I'd suggest that the -i means it does match "ABC", but the difference is in the output. -i doesn't manipulate the input, so it won't change "ABC" to "abc" because you specified "abc" as the pattern. -o says it only shows the part of the output that matches the pattern specified, it doesn't say about matching input.
The output of echo "ABC" | grep -i abc is ABC, the -o shows output matching "abc" so nothing shows:
Naos:~ mattlacey$ echo "ABC" | grep -i abc | grep -o abc
Naos:~ mattlacey$ echo "ABC" | grep -i abc | grep -o ABC
ABC