Government IT spending rises as AI becomes top budget priority

More than half of government Chief Information Officers expect their IT budgets to rise in 2026, with growing demand for artificial intelligence and other digital technologies driving investment despite ongoing fiscal constraints, according to new industry research.

Funding priorities

A survey of 284 government CIOs found that 52% anticipate budget increases specifically for AI and related technologies. Other top investment areas include cybersecurity, cited by 85% of CIOs, followed by AI and generative AI, both at 80%, and cloud platforms at 76%.

The data indicates governments continue to prioritise digital initiatives that promise tangible outcomes in public service delivery. CIOs are under pressure to justify spend by linking technology projects to measurable mission objectives, including cost reduction and improved user experience.

AI deployments

Seventy-four percent of government CIOs said they have already deployed or will deploy AI solutions in the coming year. Interest in generative AI is even higher, with 78% reporting current or imminent deployment plans. Almost half (49%) say they have plans to roll out AI agents, such as digital assistants, within the next 12 months.

Arthur Mickoleit, Director Analyst at Gartner, said demand for agentic AI is gaining ground but cautioned that newer technologies should not overshadow more established approaches:

"Agentic AI is emerging as an enabler of government transformation, but CIOs must remain mindful of the hype that can distract from more mature technologies like machine learning and business process automation," said Arthur Mickoleit, Director Analyst, Gartner. "This next wave of innovation will be essential for delivering on public sector priorities, especially as expectations are high following years of investments in digital government."

Productivity focus

Increasing productivity is the top internal priority for government CIOs next year, with 51% planning to focus on boosting employee output. Launching new digital products and services ranks second at 38%, trailed closely by efforts to improve citizen experience at 37%.

"CIOs should prioritise AI initiatives that rapidly improve internal efficiency and productivity," said Mickoleit. "At the same time, governance practices must be updated to modernise procurement, manage limited resources and balance risks with opportunities in citizen-facing AI applications."

Vendor relationships

Amid ongoing geopolitical uncertainties and heightened concerns around digital sovereignty, 55% of government CIOs expect to alter their relationships with technology vendors. Location is now a critical factor, with 39% intending to work more closely with providers based in their own region rather than relying solely on global suppliers.

"Government CIOs are increasingly seeking to reduce dependence on global technology vendors to strengthen resilience," said Mickoleit. "Many are now factoring geopolitical risk into vendor selection and long-term planning. Mapping risks and dependencies across public sector technology stacks will ensure they can mitigate and absorb future disruptions."