European Public Cloud Spending Holds Strong Amid US Tariffs

Public cloud services spending in Europe will total $229 billion in 2025 and reach $452 billion by 2029, according to IDC. The Analytics expert forecast that the segment would record a five-year (2024-2029) compound annual growth rate (CAGR) of 19%.

In a year when efficiency, automation, and revenue generation are transforming business and IT strategies, the interest in adopting AI solutions and in testing and deploying generative AI (GenAI) use cases will support investments in platform-as-a-service (PaaS). As a result, IDC expects PaaS investments to experience a 32% year-on-year growth rate by 2026.

“Despite potential impacts on European public cloud spending in the second half of 2025, including the uncertainty from U.S. tariffs, most European industries are currently maintaining a 'business-as-usual' approach," commented Andrea Minonne, research manager at IDC UK. “While sectors like automotive, consumer goods, chemical, and other manufacturing remain cautious in their spending, the overall industry outlook is not concerning, and we don't foresee a substantial effect on cloud investments. Cloud continues to be crucial for manufacturing, enabling solutions that improve supply chain visibility, facilitate agile inventory management, and deliver real-time demand forecasting to manage market fluctuations.”

The macroeconomic and geopolitical situation in Europe presents a few risks that could influence tech-buyer spending in the second half of 2025. These include the war in Ukraine, which has sparked dialogues about increasing defense spending across NATO countries; the conflicts in the Middle East, which might trigger supply chain disruptions for European businesses importing goods from Asia; and the volatility caused by the ongoing dialogues over U.S. tariffs, which might impact verticals like automotive, consumer goods, and other manufacturing industries.

Despite these headwinds, public cloud will remain a strong enabler of key priorities, including cybersecurity, which is expected to significantly push spending on security software across European federal and central governments. Regulatory compliance across heavily regulated industries like finance (banking, insurance, and capital markets) and healthcare (healthcare providers, healthcare payers, and life sciences) will also support investments in the cloud. Furthermore, automation and GenAI projects will accelerate cloud spending among software and information services companies, which are undergoing significant AI-driven organizational restructuring.

Healthcare payer, insurance, and life sciences will exhibit the fastest acceleration in cloud investments in 2026. In Europe, healthcare payers and insurers will see substantial cloud investment growth as the industries strive to meet escalating customer demand in a scalable, efficient, and secure way. For healthcare payers, whose cloud spending will grow by 25% next year, this is particularly true in countries like the UK, where National Health Service deficiencies like long waiting times are driving up the number of citizens opting for private health insurance. Life sciences investments in the cloud will be fueled by massive R&D investments in advanced therapies, significant EU funding initiatives, and accelerated digital transformation for drug discovery and innovation.