European software spending is set to surge in 2026 – here's why
Enterprises are approaching the “trough of disillusionment” with AI, but it’s not stopping them from spending
IT spending in Europe is projected to surge 11.1% in 2026, according to new figures from Gartner, but analysts have told ITPro this bullish investment highlights a drastically changing industry landscape.
Across the region, spending will surpass $1.4 trillion in total, driven across the board investment in traditional high-growth areas such as data centers, devices, software, and IT services.
Notably, software spending will account for the largest share of growth next year, according to John-David Lovelock, distinguished VP analyst at Gartner.
Speaking to ITPro ahead of the release of the new figures, Lovelock said this showcases the rabid scramble to capitalize on new AI features as enterprises enter the “trough of disillusionment”.
Over the last 20 years, spending on the part of consumers, IT companies, and enterprises have all “mixed into our data book” and have been “moving in conjuncture”, Lovelock noted. It’s a cadence that’s come to be expected based on macroeconomic conditions.
“They spend money based on their feeling of prosperity. You know what they spend on changes, but tech providers build new software tools and develop things including the cloud,” he explained.
“Enterprises [and] consumers buy mobile phones and IT services, particularly communication services, based on how prosperous they're feeling. There's a certain cadence to all of it.”
That cadence was rocked with the advent of generative AI in late 2022, Lovelock added, with technology providers investing heavily in the technology to drive adoption rates while consumers and enterprises are drawn in different directions.
“It's come in such a foundational way, because it is a foundational technology. It's not like the cloud, it's not like the internet, it's like electricity,” he told ITPro.
“We have technology and service providers spending wildly to get in front of AI, whether it's generative AI, agents, agentic AI, they are spending in order to be at the cutting edge of that – to build products and services that enterprises will buy.”
Yet while spending figures point toward a bullish market, the reality on the frontline is very different. Enterprises have become bogged down in adoption projects and increasingly disillusioned with returns from the technology.
Analysis from the consultancy shows around 90% of AI projects failed across a 12 month period in the last year, for example.
It’s here that the high software spending figures begin to make more sense, Lovelock noted. Software spending isn’t growing because providers are securing an array of net new clients, it’s because the same companies are spending more money to try and eke out whatever gains they can from AI.
European software-related spending for 2025 stands at around $290 billion, while in 2026 this is expected to grow 15.6% to over $335 billion, underlining the push on both the part of enterprise end-users and providers.
“Enterprises are going to be turning to their software providers, their current incumbent software providers, to bring them AI features and functionality,” he said.
“So they will be spending more on software, not necessarily because they're going out to buy this software, buy these new functions, but their incumbent software providers will be selling them these new functions.”
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