Citi CIO Survey: IT budgets moderate as cybersecurity reclaims top-priority rank

Citi's latest CIO Survey indicates a moderation in global IT budget growth expectations to 2.1% NTM, down from 2.5%, primarily due to a weaker European outlook, though U.S. budgets remain resilient. Despite this overall slowdown, cybersecurity has reclaimed the top spot among CIO investment priorities, with NTM budgets re-accelerating to 6.1% from 5.3%, supported by broader GenAI-driven IT investments and showing resilience against tariff impacts. While GenAI spending is projected to rise 12%, most use cases remain in early testing stages, reflecting cautious adoption.

Analysis

Citi's latest CIO survey reveals a moderation in global IT budget growth expectations for the next twelve months (NTM) to 2.1%, down from 2.5% in the prior survey. This slowdown is primarily driven by a significant weakening in the European outlook, where expected growth has fallen to 0.6%, while U.S. budgets show resilience, ticking up to 2.8%. Tariff impacts are a contributing factor, with respondents noting an average 2% downward revision to NTM budgets. Despite the overall deceleration, cybersecurity spending has re-accelerated, reclaiming its position as the top CIO investment priority with expected budget growth of 6.1%, up from 5.3%. This resilience is supported by GenAI-driven security needs and a strategic focus on vendors that can offer tariff insulation. Specifically, network security has become the highest-ranked priority, with endpoint, cloud, and identity security also gaining traction. Conversely, spending on security analytics and data security is softening due to implementation complexities. While GenAI spending is projected to increase by 12%, adoption remains in early stages, with 37% of use cases in testing and only 18% in production. CIOs show a clear preference for Microsoft, followed by OpenAI, Amazon, and Google, for their GenAI initiatives.

Key Decisions for Investors

• Consider increasing exposure to the cybersecurity sector, particularly to platform vendors with strong 'security for AI' strategies and those insulated from tariff impacts, as CIOs are accelerating spending in this area to 6.1% despite broader budget moderation.
• Favor IT vendors with significant U.S. market exposure over those concentrated in Europe, given the reported divergence in budget growth outlooks, with the U.S. remaining resilient at 2.8% while Europe's outlook has dropped to 0.6%.
• For GenAI exposure, prioritize established mega-cap providers like Microsoft, which is the top CIO choice, as enterprises are still in early-stage, cautious deployment cycles and prefer trusted vendors.
• Exercise caution with pure-play companies in security analytics and data security, as the survey indicates CIOs are delaying modernization and softening spend in these areas due to vendor overlap and complexity.