Research — 28 Nov, 2025
Enterprise AI demand drives tech spending amid uncertainty – Tech Demand Indicator highlights from Q3 2025
By Liam Eagle and Malav Parekh
Introduction
Intent to spend on technology among US businesses and consumers flattened during the third quarter of 2025, showing signs of recovering after a significant decline from Q1 to Q2, according to 451 Research's US Tech Demand Indicator, a survey-backed composite of intent to spend on technology. The Q3 2025 Tech Demand Indicator score was 51.5, indicating a slightly positive sentiment (a score greater than 50). This was almost even with the Q2 score of 51.9. The Q3 result falls close to the top of the primary projected range published in Q2 (the top end of which was 52.5).
Early projections for Q4 point to a strong recovery in spending intent, with the primary projected range for the Tech Demand Indicator falling between 59.2 and 54.5, and even the low point of the extended projection falling in the positive range, at 52.1. The midpoint of 56.9 would put the top-line score in a strongly positive position, above the Q1 score of 55.1, which was the highest point since Q1 of 2022, reflecting a widespread expectation of increased tech spending in the fourth quarter.
The Take
Demand for technology among US businesses and consumers continues to reflect the current administration's policies, particularly those relating to trade and tariffs, the resulting expectations of technology buyers around costs and availability, and the willingness of those buyers to spend amid volatility. For US businesses, the intent to spend — and projected increase in that intent for Q4 — reflects a mixture of heightened economic pressures, the uncertainty they face, and the pressing need for businesses to make significant investments in AI in its various business-transforming incarnations. The projected increase in Tech Demand Indicator score for Q4 2025 represents an increase in expected spending, but it does not necessarily suggest enthusiasm for that spending. It may also reflect a resumption of spending that was paused during the earlier period of uncertainty, and greater clarity about (increased) future costs.
US tech spending outlook remains positive despite policy volatility
The top-line US Tech Demand Indicator score remains in the slightly positive range for Q3 2025 (for the second straight quarter) amid policy volatility, but the ongoing large-scale push toward AI is likely to help IT sector companies continue producing double-digit revenue growth.
The demand score flattened from Q2 to Q3, landing at 51.52, slightly down from 51.93 one quarter ago, but toward the upper end of the estimated range of 47.83 to 52.54 shared in Q2's findings. The year-over-year change in sentiment is also near zero, from 51.99 in Q3 2024.
Figure 1: Tech spending intent flattens from Q2 to Q3 2025
Source: 451 Research's Tech Demand Indicator.
© 2025 S&P Global.
The flattening in the most recent quarter follows a significant decline in sentiment in Q2, which we associated with anticipation of the heavy tariffs on tech imports announced by the current US administration after a bullish start to the year (the Q1 Tech Demand Indicator score was 55.11).
However, the near-flat demand score is still an overall positive sentiment (>50) that is also above the prior three-year average of 50.97, indicating that organizations have a positive outlook on tech spending despite maintaining strategic restraint amid significant macroeconomic headwinds. Additionally, demand among businesses dropped slightly to 50.95 from 51.89, and it was stable for consumers at 50.21 from 50.34 in Q2.
We believe that the underlying sentiment toward tech spending is driven in part by widespread adoption of AI across organizations of all sizes. With greater clarity on the US government's trade policies, organizations should be able to better plan and execute their tech-adoption strategies in the coming quarters.
The aggregated second-quarter revenue for S&P 500 Information Technology (sector) companies exceeded expectations, with AI, cloud and information security technologies driving sales of some of the largest constituents of the index. The revenue jumped nearly 17% year over year, surpassing double-digit growth during the previous three quarters.
Although 451 Research's Tech Demand Indicator measures demand for IT products and services, we have seen a strong correlation with the aggregate performance of companies in the index. Large tech companies that focus on AI, cloud and information security are expected to repeat their strong performance in Q3.
For the final quarter, the tech demand outlook is expected to match the bullishness of early 2025. The projected tech demand score for the quarter is expected to be in the range of 54.50 to 59.19, with a midpoint of 56.84. An end-of-the-year uptick would make 2025 the third straight year in which the fourth quarter is the year's strongest in terms of technology spending intent. The growth could be associated with contract renewals as well as organizations pushing forward with plans that were reshaped or temporarily stalled by policy volatility under the new US administration. The US Federal Reserve's favorable view on rate cuts is also likely to positively influence tech spending over the next few months as borrowing to carry out business expansion and digital transformation strategies becomes easier.
An enhanced degree of tech demand within the tech sector
While technology suppliers may feel positively about rising technology spending intent, a noticeable challenge for the tech sector is the degree of demand coming from within the sector itself as it prepares for the AI-driven shift.
The software and IT services segment leads the tech spending sentiment among all industry segments, with a demand score of 54.8, followed by finance (51.3) and healthcare (50.8). While it shows the urgency with which the sector is gearing up for AI adoption — evident in the recent surge in AI-focused M&A activities — the wide gap in demand also underscores the risk the sector faces.
Conversely, manufacturing, typically one of the biggest spenders on tech, demonstrated a negative spending intent score during Q3 at 48.8. While this could be a temporary blip, partly influenced by the ongoing supply chain disruption caused by tariffs, the trend factors into the risk the tech sector is facing, despite its strong performance in recent quarters. Much of the demand from manufacturers seems to be concentrated around information security, AI, cloud, and data and analytics tools, which could be another driver for the tech industry to double down on these technologies.
Technology-specific scores suggest further concentration in key areas
Technology-specific signals of intent captured during the third quarter suggest the continued concentration of spending on certain critical technologies (security, AI and cloud computing) that was indicated in the Q2 results and interpreted as a prioritization of technology budgets amid uncertainty-driven spending cuts.
While the top-line signal of technology spending intent flattened from Q2 to Q3, the intention expressed toward individual technologies declined from quarter to quarter. The total number of technologies with a positive score fell from eight to six, and individual scores in 11 of the technology categories tracked declined from the previous quarter.
Figure 1: Technology-specific spending intent further crystallizes around key areas
Source: 451 Research's Tech Demand Indicator.
© 2025 S&P Global.
Despite that overall downward trend, changes in individual technology spending intent scores — positive and negative — were generally in small increments. Only three scores changed by more than five points quarter to quarter, and none by as much as seven points. By that measure, technology-specific scores showed more quarter-to-quarter consistency than is typical.
An outcome of those incremental changes is a further separation between the top-scoring technologies (information security, AI, and cloud infrastructure and services) and the rest of the list. While the larger trend points to businesses selectively tightening budgets during economic uncertainty, some of the technologies experiencing declining intent (such as employee devices or IT infrastructure hardware) are more aligned with cyclical spending trends and standard equipment-refresh cycles.
External economic pressures remain highly influential
External economic conditions continue to top the list of external factors having an outsized impact on IT spending decisions among business, cited by approximately 57% of respondents. This is only slightly below Q2, which had the strongest signal of that influence since we began tracking this information in 2023.
Economic conditions have consistently been the most-cited influence on technology spending decisions in every quarter tracked, typically identified by most companies surveyed. That number jumped significantly from Q1 to Q2 of this year, in line with uncertainty around US trade and tariff policy and the prospect of its longer-term impact on business operations. The continued emphasis on economic conditions as an influence suggests that public policy continues to play an outsized role in how businesses are making decisions around technology spending.
Notable shifts in the cost of energy (a decline of 5.5 percentage points) and environmental or sustainability concerns (a 3.4-point decline) likely also reflect the current administration's policies, and the sense that access to energy sources may not face the same sustainability-driven constraints in the future.
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