AI software market to quadruple to $251B by 2027

The market for software that uses artificial intelligence (AI) to automate tasks and generate content in response to user prompts is expected to grow nearly four-fold through 2027.

The worldwide AI software market will grow from $64 billion last year to nearly $251 billion in 2027, representing a compound annual growth rate (CAGR) of 31.4%, according to a new report from IDC, Worldwide Artificial Intelligence Software Forecast, 2023–2027.

Leading the AI software category are generative AI (genAI) applications that can automatically learn, discover, and make recommendations or predictions in response to user requests. There are two forms of AI applications:

• AI-centric applications or modules where AI technologies are a necessary core to the app’s function;
• AI non-centric applications where AI is infused/embedded into ERP, CRM, SCM, and HCM features and is integral to certain workflows although the app would still function without it.

“The momentum behind investments in AI and automation technologies remains unwavering despite economic uncertainty and shifting market dynamics,” Raghunandhan Kuppuswamy, an IDC research manager, said in a statement. “Businesses are realizing that utilizing cutting-edge technology is not only a strategic necessity, but also a crucial factor in achieving long-term success.”

IDC’s forecast for AI-centric software includes Artificial Intelligence Platforms, AI System Infrastructure Software (SIS), and AI Application Development and Deployment (AD&D) software (excluding AI platforms); it does not include Generative AI (genAI) platforms and applications, which IDC recently forecast will generate revenues of $28.3 billion in 2027.

Artificial Intelligence Platforms is the second-fastest growing market, expected to increase by 35.8% CAGR. AI Platforms will be the largest revenue category for most of the forecast.

AI Platforms such as Google’s Cloud AI and Amazon’s AI services facilitate the development of AI models and applications such as intelligent assistants that can mimic human cognitive abilities.

The two smallest categories in terms of overall revenue are AI Systems Infrastructure Software (AI SIS) and AI Application Development and Deployment (AI AD&D) software; though smaller in size, the latter AI software categories are still expected to see revenue growth faster than the overall market with five-year CAGRs of 32.6% and 38.7%, respectively. 

AI systems infrastructure software includes AI-powered software solutions that provide the basic foundational layers of software that enable bare metal infrastructure hardware resources to host higher-level application development. For example, AI-powered IT service management, AI-powered IT operations management, and network management.

AI AD&D Software represents tools and platforms used primarily by developers to build, test, and deploy software, such as AI-powered app  development, AI-powered data management, and AI-powered app platforms.

“The AI landscape is changing rapidly. Convergence of traditional AI with Generative AI will lead to cutting-edge solutions that combine decision efficacy with creative ingenuity,” said Ritu Jyoti, an IDC group vice president. “As businesses continue to invest in AI, they should be prepared to address challenges and prioritize ethical considerations to maximize the long-term ROI.”