Americas' Tech Services Sector Hits New High in Q1 on Surging Demand for AI: ISG Index™

Combined market up 35%, fastest growth in 4 years, to record $20.2 billion

Region's growth led by IaaS, up 77%, fueled by AI demand

Spending on technology services in the Americas rose at its fastest pace in four years to a record high in the first quarter, fueled by strong demand for AI, the latest state-of-the-industry report from Information Services Group (ISG) (Nasdaq: III), a global AI-centered technology research and advisory firm, shows.

The Americas ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of $5 million or more, shows first-quarter ACV for the combined market—including both managed services and cloud-based as-a-service (XaaS)—surpassed $20 billion for the first time, reaching $20.2 billion, up 35 percent from a year ago, the region's fastest growth since the first quarter of 2022. Versus the fourth quarter of 2025, the combined market was up 14 percent.

"The Americas market is being driven almost entirely by AI, as enterprises accelerate their spending on the cloud infrastructure services needed to support their AI ambitions," said Todd Lavieri, vice chairman and president of ISG Americas and Asia Pacific. "What growth there is in managed services came from enterprises looking to optimize their cost base so they can invest the savings primarily in AI-driven digital transformation."

Lavieri noted macroeconomic and geopolitical factors do not appear to be weighing on the sector. "Right now, nothing can slow the demand for AI. Cloud providers are investing hundreds of billions of dollars in data center capacity ahead of demand, with enterprises seeing AI as the key to future success, both in terms of margin expansion and topline growth. Nobody wants to miss the boat."

First-Quarter Results by Segment

ACV for XaaS was up 55 percent, to $14.5 billion, only the third time it has exceeded $10 billion in a quarter. It was the eighth straight quarter that XaaS has generated double-digit growth versus the prior year, averaging 34 percent in that span. The 55 percent growth rate in the first quarter was the highest seen since the third quarter of 2015—in the early days of the cloud computing era.

Within this segment, ACV for infrastructure-as-a-service (IaaS) soared 77 percent versus the prior year, to $11.5 billion, while software-as-a-service (SaaS) advanced 5 percent, at $3.0 billion.

The managed services segment, meanwhile, generated first-quarter ACV of $5.7 billion, up 1.2 percent from the prior year and up 3 percent from the fourth quarter, when growth fell into negative territory. Managed services has trended to the upside in five of the last six quarters.

Within managed services, IT outsourcing (ITO) ACV rose 3 percent, to $4.5 billion, driven by triple-digit growth in bundled infrastructure and application development and maintenance (ADM) services. Standalone ADM services, the biggest piece of the ITO pie, rose 3 percent. Business processing outsourcing (BPO) ACV advanced 22 percent, to $1.0 billion, with strong growth in facilities management and industry-specific services. Engineering, research and development (ER&D) services, meanwhile, was down 56 percent, to $189 million.

A total of 398 managed services contracts were signed in the first quarter, down 1 percent versus a year ago, the region's second straight quarterly decline, year over year. Two mega deals (contracts with ACV of $100 million or more) were awarded in the first quarter, down from three in the prior year, with mega-deal ACV down 5 percent from a year ago. The ACV of new scope awards advanced 23 percent from the prior year, to $4 billion, the fourth consecutive quarter above this level. Meanwhile, the number of smaller deals—those valued at between $5 million and $9 million—declined 8 percent versus the prior year, marking the third time in the last four quarters this segment has seen year-over-year declines.

By industry, top gainers included retail (up 130 percent) and consumer package goods (up 34 percent). The region's two largest industries for outsourcing—banking, financial services and insurance (BFSI) and manufacturing—were up 7 percent and 17 percent, respectively.

New ISG AI Index™ Launched

ISG last week announced the launch of its ISG AI Index™, a first-of-its-kind benchmark that measures how AI is impacting the global technology and business services sector. The initial findings were presented during the ISG Index call last Thursday. They show that infrastructure-as-a-service (IaaS) has seen the greatest impact from AI, up 160 percent. Software as-a-service (SaaS) has risen 53 percent while managed services is up only slightly, at 0.3 percent. On a market-weighted basis, the composite ISG AI Index was up 77 percent since inception, dating to December 2022, just after the launch of ChatGPT 3.0 and the start of the current AI era. Visit this webpage for more details.

2026 Global Forecast

ISG said it is raising its full-year forecast for XaaS revenue growth to 25 percent, up 400 basis points from its January forecast, and is holding its managed services growth forecast at 2.1 percent for the year. The forecasts reflect ISG's view that XaaS growth will continue to accelerate on strong demand for AI, while managed services growth will remain "steady" as enterprises focus on cost takeout to fund their AI initiatives.

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 94 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 1Q26 Global ISG Index results were presented during a webcast last week. 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:



Will Thoretz, ISG

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Eric Arvidson, Matter Communications for ISG

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