Australian organisations are on track to spend nearly A$26.6bn on public cloud services in 2025, marking an 18.9% increase from 2024, according to the latest projections from Gartner.
The forecast, released during the analyst firm’s infrastructure and cloud conference in Sydney this week, pointed to robust growth across all cloud segments, with infrastructure-as-a-service (IaaS) leading the charge with an expected 24.2% surge, followed closely by platform-as-a-service (PaaS) at 21.1%.
Software-as-a-service (SaaS) is expected to remain the largest segment in terms of end-user spending, projected to reach almost A$13bn in 2025, a 15.5% rise from the previous year. Gartner attributes the continued investment in cloud-based applications to functional expansion and the increasing integration of generative artificial intelligence (GenAI) capabilities.
“Public cloud services continue to be a critical driver of innovation across Australian organisations this year,” said Adrian Wong, director analyst at Gartner, adding that as the cloud momentum continues, many organisations are facing complex management issues, especially when it comes to scaling AI initiatives. “To deliver value, CIOs need a sharper cloud strategy, one that prioritises return-on-investment but also keeps pace with rapid technology shifts.”
Underscoring the strategic importance of cloud, Gartner’s annual global survey of 3,186 CIOs and technology executives, which included 109 from Australia and New Zealand (ANZ), found that 83% of ANZ CIOs rank cloud platforms among their top technology investments for 2025, just behind cyber security and data analytics.
Australia has a maturing cloud market, with organisations moving beyond cloud experimentation and tapping technologies like GenAI to boost productivity and profitability. While startups have leveraged public cloud to scale globally from their inception, larger enterprises and governments are also significantly investing in cloud, focusing on modernising legacy systems and managing data sovereignty.
The Australian government has also endorsed cloud adoption. Earlier this year, the Digital Transformation Agency (DTA) deepened its reliance on Amazon Web Services (AWS), signing a three-year whole-of-government agreement that expands access to cloud services for all levels of government.
However, challenges around cloud cost management, security, and skills gaps remain. For instance, while public cloud spending in Australia was set to hit A$23.2bn in 2024, many organisations remained immature in managing cloud costs, facing increased scrutiny from chief financial officers.
Hardeep Singh, principal analyst at Gartner, noted that legacy modernisation, cost optimisation, and the adoption of AI-driven workloads continue to drive strong demand for cloud services.
“These factors are expected to sustain cloud growth, particularly as enterprises seek agility and scalability amid uncertainty this year, as trade restrictions and tariffs dampen business confidence and introduce greater unpredictability into short-term planning.
“While the situation continues to change, a lot of cloud spend is tied to multi-year annuity contracts with providers. Tariffs are more likely to affect input costs and disrupt supply chains for new or incremental cloud spending, rather than existing usage.
“This may lead to cautious spending by providers and delays in datacentre expansions, prompting marginal adjustments to cloud spending projections. Despite this, the cloud market’s underlying momentum remains intact,” he said.