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, leading to an 80 basis point expansion in adjusted EBITDA margin to 14.3%. This performance underscores the company's ability to convert improving demand into better operating leverage, driven by pricing, a higher-value advisory mix, and AI-enabled delivery efficiencies.
The most notable highlight was the acceleration in AI-related revenue, which grew 64% year-over-year to $26 million, with nearly half of clients now generating AI-related revenue. This growth is being fueled by demand across governance, sourcing, research, and advisory services. Additionally, recurring revenue reached a record $30 million, up 7% year-over-year, providing greater visibility into the company's traditionally project-oriented model. The combination of AI-driven demand and a growing recurring revenue base is strengthening both sides of ISG's earnings model, supporting margin expansion and a higher-value service mix.
Geographically, growth broadened across the Americas and Europe, even as enterprise decision-making remained measured. Management described the pipeline as potentially the strongest it has ever been, although client decision timing remains the primary constraint on visibility. Despite this, the company guided to continued year-over-year growth and margin expansion in the third quarter of 2026, supported by the robust pipeline and improving regional trends.
Stonegate Capital Partners, which provides equity research and investor relations services, updates its coverage on ISG, noting that the differentiated read-through is that AI is strengthening both demand and operational efficiency. The firm highlights key focus areas including AI governance expansion, conversion of larger opportunities, recurring revenue mix, and a return to growth in the Asia-Pacific region.
Underlying growth remained mid-single digits excluding the effects of foreign exchange and the Martino acquisition, with a broadening across regions. The record recurring revenue adds a layer of predictability to ISG's financial performance, which is particularly valuable in a project-oriented business. As enterprises increasingly seek guidance on AI governance and implementation, ISG is well-positioned to capture incremental demand from existing client relationships.
Stonegate Capital Partners is a leading capital markets advisory firm that provides investor relations, equity research, and institutional outreach services. Its affiliate, Stonegate Capital Markets, offers a full spectrum of investment banking and research services. The update reflects confidence in ISG's strategic direction and its ability to navigate the evolving AI landscape.
