AI Drives Cloud Spending Surge, Reshapes Tech Services: Equirus

The market posted strong momentum in the first quarter, with total annual contract value (ACV) for both cloud-based services (XaaS) and managed services rising 29% year-on-year to $39.4 billion. The surge was led by AI-driven demand for cloud infrastructure, while managed services held steady. Regionally, the Americas led with 35% growth, followed by EMEA at 30% and APAC at 16%.

Equirus noted that companies are no longer just testing AI--they are using it at scale. This is increasing demand for infrastructure and changing how deals are structured and purchased. However, adoption is still uneven due to issues like poor data quality, governance gaps, and lack of trust.

For CY26, ISG has increased its growth forecast for cloud services to 25%, while keeping managed services growth unchanged at 2.1%. This reflects continued investment by large cloud providers and steady demand for SaaS. Despite market uncertainty, companies are still investing in key platforms. At the same time, they are cutting costs, consolidating vendors, and combining services to fund AI projects. Demand is shifting from smaller projects to larger, cost-focused deals, with business process outsourcing (BPO) showing strong potential--especially in back-office and industry-specific tasks.

Pricing models are also changing. Instead of paying based on hours worked or number of employees, companies are moving toward outcome-based pricing. For example, firms like Cognizant are offering solutions where clients pay for results--such as faster claims processing or better invoice handling--rather than manpower. These solutions combine AI, human oversight, and structured workflows.

On cybersecurity, Accenture and Anthropic partnered to launch Cyber.AI, a platform that uses Anthropic's Claude models and Accenture's cyber expertise to automate threat detection and incident response. The solution also includes "Agent Shield" capabilities to monitor and govern autonomous AI agents in real time. Equirus views this as a direct response to rising enterprise demand for scalable cyber defenses as generative AI adoption accelerates.

Equirus expects AI to remain the dominant growth lever for technology services through CY26. The brokerage sees XaaS as the primary driver, supported by hyperscaler capacity expansion and resilient SaaS adoption. While managed services growth will stay muted, opportunities lie in cost-driven consolidation and AI-enabled BPO deals. At the same time, governance and trust issues around AI will remain a watchpoint, potentially limiting broad-based growth unless addressed.

- ANI