Public cloud services spending in Europe will total $221-billion in 2025 and will reach $373-billion by 2028, recording a five-year (2023-2028) compound annual growth rate (CAGR) of 20%. According to the Worldwide Software and Public Cloud Services Spending Guide published by International Data Corporation (IDC), platform-as-a-service (PaaS) will continue to be fastest-growing area, fueled by the increasing demand for AI applications, integration of cloud ecosystems, and the need for scalable platforms to support digital transformation.
Some headwinds will linger from 2024, while new uncertainties will threaten European economic stability. The potential tariffs and trade tensions between the US and the European Union stemming from the new US administration, persistent economic weakness in Germany, and growing competition from China might create challenges for some European industries.
As Europe’s economic growth in 2025 remains uneven, this landscape could dent consumer and business confidence, impacting budgets dedicated to cloud-based transformational projects.
“Manufacturing industries, especially chemicals and automotive, are paying the effects of prolonged supply chain disruptions, lower demand, skill shortage, and tough global competition. 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,” says Andrea Minonne, research manager at IDC UK.
“Nonetheless, cloud is a growing market and investments will be driven to support automation and tech such as AI and generative AI .”
Banking, software and information services, and insurance will be the industries with the fastest year-on-year spending increases in 2025. Threat intelligence requirements will push banks to build AI-powered tools that can rapidly categorise and summarise data to identify potential threats, requiring a strong cloud foundation.
Moreover, last year’s strong investments in datacenters across Europe will support cloud spending to support GenAI and other technologies that will be used in areas including risk assessment, customer service, and back-office process optimisation.
Looking at the long term, software and information services will have the highest value 2023-2028 CAGR in Europe, at 24%. The industry’s spending growth will be fueled by rising demand for AI/GenAI solutions, increased investments in R&D for cybersecurity, and the adoption of scalable SaaS solutions. Insurance and life science will also grow their public spending more rapidly than other verticals.
Insurance companies will invest in public cloud to modernise core systems, automate operations, and integrate AI-driven risk management to enhance compliance, efficiency, and customer experience.
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.