Information Services Group (NASDAQ: III) reported second-quarter FY26 revenue of $65.5 million, up 6.4% year-over-year, driven by a sharp acceleration in artificial intelligence services. Adjusted EBITDA climbed 12.9% to $9.4 million, with margins expanding by 80 basis points to 14.3%.

Financial Performance

The company delivered its strongest quarterly results since 2023. Operating income reached $5.9 million, up 25.6% year-over-year, resulting in an operating margin of 8.9%, which management noted is at a three-year high. GAAP net income stood at $3.3 million ($0.07 per diluted share), compared to $2.2 million ($0.04 per share) in the prior year period.

*Prior year figures derived from disclosed growth rates.

What the Numbers Show

AI-related revenue grew 64% to $26 million in the quarter, representing 37% of total firmwide revenue. This concentration indicates a significant shift in the company’s revenue mix toward high-growth technology advisory and governance services. With nearly half of clients generating AI-related revenue, the business model is increasingly dependent on enterprise adoption of AI for cost optimization and transformation.

Regional Breakdown

Growth was broad-based across regions, though Asia Pacific faced headwinds:

• Americas: Revenue rose 6.7% to $42.1 million, with double-digit growth in research and governance.
• Europe: Revenue increased 9.8% to $18.3 million, driven by advisory and software businesses.
• Asia Pacific: Revenue fell 6.7% to $5.1 million, though management expects a return to growth in the second half following late-quarter public sector wins.

Balance Sheet and Capital Allocation

Cash position improved to $23.7 million at quarter-end, up from $22.7 million in Q1FY26. Net cash generated from operations was $5.2 million, reversing a $700,000 cash usage in the previous quarter. The gross debt-to-EBITDA ratio declined to 1.7 times from 1.9 times at the end of FY25.

The Board approved a new $30 million share repurchase authorization, the largest in company history. The program will commence after the current authorization, which has approximately $2.3 million remaining. Dividends paid during the quarter totaled $2.3 million.

Outlook

For the third quarter of FY26, Information Services Group targets revenues between $63.5 million and $64.5 million and adjusted EBITDA between $8.5 million and $9.5 million. Management highlighted that recurring revenues hit a record $30 million in Q2, up 7%, supporting visibility for future periods.

Enterprises are accelerating investments in data management platforms to support the rigorous data governance, usability, and trust requirements of large-scale AI deployments, according to new research from Information Services Group (Nasdaq: III).

The 2026 ISG Buyers Guides for Data Management and Operations assess how organizations transition AI from small-scale projects to full-scale operations. This shift demands higher data volumes for model training, freshness for inference, and quality for reliable outputs.

"Data is foundational to AI, so effective data management underpins all enterprise AI ambitions," said Kathy Rudy, partner at ISG Data, Analytics and Technology Office. She noted that many enterprises identify data usability as a significant challenge and must strengthen capabilities before bringing AI to production.

Market Assessment and Leaders

ISG evaluated 68 software providers across five specific guides: Data Management and Operations, Data Quality and Data Observability, Data Integrity, Data Intelligence and Data Products, and Data Engineering. Providers were rated on overall performance, product experience, capability, platform, and customer experience.

Databricks emerged as the top Overall Leader in three of the five guides:

• Data Management and Operations
• Data Intelligence and Data Products
• Data Engineering

In the Data Quality and Data Observability guide, Acceldata was the top Overall Leader. Salesforce led the Data Integrity guide.

What the Numbers Show

The assessment reveals a concentration of leadership among established enterprise technology vendors. Databricks, IBM, and Pentaho appeared as Overall Leaders or Exemplary providers across multiple distinct categories, suggesting that enterprises view integrated platforms as critical for managing the complexity of AI-ready data pipelines. Conversely, specialized players like Acceldata (Observability) and Salesforce (Integrity) lead in niche verticals, indicating a market split between broad platform adoption and best-of-breed tool selection for specific governance functions.

Adoption of DataOps Practices

Governance is becoming increasingly central to data management software as enterprises accelerate analytics and agentic AI initiatives. To maintain a single version of truth, organizations are adopting master data management and data intelligence platforms. These tools support regulatory compliance and enable governed self-service access for analysts and business users.

Matt Aslett, director of research at ISG, stated that data management is integrating more tightly with IT infrastructures. Through 2028, ISG expects two-thirds of enterprises to use agile and collaborative practices, such as DataOps, for faster AI adoption. DataOps provides an environment for the continuous processing, testing, and deployment of data integration pipelines.