European tech spending will exceed €1.5 trillion in 2026, up 6.3% year-over-year, according to Forrester forecasts released this week. The growth reflects a strategic pivot: organizations are buying their own infrastructure rather than renting indefinitely from US cloud providers.
Hardware leads the surge at 14.3% growth, driven by purchases of AI-optimized servers and supporting infrastructure. Software follows at 11.2%, with cybersecurity tools and sovereign cloud platforms taking priority. IT services lag at 3.7%, suggesting the spending shift favors ownership over outsourcing.
The timing matters. US tariff threats and EU regulatory enforcement have made tech procurement explicitly political. European firms face mounting pressure around data residency, particularly in defense and healthcare. UK defense R&D spending is forecast to grow 9% annually through 2030, while NHS technology budgets are on track to nearly double to £10 billion by 2029.
Forrester frames this as a sovereignty play, which it is. Sovereign cloud platforms, domestic AI compute, and stricter data residency requirements are getting budget priority across the EU and UK. Michael O'Grady, principal forecast analyst at Forrester, notes financial services are furthest along, with roughly three-quarters of UK firms already running AI in production.
The context: Trump threatened tariffs of 10-25% on EU imports beginning February 1, while Brussels prepared to enforce over €100 billion in collective fines against US tech giants under the Digital Markets Act and Digital Services Act. No tariffs have been implemented yet, but the trajectory is clear.
Ireland is feeling the pressure most acutely due to its reliance on US multinationals. The broader EU economy appears resilient, with real GDP growth in 2026 expected to match 2025, supported by intra-European trade and rising defense spending.
The pattern is consistent: European organizations are betting on control over convenience. The question isn't whether this trend continues, but how quickly US hyperscalers adapt their European offerings to meet sovereignty requirements before they lose share permanently.