AI-Driven Demand for Cloud Services Propels Americas Tech Market to New High in Q4, ISG Index™ Finds

Combined market up 21%, as AI drives record demand for cloud services

ISG forecasts 2.1% managed services growth, 20% XaaS growth globally for 2026

STAMFORD, Conn.--(BUSINESS WIRE)--AI-driven demand for cloud services propelled the Americas technology services and software market to a record high in the fourth quarter, the latest state-of-the-industry report from Information Services Group (ISG) (Nasdaq: III), a global AI-centered technology research and advisory firm, finds.

The Americas ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of $5 million or more, shows fourth-quarter ACV for the combined market—including both managed services and cloud-based as-a-service (XaaS)—climbed 21 percent, to a record $17.9 billion. It was the fifth straight quarter growth has topped 20 percent versus the prior year. The growth rate of the latest quarter, however, was the weakest over that span, which has averaged 24.5 percent a quarter. Versus the third quarter, combined ACV was up 4 percent sequentially.

“The Americas led the industry’s global growth in 2025, fueled by the region’s accelerating investment in AI-related services,” said Todd Lavieri, vice chairman and president of ISG Americas and Asia Pacific. “In addition to continuing double-digit XaaS growth, the region crossed $23 billion in managed services ACV for the first time, supported by strong ITO activity, a rebound in BFSI, and continued momentum in infrastructure and bundled work. While the fourth quarter softened a bit, full-year performance confirms that the Americas remains the anchor of global growth.”

Q4 Results by Segment

While managed services turned in a strong year, it finished 2025 on a weak note. Fourth-quarter ACV declined 6 percent, to $5.6 billion—breaking a four-quarter streak of year-over-year gains averaging 13 percent a quarter. The Q4 managed services market also declined against the third quarter, down 12 percent sequentially.

Within managed services, IT outsourcing (ITO) ACV was down 9 percent, to $4.2 billion, with the only growth coming from bundled application development and maintenance (ADM) and infrastructure services and managed network services. Business process outsourcing (BPO), meanwhile, grew 14 percent, to $1.0 billion, on the strength of industry-specific services as well as facilities management, HR and finance and accounting services. Engineering (ER&D) services, on the other hand, declined 12 percent, to $387 million.

During the quarter, 365 managed services contracts were awarded, down 4 percent from the prior year, the only quarter in 2025 that saw volume decline year over year. Three mega deals (contracts with annual value of at least $100 million) were awarded, down from 7 in the prior year. The ACV of those mega-deals was down by 58 percent against the fourth quarter of 2024.

By industry, several sectors recorded gains of more than 50 percent, including energy (up 89 percent) and healthcare/pharma (up 85 percent). However, that was offset by declines in other large outsourcing industries, including banking, financial services and insurance (BFSI), down 17 percent, and manufacturing, down 31 percent.

In the cloud-based XaaS segment, fourth-quarter ACV surged 39 percent, to a record $12.3 billion, its best quarterly growth rate since the second quarter of 2022. It was the seventh straight quarter of XaaS growth, averaging 31 percent a quarter.

Within XaaS, infrastructure-as-a-service (IaaS) soared 52 percent, to $9.4 billion, fed by surging AI and cloud modernization demand. Software-as-a-service (SaaS) grew by a more modest 8 percent, to $3.0 billion.

Full-Year Results

For the full year, the Americas combined market generated a record $65.9 billion of ACV, up 25 percent, a growth rate three times that of 2024 and the fastest annual growth since 2021.

Managed services ACV advanced 9 percent, to a record $23.4 billion, on record volume of 1,640 contracts, up 12 percent from the prior year. Fifteen mega-deals were awarded, one off the 2024 pace, with the ACV of those contracts declining slightly year over year.

Among major industries, ACV in the all-important BFSI sector, the region’s largest industry for sourcing, was up 18 percent for the year, to $6.9 billion—equal to an incremental $1 billion in ACV, despite a soft fourth quarter. Other industries were also up double digits, including energy, up 50 percent, to $1.8 billion, and healthcare and pharma, up 30 percent, to $3.6 billion. Manufacturing, meanwhile, was off slightly, down 1.5 percent, to $3.5 billion.

ACV for XaaS segment climbed 35 percent, to $42.5 billion, or $11 billion more than the prior year. Growth accelerated from the 18 percent growth rate in 2024. The XaaS market now accounts for 64 percent of the combined market, up from 59 percent the previous year.

Within XaaS, IaaS was up 45 percent, to $30.9 billion, while SaaS rose 15 percent, to $11.6 billion.

2026 Global Forecast

For the full year, ISG is forecasting 2.1 percent revenue growth for managed services, and 20 percent revenue growth for cloud-based software and services (XaaS), the latter supported by continuing cloud migration, AI adoption, cybersecurity investment and platform-led consumption.

“AI is reshaping demand faster than managed services economics are adapting,” said Lavieri. “It continues to accelerate growth in cloud, infrastructure and platforms, while putting pressure on traditional labor-based pricing and margin structures in managed services.”

About the ISG Index™

The ISG Index™ is recognized as the authoritative source for marketplace intelligence on the global technology and business services industry. For 93 consecutive quarters, it has detailed the latest industry data and trends for financial analysts, enterprise buyers, software and service providers, law firms, universities and the media.

The 4Q25 Global ISG Index results were presented during a webcast on January 15. To view a replay of the webcast and download presentation slides, visit this webpage.

About ISG

ISG (Nasdaq: III) is a global AI-centered technology research and advisory firm. A trusted partner to more than 900 clients, including 75 of the world’s top 100 enterprises, ISG is a long-time leader in technology and business services that is now at the forefront of leveraging AI to help organizations achieve operational excellence and faster growth. The firm, founded in 2006, is known for its proprietary market data, in-depth knowledge of provider ecosystems, and the expertise of its 1,600 professionals worldwide working together to help clients maximize the value of their technology investments.