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    III
    Earnings call· Jun 2026(Q2 FY26)

    Information Services Group Q2 FY26 earnings call III

    Aug 6, 2026 Source

    Executive summary

    Information Services Group Q2 FY26 — Strong AI-driven Growth and Expanded Share Buyback

    Information Services Group delivered a strong second quarter, driven by broad-based growth across regions and a significant tailwind from AI-related services, which now constitute a substantial portion of firm-wide revenue. The company continues to improve its business quality with record recurring revenues and expanding margins, supported by disciplined cost management and higher-value advisory work. Management remains optimistic about the pipeline and decision-making pace, while also expanding its capital return program.

    Highlights

    5

    • Revenue of $65.5 million, up 6.4% year-over-year, exceeding expectations.

    • Adjusted EBITDA increased 12.9% to $9.4 million, marking the seventh consecutive quarter of double-digit growth.

    • AI-related revenue grew 64% to $26 million in Q2, representing 37% of firm-wide revenue for the first half.

    • Recurring revenues reached a record $30 million, up 7%, now representing 45-47% of total revenue.

    • Expanded share buyback program by an additional $30 million, the largest in company history.

    Concerns

    3

    • Asia Pacific revenue was down $400,000 or 6.7% compared to the prior year.

    • Clients remain measured in their pace of spending, leading to slower decision-making, though this is improving compared to a year ago.

    • Acquisition valuation expectations are rising, making the M&A market "a little bit more frothy" than a year ago.

    Guidance & targets

    2
    CategoryTargetConfidence
    Q3 FY26 Revenue
    $63.5 million to $64.5 million
    high materiality
    High
    Q3 FY26 Adjusted EBITDA
    $8.5 million to $9.5 million
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Americas
    Key client engagements included 3M, Centauri, and the Commonwealth of Pennsylvania. Expanded relationship with a major global oil and gas company, adding $1 million of revenue. Won a new $1 million engagement with a U.S.-based global manufacturer.
    Double-digit growth in research and governanceDouble-digit growth in health sciences and insurance industry verticals
    		$42.1 million6.7%6%—
    Europe
    Key client engagements included Roche, Olympus, and BNP Paribas. Expanded relationship with a leading health insurer, driving cost savings up to 50%. Won new business with a leading health and pharmacy chain, achieving $10 million of savings this year.
    Double-digit growth in advisory, software and governance businessesDouble-digit growth in consumer, banking, manufacturing and health sciences industry verticals
    		$18.3 million9.8%——
    Asia Pacific
    Saw a breakthrough in public sector spending late in the quarter, expected to return to growth in H2 FY26. Key clients included Woolworths, AirTrunk, and the Australian Department of Home Affairs. Won a significant public sector agreement providing over $12 million in net savings.
    Double-digit growth in health sciences, energy and utility verticals
    		$5.1 million-6.7%——

    Operational metrics

    22
    Total revenue
    $65.5 millionup 6.4% year-over-year
    Q2 FY26

    Revenue for the second quarter, exceeding expectations.

    Recurring revenue
    $30 millionup 7%
    Q2 FY26

    Powered by research and governance businesses. Objective to reach over 50% of revenue, currently 45-47%.

    AI-related revenue
    $26 milliongrew 64%
    Q2 FY26

    Represents more than growing interest in AI, showing enterprises turning to ISG for business challenges.

    AI-related revenue
    $47 million
    H1 FY26

    For the first half of the fiscal year.

    Adjusted EBITDA
    $9.4 millionup 12.9% year-over-year
    Q2 FY26

    Above expectations, reflecting higher-value advisory work, recurring revenues, and AI-enabled delivery.

    Adjusted EBITDA margin
    14.3%rose more than 80 basis points
    Q2 FY26

    Expanded due to continued evolution toward higher-value advisory work, growth in recurring revenues, and increasing leverage from AI-enabled delivery.

    Operating income
    $5.9 millionup 25.6% year-over-year
    Q2 FY26
    Operating margin
    8.9%
    Q2 FY26

    Fueled by solid pricing and continued focus on cost optimization.

    GAAP Net Income
    $3.3 millioncompared with $2.2 million last year
    Q2 FY26
    Non-GAAP EPS
    $0.10up from $0.08 a year ago
    Q2 FY26

    Adjusted net income was $5 million.

    Headcount
    1,281essentially flat with last quarter
    Q2 FY26 end
    Consulting utilization
    74%remained solid
    Q2 FY26
    Cash and investments balance
    $23.7 millioncompared with $22.7 million at the end of the first quarter
    Q2 FY26 end
    Net cash generated from operations
    $5.2 millionas compared to a $700,000 cash usage in the first quarter
    Q2 FY26

    Company expects strong operating cash flow for the remainder of the year.

    Share repurchase authorization
    $30 millionlargest such program in our history
    approved this week

    Part of a disciplined capital allocation strategy. Expect an acceleration in buybacks during the second half.

    Share repurchase authorization remaining
    $2.3 million
    as of June 30, 2026

    The new $30 million program will take effect after this one is completed.

    Stock repurchased
    $1.5 million
    Q2 FY26
    Dividends paid
    $2.3 million
    Q2 FY26
    Gross debt-to-EBITDA ratio
    1.7xdown from 1.9x at December 31, 2025
    Q2 FY26 end

    Balance sheet remains solid.

    Average borrowing rate
    5.3%down 81 basis points year-over-year
    Q2 FY26
    Revenue from existing clients
    85%consistent for more than a decade (80% to 85%)
    annual

    Provides visibility into future revenue.

    Underlying growth rate
    mid-single digits
    Q2 FY26

    Response to analyst question about organic growth.

    Industry KPIs

    13
    MetricValueDetails
    Headcount dso1,281units
    Infra economics—
    Rpo current rpo—
    Customer logo metrics900clients
    GMV take rate payments—
    Large customer cohorts—
    Software recurring arr$30 millionUSD
    Bookings tcv book to bill—
    Genai ai book of business$26 millionUSD
    Consumption revenue growth—
    Sales capacity productivity—
    Net revenue dollar retention—
    Ai agentic channel product adoption—

    Deals & partnerships

    5
    Major global oil and gas companyExpanded relationship, supporting enterprise-wide technology transformation, including revamping service agreements, provider ecosystems, and AI initiatives (AIOps). Latest engagement is a major application sourcing program.adding $1 million of revenue to an already multimillion dollar account

    Began with a benchmarking engagement a few years ago, now a strategic partner.

    U.S.-based global manufacturer of heating, cooling and refrigeration solutionsNew engagement to transform technology supplier landscape, modernize network, and strengthen provider governance. Won through private equity channel to support portfolio companies.$1 million engagement

    Opening door to broader relationship involving AI to optimize customer experience and operating efficiencies.

    Leading health insurerExpanded relationship, initially supporting a $1 billion sourcing program for workplace and core tech services. Added transition, network, security, and governance. Discussions to add change management and software advisory.

    Growing multimillion dollar relationship.

    Leading health and pharmacy chainWon new business to advise on a struggling technology services contract, resetting the agreement based on ISG's strategy recommendations.

    Jointly exploring other opportunities, including AI-driven process improvements.

    Government entity in AustraliaSignificant agreement in the public sector to provide sourcing support, including negotiations with telecom providers.

    Leading to additional engagements to design and support AI-led future workplace services and optimize existing tech services.

    Risks & headwinds

    3
    Clients remain measured in their pace of spendingongoing

    not much different than it was 3 to 6 months ago

    Mitigation: ISG's strategy aligns with client priorities (cost optimization, business transformation, AI adoption); pipeline is strong and decisions are being made more frequently than a year ago.

    Geopolitical issues in different parts of the main countries in Europeongoing

    AI spending not at the pace of the U.S. yet

    Mitigation: Europe has seen a pickup in AI spending as clients recognize AI as a competitive weapon.

    Value expectations for acquisitions are beginning to risecurrent market

    a little bit more frothy than it was maybe if you were to ask this question a year ago

    Mitigation: ISG remains active in the M&A market, looking for capabilities to accelerate growth, but is mindful of valuation levels.

    What to watch in Q3 FY26

    5

    Asia Pacific Revenue Growth

    back half of this year
    Currentdown 6.7%
    Targetreturn to growth

    Why it matters

    Management expects a return to growth in this region following a breakthrough in public sector spending, indicating a potential turnaround for a previously underperforming segment.

    In Asia Pacific, our Q2 revenues of $5.1 million were down $400,000 compared with the prior year. ... And based on this trend, we expect this region to return to growth during the back half of this year.

    Q&A highlights

    6

    What are the current trends in client tech spending, especially compared to 3-6 months ago, and has the decision-making process sped up?

    There's a shift in spending towards growth initiatives and AI, with AI being a structural growth theme. Spending is accelerating in AI, but the overall pace of decision-making is still measured, similar to 3-6 months ago, though decisions are being made more frequently than a year ago.

    “The money is there. The spending is there. The pace is measured, but decisioning is happening now much more so than a year ago.”

    asked by Jacob Mutchler · answered by Michael P. Connors

    2 min read5 chapters

    Detailed Narrative

    01

    AI as a Strategic Tailwind

    ISG is actively reshaping its business to be an AI-centered technology research and advisory firm, leveraging AI to drive client demand and improve service delivery. AI-related revenue surged 64% to $26 million in Q2, contributing significantly to the firm's overall performance and representing 37% of first-half revenue. This growth is broad-based across advisory, research, and governance, indicating AI's integral role in client engagements.

    02

    Expanding Margins and Cost Management

    The company achieved its seventh consecutive quarter of double-digit adjusted EBITDA growth, with a 12.9% increase to $9.4 million and an 80 basis point expansion in adjusted EBITDA margin to 14.3%. This margin improvement is attributed to a shift towards higher-value advisory work, growth in recurring revenues, and increased leverage from AI-enabled delivery, alongside disciplined cost management. Operating margin reached an 8.9% three-year high.

    03

    Client Priorities and ISG's Alignment

    ISG's strategy is closely aligned with current enterprise priorities, which include cost optimization, business transformation, and vendor/contract optimization. The company's integrated platform, combining advisory services, proprietary research, and governance expertise, positions it uniquely to address these needs, particularly as AI becomes central to business transformation discussions. This alignment is driving stronger growth and deeper client relationships.

    04

    Regional Performance and Key Engagements

    The Americas region delivered $42.1 million in revenue, up 6.7%, with double-digit growth in research, governance, health sciences, and insurance. Europe continued its strong momentum with revenues up 9.8% to $18.3 million, driven by advisory, software, and governance businesses. Asia Pacific revenue was down 6.7% to $5.1 million but is expected to return to growth in the second half due to a breakthrough in public sector spending.

    05

    Capital Allocation Strategy

    ISG maintains a disciplined capital allocation strategy, balancing reinvestment in the business, shareholder returns via dividends and share repurchases, and strategic acquisitions. The Board approved a new $30 million share repurchase authorization, the largest in company history, signaling confidence in future performance and a commitment to enhancing shareholder value. An acceleration in buybacks is expected in the second half.

    AI-generated summary of the company’s earnings call. Not investment advice.