Damo's 2025 IT Industry Outlook: CIO predicts moderate growth in IT spending this year, industry optimism has improved

Zhitong Finance App learned that according to Damo's latest ClO survey, ClO reiterated its expectations for a moderate acceleration in IT budget growth in 2025, from 3.4% in 2024 to 3.7% in 2025. Budget growth expectations rose moderately from month to month, and optimism about the IT industry in 2025 improved.

With a moderate and continuous rise in IT budget growth expectations, and improvements in forward-looking indicators, Damo has reaffirmed the IT industry's improving momentum until 2025. As AI/ML plans top the list of ClO priorities and defensibility, the rewards of these technologies seem increasingly clear.

Meanwhile, the forecast for budget growth in the fourth quarter of '24 (+3.7% year over year) improved slightly, while the forecast for the third quarter was a 3.6% year over year increase. Importantly, IT budget growth is expected to continue to rise in the direction of a longer survey period (10-year average +4.1%). At the industry level, ClO expects spending on software (up 30 basis points to 3.8% year over year), communications (up 13 basis points to 2.9% year over year), and IT services (up 15 basis points to 2.8% year over year) in 2025. According to data from Damo, hardware spending is expected to slow down moderately in 2025 (up 8 basis points to 1.6% year over year).

However, from a continuous industry perspective, all IT industries surveyed by Damo saw positive revisions to the 2025 quarterly budget growth forecast, most notably software (9 basis points quarterly increase) and IT services (6 basis points quarterly increase).

In other words, the data for the fourth quarter of 2024 does show some regional differences — US CLO's expectations for IT spending growth in 2025 continue to exceed EU peers, with the US up 3.8% year over year, while the EU is up 3.2% year over year.

Furthermore, compared to the slight decline in EU CLO expectations, the US CLO predicts that IT budget expectations for 2025 will improve moderately.

A key indicator of ClO sentiment — the 1-year up/down ratio — measures the ratio of ClO for which the expected budget was increased/lowered. It rebounded to 1.0 times in the fourth quarter of '24, reflecting the balance between ClO, which is expected to increase the IT budget in 2025, and ClO, which is expected to be lowered.

Continued moderate increases in budget growth expectations have affected the long-term survey average in Damao, and the bank has reaffirmed its confidence in a more constructive 2025. Increased certainty in the macro context, combined with gradual visibility into the functions that generate artificial intelligence, should maintain rising budget growth expectations in the future.