European AI spending set to hit $290 billion by 2029
European enterprises are committing serious money to AI, and the numbers are accelerating. According to IDC’s Worldwide AI and Generative AI Spending Guide, AI spending across Europe will reach $290 billion by 2029, growing at a compound annual growth rate of 33.7%.
Organizations across the continent are moving AI out of proof-of-concept projects and into core operations, with budgets reallocating toward multi-agent systems and AI-embedded enterprise strategies.
Software leads on spending; AI platforms grow fastest
Software accounts for 58.5% of total European AI spending in 2026, making it the largest technology segment by a wide margin. It is also the fastest-growing, with a projected CAGR of 42.9% through 2029. Within software, AI platforms are expanding at 52.5% annually, driven by the buildout of agentic components across industries.
Generative AI solutions are already widespread in enterprise deployments. IDC projects they will account for roughly 54% of the total European AI market by the end of the forecast period.
Banking dominates, healthcare accelerates
Banking holds 12.5% of the European AI market in 2026, making it the largest industry segment and the top spender in four of the five major European markets. Active use cases include fraud analysis, threat intelligence, contact center automation, and customer self-service. Banking institutions are also increasing investment in FinOps, sovereign cloud infrastructure, and AI governance as agentic deployments grow more complex.
Software and information services ranks second, with most spending directed at AI infrastructure provisioning to support agentic workloads through PaaS and IaaS platforms. Retail ranks third, investing in digital commerce, customer service, pricing optimization, and supply chain planning.
Healthcare providers are growing the fastest of any industry segment, at a 39.7% CAGR across all five major European markets through 2029. The primary use case is clinical workflow and resource optimization. Media and entertainment follows at 37.3% CAGR, driven by generative AI applications in content creation, video production, and audience personalization. Professional and personal services, utilities, and life sciences are also growing above the market average.
Agentic AI is driving urgency
“Despite geopolitical tensions and supply chain disruptions, the AI market remains dynamic and is rapidly transitioning from experimental to operational and strategic for enterprises,” said Carla La Croce, research manager, Data and Analytics, IDC.
La Croce noted that the emergence of agentic AI tools has made this transformation more urgent and more profound than many anticipated. Agentic AI refers to systems capable of taking multi-step actions autonomously, without requiring human input at each step. The category is driving demand for AI platforms and is a key factor behind the acceleration in software spending.
Risks on the horizon
IDC identifies regulatory fragmentation stemming from the EU AI Act as a constraint on market growth, with compliance requirements varying across member states. Persistent AI talent shortages and cloud cost optimization pressures are also cited as potential brakes on spending. On the other side of those constraints, IDC notes that compliance activity is expected to generate incremental demand for AI governance and assurance services, particularly in banking, insurance, and healthcare.
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