IT Services: 2Q26 CIO Survey: IT Services Lags Broader Budget Acceleration as AI Continues to Crowd Out Discretionary Spend

Research evidence excerpt

IT Services: 2Q26 CIO Survey: IT Services Lags Broader Budget Acceleration as AI Continues to Crowd Out Discretionary Spend

Foundation

July 16, 2026 02:23 AM GMT

Morgan Stanley & Co. LLCMIT Services | North America James E Faucette

Equity Analyst

2Q26 CIO Survey: IT Services James.Faucette@morganstanley.comShefali Tamaskar +1 212 296-5771

Research Associate

Shefali.Tamaskar@morganstanley.com +1 212 761-4948

Lags Broader Budget Michael N Infante

Michael.Infante@morganstanley.com +1 212 761-4631

Acceleration as AI Continues to Meryl R Thomas, CFA

Meryl.Thomas@morganstanley.com +1 212 761-0774

Crowd Out Discretionary Spend

IT Services

North America

2Q26 CIO Survey points to modestly weaker 2026 IT Services Industry View In-Line

growth expectations despite improving overall IT budgets,

suggesting AI remains a top enterprise priority but is still

absorbing discretionary dollars, hurting Services growth.MAnnual IT Services budget growth is still down vs. CY25, with growth

expectations weakening QoQ, even as overall IT budget growth improves. Our

2Q26 CIO Survey, fielded May 8 to June 18, 2026, points to +1.8% y/y IT Services

growth in 2026, a slight downward QoQ revision from the +2.0% y/y growth

recorded in our 1Q26 survey. Services growth expectations for 2026 remain slightly

below 2025 levels, with expected growth of +1.8% in 2026 down from +2.1% in

2025. Consistent with our last survey (1Q26 CIO Survey: IT Services Not Getting

Worse, But Mixed Backdrop; Hope In Broader Budgets), overall IT budget growth

expectations for 2026, which include hardware, software, communications, and

services, accelerated to +3.8% versus +3.7% in 2025 and the 1-year up-to-down ratio

for potential overall IT budget revisions increased to 1.2x from 0.8x in 1Q26, with