Enterprise IT spending is forecast to grow 5% in 2027, the strongest spending outlook since October 2022, as businesses continue to invest in AI despite rising hardware costs and pressure on tech budgets.

According to findings from Enterprise Technology Research’s October 2026 Technology Spending Intentions Survey, IT spending growth for 2026 is expected to reach 3.9%, up slightly from July’s 3.8% estimate.

The survey, based on 1,338 responses as of September 14, found that 76% of enterprises plan to increase their 2026 technology budgets, compared with 15% expecting cuts. The share of companies boosting spending is the highest recorded in five surveys.

Beneath the positive overall outlook, enterprises are making major changes in how they allocate their tech budget. AI investment is taking priority over hardware upgrades, outside consultants and some existing IT operations.

A key finding: 53% of enterprises exceeded their AI budgets during the previous six months, up from 47% in July. Among Global 2000 companies, the figure reached 61%.

But these cost overruns had to balanced with cuts elsewhere. Some 60% of respondents are cutting spending on contractors and consultants, while 57% are delaying hardware upgrades or legacy infrastructure modernization. SaaS budgets are less affected, with 32% reporting cuts.

Hardware, Software and Cloud

Hardware prices are rising at a remarkable rate. Enterprises report hardware price inflation of 7.3%, more than double the 3.4% recorded a year earlier. ETR attributes much of the increase to higher memory costs reaching business customers after a delay of two to three quarters.

With hardware prices climbing, expected hardware spending growth has declined from 4% in July to 3%. This decline suggests businesses are extending the life of existing equipment rather than paying higher prices for replacements.

Software spending offers a far more upbeat picture. Expected software budget growth for 2026 has improved to 4.1%, the first upward revision since October 2025. Security software leads the sector with 7.9% growth, followed by data and business intelligence at 6.6%.

Cloud spending, while still strong at 7.2% growth, is a weak spot in enterprise spending. The growth figure is the lowest reading across nine surveys.

Where’s the ROI?

The ETR research offers insight into which AI deployment strategies are delivering measurable returns, a category that has been a cause for concern as AI budgets have grown.

Among enterprises purchasing external AI solutions, 52% report positive ROI, including 18% achieving sustained returns at scale and 34% seeing positive results from pilot projects.

In contrast, internally developed AI applications are producing weaker results. Only 40% of enterprises building with open-weight models report positive ROI, while 24% report little or no adoption or traction.

Despite the difference, 49% of enterprises are developing their own AI products, up from 41% a year earlier.

AI and Hiring Trends

AI investment, not surprisingly, is changing workforce planning. The survey found that 36% of enterprises are using AI to limit future hiring, while 21% are reducing existing headcount. Both figures have risen since 2025, when they stood at 25% and 17%, respectively.

The trend is more pronounced among Global 2000 companies, where 44% are restricting future hiring and 26% are reducing current staffing.

Despite lower expected headcount, enterprises still expect paid software seats to grow 3% over the next six months, suggesting that AI-driven workforce reductions have not translated into an overall decline in software licensing demand.

As for most common use cases for enterprise AI, productivity remains the leader, cited by 74% of respondents, followed by decision support at 68%.