III Earnings Jump on AI Gains

Information Services Group (III 3.23%), a global AI-centered technology research and advisory firm, reported results on August 6, 2025. The company exceeded both revenue and non-GAAP earnings expectations for Q2 2025, with GAAP revenue at $61.6 million versus the $60.002 million estimate, and non-GAAP earnings per share (EPS) at $0.08 compared to an expected $0.028. Despite reported GAAP revenue declining year over year in the quarter, adjusted results, excluding the divested automation business, showed underlying growth. Stronger operational margins and robust cash from operations marked a positive quarter, though performance varied by region. Management provided measured guidance for the third quarter, citing ongoing regional and macro uncertainties.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Company overview and strategic focus

Information Services Group is a consulting and analytics firm specializing in technology and digital transformation advisory, particularly for large enterprises. It uses proprietary data, benchmarks, and AI platforms to help organizations modernize operations and IT infrastructure. The company’s core services revolve around transaction advisory, digital transformation, and technology optimization, all increasingly centered on artificial intelligence (AI) and automation.

In recent years, the company has focused on expanding its AI-centered solutions and recurring revenue through digital platforms such as ISG Tango, a sourcing and contract management platform, and GovernX, a governance and compliance platform. The strategy emphasizes staying ahead in the fast-evolving IT market by leveraging its wealth of data, maintaining global independence, and investing in capabilities that foster long-term client relationships and subscription business.

Quarter highlights: Performance, initiatives, and challenges

During the quarter, Information Services Group exceeded GAAP revenue and non-GAAP EPS expectations. Revenue performance, when adjusted for the prior year’s automation unit divestiture in October 2024, revealed underlying growth. The Americas region posted 16% revenue growth excluding automation, demonstrating the strength of AI-driven services and client demand. Conversely, Europe and Asia-Pacific continued to struggle, with revenue declines of 7% and 1%, respectively (excluding automation), highlighting ongoing regional disparities.

Margins improved, driven by an adjusted EBITDA margin (non-GAAP) of 13.5%, up from 11.1% in the prior year quarter. The company’s operational leverage came from a higher mix of recurring revenue, improved platform utilization, and rapid uptake in AI advisory services. The number of clients for AI-focused research and advisory reached 200 in the trailing twelve months, up from 150 clients previously, reflecting broadening adoption of company offerings.

Management continued investing in talent and technology, reporting that 90% of client-facing employees have been trained in AI. They also noted enhancements to proprietary platforms: ISG Tango played a key role in boosting efficiency and expanding the mid-market customer base, while GovernX contributed to operational improvements. These platforms are designed to handle sourcing, contract management, and compliance using AI algorithms that shorten client implementation timeframes.

Several strategic moves shaped the quarter. The announced acquisition of Martino & Partners, expected to close in September 2025, aims to strengthen the company’s European presence, especially in Italy’s public and private sector modernization. The company devoted $2.4 million to dividend payments and repurchased $4.0 million of shares, continuing its approach to shareholder returns. Currency translation contributed a $0.8 million benefit to reported revenues. There were no material one-time gains or losses reported outside of ongoing integration and acquisition expenses.

Product and platform evolution

The company’s core product families fall into technology advisory and proprietary digital solutions. ISG Tango is a sourcing and contract management platform designed to help clients select service providers and manage complex IT contracts efficiently; its rising adoption helped both margins and mid-market penetration. GovernX is a governance and compliance management platform that automates contract compliance and performance tracking, supporting long-term client retention through automation and digital insights.

Recurring revenue, derived from multi-year managed services contracts and public sector projects, remains a centerpiece of the company’s growth plans. Management previously reported recurring revenues representing 44% of overall revenue, consistent with improved cash flow and overall business stability. Proprietary intellectual property and datasets underpin these solutions, giving clients a data-driven approach to digital transformation and technology procurement.

Looking ahead: Outlook and key areas to watch

Management issued guidance for Q3 2025, forecasting revenue between $60.5 million and $61.5 million. Adjusted EBITDA is expected to be between $7.5 million and $8.5 million for Q3 2025. This outlook is roughly in line with current results, which signals a cautious stance reflecting macroeconomic and regional uncertainties, particularly outside the Americas.

The company declared a quarterly dividend of $0.045 per share, scheduled for payment on September 26, 2025. Looking ahead, investors and observers should watch the pace of international recovery, especially in Europe and Asia-Pacific, and the integration of Martino & Partners. The focus will remain on margin expansion, cash generation, and continued advancement of AI and platform-centered offerings, all while navigating ongoing global market dynamics.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.