Why is Gartner forecasting such huge growth for IT in 2025?

Why is Gartner forecasting such huge growth for IT in 2025?

The research and consultancy firm predicts that investment in IT will grow by 9.8% in 2025 - thanks to demand for Gen AI technology.

Published on 24th January 2025

According to Gartner, the US-based technological research and consultancy firm, global spending in the IT sector is set to reach US$5.61tn in 2025, shooting up 9.8% increase from 2024.

While the figure indicates significant growth, the report highlights a nuanced landscape, particularly with how Chief Information Officers (CIOs) plan to allocate their expanded budgets.

John Lovelock, Gartner’s Chief Forecaster, noted that much of the increase will serve to counterbalance escalating prices in recurrent spending categories. In other words, as regularly used products and services become more expensive, corporate budgets are increasing to accommodate.

“While budgets for CIOs are increasing, a significant portion will merely offset price increases within their recurrent spending,” John explains. “This is that, in 2025, nominal spending versus real IT spending will be skewed, with price hikes meaning absorbing some or all of budget growth.”

In particular, Gen AI programmes are projected to spike in price and demand.

Generative AI's indirect influence on spending

In 2025, Gen AI will continue to shape the IT sector’s trajectory, albeit in more direct ways than it has done previously.

Spending in areas such as data centre systems, devices and software is expected to experience double-digit growth, with hardware upgrades serving as a primary driver.

Data centre systems are expected to see the sharpest rise, surging by 23.2% to US$405.5bn in 2025, while software spending is set to grow by 14.2% to US$1.25tn.

However, John tempered expectations about the immediate impact of Gen AI investments. “Gen AI is sliding toward the trough of disillusionment,” he says, “which reflects CIOs’ declining expectations for Gen AI, but not their spending on this technology.”

While consumers and enterprises alike will purchase AI-enabled devices such as PCs, tablets, and mobile phones, these purchases are unlikely to be driven primarily by Gen AI functionality due to the lack of compelling applications.

AI-optimised servers are emerging as a standout area, with spending expected to double that of traditional servers in 2025, reaching US$202bn.

“IT services companies and hyperscalers account for over 70% of spending in 2025,” John says.

“By 2028, hyperscalers will operate US$1tn worth of AI-optimised servers, but not within their traditional business model or IaaS market. Hyperscalers are pivoting to be part of the oligopoly AI model market.”

How price pressures are reshaping budgets

CIOs face the dual challenge of navigating inflationary pressures and managing operational demands, which are reflected in the forecast’s segment-specific growth projections.

Devices, for instance, are expected to see a 10.4% rise in spending to US$810.2bn, driven in part by necessary upgrades rather than discretionary enhancements.

John’s projections point to a cautious optimism among technology leaders. “The new AI-ready PCs do not yet have ‘must-have’ applications that use the hardware,” he said, illustrating the current gap between technological potential and practical utility.

As enterprises await breakthroughs in functionality, much of the immediate spending will centre on maintaining operational efficiency and addressing price hikes.

The role of hyperscalers and AI in reshaping markets

Hyperscalers – companies specialising in massive-scale cloud services – are increasingly positioned as key players in the evolving IT landscape.

With their anticipated US$1tn investment in AI-optimised servers by 2028, these firms are set to transition beyond traditional infrastructure-as-a-service (IaaS) models into more specialised AI ecosystems.

This shift aligns with broader market trends that favour concentrated investment in advanced computing resources.

Gartner’s highlights the importance of these developments for understanding the future direction of IT spending, particularly in terms of how major players adapt their business models to remain competitive.

Methodology and market insights

Gartner’s IT spending forecasts are built on a comprehensive analysis of sales data from over a thousand vendors across the spectrum of IT products and services.

This rigorous approach enables the firm to deliver nuanced insights into market dynamics and provide guidance to CIOs navigating an increasingly complex technological environment.

These forecasts offer a critical lens through which to examine the interplay of emerging technologies, economic pressures and strategic priorities in the global IT market.

“Understanding the broader spending context is essential for CIOs aiming to align their budgets with both current needs and future opportunities,” says John.

Source

Image Credit

Aitthiphong Khongthong via Vecteezy

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