Demand for technology services in Europe continued to accelerate in the second quarter, as the region increasingly turns to managed services to reduce costs and cloud services to meet AI objectives, according to the latest state-of-the-industry report from Information Services Group (ISG), a global AI-centered technology research and advisory firm. The EMEA ISG Index™ shows second-quarter ACV for the combined market soared 46 percent—its largest growth in eight years—to US $13.0 billion.
EMEA combined market up 46% to $13.0B, largest growth in eight years.
XaaS segment surged 64% to $8.3B record; IaaS up 79% to $6.8B.
Managed services up 21% to $4.7B with 294 contracts awarded.
UK posted best quarter in three years, up 84% to $1.4B.
BFSI managed services up 55%, first positive trend in nine quarters.
ISG raises global XaaS forecast to 30% growth for 2026.
ACV for the as-a-service (XaaS) segment surged 64 percent year on year, its fastest growth ever, to a record US $8.3 billion. Infrastructure-as-a-service (IaaS) climbed 79 percent year on year, to a record US $6.8 billion. Software-as-a-service (SaaS) grew 19 percent to US $1.5 billion. Managed services ACV advanced 21 percent, to US $4.7 billion, with 294 contracts awarded, up 23 percent. Managed services growth was driven by new scope activity, with deals up 25 percent and ACV up 32 percent, to US $3.3 billion.
Within managed services, IT outsourcing (ITO) rose 21 percent to US $3.2 billion, led by application development and maintenance (ADM) and infrastructure services. Business process outsourcing (BPO) grew 37 percent to US $915 million. By industry, managed services ACV was sharply higher in BFSI (up 55 percent), travel, transportation and leisure (up 51 percent), and energy (up 34 percent). The UK posted its best quarter in three years, with ACV of US $1.4 billion, up 84 percent year on year.
For the first half, combined market ACV rose 37 percent, to US $25.0 billion. Managed services, at US $9.3 billion, was up 13 percent, while XaaS, at US $15.7 billion, climbed 56.5 percent. For the full year, ISG said it is maintaining its global forecast of 2.1 percent revenue growth for managed services while raising its previous growth forecast for cloud-based XaaS by 500 basis points, to 30 percent.
Anthony Drake, president, ISG EMEA, stated: "Europe has become the fastest-growing region for technology services, fueled not only by an increasing demand for AI, but for managed services, which acts as a cost-savings lever to help fund AI ambitions and continued digital transformation. We're seeing strong double-digit growth pretty much across the board."
About ISG
ISG is a global AI-centered technology research and advisory firm. A trusted partner to more than 900 clients, including 75 of the world's top 100 enterprises, ISG is a long-time leader in technology and business services that is now at the forefront of leveraging AI to help organizations achieve operational excellence and faster growth.
