Europe’s IT Spending to Soar in 2026 Amid AI and Digital Sovereignty Surge

Europe’s IT spending is set to climb sharply, reaching $1.428 trillion in 2026, up from $1.286 trillion in 2025. This projected 11.1% increase highlights the region’s accelerating investment in technology and digital transformation.

According to a new report from Gartner, software, cloud services, cybersecurity, and AI are driving Europe’s IT spending surge. Despite tight budgets and limited staff, CIOs are prioritizing software upgrades to embed advanced AI capabilities, with a strong focus on generative AI to enhance innovation.

Generative AI adoption accelerates across the region

Generative AI spending in Europe is set to jump, with forecasts predicting a 78.2% increase in 2026. At the same time, public cloud services are expected to grow by 24% year-over-year, driven by a push for digital sovereignty as organizations bring infrastructure closer to home to meet regulatory and security demands.

Growing interest in sovereign cloud solutions is being driven by geopolitical uncertainty, which is prompting many European organizations to rethink their cloud strategies. A recent Gartner survey found that 61% of CIOs and tech leaders in Western Europe plan to increase reliance on local cloud providers. Moreover, 53% anticipate geopolitical factors will limit their use of global providers in the future.

“The European economy is somewhat different to the rest of the world. Europe is still struggling with an overall GDP recovery, much more susceptible to the uncertainty with their global trade. They are looking at ‘geo-repatriation,’ a portion of the digital sovereignty movement who is trying to get more technology from companies closer to home,” said John-David Lovelock, VP analyst at Gartner.

Hardware costs increase as AI features become standard

Gartner’s research also found that device makers are increasingly integrating AI features into their products, which is increasing hardware costs and prices. Consequently, spending on AI-optimized servers in Europe is forecasted to rise from $39.3 billion in 2025 to $46.8 billion in 2026, though the region still falls behind North America and China in this area.

European companies are increasingly turning to domestic AI and cloud solutions amid intensifying regulatory, geopolitical, and security concerns. Gartner predicts that by 2027, 35% of European countries will adopt region-specific AI platforms, which is a significant rise from just 5% today due to government initiatives to protect local data and infrastructure.

How European businesses can thrive amid rising IT investments

European organizations should prepare for a significant shift in IT priorities as spending accelerates toward AI, cloud, and cybersecurity. The forecasted 11% growth in IT investment by 2026 indicates a strong push for digital transformation, with generative AI and sovereign cloud emerging as key drivers. Companies that delay adoption risk falling behind competitors who are already embedding AI into software and leveraging cloud platforms for scalability and compliance.

To stay ahead, businesses should prioritize integrating AI capabilities into their operations, starting with software upgrades and pilot projects for generative AI. Moreover, organizations should explore sovereign cloud solutions and diversify providers to address geopolitical risks and meet regulatory requirements.

Lastly, budget planning is also important, as hardware costs are expected to rise with AI-enabled devices and servers. Strengthening cybersecurity and aligning infrastructure with regional compliance standards will be required to protect data and maintain trust in an increasingly complex digital environment.