Gartner sees 10% IT spending jump in 2025, but don’t get too excited – News

Gartner Inc. expects worldwide information technology  spending to grow 9.8% to $5.61 trillion in 2025, well ahead of the 7.7% increase in 2024, but don’t get your party hats out just yet.

The research firm says much of the spending bump will cover price increases for existing products and services. “The median amount that CIOs are putting aside for price increases is unusually high,” said John-David Lovelock, a Gartner distinguished VP analyst. IT buyers didn’t allocate much budget for price hikes between 2016 and 2020, as contract negotiations or service modifications typically mitigated them.

However, Lovelock noted that since 2022, software providers have been steadily raising prices on cloud offerings due to rising costs for skills and operational expenses. Concerns about tariffs that the incoming Trump administration may impose may also push prices higher. Software spending is expected to grow 14.2% this year compared to 12% last year.

Leading the spending surge are data center systems, which are expected to grow 23.2% this year, coming on top of a torrid 39.4% growth rate in 2024. Generative AI has shifted spending on data center servers permanently up and to the right, a phenomenon Lovelock called “an incredible change” in market dynamics.

By 2028, hyperscalers, service providers, colocation and cloud facilities will have spent roughly $1 trillion on AI-optimized servers. “In six years, we’re going to triple the spending on servers we had over the last 20 years,” he said.

Data center growth to continue

Lovelock said the outsized growth in data center spending will likely continue in the foreseeable future. That’s despite Gartner’s belief that generative AI is sliding toward the “trough of disillusionment” that invariably follows the peak of the hype cycle.

“We started at the peak of inflated expectations, where companies thought they could lay off all their employees and triple their revenue because of gen AI,” he said. “Most of the proofs of concept in 2024 failed.”

Disillusionment is a natural part of the adoption cycle for any breakthrough technology and shouldn’t indicate that interest in generative AI will wane, Lovelock said. Rather, “2025 is the year of ‘let’s get down to what we can actually do with it,’” he said. “Expectations and spending aren’t linked.”

Another factor likely to skew IT spending this year is a resurgence in PC sales fueled by scheduled replacements of machines purchased during COVID-19 and Microsoft Corp.’s plan to end support for Windows 10 on Oct. 14. Gartner predicts device sales will grow 10.4% this year up from 6% growth last year.

AI PCs dominate

Many of those replacement machines will be the new breed of artificial intelligence PCs, which come with neural processing units. Gartner forecasts AI PCs will make up 43% of shipments in 2025 and nearly 100% by 2026.

Though vendors aggressively market the devices as the future, businesses and consumers aren’t necessarily demanding them yet. “There’s really no software that takes advantage of that functionality,” Lovelock said. “The AI assistants still make calls back to the cloud. This is more about future-proofing.”

Gartner said IT services companies and hyperscalers will account for over 70% of spending in 2025 and will soon dominate the AI software and services market as model training costs spiral upward.

“The current round of models cost over $100 million to train,” Lovelock said. “By 2026-2027, training costs for the next-generation models could reach $10 billion per model.” At those prices, few new entrants are likely to obtain the funding they need to enter the market.

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