14 November 2025

The report reveals that although cloud computing now forms the backbone of modern enterprise operations — growing into a sector valued at over $700 billion — many organisations have arrived at their current cloud environments by chance rather than through deliberate planning. Despite this, cloud investments continue to surge, with companies increasing their cloud spending by more than 30% on average over the past year, even as they face challenges related to AI integration, security demands, and evolving regulatory and governance landscapes.

Nicolas Sekkaki, Global Cloud Practice Leader at Kyndryl, emphasised the importance of moving from reactive to strategic cloud approaches. He stated that the distinction between a reactive and a deliberate cloud strategy has never been more critical. As AI relies on seamless data access and governance, hybrid cloud models are becoming the key differentiator, enabling organisations to adopt AI at scale securely while fostering continuous innovation through interoperability, trust, and agility.

Key findings from the report highlight that concerns over sovereignty and security are reshaping cloud strategies, with 75% of leaders expressing worries about geopolitical risks associated with global data storage. Additionally, 65% have already adjusted their plans to comply with new data sovereignty regulations. Hybrid and multi-cloud environments are now standard, with 84% of organisations intentionally using multiple cloud providers and 41% repatriating some data to on-premises systems to balance control, performance, and compliance.

The report underscores that AI success is closely linked to deliberate cloud design. While 89% of leaders believe cloud investments have facilitated AI deployment, 35% report facing significant integration challenges that hinder ROI. To address this, many organisations are turning to specialised infrastructure, including private AI clouds and neoclouds optimised for GPU-heavy workloads, to strike a balance between computational power and cost efficiency.

As cyber threats increase — 82% of organisations experienced a cyber-related outage this year — cloud security is evolving to meet the demands of AI-driven environments. Enterprises are adopting more flexible architectures, with 91% stating their cloud infrastructure can adapt to new regulatory requirements. Furthermore, 75% are investing in AI-powered cybersecurity solutions, reflecting a strategic shift toward proactive threat mitigation.

The report emphasises that architecture now plays a pivotal role in enterprise control. Organisations that approach cloud as a strategic, integrated capability — aligning infrastructure, governance, and data — are better positioned to securely adopt AI, comply with regulations, manage costs, and drive innovation. The rise of agentic AI, which combines scalability in public clouds with governance in private environments, is fuelling this shift. Hybrid architectures are emerging as the foundation that seamlessly connects these environments, enabling enterprises to optimise performance, security, and cost-efficiency.

In this evolving landscape, sovereignty and security are no longer barriers but core design principles fostering trust and interoperability. As global hyperscalers localise infrastructure to meet regulatory standards, enterprises are building architectures that enable secure, compliant data movement across borders and providers, paving the way for a resilient, AI-ready future.