AI boom to push Australian IT spending past A$172bn

Australian IT spending is set to grow to A$172.3bn in 2026, driven by a corporate rush to invest in artificial intelligence (AI), cyber security and cloud technologies, according to the latest forecast from Gartner.

The 8.9% year-on-year increase from 2025 was announced at the Gartner IT Symposium/Xpo on the Gold Coast this week, where analysts are discussing key trends for CIOs and technology leaders.

“Despite an uncertain environment, investments in AI, cyber security and cloud will continue to drive new IT spending in Australia next year,” said Andy Rowsell-Jones, a distinguished vice-president analyst at Gartner.

“With AI firmly in the spotlight, Australian organisations are widening their focus from generative AI [GenAI] towards investments in other related AI technologies for real-time intelligence and operational scalability, helping ensure long-term success,” he added.

The most significant growth will be seen in datacentre systems, which are expected to expand by 22.5% in 2026 to reach A$10.1bn. Within this, spending on servers is projected to grow by 30% to A$7.7bn as organisations invest heavily in AI-optimised hardware to support GenAI workloads.

Australian datacentre providers have been catering to the growing demand for AI infrastructure. In August 2025, Macquarie Data Centres announced plans to host the Dell AI Factory with Nvidia infrastructure platform in its sovereign facilities to meet growing demand for local, secure and compliant GenAI infrastructure.

The move was aimed at providing Australian organisations, particularly those in highly regulated sectors such as finance, healthcare and government, a local platform for building and deploying applications such as private large language models (LLMs), agentic AI and digital twins.

John-David Lovelock, distinguished vice-president analyst at Gartner, noted that the rapid expansion of hyperscale datacentres for GenAI is driving huge demand for power, which utility providers struggle to keep up with.

“It is encouraging to see such strong growth continuing in datacentre spending, as enterprises and service providers work together on solutions to support rapid GenAI growth,” he said.

While datacentres are the fastest-growing segment, software will become the largest category of IT spend in Australia, overtaking IT services for the first time. Gartner forecasts software spending to grow by 13.6% to reach almost A$60bn in 2026.

According to Rowsell-Jones, this is a direct result of organisations seeking to modernise and secure their operations.

“Australian organisations are rapidly migrating to AI-enabled software and cyber security tools to enhance workflows, manage compliance and combat threats, which are both commonly delivered as software services,” he said. “In particular, GenAI is transforming the software landscape by enabling more intelligent, efficient and personalised applications.”

Technology vendors are moving quickly to embed GenAI capabilities into their product suites, with Gartner predicting a long-term shift. By 2028, the firm expects 75% of enterprise software spending will be on applications with GenAI functionality, as it becomes a key differentiator for unlocking new efficiencies.

These applications are increasingly cloud-based, with spending on software-as-a-service (SaaS) tools projected to reach almost A$13bn in 2025, a 15.5% rise from 2024.

“Public cloud services continue to be a critical driver of innovation across Australian organisations this year,” said Adrian Wong, director analyst at Gartner, adding that as the cloud momentum continues, many organisations are facing complex management issues, especially when it comes to scaling AI initiatives.

“To deliver value, CIOs need a sharper cloud strategy, one that prioritises return on investment but also keeps pace with rapid technology shifts,” he said.