ISG Q2 2026 Earnings: Revenue Rises 6.4% as Margins Expand

Information Services Group, or ISG (Nasdaq: III), reported Q2 2026 revenue of $65.5 million, up 6.4% from $61.6 million for the quarter ended June 30, while GAAP diluted EPS rose to $0.07 from $0.04. Profit increased faster than revenue, adjusted EBITDA margin expanded by 80 basis points to 14.3%, and recurring revenue reached a quarterly record of $30 million.

Core Earnings Data

Revenue increased by $3.9 million year over year. Lower direct advisor costs—down about 5.8% despite revenue growth—helped operating income rise about 25.6%, although selling, general and administrative expenses increased about 24.4%.

Net income grew 51%, supported by the operating improvement, lower interest expense, and a shift from a $96,000 foreign-currency transaction loss to a $254,000 gain.

Adjusted EBITDA, adjusted net income, adjusted EPS, and constant-currency results are non-GAAP measures.

Business and Regional Performance

Europe and the Americas drove reported revenue growth, while Asia Pacific remained the only declining region. Recurring revenue reached a record $30 million—about 46% of total quarterly revenue—with management attributing the result to AI-centered research and governance services.

Currency contributed to the reported growth rates. ISG’s non-GAAP constant-currency data imply revenue growth of about 5.1%, compared with reported growth of 6.4%. Constant-currency adjusted EBITDA increased about 6.3%, versus the reported 13% increase, indicating that foreign-exchange movements amplified the reported improvement.

Profitability, Cash Flow, and Capital Allocation

Direct advisor costs declined to $33.5 million from $35.6 million, reducing those costs to about 51.2% of revenue from 57.8%. In contrast, SG&A expenses rose to $25.1 million from $20.1 million, increasing to about 38.3% of revenue from 32.7%. The improvement in direct service economics was large enough to offset the higher SG&A burden and expand the operating margin.

Operating cash flow was $5.2 million, compared with a $0.7 million cash outflow in Q1 2026. This is a sequential comparison because prior-year quarterly operating cash flow was not supplied. Cash increased to $23.7 million at June 30 from $22.7 million at March 31 during a quarter in which ISG paid $2.3 million in dividends and repurchased $1.5 million of shares.

The board added $30 million to the share-repurchase authorization, bringing total available capacity to $32.3 million. The new authorization will take effect after completion of the existing program, which had approximately $2.3 million remaining at quarter-end. ISG also declared a quarterly dividend of $0.045 per share, payable September 25, 2026, to shareholders of record on September 4.

Q3 2026 Guidance

ISG set Q3 revenue guidance of $63.5 million to $64.5 million and adjusted EBITDA guidance of $8.5 million to $9.5 million. The midpoints are modestly below Q2 results on a sequential basis, although management said the ranges would continue year-over-year growth.

Management said demand for AI-centered research, advisory, and governance services remained supportive, while cost optimization and business transformation services continued to attract clients amid uncertain macroeconomic conditions. ISG is monitoring foreign exchange, inflation, and other macro factors as it plans for the quarter.

Recent Insider Transactions

The supplied insider data show 533,231 shares purchased and 450,000 shares sold during the last six months, resulting in net purchases of 83,231 shares. Total insider holdings were listed at 13.34 million shares, with net purchases equal to 0.6% on the source’s measure. Nine of the latest ten reported transactions were stock awards rather than open-market purchases, so they should be distinguished from discretionary buying.

Risks Investors Should Watch

• Regional performance remains uneven. Europe and the Americas grew, but Asia Pacific revenue fell 7%. Continued weakness there could limit consolidated growth.
• SG&A is rising faster than revenue. The quarter’s margin expansion depended on lower direct advisor costs offsetting a substantial SG&A increase. A reversal in direct-cost efficiency would put more pressure on operating margins.
• Currency increased reported growth. Revenue and adjusted EBITDA grew more slowly on a constant-currency basis, creating a risk that less favorable exchange rates could reduce future reported growth.
• Capital allocation will affect liquidity. Available repurchase capacity of $32.3 million exceeds the $23.7 million quarter-end cash balance. The authorization represents capacity rather than immediate spending, but its execution pace will matter alongside dividends, reinvestment, and potential acquisitions.

Summary

ISG’s Q2 2026 results combined moderate revenue growth with faster profit expansion, driven by Europe, the Americas, record recurring revenue, and lower direct advisor costs. Investors’ next focus will be whether the company can deliver its Q3 growth ranges while controlling SG&A, sustaining direct-cost efficiency, and balancing expanded shareholder returns with its cash resources.