Combined market up 39 percent, fastest growth in four years

Demand for cloud infrastructure services soars 86 percent; managed services down

Demand for technology services in the Americas hit a new high in the second quarter, accelerated by the region’s insatiable appetite for AI, according to the latest state-of-the-industry report from Information Services Group (ISG) (Nasdaq: III), a global AI-centered technology research and advisory firm.

The Americas ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of $5 million or more, shows second-quarter ACV for the combined market—including both cloud-based as-a-service (XaaS) and managed services—reached a record $21.8 billion, up 39 percent, the region’s highest growth rate since the first quarter of 2022. The latest quarter was the region’s seventh consecutive quarter of double-digit growth, averaging 28 percent in that span.

Demand for the hyperscaler services needed to run AI models accounted for a substantial portion of the region’s growth in the second quarter. The ACV of such infrastructure services (IaaS), offered by providers like AWS, Microsoft Azure, Google Cloud and Oracle Cloud, skyrocketed 86 percent, to a record $13.2 billion, in the quarter. Software-as-service (SaaS), also fueled by AI, advanced 23 percent, to $3.4 billion. Together, these two XaaS offerings generated ACV of $16.6 billion, up 69 percent, the highest growth rate ever for the XaaS segment, eclipsing the previous high set in the third quarter of 2015. XaaS is now on nine-quarter streak of double-digit growth, averaging 38 percent a quarter during that time.

Managed services, meanwhile, saw its ACV decline 12 percent versus the prior year, to $5.2 billion. Within managed services, IT outsourcing (ITO) was down 23 percent, to $3.6 billion, led by a decline in application development and maintenance (ADM) services, as AI is increasingly being used to handle human tasks. Business process outsourcing (BPO), however, climbed 37 percent, to $1.3 billion, as enterprises sought to leverage AI to lower costs in such areas as customer engagement, finance and accounting and supply chain management. Spending on engineering services, primarily software engineering to integrate AI, rose 9 percent, to $326 million.

"Demand for all things AI continues to fuel extraordinary growth in the Americas market," said Todd Lavieri, ISG vice chairman and president of ISG Americas and Asia Pacific. "Traditional IT outsourcing, particularly for ADM services, however, declined in the second quarter, partially offset by growing demand for BPO, as enterprises sought AI-powered back-office solutions to optimize costs and generate funds for AI investments."

During the quarter, a total of 377 managed services contracts were awarded, down 4 percent from the prior year. Among them were four mega-deals (contracts with annual value of $100 million or more), compared to five in the prior year, with the ACV of those four mega-deals down 20 percent from last year’s second quarter.

By industry, only two major sectors posted year-over-year growth in managed services: consumer packaged goods (CPG), which climbed 44 percent, and banking, financial services and insurance (BFSI), which rose slightly, up 1.3 percent. BFSI, the region’s largest industry for outsourcing, has trended positive in seven of the last eight quarters. Manufacturing, meanwhile, was down 18 percent and healthcare was down 20 percent for the quarter.

First-Half Results

The Americas’ combined market climbed 36 percent in the first half, to a record $42.0 billion. XaaS soared 61 percent, to a record $31.1 billion, while managed services was down 6 percent, to $10.9 billion, the first time since 2019 the region saw this market decline in the first half. XaaS represented 74 percent of the combined market in the first half, up sharply from 62.5 percent a year ago.

Within XaaS, IaaS jumped 82 percent, to $24.6 billion, while SaaS advanced 13 percent, to $6.4 billion. On the managed services side, ITO was down 11 percent, to $8.1 billion; BPO was up 30 percent, to $2.3 billion, and engineering services slid 29 percent, to $516 million.

A total of 771 managed services contracts were awarded in the first half, down 3 percent, including six mega-deals, compared with eight in the first half of 2025, as mega-deal ACV dropped 15 percent.

2026 Global Forecast

For the full year, ISG said it is maintaining its global forecast of 2.1 percent revenue growth for managed services. At the same time, ISG is raising its previous growth forecast for cloud-based XaaS by 500 basis points, to 30 percent, reflecting continuing strong demand for AI infrastructure and software services.

About the ISG Index™

The ISG Index™ is recognized as the authoritative source for marketplace intelligence on the global technology and business services industry. For 95 consecutive quarters, it has detailed the latest industry data and trends for financial analysts, enterprise buyers, software and service providers, law firms, universities and the media.

The 2Q26 Global ISG Index results were presented during a webcast on July 9. To view a replay of the webcast and download presentation slides, visit this webpage.

About ISG

ISG (Nasdaq: III) is a global AI-centered technology research and advisory firm. A trusted partner to more than 900 clients, including 75 of the world’s top 100 enterprises, ISG is a long-time leader in technology and business services that is now at the forefront of leveraging AI to help organizations achieve operational excellence and faster growth. The firm, founded in 2006, is known for its proprietary market data and research, in-depth knowledge and governance of provider ecosystems, and the expertise of its 1,500 professionals worldwide working together to help clients maximize the value of their technology investments.

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Press Contacts:

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