DALLAS, TX -- August, 10 2026 -- Information Services Group, Inc. (NASDAQ: III): Stonegate Capital Partners Updates Coverage on Information Services Group, Inc. (NASDAQ: III). III’s 2Q26 results improved the forward setup as revenue and adj. EBITDA exceeded guidance, AI-related revenue accelerated, and recurring revenue reached a record. The differentiated read-through is that AI is strengthening both sides of ISG’s earnings model, generating demand across governance, sourcing, research, and advisory while supporting delivery efficiency, higher-value mix, and margin expansion. Underlying growth remained mid-single digits excluding FX and Martino, with growth broadening across the Americas and Europe despite measured enterprise decision-making. Record recurring revenue expands visibility beneath ISG’s project-oriented advisory work. Management said the pipeline is probably as strong as it has ever been, although client decision timing remains the primary visibility constraint. We are keeping an eye on AI governance expansion, larger opportunity conversion, recurring-revenue mix, and APAC’s return to growth.
Quarterly Results – III reported revenue, adj. EBITDA, and adj. EPS of $65.5M, $9.4M, and $0.10, respectively, versus $61.2M, $8.3M, and $0.09 in 1Q26. Revenue increased 6.4% y/y and exceeded the $62.5M-$63.5M outlook, including a $0.7M FX benefit. Adj. EBITDA increased 13% y/y and exceeded the $8.0M-$9.0M range, while margin expanded 80 bps to 14.3%. Drivers included pricing, cost optimization, higher-value advisory mix, recurring-revenue growth, and leverage from AI-enabled delivery. Consulting utilization was 74%, while operating cash flow improved to $5.2M from a $0.7M use in 1Q.
AI and Recurring Revenue – AI-related revenue increased 64% y/y to $26M from approximately $21M in 1Q, with nearly half of clients generating AI-related revenue. Management views AI governance as incremental white-space demand that can attach to existing relationships and lead into broader sourcing, workforce readiness, and transformation work. Recurring revenue increased 7% y/y to $30M, driven by research and governance, and management targets mix above 50% over the next couple of years. ISG has not seen billing-rate pressure from AI; management instead expects more frequent technology program and contract reviews to support transaction activity.
Regional Trends - Americas revenue increased 7% y/y and 6% q/q to $42.1M, supported by research, governance, health sciences, and insurance. Europe increased 10% to $18.3M as demand improved across advisory, software, governance, consumer, banking, manufacturing, and health sciences. APAC declined 7% to $5.1M, though improved late-quarter public-sector activity supports management’s expectation for growth in 2H26.
Guidance – III guided 3Q26 revenue to $63.5M-$64.5M and adj. EBITDA to $8.5M-$9.5M. Management expects y/y growth and margin expansion, while considering European summer seasonality and a later Labor Day. Cash ended at $23.7M, gross debt/EBITDA improved to 1.7x from 1.9x at year-end, and the Board added $30M to the repurchase authorization, bringing total availability to $32.3M, with buybacks expected to accelerate in 2H.
Valuation – We use both a DCF and EV/EBITDA comp analysis to guide our valuation. Our DCF analysis produces a valuation range of $5.38 to $6.76 with a mid-point of $5.98. Our EV/EBITDA valuation results in a range of $6.05 to $6.85 with a mid-point of $6.45. Using a simple average this arrives at a valuation range of $5.71 to $6.80 with a price target at the mid-point of $6.21.
