European spending on artificial intelligence (AI) is projected to reach $144.6 billion by 2028, growing at a 30.3 percent compound annual growth rate (CAGR), according to IDC report.
Generative AI (GenAI) is expanding rapidly, currently making up nearly a fourth of the AI market and expected to reach one-third by 2028. IDC’s survey shows that 87 percent of European companies plan to allocate up to 30 percent of their AI budgets to GenAI.
Carla La Croce, research manager, Data and Analytics at IDC, said: “GenAI is a top priority for C-suite leaders and opens opportunities to develop more integrated internal strategies among C-suites.”
Software dominates AI spending, accounting for over 60 percent of the market, with AI platforms leading growth. Services and hardware also contribute significantly, with investments in servers seeing unexpected growth in 2024.
European industries are making significant investments in artificial intelligence (AI) and generative AI, with banking leading the way. According to IDC’s Worldwide AI and Generative AI Spending Guide, banking is set to spend $10.5 billion on AI by 2025, accounting for 32.4 percent of the market.
The financial services sector is expected to lead AI spending in Europe, making up 23 percent of the market by 2025, with banking at the forefront. AI investments focus on efficiency, risk management, customer experience, and cybersecurity, with key use cases in fraud detection, threat intelligence, and AI-enabled customer service.
Software and information services follow with an estimated $6.6 billion in spending, reflecting a compound annual growth rate (CAGR) of 29.5 percent from 2024 to 2028. The software and information services industry follows, primarily investing in AI infrastructure. Retail ranks third, leveraging AI and GenAI for personalized shopping, operational efficiency, and sales growth.
Retail ranks third, with $6.5 billion in AI investments and a CAGR of 27.4 percent, as the industry increasingly adopts AI to enhance customer experiences and optimize operations. Digital commerce is the top AI use case in retail, followed by AI-driven customer service and logistics optimization.
Telecommunications is also a key player, expected to invest $4 billion in AI, with a CAGR of 27.1 percent. Professional and personal services round out the top five industries, with projected AI spending of $3.4 billion and the highest CAGR among the top sectors at 34.7 percent.
These figures highlight the growing importance of AI across industries, with businesses prioritizing AI-driven solutions to improve efficiency, security, and customer engagement.
Media and entertainment are the fastest-growing industries in AI adoption, with CAGRs exceeding 35 percent from 2024-2028, driven by GenAI applications in content creation and video production. Professional services, healthcare, and life sciences also show strong growth, with AI being used for clinical workflow optimization and pharmaceutical research.
Key investment areas include security, AI-enabled customer service, and AI infrastructure provisioning, particularly in software, telecom, and retail. By 2025, AI and GenAI will be most applied in customer service, IT operations, sales, and AI infrastructure. High-growth areas include HR, engineering R&D, and marketing.
