Group, Inc. (NASDAQ: III) reported second-quarter 2026 results that beat guidance on both revenue and adjusted EBITDA, driven by accelerating AI-related revenue and record recurring revenue. The company's performance underscores a strengthening demand environment and improved operating leverage, with management describing the pipeline as potentially the strongest it has ever been.
Revenue increased 6.4% year-over-year to $65.5 million, while adjusted EBITDA rose 13% to $9.4 million, exceeding company guidance. Adjusted EBITDA margin expanded by 80 basis points to 14.3%. These results reflect the company's ability to convert improving demand, pricing power, a higher-value advisory mix, and AI-enabled delivery efficiencies into better profitability.
A key highlight was the 64% year-over-year surge in AI-related revenue to $26 million, with nearly half of ISG's clients now generating AI-related revenue. This growth spans governance, sourcing, research, and advisory services. Additionally, recurring revenue increased 7% to a record $30 million, providing greater visibility into the company's traditionally project-oriented model. The combination of AI-driven demand and recurring revenue is reshaping ISG's earnings structure, enhancing both top-line growth and margin potential.
Geographically, growth broadened across the Americas and Europe, despite measured enterprise decision-making. Underlying growth remained in the mid-single digits when excluding foreign exchange and the Martino acquisition. Management noted that while client decision timing remains a near-term constraint on visibility, the strength of the pipeline supports a constructive outlook for the second half of 2026.
For the third quarter, ISG guided to continued year-over-year growth and margin expansion. The company is monitoring several factors that could further accelerate performance, including the expansion of AI governance services, conversion of larger opportunities, growth in recurring revenue mix, and a return to growth in the Asia-Pacific region.
These results are significant because they demonstrate that AI is not only driving new business but also improving delivery efficiency and margin performance. The record recurring revenue adds a layer of predictability to ISG's financials, which could appeal to investors seeking stable growth in the consulting sector. With a strong pipeline and broadening regional growth, ISG appears well-positioned to capitalize on the ongoing digital transformation and AI adoption trends.
