Australian Businesses to Spend $33.6 Billion on Cloud in 2026
Synopsis
Australian organizations are on track to spend a record $33.6 billion on public cloud services in 2026, according to a May 11 report from Gartner. This 17.9% increase is being fueled by a massive shift from AI testing to full-scale production. While software remains the biggest cost at $16.4 billion, infrastructure services are growing at 24.1% as companies seek high-performance power for new AI tools. Analysts highlight a new focus on "cloud efficiency," with businesses using smaller, targeted AI models to save money while still driving automation. As companies prioritize business value over experimentation, the Australian market is becoming a global leader in practical cloud and AI integration.
By 2026, Australian public cloud services spending will spend $33.6 billion, surpassing a 17.9% increase on last year. An increase in AI testing to production, particularly across infrastructure and platform services, is the major factor contributing to the uptick.
Key Highlights
- Cloud expenditure in Australia will be $33.6 billion by 2026.
- Infrastructure-as-Service (IaaS) will be the fastest-growing member of the public cloud with a growth rate of 24.1%.
- The largest category, Software Services (SaaS), has remained at $16.4 billion.
- Businesses are moving from experimenting with AI to using it as a business tool in the real world.
- More organisations are using smaller, targeted AI models in an effort to save costs.
Cloud Market Growth
A report released on Monday May 11, 2026, by Gartner showed the boost in Australian cloud spending coming. Worldwide public cloud services spending is expected to rise from $28.5 billion in 2025 to $33.6 billion in 2026, according to organisations’ budget projections.
Software-as-a-service(SaaS) still accounts for the biggest pie of the budget to tune into at about $16.4 billion, but it is the foundational layers where real momentum exists. Infrastructure and platform services undergo fast double-digit growth as businesses create the backbone required for modern-day digitisation.
Reasons Behind the Shift
The main reason for the spike in spending is that Australian businesses are no longer using AI for normal tasks. They are progressing from initial tests to actually rolling AI tools into their everyday lives. The change in this requires powerful computing, hence the 24.1% increase in infrastructure spending. On the other trend driving businesses toward greater reliance on solid cloud platforms with which to manage these smart applications over the next five years will be companies’ increasing focus on agentic AI, that is, autonomous systems that can handle complex workflows.
Investor Perspectives
Investors want to see proof that giant tech budgets are translating into business value. We’re seeing a clear shift towards what we call cloud efficiency where companies smarten up on how they are spending. The move away from big, expensive AI models to small, domain-specific and cheaper but functional (enough) is so that people are not running a giant model for everything. The push toward inference-optimised strategies indicates that the market is maturing, with more attention to ROI as opposed to just chasing the next hype wave.
What to Watch
Looking ahead, organisations will oversee their hybrid cloud arrangements. The need to process data at the edge, often closer to the source of data creation, has taken on greater urgency as costs have risen and automation of business processes has become increasingly important, Gartner experts said. Though still growing, the pace is slowing as companies tighten their processes concerning licensing costs and fighting through their application portfolios. The race is to integrate AI as the new core into their businesses, while keeping cloud bills in check.
FAQs
- How much will cloud services be in 2026 in Australia?
By 2025, public cloud expenditure is projected to reach $33.6 billion growing almost 18% from the previous year.
- What is the fastest-growing part of the cloud market?
Infrastructure-as-a-service (IaaS), at 24.1%, is projected to grow fastest as enterprises are preparing systems for AI modes
- Does AI drive the cloud spending growth?
Yes, the main driver behind these new cloud investments is moving from AI experimentation to real-time production.
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