Europe’s technology engine is shifting into a higher gear. Despite economic uncertainty, tariff pressures, and geopolitical tensions, the region’s tech spending will see a robust 6.3% growth in 2026, which will exceed €1.5 trillion for the first time. A wave of demand for AI‑optimized hardware, surging cloud adoption, cybersecurity urgency, and a renewed focus on tech sovereignty brings Europe’s digital transformation into focus.
AI and datacenter investment is booming. Datacenter growth in the Nordics and Southern Europe will flourish as organizations look for energy‑efficient, sovereign‑aligned infrastructure options outside of traditional hubs like London and Dublin, where grid constraints are tightening. The result is double‑digit growth in AI‑optimized servers and related hardware. France has a competitive edge in AI, quantum and space helped by a vibrant ecosystem of startups, spearheaded by Mistral AI, Hugging Face and Dataiku.
Software spending maintains double‑digit momentum. Cloud‑delivered applications and AI‑enhanced business software are powering an 11% rise in software investment. The expanded attack frontier from cloud adoption and AI require more sophisticated cybersecurity solutions that push budgets higher. In Germany, spend on public cloud if forecast to grow 17% to capture more than half of software spend.
Sovereignty becomes a defining theme. Europe is no longer treating digital sovereignty as a long‑term ambition. Most of Europe’s tech cloud services comes from the US which forces Europe to focus on cloud, security and data sovereignty, and to place legal constraints on US tech firms. The European Union wants to become an ethical AI leader across computing infrastructure, high quality data and sector specific AI algorithms. The European commission’s 2026 Chips Act focuses on “AI made in Europe”, energy efficiency, the security of European AI chip supply and the creation of 5 AI gigafactories for the development and training of complex AI models.
Europe’s focus on tech sovereignty will likely reshape vendor dynamics and infrastructure choices for years to come. To learn more about the tech investments that companies are making and how this is likely to change over time read Forrester’s new European Tech Market Forecast, 2025 To 2030 and check out our forecasts that focus on Global and US technology spending trends and see our new 2025 Global Tech Vendor Tracker to see the dynamics of vendor growth.
Have any thoughts? Contact me, Michael O’Grady.
Forrester clients can schedule a Forrester guidance session for more insights and to explore the narratives within this forecast.
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