Information Services Group (III) ISG Q2 Global Index Call earnings summary

Market overview and growth trends

• Combined global market ACV rose 7% year-over-year to $24.8 billion, the best quarter since Q2 2022, driven by cloud resurgence and IaaS up 15% year-over-year.

• IT and business services industry remains in a low single-digit growth environment, with Q2 revenue growth slowing to just over 1% and provider margins under pressure for a second consecutive quarter.

• Growth is primarily driven by cloud XaaS, which increased 11%, while managed services saw only slight growth.

• ISG forecasts continued slow growth, lowering 2024 managed services growth to 2% and XaaS to 14%.

• AI project-based activity is up 60% on a trailing 12-month basis, but this may be masking underlying sector weakness.

Bookings and segment performance

• XaaS segment ACV reached $14.7 billion, up 11% year-over-year, with IaaS up 15% to $10.9 billion.

• Managed services ACV was flat year-over-year at $10.1 billion, with 10 mega deals but lower total ACV than last year.

• IT outsourcing (ITO) ACV rose 2% to $7.7 billion, while applications development and maintenance ACV fell 16%.

• Data center ACV surged 66.5%, surpassing $1 billion for the first time in a decade.

• Business process outsourcing (BPO) ACV declined 1% to $2.4 billion, despite a 12% increase in contract awards.

Regional and sector insights

• Asia Pacific led growth, up 32% in Q2 and 26% for the first half, with BFSI strong in the region.

• Americas and EMEA saw declines, mainly due to BFSI weakness, with managed services in the Americas down 2.4% and EMEA down 3% year-to-date.

• BFSI sector ACV is down 1% year-to-date, with managed services down 11%, largely due to fewer large deals.

• Energy sector ACV dropped 7%, with managed services down 19% and XaaS up 11%.

• Record 1,435 managed services contracts were signed in H1 2024, with 14 mega-deals, down from 18 last year.