Australian cloud spending to hit AUD $33.6bn in 2026

Australian organisations are forecast to spend more than AUD $33.6 billion on public cloud services in 2026, according to Gartner, a 17.9% increase from 2025.

Infrastructure-as-a-service is expected to record the fastest growth among the main cloud segments, rising 24.1% to AUD $7.1 billion. Platform-as-a-service is forecast to grow 20.9% to almost AUD $10 billion, while software-as-a-service will remain the largest category at nearly AUD $16.4 billion.

The spending pattern reflects a market in which companies are expanding cloud use while adjusting to AI workloads and tighter cost controls. Gartner expects overall public cloud spending in Australia to rise from AUD $28.5 billion in 2025 to AUD $33.6 billion in 2026.

Software-as-a-service, long the market's biggest segment, is expected to grow more slowly than infrastructure and platform services. Gartner forecasts SaaS spending will rise 13.8% in 2026, down from 15.0% growth in 2025, as organisations focus more closely on licence optimisation, slower user growth and tighter scrutiny of application portfolios.

Desktop-as-a-service remains the smallest category in the forecast, with spending expected to increase 9.7% to AUD $155 million in 2026 from AUD $141 million in 2025.

AI demand

The strongest gains are expected in the layers of cloud spending most closely tied to computing resources and application development. Gartner linked that trend to changing demand as Australian organisations move from early AI testing to production deployments.

"AI‐driven demand for high‐performance cloud infrastructure is changing how Australian organisations are prioritising cloud spending this year," said Adrian Wong, Director Analyst, Gartner.

Spending decisions are increasingly shaped by the need to support practical AI use rather than initial experimentation.

"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," Wong said.

The figures suggest Australian buyers are allocating more budget to the foundational parts of the cloud stack even as the software market remains larger overall. In monetary terms, SaaS is still set to account for almost half of total public cloud spending, but faster growth in IaaS and PaaS points to a shift in where incremental spending is going.

Efficiency focus

The push for efficiency is also affecting how companies design AI infrastructure. Rather than relying only on large general-purpose models, some organisations are expected to favour smaller models trained or tuned for narrower tasks, with cloud architecture choices reflecting that shift.

"The increasing focus on cloud efficiency this year is also underpinning AI infrastructure strategies," Wong said. "There's a shift toward inference-optimised approaches as organisations fine-tune smaller domain-specific models instead of relying on larger general purpose LLMs. Many are turning to hybrid cloud architectures to push this processing to the edge, which lowers cloud costs while still supporting automation at scale."

Public cloud growth in Australia remains strong, though slightly slower than the previous year. Gartner estimated total market growth at 18.9% in 2025, compared with the 17.9% forecast for 2026.

By segment, cloud application infrastructure services are projected to increase from AUD $8.3 billion in 2025 to AUD $10.0 billion in 2026. Cloud system infrastructure services are forecast to rise from AUD $5.7 billion to AUD $7.1 billion over the same period, highlighting the scale of expected investment in the computing and storage layers that support AI workloads and broader digital operations.

The numbers add to evidence that Australian organisations are still increasing cloud budgets despite pressure to show clearer returns on technology spending. Gartner's forecast points to a market where cloud adoption is broadening, but buyers are paying closer attention to cost discipline, workload placement and the business case for AI.