Information Services Group Q1 Earnings Call Highlights

Key Points

• Solid Q1 financials: Revenue of $61.2 million was up 3% year‑over‑year and adjusted EBITDA rose 11.8% to $8.3 million, with margins expanding (adjusted EBITDA margin 13.5%, +111 bps) and operating income up 47.7%.
• AI is a major growth driver: AI‑related revenue reached $21 million (about one‑third of total), up from $12 million a year ago, as pilots move toward deployments and ISG also uses AI internally to boost delivery speed and margins.
• Large governance win and regional strength: ISG signed its largest deal to date—an up‑to‑$17 million multi‑year governance agreement to manage $300 million in tech spend for a global manufacturer—and Europe revenue jumped 25% to $17.3 million, while Asia Pacific showed signs of pipeline improvement.

Information Services Group NASDAQ: III reported first-quarter 2026 results that landed at the top end of its guidance range, driven by strong growth in Europe, expanding profitability, and rising demand tied to artificial intelligence work and cost optimization initiatives.

First-quarter results: Revenue up 3%, adjusted EBITDA up 12%

Chairman and CEO Michael Connors said ISG “had a strong 1st quarter and an excellent start to the year, continuing our momentum.” Revenue totaled $61.2 million, up 3% year-over-year, which Connors attributed to “25% growth in Europe and 9% growth in recurring revenues, powered by our research, public sector, and governance businesses.”

Executive Vice President and CFO Michael A. Sherrick provided additional detail by geography. In the Americas, revenue was $39.8 million, down 2.9% year-over-year. Europe revenue rose 25.3% to $17.3 million, while Asia Pacific declined 14.7% to $4.1 million.

Profitability improved as well. Sherrick said adjusted EBITDA was $8.3 million, up 11.8%, and adjusted EBITDA margin expanded 111 basis points to 13.5%. Operating income was $5 million, up 47.7%, with operating margin at 8.2%.

On the bottom line, Sherrick reported GAAP net income of $2.7 million, or $0.05 per fully diluted share, compared with $1.5 million, or $0.03 per fully diluted share, in the prior-year period. Adjusted net income was $4.3 million, or $0.09 per fully diluted share, up from $3.7 million, or $0.07 per fully diluted share, a year earlier.

AI-related revenue reached $21 million as pilots move toward deployments

Connors highlighted AI as a key driver in the quarter, saying demand “continues to accelerate.” He said ISG delivered $21 million of AI-related revenue in the first quarter—“about a third” of total company revenue—up from $12 million a year ago.

Connors described AI-related revenue as including “work where AI is a key part of the client solution,” such as AI research and insights, AI strategy, sourcing governance, operating model design, business case validation, technology provider evaluation, and transformation support. He added that AI and the cost optimization initiatives that fund digital transformation “remain leading areas of client investment.”

ISG is also applying AI internally to improve delivery and support margin expansion. Connors said the company is “leveraging AI in our own client delivery model to improve speed, quality, and efficiency, thereby supporting margin expansion over time.”

Connors also pointed to the company’s newly launched ISG AI Index, which he said shows early AI spending concentrated in infrastructure as hyperscalers expand capacity, with software and platform providers beginning to monetize AI capabilities and managed services still in early stages.

Largest deal ever: Up to $17 million multi-year governance agreement

Connors said ISG signed its largest contract to date in the quarter: a multi-year agreement “valued up to $17 million” to provide governance services to a “top global manufacturer.” Under the contract, ISG will manage $300 million in global technology spend across 200 vendors in support of a multi-year AI-powered transformation. Connors said ISG expects to support the client “for up to eight years” and that the work is beginning now.

During Q&A, Connors described AI governance as a “hot topic” and said ISG has “a number of discussions going on” and pipeline activity around governance services, with AI governance “at the top of the list.”

Asked about contract economics, Sherrick said deals like the large governance agreement typically include two components: an implementation period followed by an ongoing fixed-fee contract. Connors suggested thinking about the arrangement as “roughly $2 million a year,” with contribution beginning “toward the tail end of Q2” and becoming more annualized in Q3.

Regional performance: Europe momentum, Asia Pacific pipeline improvement

Connors said the Americas delivered $40 million in revenue in Q1, down about 3% year-over-year “against a tough compare” but up 4% sequentially. He said the Americas pipeline is “robust,” and management expects “solid year-over-year growth in Q2.” Connors cited double-digit growth in research and governance and in the health sciences, insurance, and public sector verticals, and referenced client engagements including Estée Lauder, ExxonMobil, and the State of Arizona.

In Europe, Connors said the region carried momentum from the second half of last year into Q1, with revenue up 25% to $17 million. He attributed growth to double-digit increases in advisory, software, and governance businesses and strength in consumer, insurance, and health sciences verticals. He cited engagements including Allianz, Diageo, and BARMER, and said ISG won a roughly $1 million engagement with a “welcome-back” client—defined as one that has not worked with ISG in the last 24 months—as well as a $3 million engagement with a new pharmaceutical client.

In Asia Pacific, Connors said revenue was $4.1 million, down $700,000 year-over-year, but management expects Q2 revenue to increase about 20% sequentially based on its pipeline, including public sector work. In response to a question about Australia, Connors said the pipeline is “very strong, including the public sector,” and added that “federal spending based on our pipeline, we see picking up,” with improvement expected to show in the second quarter.

Guidance, capital returns, and balance sheet

For the second quarter, Connors said ISG is targeting revenue of $62.5 million to $63.5 million and adjusted EBITDA of $8 million to $9 million. Sherrick told analysts the company was not pointing to any single item affecting the outlook, but cited an “uncertain macro environment” and said the company aims to be conservative given it was “still early in May.”

Sherrick said headcount ended the quarter at 1,276, essentially flat with year-end. Consulting utilization was 71.5%, in line with typical first-quarter levels. ISG ended the quarter with $22.7 million in cash, compared with $28.7 million at the end of the fourth quarter. Net cash used in operations was $700,000, which Sherrick said aligned with normal first-quarter seasonality, and he said the company expects strong operating cash flow for the remainder of the year.

During the quarter, ISG paid $2.2 million in dividends and repurchased $2.1 million of stock. Sherrick said the next quarterly dividend will be paid June 26 to shareholders of record as of June 5. Fully diluted shares outstanding were 50.2 million, and gross debt-to-EBITDA was just under 1.8x, down from 1.9x at year-end 2025. Sherrick added that the average borrowing rate for the quarter was 5.4%, down 115 basis points year-over-year.

In closing remarks, Connors said the company’s AI positioning is already influencing results, stating that AI is “already having a positive impact on our revenue, our margins, governance wins, and client demand.” He also noted ISG recently rang the Nasdaq closing bell to mark its 20th anniversary.

About Information Services Group NASDAQ: III

Information Services Group, Inc (ISG) is a leading global technology research and advisory firm specializing in digital transformation, sourcing strategies and technology-driven business operations. Headquartered in Stamford, Connecticut, the company leverages deep market insights and data analytics to help clients optimize cost structures, accelerate growth and navigate complex technology landscapes. Since its founding in 2006, ISG has cultivated expertise across industries including financial services, healthcare, manufacturing and the public sector.

ISG's core offerings include sourcing advisory, managed governance, market intelligence and research services.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.