Public cloud services spending in Europe is set to total $229 billion in 2025 and is projected to reach $452 billion by 2029, according to the Worldwide Software and Public Cloud Services Spending Guide published by the International Data Corporation (IDC).

The report showed that this trajectory reflects a five-year compound annual growth rate of 19 per cent between 2024 and 2029.

In a year when efficiency, automation and revenue generation are reshaping both business and IT strategies, the adoption of artificial intelligence solutions and the testing and deployment of generative AI use cases will support further investment in platform-as-a-service.

IDC expects spending on platform-as-a-service to record a 32 per cent year-on-year growth rate by 2026.

“Despite potential impacts on European public cloud spending in the second half of 2025, including the uncertainty from US tariffs, most European industries are currently maintaining a ‘business-as-usual’ approach,” said Andrea Minonne, research manager at IDC UK.

“While sectors like automotive, consumer goods, chemical, and other manufacturing remain cautious in their spending, the overall industry outlook is not concerning, and we don’t foresee a substantial effect on cloud investments,” he said.

“Cloud continues to be crucial for manufacturing, enabling solutions that improve supply chain visibility, facilitate agile inventory management, and deliver real-time demand forecasting to manage market fluctuations,” he added.

The report explained that the macroeconomic and geopolitical situation in Europe presents several risks that could influence technology spending in the second half of 2025.

These include the ongoing war in Ukraine, which has sparked discussions about increased defence spending across NATO countries.

Conflicts in the Middle East may also disrupt supply chains for European businesses that import goods from Asia.

In addition, volatility arising from US tariff negotiations may affect industries such as automotive, consumer goods and other manufacturing sectors.

Despite these risks, public cloud will remain a strong enabler of key priorities, including cybersecurity, which is expected to significantly increase spending on security software by European federal and central governments.

Regulatory compliance across heavily regulated industries such as finance, including banking, insurance and capital markets, and healthcare, including providers, payers and life sciences, will also sustain investment in cloud services.

The report also emphasised that automation and generative AI projects will accelerate cloud spending among software and information services companies, many of which are undergoing significant AI-driven organisational restructuring.

Healthcare payer, insurance and life sciences are expected to show the fastest acceleration in cloud investments in 2026.

In Europe, healthcare payers and insurers will significantly increase cloud spending as they strive to meet growing customer demand in a scalable, efficient and secure manner.

For healthcare payers, whose cloud spending will rise by 25 per cent in 2026, this trend is particularly visible in the United Kingdom, where deficiencies in the National Health Service such as long waiting times are driving more citizens to take out private health insurance.

Life sciences companies will also step up cloud investments, supported by substantial research and development in advanced therapies, major European Union funding initiatives and accelerated digital transformation in drug discovery and innovation.