According to Gartner, IT spending in Australia is projected to exceed $172.3 billion in 2026, marking a significant milestone in the country’s digital transformation journey. This surge reflects global trends where enterprises prioritise cloud adoption, cyber security, and AI-driven innovation to remain competitive.

What is driving this 8.9% increase in IT spending growth?

1. Software and IT Services

Software and IT services are at the heart of Australia’s IT spending growth, driving the forecasted 8.9 percent increase in 2026. Organisations are prioritising digital transformation to remain competitive, and this means investing in modern applications, cloud-native platforms, and managed services. These solutions enable businesses to streamline operations, improve customer experiences, and make data-driven decisions.

The shift from legacy systems to subscription-based models is accelerating as companies seek flexibility and scalability without the heavy upfront costs of traditional infrastructure.

IT services are also becoming critical as technology ecosystems grow more complex. As organisations adopt cloud, AI, and automation, they need specialised expertise to integrate, secure, and optimise these solutions. Managed services and consulting are increasingly relied upon to fill capability gaps, allowing internal teams to focus on innovation and strategic priorities.

This trend reflects a broader move toward outsourcing essential IT functions to trusted partners.

“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,” said Andy Rowsell-Jones, Distinguished VP Analyst at Gartner. “In particular, GenAI is transforming the software landscape by enabling more intelligent, efficient and personalised applications.”

How are you leveraging software and IT services to accelerate your transformation? Are you getting the most out of your technology investments, or is there room to improve?

2. Cloud Adoption

Cloud adoption is a major enabler of this transformation, underpinning the flexibility and scalability businesses need to innovate quickly. Organisations are migrating workloads to cloud platforms to reduce infrastructure costs, improve resilience, and gain access to advanced services such as AI and analytics without maintaining costly on-premises systems.

This shift is not just about technology; it is about creating an agile foundation for growth.

According to IDC, by 2026 more than 70 percent of Australian organisations will run the majority of their workloads in the cloud, whether public or hybrid. SaaS and IaaS solutions dominate IT budgets, with SaaS remaining the largest segment. However, IaaS is projected to grow at 20 to 25 percent CAGR in Australia as businesses modernise infrastructure and prepare for AI-driven workloads.

Where are you on your cloud migration journey? Are you fully leveraging the flexibility and innovation potential that cloud offers, or is there still work to do?

3. Cyber Security Investments

It’s no surprise that cyber security remains one of the fastest-growing areas of IT spending in Australia, driven by escalating threats and stricter compliance requirements. Organisations are allocating larger budgets to advanced security solutions to protect sensitive data, maintain customer trust, and ensure operational continuity. This is not just a technical necessity; it is a business-critical investment that safeguards reputation and reduces the risk of financial loss.

The growing sophistication of attacks and the rising cost of breaches are reinforcing this trend. According to the Australian Cyber Security Centre, more than 84,700 cybercrime reports were lodged in FY2024–25, around one every six minutes, with average self‑reported losses rising to $56,600 for small businesses. At the same time, IBM reports that the average cost of a data breach for Australian organisations remains at AUD $4.26 million.

For many organisations, managed security services are becoming an attractive option, offering enterprise-grade protection without the complexity and expense of building in-house capabilities.

How confident are you in your current security posture? Are you investing enough to protect your business and maintain trust in an increasingly digital world?

4. AI & Automation

AI and automation are moving from experimental technologies to essential business tools. Organisations are using AI to enhance customer experiences, improve decision-making through predictive analytics, and unlock efficiencies by automating repetitive tasks. This is not just about saving time; it is about enabling smarter, faster, and more personalised services that customers increasingly expect.

The demand for AI capabilities is driving significant investment in both infrastructure and talent. IDC forecasts that AI spending in Asia-Pacific will grow at a compound annual rate of over 25 percent through 2026, with Australia playing a key role in this growth. Businesses that embrace AI early will gain a competitive edge, but they must also prepare for challenges such as hardware requirements for large-scale AI workloads and the need for specialised skills to manage and optimise these technologies.

“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,” said Rowsell-Jones

How are you leveraging AI and automation today? Are you ready to scale these capabilities to stay ahead of customer expectations and industry trends?

The Infrastructure Behind AI: Why Data Centres Are Becoming the Next Big Investment

As businesses accelerate adoption of AI and automation, the impact is not limited to software and services. It is reshaping infrastructure priorities at a fundamental level. Investments in AI-ready hardware and data centre systems are surging as organisations prepare to support demanding workloads like generative AI.

Gartner forecasts that spending on data centre systems in Australia will see the largest growth in 2026, increasing 22.5 percent to A$10.1 billion. Within this category, server spending alone is expected to rise by 30 percent to reach A$7.7 billion, driven by AI-optimised servers designed to handle training and inference at scale.

This shift underscores a critical reality: the future of IT is not just about applications and platforms, but also about the physical infrastructure powering them.

Looking ahead…

The next few years will redefine IT strategies in Australia as organisations navigate rapid technological change. Businesses that anticipate these trends and act proactively by investing in cloud, AI, and cyber security will position themselves to thrive in an increasingly digital economy. These investments are not just about keeping pace with competitors; they are about building resilience, unlocking innovation, and creating the agility needed to respond to shifting market demands.

Success will depend on making strategic choices today. Aligning IT priorities with emerging technologies, modernising infrastructure, and strengthening security will enable organisations to deliver smarter services and maintain trust in a connected world.

The question is clear: are you ready to take the next step and turn these trends into a competitive advantage?

*More information on the forecast can be found in the complimentary Gartner webinar IT Spending Forecast, 2Q25 Update: Navigate the Complexities of the Current IT Landscape.

Diamond IT can help you future-proof your IT strategy

If you need expert guidance on cloud migration services, AI integration consulting, and cyber security solutions tailored to your business goals to position your business for success, our team is here to help. Contact us on 1300 307 907, email us at enquiries@diamondit.com.au or fill out the form below.