European AI spending is expected to reach $133 billion by 2028, with a compound annual growth rate (CAGR) of 30.3 percent from 2024 to 2028, IDC report said.
Generative AI (GenAI) is driving AI adoption, with a projected CAGR of 55 percent, significantly outpacing more established AI technologies. Around 40 percent of European companies are investing heavily in GenAI solutions.
AI software will account for 58 percent of total AI investments, with applications and platforms leading initially. By 2028, AI platforms will take the lead as businesses demand more customized solutions.
Financial services, especially banking, will lead AI spending, representing over 23 percent of total investments. Media and entertainment will experience the fastest growth, with a 33 percent CAGR, driven by GenAI solutions for customer engagement.
The banking industry holds the largest share of AI and GenAI spending at 15.7 percent in 2024. This highlights the significant investments banks are making in AI technologies, possibly to enhance fraud detection, customer service (via chatbots), and automation of financial processes.
Retail is the second-largest sector for AI spending, making up 9.5 percent. AI is likely being utilized here to optimize supply chains, improve customer experience (such as personalized recommendations), and boost e-commerce operations.
Software and Information Services industry accounts for 8.3 percent of AI and GenAI spending. AI applications in this space could include automation tools, enhanced analytics, and software development processes (like code generation or automated testing).
The telecom industry is expected to allocate 5.5 percent to AI and GenAI. In telecom, AI may be leveraged to improve network efficiency, customer service, and predictive maintenance.
Professional and Personal Services sector holds a 5.1 percent share, possibly reflecting the use of AI for streamlining business processes, legal tech, and consulting services.
The remaining 55.9 percent of AI and GenAI spending is spread across various other industries. This suggests that AI’s adoption is becoming widespread across different sectors, even though they individually contribute smaller shares.
Significant investments will target security-related use cases, such as fraud analysis and threat intelligence. Other growth areas include AI-enabled customer service, digital commerce, and augmented professional growth.
Services will be the second-largest and fastest-growing AI investment category, followed by hardware, with less emphasis on infrastructure spending in Europe compared to the U.S.
Retail, healthcare, life sciences, and insurance sectors will see above-average growth in AI spending.
