Information Services Group (ISG) reported second-quarter 2026 results that exceeded guidance, with revenue increasing 6.4% year-over-year to $65.5 million and adjusted EBITDA climbing 13% to $9.4 million. The adjusted EBITDA margin expanded 80 basis points to 14.3%, underscoring the company's ability to convert demand into profitability. The results reflect a broader trend: AI is becoming a dual driver for ISG, fueling demand across its service lines while also enhancing delivery efficiency and mix.
AI-related revenue surged 64% year-over-year to $26 million, with nearly half of clients now generating AI-related revenue. This acceleration is not just a top-line story; it is also improving the quality of revenue. Recurring revenue reached a record $30 million, up 7% year-over-year, providing greater visibility in a business traditionally reliant on project-based work. The combination of AI-driven demand and recurring revenue strengthens ISG's earnings model, as AI governance creates incremental opportunities within existing client relationships.
Geographically, growth broadened across the Americas and Europe, despite a measured pace of enterprise decision-making. Management noted that the pipeline is "probably as strong as it has ever been," though client decision timing remains the primary constraint on visibility. This robust pipeline, coupled with improving regional trends, supports 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.
For investors, the key takeaway is that ISG is leveraging AI to enhance both revenue generation and operational efficiency. The rise in recurring revenue adds stability, while the expansion in AI-related revenue positions the company to capitalize on the growing need for AI governance, sourcing, and advisory services. However, the pace of enterprise decision-making remains a near-term variable, and the company's ability to convert its strong pipeline into closed deals will be critical.
Stonegate Capital Partners, which updated its coverage on ISG, highlighted the positive read-through of these results. The firm noted that AI is strengthening both sides of ISG's earnings model, and the record recurring revenue expands visibility beneath the project-oriented advisory work. Stonegate is monitoring AI governance expansion, larger opportunity conversion, and the return to growth in the Asia-Pacific region.
As ISG continues to navigate a dynamic market, its focus on AI and recurring revenue should provide a foundation for sustained growth. The company's ability to deliver on its guidance and convert its pipeline will be key indicators of its momentum in the coming quarters.
