US Tech_ 1Q25 CIO Survey Macro Flash – Tale of Two Cohorts

Summary of the 1Q25 CIO Survey Macro Flash Industry Overview - Industry: Technology, Media, and Telecommunications (TMT) - Region: North America Key Insights 1. Growth Expectations: As of February 20, 2025, growth expectations accelerated by 98 basis points year-over-year (YoY) to 4.1%, but responses collected through March 10 indicate a deceleration of 42 basis points YoY to 3.2% [1][3][14]. 2. IT Budget Growth: The 2025 IT budget growth expectations are at 3.7% YoY, which is an increase of 28 basis points from 3.4% in 2024, but still below the long-term average of 4.1% pre-COVID [3][8][14]. 3. Bifurcation of Results: The survey results show a significant bifurcation based on the completion date. Responses from February 10-20 indicated a more optimistic growth expectation of 4.1%, while those collected after February 20 reflected a more muted outlook of 3.2% [3][14][27]. 4. Sector Performance: Software is expected to remain the fastest-growing IT sector in 2025 with a growth rate of 3.8%, followed by Communications (3.0%), IT Services (2.6%), and Hardware (1.5%) [10][19][22]. 5. CIO Sentiment: The Up-to-Down ratio for 2025 budgets decreased to 0.8x from 1.0x in 4Q24, indicating a downward bias among CIOs regarding budget revisions [10][25][27]. 6. Medium-Term Outlook: The medium-term revision ratio improved to 4.2x in 1Q25 from 3.5x in 4Q24, suggesting a more durable spending backdrop despite current volatility [9][32]. Additional Observations 1. CIO Priorities: The top priorities for CIOs in 1Q25 include Artificial Intelligence/Machine Learning, Security Software, Digital Transformation, Cloud Computing, and ERP Applications [12][36]. 2. Spending Resilience: Security Software is viewed as the most defensible IT initiative, closely followed by AI/ML, indicating that these areas are less likely to face cuts in spending [44]. 3. Budget Revision Expectations: 21% of CIOs expect upward revisions to their 2025 budgets, while 26% anticipate downward revisions, reflecting a cautious outlook [10][25]. 4. Impact of Macro Environment: The increasing macro volatility is expected to weigh on CIO sentiment and pose additional risks to IT budgets in the near term, influenced by trade policies, interest rates, and federal spending uncertainties [3][11][27]. Conclusion The 1Q25 CIO Survey indicates a complex landscape for the technology sector, with growth expectations showing signs of bifurcation and a cautious outlook among CIOs. Despite some positive indicators, the overall sentiment reflects concerns over macroeconomic volatility and its potential impact on IT spending.