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 rising 13% to $9.4 million. The adjusted EBITDA margin expanded by 80 basis points to 14.3%, reflecting improved demand, pricing, higher-value advisory mix, and AI-enabled delivery efficiencies. This performance underscores ISG's ability to convert market tailwinds into better operating leverage.
AI-related revenue surged 64% year-over-year to $26 million, with nearly half of clients now generating AI-related revenue. This growth spans across governance, sourcing, research, and advisory services, while also enhancing delivery efficiency and margin expansion. Additionally, recurring revenue hit a record $30 million, up 7% year-over-year, providing greater visibility beneath ISG's project-oriented advisory work. The combination of AI-driven demand and a growing recurring revenue base is pivotal for ISG's forward trajectory.
Geographically, growth broadened across the Americas and Europe, despite measured enterprise decision-making. Management indicated that the pipeline is possibly the strongest it has ever been, although client decision timing remains the primary constraint on visibility. This optimism is reflected in guidance for continued year-over-year growth and margin expansion in the third quarter.
ISG's underlying growth remained mid-single digits when excluding foreign exchange and the Martino acquisition. The company is focusing on AI governance expansion, converting larger opportunities, increasing recurring revenue mix, and returning APAC to growth. These factors are expected to support a constructive second-half 2026 outlook.
The results are particularly significant as they demonstrate that AI is strengthening both sides of ISG's earnings model: generating demand across its service lines and improving delivery efficiency and mix. Record recurring revenue adds a layer of predictability to a traditionally project-based business, enhancing investor confidence.
While enterprise decision timing poses near-term challenges, the robust pipeline and improving regional trends position ISG well for sustained growth. The company's ability to capitalize on AI trends and expand its recurring revenue base will be key metrics to watch in the coming quarters.
