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Organizations will continue to prioritize spending on AI infrastructure

Growth drivers

• Investment in, renewed focus on and adoption of enterprise AI are increasing demand for high-performing infrastructure.
• Private and hybrid cloud deployments increase demand for hyperconverged infrastructure form factors.
• Organizations are prioritizing investments in denser and more energy-efficient infrastructure solutions to make way for AI.
• Edge deployments are creating new-new workload opportunities for OEMs.

Growth inhibitors

• The enterprise and SMB spend environment remains cautious and fragile as trade wars erupt.
• ODMs are largely capturing cloud growth as they produce low-cost, custom, commoditized hardware for hyperscalers.
• Commodity hardware and the popularity of software-defined infrastructure reduce OEMs’ pricing power.
• Heightened demand for InfiniBand threatens traditional Ethernet-based networking solutions providers.

 

 

 

TBR predicts that the top 5 covered IT infrastructure OEMs will achieve double-digit revenue growth from 2024 to 2029 but their respective market shares will decline

 

Despite shipping over $11B in Blackwell products in 4Q24, NVIDIA is racing to increase production to meet the market’s seemingly insatiable demand for AI servers

Within the OEM market, AI server demand continues to be driven primarily by services providers and model builders, but sovereigns are showing increased interest in OEMs’ AI infrastructure solutions, presenting the OEMs with a major opportunity. Additionally, although enterprise demand for on-premises deployments of AI infrastructure remains soft, especially for the most powerful and thereby highest-revenue-generating systems, the industry expects enterprise AI demand will accelerate throughout 2025 and 2026 as customers pursuing tailored AI solutions increasingly transition from the prototyping phase to the deployment phase.

TBR predicts Dell will lead covered vendors in terms of storage revenue growth due in part to increased attached sales opportunities associated with the company’s growing server business

Key takeaways

TBR forecasts the storage market will grow at a 13.4% CAGR from 2024 to 2029 as organizations across a variety of industries invest in modernizing and hybridizing their storage estates to support current and future workloads, including those related to AI. Organizations’ data volumes will continue to grow over the next five years as the rise of AI further underscores the value behind organizations’ proprietary data.

 

The storage market typically lags trends in the traditional server market, as is presently the case. However, as organizations increasingly transition from prototyping to deploying AI solutions, data management and orchestration has risen toward the top of key customer pain points. Recognizing this, storage OEMs are selling customers on the capabilities of their storage platforms, comprising software, adjacent services and sometimes hardware. Additionally, storage OEMs are forming partnerships with hyperscalers and other ecosystem players, like NVIDIA, to have their storage solutions validated and certified for operability and AI system reference architectures. TBR believes Dell and Hewlett Packard Enterprise (HPE) are well positioned for growth in storage over the next five years due to their strong data management capabilities and increased opportunities around attaching storage sales to server deals.

 

In 2024 TBR estimates Lenovo overtook NetApp for the third-largest storage market share among covered vendors. The storage market has become more of a priority for Lenovo in recent years due to the segment’s higher margins, evidenced by the company’s recently announced acquisition of Infinidat. TBR forecasts NetApp will outperform Lenovo in five-year storage revenue CAGR, but Lenovo will retain its positioning in the market among covered vendors.

 

 

IT infrastructure OEMs are expanding manufacturing capabilities in Saudi Arabia

EMEA market changes and vendor activities

Relative to the U.S., European economies have had more difficulty recovering from the pandemic; however, looking ahead to 2029, TBR forecasts covered vendors’ IT infrastructure revenue derived from the EMEA region will grow at a 12.9% CAGR due in large part to AI. While the EMEA market pales in comparison to that of the Americas, TBR believes the region’s strong growth will be driven both by rising AI adoption — especially among sovereigns — as well as rapidly increasing technology and infrastructure investments in countries like Saudi Arabia.

 

TBR believes HPE is among the best-positioned covered vendors in the EMEA geography. Sovereigns in the region already have a strong working relationship with HPE due to their legacy investments in high-performance computing based on Cray systems, and the company has made some of the strongest commitments among covered vendors to develop infrastructure manufacturing capacity in Saudi Arabia and the rest of the Middle East.

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ServiceNow’s evolving value proposition, centered on seamless tech integration and sales alignment, provides a strong backbone in its alliances’ strategy, appealing to client-mindshare-hungry partners

Key trends

The need to unlock data and break down integration barriers between the back, middle and front office is as relevant as ever as customers look to deploy generative AI (GenAI) within their workflows. Acting as an abstraction layer on top of the enterprise system of record (SOR), ServiceNow is in a strong position to message around business transformation and to have more outcome-based conversations with clients, which is aligned with the IT services companies and consultancies’ business models. IT services companies and consultancies that have experience reducing organizations’ technical debt and implementing systems like SAP, Workday and Salesforce are well positioned to use ServiceNow to deliver added value. As evidenced by ServiceNow’s introduction of consumption-based pricing for AI Agents, ServiceNow is focused on selling value as part of its GenAI portfolio, which is certainly in step with the market, though outcome-based pricing may be something for ServiceNow to consider to further align with the global systems integrator (GSI) ecosystem and stay ahead of its growing list of SaaS competitors.

Go-to-market strategy

As ServiceNow continues to grow and pursue new market opportunities, the company is doing a better job of enabling the ecosystem in both sales and delivery. Unlike some of its SaaS peers, ServiceNow is not as established in the market, underscoring a clear need to leverage partners that have the C-Suite relationships, particularly in the line of business (LOB) that can articulate ServiceNow’s value as it exists alongside core enterprise applications. Despite its rapid expansion into more SaaS markets, ServiceNow remains a platform company at its core, but being a true platform company requires an ecosystem that can build on that platform. We suspect the Build motion, where partners sell custom, often industry-specific offerings they develop on the Now Platform, will be an increasingly critical motion, helping ServiceNow capitalize on opportunities.

Vendors

Given the smaller size, ServiceNow is unsurprisingly among the fastest-growing practice area within the GSIs, with average practice-related revenue up 12.9% year-to-year in 4Q24. Several partners have more than $1 billion commitments with ServiceNow, and in early 2025 Infosys and Cognizant joined their competitors in the Global Elite tier of the ServiceNow Partner Program. Cognizant is also the inaugural partner for ServiceNow’s Workflow Data Fabric platform, a key offering that rounds out ServiceNow’s portfolio, offering zero-copy integrations with key platforms, including Google Cloud and Oracle, to feed ServiceNow’s AI Agents. On the technology side, ServiceNow is also strengthening its partnerships with hyperscalers beyond Microsoft, which could unlock new points of engagement for services partners as they start to embrace the multiparty alliance structure. For example, Deloitte is looking at how it can build agents for ServiceNow-specific use cases, with an immediate focus on the front office, on Google Cloud Platform (GCP), while Accenture included ServiceNow on its partner list for the recently announced Trusted Agent Huddle for agent-to-agent interoperability.

Emergence of multipartner networks will test vendors’ trustworthiness and framework transparency

Prioritizing the needs of partners and enterprise buyers over internal growth aspirations will position vendors across the ICT value chain as leading ecosystem participants. It sounds like an idea born in marketing, but positive digital transformation (DT) outcomes will require multiparty business networks that bring together the value propositions of players across the technology value chain. By leading with their core competencies, players can establish needed trust among partners and customers alike, increasing their competitiveness against other players that have spread themselves too thin with aspirations of being end-to-end DT providers.

 

To better understand these approaches, we have identified three back-office ecosystem relationship requirements that guide how the parties work together.

 

TBR has identified 4 cloud ecosystem relationship requirements that guide how the parties work together

ServiceNow ecosystem relationship best practices

1.Consider PaaS layer and its role in the SaaS ecosystem: As discussed throughout our research, the value is shifting from “out of the box” to “build your own,” and customers clearly believe building their own custom solutions around a microservices architecture will give their business a competitive advantage. Naturally, we expect ServiceNow wants partners to take the lead in Now Assist delivery, but for the GSIs to see value, GenAI has to actually change the business process.

 

2.Drive awareness through talent development efforts: ServiceNow’s growing portfolio outside the core IT service management (ITSM) space is creating new channel opportunities for services partners to capitalize on, compelling them to invest in training and development programs. Gaining the stamp of approval from a ServiceNow certification program enhances services partners’ value proposition, especially in new areas such as the Creator Workflow and Build portion of the ServiceNow portfolio, which positions them to drive custom application and managed services opportunities. Standing out in a crowded marketplace where services and technology providers vie for each other’s attention will elevate the need to invest in consistent messaging and knowledge management frameworks that elevate buyer trust.

 

3.Prioritize IT modernization ahead of GenAI opportunities and scaling NOW deployment: Some vendors have made GenAI capabilities available only to cloud-deployed back-office suites, meaning customers still on legacy systems must first migrate to the cloud before they can adopt the emerging technology. Partners must account for this modernization prerequisite by prioritizing traditional migration services through broader programs like RISE with SAP if they hope to pursue new opportunities over the long term. Reducing legacy technical debt will also free up resources, both human and financial, which will allow for broader ServiceNow portfolio adoption.

 

4.Set up outcome-based commercial models to scale adoption across emerging areas and protect against new contenders: Aligning commercial, pricing and incentive models that resonate with buyer priorities and achieving business outcomes can allow partners to expand addressable market opportunities, especially as scaling GenAI adoption necessitates greater trust in the portfolio offerings. ServiceNow’s consumption-based model provides a short-term hedge against potential tech partner disruptors, which may take on the risk to offer similar solutions but are able to better align with services partners’ messaging through the use of outcome-based pricing.

 

 

Acting as an abstraction layer, ServiceNow has a unique opportunity to further expand into the back office to address integration pain points but risks further overlapping with its SOR peers

ServiceNow positions as system of action to expose gaps in core system of record

Existing as a platform layer that orchestrates and integrates workflows, ServiceNow has long been able to successfully enter new markets without encountering a lot of head-to-head competition. But this is changing as ServiceNow, a $10-plus billion company, continues to drive traction with the LOB buyer by challenging a lot of the fragmentation that exists within front- and back-office systems. Over the past several quarters, ServiceNow has continued to launch new products in areas like talent management, finance and supply chain. One of the company’s biggest moves was in the front office with the launch of Sales & Order Management (SOM), giving customers the ability to use CPQ (configure, price, quote) and guided selling in a single product. Though ServiceNow famously integrates with all of the systems of record, these new innovations could pose a risk to the likes of SAP, Workday and Salesforce, which perhaps do not have the platform capabilities to build custom processes that can be tied back to the workflow, at least in a truly modern way. To be clear, ServiceNow is not interested in being a core CRM, ERP or human capital management (HCM) provider, and today acts as a service delivery system. But having customers store their data in the service delivery layer, as opposed to the core system of record so they can use that data against a specific workflow, is how ServiceNow aims to position as a “system of action.”

DXC Technology’s ServiceNow Ecosystem Strategy in Review

TBR assessment

DXC Technology has an established history and deep expertise within the ServiceNow ecosystem, with a partnership spanning more than 15 years, a talent pool of over 1,800 ServiceNow experts, and a track record of more than 7,200 global implementations with over 350 instances managed worldwide, all of which position the company as a mature and experienced service provider for ServiceNow. Notable client wins, such as with the city of Milan (medical supply delivery during a crisis), Nordex Group (workplace safety management) and Swiss Federal Railways (unified customer inquiry management) underscore DXC’s ability to leverage the partnership to address diverse and critical business challenges across different industries and sectors. These successes highlight DXC’s capacity to translate its deep ServiceNow knowledge and implementation capabilities into tangible business value for its clients, suggesting a well-established and impactful ServiceNow practice.

Strategic portfolio offering

Through a strategic alliance with ServiceNow and bolstered by a dedicated global business group and acquisitions such as Syscom AS, TESM, BusinessNow and Logicalis SMC, DXC delivers a comprehensive range of ServiceNow-focused solutions. This approach enables DXC to digitize processes, enhance user experiences, and transform service management across the full ServiceNow platform, driving business innovation at scale, including specialized solutions such as those for the insurance industry, where DXC has had core competencies and long-lasting customer relationships. DXC’s offerings span enterprise applications transformation, security solutions, and compute and data center modernization, all designed to maximize client efficiency and agility utilizing the ServiceNow platform. The establishment of a new Center of Excellence in Virginia in November 2024, combining DXC’s industry strengths with ServiceNow’s solutions, further solidifies the two companies’ commitment to streamlining AI adoption and delivering cutting-edge solutions.

 

 

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Edge adoption will be supported by GenAI, including through the use of SLMs, but it will take time for new use cases to develop

The rise of SLMs could drive new opportunities at the enterprise edge

As highlighted in TBR’s AI and GenAI Model Provider Market Landscape, small language models (SLMs) are gaining traction and offer the greatest long-term opportunity to improve capabilities for enterprise use cases while limiting compute needs. These models typically employ up to 10 billion parameters, which, when compared to their frontier counterparts, reduces their ability to perform a broad range of tasks. That said, with techniques like fine-tuning, SLMs can often outperform larger models on very specific use cases while leveraging fewer compute resources, two major factors in enterprise edge adoption. We expect the rise of AI inferencing and the role SLMs play in offering faster inference times will drive new use cases to the edge over time. AI leaders, such as Microsoft and Google Cloud, may benefit from considering the role of SLMs more broadly to target more tangible enterprise use cases that exist outside the central cloud. IBM is a strong example of a vendor leading with an SLM strategy, via Granite models, which IBM is actively extending to the edge in partnership with infrastructure providers like Lumen.

AI use cases at the edge already exist

AI has been a foundational technology in enterprise edge computing for years and continues to support growth of the enterprise edge market, which TBR expects will expand to $144 billion in 2029. TBR’s enterprise edge spending forecast has not increased significantly from our previous guidance in 2024, which already incorporated our long-standing assumption that AI will propel market growth. TBR expects that the industrywide focus on generative AI (GenAI) will likely lead to increased adoption of edge computing but that the bulk of enterprises embarking on these projects in 2025 will focus on piloting and adoption of cloud and centralized AI resources.

Compared to other deployment methods, edge expansion still lags

According to TBR’s 2Q25 Infrastructure Strategy Customer Research, 34% of respondents expect to expand IT resources at edge sites and branch locations over the next two years. But this is noticeably lower than the 55% who plan to expand IT resources within centralized data centers, while the central cloud and managed hosting are also gaining more traction. The possibility of large capital outlays and an unclear path to ROI remain the biggest adoption hurdles to edge technology, with some customers exploring other alternatives that have a clearer ROI road map.

GenAI will not have a significant impact on enterprise edge market growth, at least in the near term, as customers prioritize their investments in the IT core and cloud

Forecast assumptions

TBR continues to revise its enterprise edge forecast to account for changes in the traditional IT and cloud markets, including the advent of GenAI. Although the enterprise edge market benefited from the hype surrounding AI in 2024, many pilot projects may not enter production and more concrete use cases around edge AI need to be developed.

The enterprise edge market is estimated to grow at a 19.9% CAGR from 2024 to 2029, surpassing $144 billion by 2029. Professional and managed services will remain the fastest-growing segment, followed by software, at estimated CAGRs of 22.4% and 19.3%, respectively.

 

Servers, networking, hyperconverged infrastructure and edge equipment were identified by respondents as the foundational infrastructure components enabling more advanced edge use cases

For most IT organizations, the amount of physical hardware under management will stay the same or grow in the coming two years. Servers, networking equipment, hyperconverged infrastructure and edge equipment all had similar levels of expected expansion, while storage and high-performance computing were least likely to expand.

TBR believes AI is somewhat responsible for expected increases in server and networking footprints, compared to two years ago.

Storage was reported as the area that was most likely to expand. Balancing of public cloud spending may also be contributing to the expansion of server footprints.

Expectations to deploy infrastructure at edge locations increased, with 80% of respondents in 2025 indicating between 25% and 50% of new infrastructure purchases will be deployed at edge or branch locations compared to 68% in 2024.

Scenario discussion excerpt

Though cloud vendors still say edge partners will drive new growth opportunities, their optimism is shifting toward other technologies, namely GenAI

When TBR first launched the Voice of the Partner Ecosystem Report, which includes survey results from alliance partnership decision makers across three groups of vendors — OEMs, cloud providers and services providers — cloud respondents said edge computing was a top technology area that would drive growth. But a year later, the results have changed, and cloud vendors’ optimism in partner-led growth surrounding edge solutions seems to have waned, largely in favor of other technologies, namely GenAI. These results are not surprising given how much the GenAI market has evolved in the last 12 months.

OT stakeholders understand the edge but are not necessarily thinking about IT solutions through the lens of their own processes. Because of this, edge hardware vendors and cloud providers benefit from partnering with edge-native software vendors that have permission from OT buyers and can help edge incumbents sell solutions, including attached software and services. The dynamics between IT and OT departments reinforce the importance of the vendor ecosystem in the enterprise edge market.

Vendor profiles excerpt

Lightweight versions of Gemini help Google Cloud target AI edge use cases, but when it comes to Gemini on GDC, the IT core will likely be more relevant than the edge

TBR Assessment: Over the past several quarters, Google Cloud has done much work building out GDC, turning it into a robust, cloud-to-edge solution for enterprises. Expanding work with local operators to deliver GDC as a sovereign solution and making GDC available as an air-gapped solution (fully disconnected from the internet) has helped GDC scale and become relevant with more sensitive workloads. The biggest recent development pertaining to GDC is AI, with Google announcing that Gemini will be made available on GDC, a big step forward in helping customers run AI outside the central cloud, underpinned by NVIDIA’s AI-optimized GPUs. Given that the Gemini family consists of large-scale, frontier models, local, on-premises deployments for Gemini in GDC may be the most likely use case, as SLMs are generally better suited at the edge. Of course, customers can fine-tune and develop smaller models with Vertex AI, which is also supported on GDC, but such efforts would require a certain maturity and experience level from the customer. Google also continues to target the AI edge opportunity with more tailored versions of Gemini, such as Gemini Nano, which is designed to run on devices.


Key Strategies

• Offer a range of partner solutions based on Google Cloud Platform rather than participating in the IoT market directly.
• Use Distributed Cloud Edge to target telcos’ Core 5G solutions and RAN functions.
• Target key edge use cases like computer vision and AI edge inferencing.

 

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Despite hyperscalers’ increasing investments in custom AI ASICs, TBR expects demand for GPGPUs to remain robust over the next 5 years, driven largely by the ongoing success of NVIDIA DGX Cloud

The world’s largest CSPs, including Amazon, Google and Microsoft, remain some of NVIDIA’s biggest customers, using the company’s general-purpose graphics processing units (GPGPUs) to support internal workloads while also hosting NVIDIA’s DGX Cloud service on DGX systems residing in the companies’ own data centers.
 
However, while Amazon, Google and Microsoft have historically employed some of the most active groups of CUDA developers globally, all three companies have been actively investing in the development and deployment of their own custom AI accelerators to reduce their reliance on NVIDIA. Additionally, Meta has invested in the development of custom AI accelerators to help train its Llama family of models, and Apple has developed servers based on its M-Series chips to power Apple Intelligence’s cloud capabilities.
 
However, even as fabless semiconductor companies such as Broadcom and Marvell increasingly invest in offering custom AI silicon design services, only the largest companies in the world have the capital to make these kinds of investments. Further, only a subset of these large technology companies engage in the type of operations at scale that would yield measurable returns on investments and total cost of ownership savings. As such, even as investments rapidly rise in the development of customer AI ASICs, the vast majority of customers continue to choose NVIDIA’s GPGPUs due to not only their programming flexibility but also the rich developer resources and robust prebuilt applications comprising the hardware-adjacent side of NVIDIA’s comprehensive AI stack.
 

 

Companies across a variety of industry verticals want to take a piece of NVIDIA’s AI cake

Scenario Discussion: NVIDIA faces increasing threats from both industry peers and partners

NVIDIA GPGPUs are the accelerator of choice in today’s AI servers. However, the AI server and GPGPU market incumbent’s dominance is increasingly under threat by both internal and external factors that are largely related. Internally, as Wall Street’s darling and a driving force behind the Nasdaq’s near 29% annual return in 2024, NVIDIA’s business decisions and quarterly results are increasingly scrutinized by investors, forcing the company to carefully navigate its moves to maximize profitability and shareholder returns. Externally, while NVIDIA positions itself largely as a partner-centric AI ecosystem enabler, the number of the company’s competitors and frenemies is on the rise.
 
Despite NVIDIA’s sequentially eroding operating profitability, investor scrutiny has not had a clear impact on the company’s opex investments — evidenced by a 48.9% year-to-year increase in R&D spend during 2024. However, it may well be a contributing factor to the company’s aggressive pricing tactics and rising coopetition with certain partners. While pricing power is one of the luxuries of having a first-mover advantage and a near monopoly of the GPGPU market, high margins attract competitors and high pricing drives customers’ exploration of alternatives.
 
Additionally, the fear of vendor lock-in among customers is something that comes with being the only name in town, and while there is not much most organizations can do to counteract this, NVIDIA’s customers include some of the largest, most capital-rich and technologically capable companies in the world.
 
To reduce their reliance on NVIDIA GPUs, hyperscalers and model builders alike have increasingly invested in the development of their own custom silicon, including AI accelerators, leveraging acquisitions of chip designers and partnerships with custom ASIC developers such as Broadcom and Marvell to support their ambitions. For example, Amazon Web Services (AWS), Azure, Google Cloud Platform (GCP) and Meta have their own custom AI accelerators, and OpenAI is reportedly working with Broadcom to develop an AI ASIC of its own. However, what these custom AI accelerators have in common is their purpose-built design to support company-specific workloads, and in the case of AWS, Azure and GCP, while customers can access custom AI accelerators through the companies’ respective cloud platforms, the chips are not physically sold to external organizations.
 
In the GPGPU space, AMD and, to a lesser extent, Intel are NVIDIA’s direct competitors. While AMD’s Instinct line of GPGPUs has become increasingly powerful, rivaling the performance of NVIDIA GPGPUs in certain benchmarks, the company has failed to gain share from the market leader due largely to NVIDIA CUDA’s first-mover advantage. However, the rise of AI has driven growing investments in alternative programming models, such as AMD ROCm and Intel oneAPI — both of which are open source in contrast to CUDA — and programming languages like OpenAI Triton. Despite these developments, TBR believes NVIDIA will retain its majority share of the GPGPU market for at least the next decade due to the momentum behind NVIDIA’s closed-source software and hardware optimized integrated stack.
 

 

Microsoft Copilot+ PCs represent a brand-new category and opportunity for Windows PC OEMs industrywide

PC OEMs expected the post-pandemic PC refresh cycle to begin in 2023, but over the past 18 months, their expectations have continually been delayed, with current estimates indicating the next major refresh cycle will ramp sometime in 2025. While the expected timing of the refresh cycle has changed, the drivers have remained the same, with PC OEMs expecting that the aging PC installed base, the upcoming end of Windows 10 support — slated for October 2025 — and the introduction of new AI PCs will coalesce, driving meaningful rebounds in the year-to-year revenue growth of both the commercial and consumer segments of the PC market.
 
As organizations graduate from Windows 10 devices to Windows 11 devices, TBR expects many customers will opt for AI PCs to future-proof their investments, understanding that the overall commercial PC market will be dominated by devices powered by Windows AI PC SoCs in a few years’ time. However, while TBR expects the Windows AI PC market to grow at a 44.3% CAGR over the next five years, the driver of this robust growth centers on the small revenue base of Windows AI PCs today.
 
While Apple dominated the AI PC market in 2024 due to the company’s earlier transition to its own silicon platform — the M Series, which features onboard NPUs — TBR estimates indicate that among the big three Windows OEMs, HP Inc.’s AI PC share was greatest in 2024, followed closely by Lenovo and then Dell Technologies. Without an infrastructure business, HP Inc. relies heavily on its PC segment to generate revenue, and as such, TBR believes that relative to its peers — and Dell Technologies in particular — HP Inc. is more willing to trade promotions and lower margins for greater number of sales, which is a key factor in the current increasingly price-competitive PC market. TBR estimates Lenovo’s second-place positioning is tied to the company’s growing traction in the China AI PC market, where the company first launched AI PCs leveraging a proprietary AI agent in a region where Microsoft Copilot has no presence.
 

The PC ecosystem increases its investments in developer resources to unleash the power of the NPU

 
Currently available AI PC-specific applications, such as Microsoft Copilot and PC OEMs’ proprietary agents, are focused primarily on improving productivity, which drives more value on the commercial side of the market compared to the consumer side. However, it is likely more AI PC-specific applications will be developed that harness the power of the neural processing unit (NPU), especially as AI PC SoCs continue to permeate the market.
 
Companies across the PC ecosystem, including silicon vendors, OS providers and OEMs, are investing in expanding the number of resources available to developers to support AI application development and ultimately drive the adoption of AI PCs. For example, AMD Ryzen AI Software and Intel OpenVINO are similar bundles of resources that allow developers to create and optimize applications to leverage the companies’ respective PC SoC platforms and heterogenous computing capabilities, with both tool kits supporting the NPU, in addition to the central processing unit (CPU) and GPU.
 
However, as it relates to AI PCs, TBR believes the NPU will be leveraged primarily for its ability to improve the energy efficiency of certain application processes, rather than enabling the creation of net-new AI applications. While the performance of PC SoC-integrated GPUs pales in comparison to that of discrete PC GPUs purpose-built for gaming, professional visualization and data science, the TOPS performance of SoC-integrated GPUs typically far exceeds that of SoC-integrated NPUs, due in part to the fact that the processing units are intended to serve different purposes.
 
The GPU is best suited for the most demanding parallel processing functions, requiring the highest levels of precision, while the NPU is best suited for functions that prioritize power efficiency and require lower levels of precision, including things like noise suppression and video blurring. As such, TBR sees the primary value of the NPU being extended battery life — an extremely important factor for all mobile devices. This is the key reason why TBR believes that AI PC SoCs will gradually replace all non-AI PC SoCs, eventually being integrated into nearly all consumer and commercial client devices.
 
One of the reasons PC OEMs are so excited about the opportunity presented by AI PCs is that AI PCs command higher prices, supporting OEMs’ longtime focus on premiumization. Commercial customers, especially large enterprises in technology-driven sectors like finance, typically buy more premium machines, while consumers generally opt for less expensive devices, and TBR believes this will be another significant driver of AI PC adoption rising in the commercial segment of the market before the consumer segment.

TBR Spotlight Reports represent an excerpt of TBR’s full subscription research. Full reports and the complete data sets that underpin benchmarks, market forecasts and ecosystem reports are available as part of TBR’s subscription service. Click here to receive all new Spotlight Reports in your inbox.

Post updated: Nov. 15, 2025

A rebound in financial services and activities around improving productivity and optimizing costs drove revenue performance for IT services vendors during 2Q25

Outlook: TBR estimates trailing 12-month (TTM) revenue growth for the benchmarked IT services vendors will be 2.6% year-to-year in 2025, higher than 2024 revenue growth of 0.9% year-to-year. The market dynamics have not changed since 3Q23, when the uncertain macroeconomic environment began to pressure discretionary spending and consulting activities while fueling a wave of outsourcing demand around infrastructure and application modernization, productivity improvement and cost optimization. Clients are showing increased interest in large transformational offerings to increase productivity and reduce costs, and this trend is increasing the share of managed services deals in IT services providers’ signings mix. Manufacturing faces ongoing downward pressure in Europe, particularly in the automotive sector, but demand for supply chain optimization and digital transformation continues to fuel growth in the sector globally. Vendors are experiencing a rebound in demand from clients in the financial services sector such as banks seeking to improve customer experience (CX) through the use of agentic AI solutions. Although agency spending and headcount cuts by the Department of Government Efficiency (DOGE) negatively impacted the performance of some IT services providers in the U.S. public sector in 1H25, we expect new consulting opportunities to emerge in the long term around efficiency improvement, including systems enhancement, technology modernization and AI adoption. However, some vendors are warning that solicitations, award activity and adjudications have been slowing and that there will be some challenges in 2H25, and expect that consulting engagements will face increased scrutiny.

Key Vendors: Accenture remained the largest vendor in TBR’s IT Services Vendor Benchmark in terms of revenue and headcount and was No. 7 in TTM revenue growth in 2Q25. Accenture’s relentless execution will help the company maintain stakeholder trust as it enters the next phase of its business model rotation and pursues opportunities with upper-midmarket clients. NTT DATA was No. 2 in TTM revenue and No. 14 in TTM revenue growth in 2Q25. NTT’s recent purchase of the remaining shares of NTT DATA creates uncertainty around NTT DATA’s decentralized structure, which currently includes both domestic and overseas operations and enables NTT DATA to tailor service offerings to specific regional markets. Tata Consultancy Services (TCS), which was No. 3 in TTM revenue and No. 16 in TTM revenue growth in 2Q25, demonstrates a strong commitment to innovation through significant investment in research and development, which has incrementally created valuable intellectual property that supports the company’s cutting-edge platforms and solutions.

Market Overview: TTM IT services revenue grew 2.5% year-to-year in 2Q25, compared to year-to-year increases of 1.6% in 1Q25 and 0.9% in 2Q24. Accelerated momentum in financial services and activities around IT modernization and efficiency improvement enabled vendors to alleviate pressures from tight discretionary spending and extended buyer decision cycles. Vendors were able to stabilize profitability in 2Q25, with 20 of the 31 benchmarked vendors improving TTM operating margins year-to-year due to tight expense management, productivity initiatives and stable utilization, and increased use of automation, generative AI (GenAI) and agentic AI solutions.

Solutions enabled by technology partner capabilities increase IT services providers’ value proposition around addressing specific infrastructure, operational and business challenges

Quarterly focus: Alliances

TBR Assessment: According to TBR’s 2Q25 Cloud Ecosystem Report, “Enterprise buyers are becoming increasingly conflicted in their expectations of how vendors can best support their technology needs. … In a nutshell, vendors cannot rely on a one-size-fits-all AI ecosystem strategy across regions. Success will require region-specific approaches: IP-led initiatives in APAC, orchestration frameworks in Europe, and startup-centric marketplaces in the Americas. All must be underpinned by interoperable APIs and strong governance to help IT services providers capture and monetize local demand. Executing against such expectations while continuing to rely on a traditional labor-arbitrage model will test professional services firms’ readiness to transform their own operations while maintaining trust with hyperscalers, which continue to explore the opportunity to drive professional services revenue by simplifying the sales process and marketplace through the use of agentic AI.”

Examples of recent vendor activities
IBM is expanding activities with technology providers to augment its cloud and AI capabilities and support clients through all stages of transformation and optimization. Since April IBM has expanded its relationships with Microsoft, Amazon Web Services (AWS), Oracle, Salesforce and SAP. IBM Consulting established a Microsoft practice with 33,000 certified experts dedicated to technologies such as Azure OpenAI, Azure Cloud, Copilot, Fabric and Sentinel. IBM, which has approximately 12,000 AWS-trained professionals, introduced tools and frameworks for building and managing AI agents and integrating them with technologies available on the AWS Marketplace. IBM Consulting is providing AI Integration Services to help clients establish agentic AI capabilities and is offering the IBM Consulting Advantage solution to transform processes through agentic AI on AWS. IBM and Oracle provide agentic AI and hybrid cloud solutions by bringing IBM watsonx to Oracle Cloud Infrastructure. IBM, which has more than 10,000 dedicated Oracle consultants, is expanding its consulting services to enable the use of AI agents across platforms and transform business processes. IBM has more than 7,000 Salesforce-certified professionals and is developing its Salesforce capabilities by introducing AI agents based on IBM watsonx Orchestrate that work with Salesforce technologies and IBM Granite models. IBM has more than 18,000 SAP-certified consultants and, together with SAP, launched a hyperscaler option for moving SAP S/4HANA workloads from on-premises IBM Power servers to the cloud.

Although client trust wavered in the past several quarters due to uncertainty around Atos Group’s transformation, the company received stable support from its technology partners, which will drive portfolio expansion and position the company for growth. In July Atos Group was awarded the Golden Certificate from SAP and was certified for the 10th consecutive time as a SAP Global Operations Partner. The award reflects Atos Group’s dedication to its partnership with SAP, which has spanned more than 20 years, and established managed services capabilities with over 10,000 professionals with SAP expertise. Also in July, Atos Group renewed its status as a Google Cloud Managed Service Provider, driven by capabilities around providing cloud-native services, infrastructure solutions and digital modernization. In April Atos Group received Microsoft’s Private Cloud Solution Partner Designation due to its track record of providing Azure Cloud in data centers globally. Expanding capabilities around Google Cloud and Microsoft diversifies Atos Group’s infrastructure services capabilities and creates opportunities for growth outside of commoditized and low-growth traditional infrastructure services segments. Over the past several years the company has been decreasing its dependency on legacy infrastructure services and reviewing and exiting low-growth and low-margin contracts in the segment.ications strengthens Cognizant’s Neuro AI platform.

Although managed services activities contributed to an acceleration in 2Q25 overall TTM revenue growth year-to-year, 15 of the 31 benchmarked vendors ranked below the average

 

 

Vendor spotlight excerpt

Accenture pursues new revenue growth opportunities with upper-midmarket clients, while TCS leverages its cloud and AI expertise and solutions to pull long-term managed services deals

Key Findings and TBR Assessment

Accenture, NTT DATA and TCS retained their No. 1, No. 2 and No. 3 revenue contribution positions, respectively, compared to 1Q25. Vendors will be challenged to maintain sales growth momentum in 2026 as Accenture navigates macroeconomic headwinds and internal operating model adjustments. Building a pipeline in the midmarket will gradually augment Accenture’s performance. TCS leverages its scale and cost-efficient global talent to offer flexible, competitive pricing, which will be a key advantage as clients scrutinize budgets during uncertain economic times.

IBM moved up from No. 5 to No. 4, Capgemini rose from No. 6 to No. 5, and Fujitsu dropped from No. 4 to No. 9. Although IBM Consulting’s revenue growth has been negatively impacted by clients’ extended decision making, the business continues to benefit from clients’ emphasis on cost-efficient, high-impact technology investments. Pursuing opportunities in the public sector in Europe, specifically in the defense subsegment and around sovereignty solutions, will positively affect Capgemini’s revenue expansion in 2H25.

Cognizant and Infosys each moved up by one position, to No. 6 and No. 7, respectively, compared to 1Q25. Cognizant is capturing opportunities in vendor consolidation, cost reduction and efficiency improvements, and is leveraging its AI expertise and Neuro AI platform to effectively win new projects with existing clients. Infosys is deploying industry-centric, cloud-ready, GenAI-enabled services and solutions within established IT buyer relationships while also relying on customer-zero use cases.

 

Revenue segment views excerpt

C&SI revenue growth year-to-year accelerated from 2Q24 to 2Q25, indicating clients are becoming more open to signing discretionary funded engagements

C&SI: Although discretionary spending remained tight, some of the IT services providers saw pockets of growth in C&SI in 2Q25, leading to an increase in C&SI revenue share and revenue growth year-to-year acceleration compared to 2Q24. Portfolio development, client relationship building and skills development to drive transformational engagements aided revenue performance in 2Q25. For example, Accenture is partnering with Deloitte and Korn Ferry to support Saudi Aramco’s employee experience transformation program using LearnVantage capabilities. Capgemini is working with GN Hearing to improve the company’s customer experience and order processing by implementing a Salesforce global order management system.

BPO: Vendors’ BPO businesses continue to benefit from the ongoing shift in buyer priorities from innovation and growth to business resiliency and optimization. Automation, GenAI and agentic AI capabilities within BPO will shift vendors’ service delivery models and generate productivity improvements; however, GenAI and agentic AI threaten the core value proposition centered on human-backed service delivery. IBM Consulting will combine AI Integration Services with capabilities from its partner ecosystem to enable clients to reengineer business processes, improve the user experience, and orchestrate systems comprising AI assistants, agents and data.

Application outsourcing (AO): Application outsourcing revenue growth accelerated year-to-year to 2Q24. Enterprise applications are core to broader digital transformation engagements and create expansion opportunities for vendors. Preparing clients’ applications and data streams for cloud and AI integration continues to fuel managed application services opportunities.

IT outsourcing (ITO): Integration of new infrastructure, enabled by vendors’ cloud and consulting practices, provides a natural starting point for companies to build their managed services pipeline. Demand for IT optimization and IT operations efficiency through AI and automation, and security services continues to fuel ITO revenue opportunities. For example, in July Atos Group renewed its status as a Google Cloud Managed Service Provider due to its capabilities around delivering cloud-native services, scalable infrastructure solutions and digital modernization to enterprises globally through advanced support, optimization and AI-driven management of Google Cloud environments.