Cloud spending soars in financial services – but it's not all plane sailing for another key European industry

The banking industry is ramping up cloud spending more than any other sector, according to new research, but other major sectors appear to be easing off the pedal.

Analysis from IDC shows public cloud spending in Europe will hit a total of $221 billion this year and is expected to reach $373 billion by 2028 - marking a five-year compound annual growth rate of 20%.

Platform as a Service (PaaS) will remain the fastest-growing area for cloud spending, IDC said, thanks to the increasing demand for AI applications, integration of cloud ecosystems, and the need for scalable platforms that can support firms' digital transformation.

Banking, software and information services, and insurance will be the industries with the fastest year-on-year spending increases in 2025, IDC noted.

In the case of banking, this is thanks to threat intelligence requirements that are pushing companies to build AI tools that can rapidly categorize and summarize data and identify potential threats.

Meanwhile, last year’s strong investments in data centers across Europe will mean more cloud spending on generative AI and other technologies for risk assessment, customer service, and back-office process optimization.

Cloud spending gains face significant barriers

However, IDC said potential new US tariffs and trade tensions with the European Union, persistent economic weakness in Germany, and growing competition from China may create challenges for some European industries.

With Europe's economic growth in 2025 likely to remain shaky, consumer and business confidence could suffer, impacting budgets dedicated to cloud-based transformation projects.

"Manufacturing industries, especially chemicals and automotive, are paying the effects of prolonged supply chain disruptions, lower demand, skill shortage, and tough global competition," said Andrea Minonne, research manager at IDC UK.

"Deteriorating business confidence will slow down cloud spending, which will still grow, but at a slower place compared with verticals like banking or software and information systems."

Looking ahead, IDC said software and information services are set to have the highest value compound annual growth rate in Europe between 2023 and 2028, standing at 24%.

This spending growth will be fueled by rising demand for AI and generative AI solutions, increased investments in cybersecurity research and development, and the adoption of scalable SaaS solutions.

Insurance and life science will also grow their public spending more rapidly than other verticals, said IDC. Insurance firms will be investing in public cloud to modernize their core systems, automate operations, and integrate AI-driven risk management to improve compliance, efficiency, and customer experience.

Meanwhile, despite near-term supply constraints and manufacturing limitations, life sciences companies are investing in AI-driven drug discovery, expanding production capacity and strengthening digital supply chain resilience.

"Cloud is a growing market and investments will be driven to support automation and tech such as AI and generative AI," said Minonne.

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