2025 IT Services Growth Expected to Remain Steady Compared to 2024: Morgan Stanley

Morgan Stanley recently released its Chief Investment Officer (CIO) survey, which sheds light on the anticipated growth of IT services for 2025.

In a note published on Thursday, the bank indicated that the survey reflects a stable outlook that aligns with projections for 2024.

The survey estimates a 2.7% year-over-year (YoY) increase in IT services budgets for 2025. This figure is slightly above the 2.6% growth expected for 2024 but still falls short of the pre-pandemic average of 3.9%.

Despite ongoing global economic challenges, the IT services sector appears to remain resilient, with certain industries exhibiting more robust growth expectations.

Morgan Stanley noted a minor improvement in growth expectations for 2025, with an 11 basis points increase resulting in a projected 2.7% YoY growth, up from the anticipated 2.6% for 2024.

The report stated, “The 2025 IT Services budget growth of 2.7% YoY is largely in line with the growth expectations for 2024, with a slight increase attributed to improved spending intentions in Europe.”

These enhanced spending intentions in Europe have been observed in sectors such as business services, energy, healthcare, and retail. Conversely, sectors including technology, financial services, and manufacturing may experience downward adjustments.

Morgan Stanley also pointed out that the European market has exhibited unexpected resilience, bolstering the overall growth outlook, even amid persistent macroeconomic challenges, particularly in the automotive and aerospace sectors.

In contrast, IT budgets in the United States are anticipated to remain stable with no major acceleration.

The bank noted an uptick in vendor discounting within the sector, with 44% of CIOs reporting increased vendor discounts in the third quarter of 2024, compared to 37% in the second quarter of that same year. This trend suggests that vendors are adopting competitive pricing strategies to regain market share and attract new clients in a challenging spending environment.

Additionally, Morgan Stanley emphasized that the adoption of generative AI by enterprises is still in its nascent stages, with 48% of respondents believing that generative AI projects will be production-ready by the second half of 2025.

The bank concluded, “We believe that clients are focusing on projects that enhance overall generative AI readiness, such as those pertaining to data governance, which has led clients to postpone generative AI deployments until the latter half of 2025.”