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Australian public cloud spending to surpass A$33.6bn in 2026

As hyperscalers such as AWS and Microsoft pour billions into Australian datacentres, Gartner predicts local public cloud spending will grow by 17.9% in 2026, driven by the growth in AI infrastructure demands

Aaron Tan
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Published: 11 May 2026 9:41

Australian organisations are expected to spend more than A$33.6bn on public cloud services in 2026, an increase of 17.9% from 2025, according to the latest forecast from technology research firm Gartner.

Driven by the growing adoption of artificial intelligence (AI), infrastructure as a service (IaaS) is forecast to record the fastest growth among the main cloud segments, rising 24.1% to A$7.1bn. This will be closely followed by platform as a service (PaaS) at 20.9%.

“AI-driven demand for high-performance cloud infrastructure is changing how Australian organisations are prioritising cloud spending this year,” said Adrian Wong, director-analyst at Gartner.

“While AI compute demands are driving rapid IaaS growth, the ultimate goal for Australian organisations is business value. As the market shifts from early AI experimentation to real-time inference and agentic AI, organisations are relying heavily on robust PaaS environments to manage autonomous workflows and integrate them into core applications,” he added.

Software as a service (SaaS) remains the largest spending category for Australian organisations in 2026, forecast to reach almost A$16.4bn. However, its 13.8% increase represents a slight slowdown in growth compared with 2025 as the market matures. Organisations are increasingly prioritising licence optimisation, absorbing slower seat growth and applying tighter scrutiny to their application portfolios.

Hyperscaler investments fuel local capacity

The continued surge in Australian cloud spending aligns with massive recent infrastructure investments from global hyperscalers eager to turn the country into a regional AI and cloud hub.

In June 2025, Amazon Web Services (AWS) announced a record A$20bn investment to expand its datacentre infrastructure in Sydney and Melbourne between 2025 and 2029. The expansion is aimed at supporting complex AI workloads, supercomputing applications, and national security requirements.

AWS’s investment follows Microsoft’s A$5bn commitment in late 2023 to expand its computing capacity by 250% and grow its hyperscale and AI infrastructure footprint to 29 datacentre locations across the country.

As Australian organisations mature in their AI journey, more of them are gearing towards inference-optimised infrastructure as they fine-tune smaller, domain-specific models instead of relying on general-purpose large language models. “Many are turning to hybrid cloud architectures to push this processing to the edge, which lowers cloud costs while still supporting automation at scale,” Wong said.

One of the AI applications that can benefit from inference-optimised infrastructure is agentic commerce, where virtual agents have reasoning capabilities to understand context, identify complex needs and act on behalf of the customer.

In April 2026, Australian hardware chain Bunnings launched Buddy, an AI-powered shopping assistant that provides customers with expert advice and helps them find what they need. Built with Google Cloud’s Gemini Enterprise for CX platform in just over six weeks, the tool combines Google AI and infrastructure with Bunnings’ deep product expertise to transform the e-commerce experience from “product search to project search”.

Following its progressive roll-out on Bunnings’ Australian website, Buddy will be launched in New Zealand later this year. Bunnings also plans to consolidate its customer service touchpoints, so that Buddy handles initial support queries.

The retailer also intends to integrate customer loyalty data, enabling the shopping assistant to offer hyper-personalised recommendations with customer consent, such as automatically suggesting tools from brands that a customer is already using.

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