Information Services Group: 3 Key Takeaways for Long-Term Investors

On its third quarter of 2026 earnings call, held on Nov. 2, 2026, Information Services Group (NASDAQ:III) announced that artificial intelligence sales grew 56% year over year to nearly $34 million, crossing half of total firm revenue ahead of schedule. The advisory firm's core pivot protects client relationships as large enterprises seek help managing ballooning software and infrastructure costs. Long-term investors get a direct window into corporate technology spending without taking on software development risks. Three things management said stand out.

1. Artificial Intelligence Services Surpass Half of Total Sales Ahead of Schedule

Management launched a strategic push two years ago to transform Information Services Group into an artificial intelligence advisory firm, aiming to reach half of overall revenue from these services by late 2027. Reaching that goal early shows corporate clients are accelerating contracts to redesign operating models and retrain staff.

Our AI-related revenues in Q3 grew 56% to almost $34 million. That represents over 50% of our total firmwide revenues in the quarter, a level we did not expect to achieve until later in 2027.
-- Michael P. Connors, Chairman and Chief Executive Officer

2. Complex Autonomous AI Workflows Increase Client Spending on Advisory Services

When enterprises move from simple virtual assistants to automated software agents, token consumption and computing costs quickly expand. That budget expansion drives corporate executives to independent advisors who construct vendor contracts and track productivity gains.

Total AI spending, therefore, can increase even as unit prices decline. Consider an enterprise with 50,000 employees each using AI assistance at an assumed cost of $600 per employee per year, its annual budget for this client is $30 million.
-- Michael P. Connors, Chairman and Chief Executive Officer

3. Disciplined Cost Optimization Drives Operating Margins to a Four-Year High

Keeping staff headcount flat at 1,273 while raising consultant utilization -- the percentage of billable time consultants spend on client work -- to 74% expanded operating margins to nearly 10%. Profit expansion and disciplined cost management generated $12.3 million in operating cash flow for the quarter.

Operating income was $6.5 million, up 40.6%, driving operating margin of 9.9%, up 255 basis points year-on-year. Our operating margin is at a 4-year high, fueled by solid pricing and our continued focus on cost optimization.
-- Michael Sherrick, Executive Vice President and Chief Financial Officer

Looking Ahead

International revenues are accelerating in Europe and Asia Pacific, adding top-line momentum alongside steady market intelligence subscription growth. Proprietary pricing models and independent vendor research give Information Services Group a structural advantage when advising on complex cloud migrations. Investors are watching pricing discipline and contract conversion speed in the Americas.

As AI becomes more capable, the need to translate that capability into measurable returns becomes more important. We believe that creates opportunity for ISG.
-- Michael P. Connors, Chairman and Chief Executive Officer

Strong operating cash flow supports ongoing share repurchases and regular dividend payments while leverage stays low.

Working together as a global team, we are committed to delivering the ROI to our clients and long-term value to all of you, our shareholders.
-- Michael P. Connors, Chairman and Chief Executive Officer

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