The edge compute market is set for an artificial intelligence (AI)-fueled boost that will spur overall segment spend to $380 billion by 2028, according to a new report from IDC, but enterprises will shift the focus of their investment in support of edge Artificial Intelligence (AI) workloads from hardware-based on-premises deployments toward cloud and service provider hosted infrastructure-as-a-service (IaaS) options.

IDC predicts global spending on edge computing solutions will hit nearly $261 billion this year, providing the basis for a nearly 14% compound annual growth rate (CAGR) over the next few years. That surge will be driven by the need for more powerful compute platforms to support AI workloads.

That initial hardware investment will be pointed at AI accelerated processors that will power real-time data processing and “intelligent end points that increasingly require edge-based compute, storage, and network capabilities such as those supporting agentic AI capabilities,” the IDC report notes.

Alexandra Rotaru, data and analytics manager at IDC's Data and Analytics Group, explained that IoT remains the biggest edge use case driver for enterprises, but AI, augmented reality (AR), virtual reality (VR), robotics, and drones are also driving interest.

“IoT is still the biggest, but the fastest growing is AI and also augmented reality, but probably this will change in one year and AI will take everything in terms of the fastest growing market,” Rotaru said.

As noted, most of that initial investment is targeted at equipment that enterprises are using to support on-premises use cases.

“Basically, servers and storage … we will see more increase there for sure even though it's already a big market because the infrastructure is very important for the edge,” Rotaru said.

IDC’s report tracks dozens of enterprise verticals, with Rotaru stating the biggest edge investments will come from retail, manufacturing, travel and transportation, utilities, and the financial sector. These sectors have shown a strong willingness to invest in technology despite lingering macro-economic challenges.

“The latest surveys that we had at the end of 2024 are showing that organizations are more optimistic about 2025 than 2024 in terms of the overall IT spending,” Rotaru said. “Even with all these developments at a global level, organizations are still optimistic.”

This notion aligns with a recent PwC Global AI Study showed a vast majority of business executives “considered AI a business advantage and were either already using it or planning to do so.”

Edge hardware now, edge IaaS later That enterprise investment focus is expected to evolve during the forecast period, with enterprises slowly migrating spend toward IaaS options from cloud and service providers. This will provide a potential opportunity for cloud and service providers to find a return on their infrastructure investment.

Rotaru explained that cloud providers will drive IaaS interest due to their growing AI skill and scale base.

“All this demand for support from cloud service provider is directly linked to requirements for high-performance GPUs,” Rotaru added. “So we are expecting a strong demand for these kinds of services and this kind of infrastructure.”

Service providers are also expected to increase their investments. IDC predicts those providers to invest nearly $100 billion by 2028 to support their multi-access edge compute (MEC), content delivery networks (CDNs), and virtualized network function (VNF).

“We're seeing service providers double down on investments – building out low-latency networks, enhancing AI-driven edge analytics, and forging partnerships to deliver scalable, secure infrastructure,” McCarthy noted in a statement. “These efforts are critical to realizing the full potential of edge computing, enabling everything from smarter manufacturing floors to responsive health care systems, and ultimately driving a new wave of innovation across verticals.”

Telecom operators have been attempting to position their physical assets to help power edge and AI opportunities.

Verizon CEO Hans Vestberg, who has been a long-time proponent of the operator being in a strong position to power edge computing services, continues to pump up that potential despite a lack so far of a significant return.

“Our portfolio of high-performance spectrum, the capacity of our fiber, and our ability to deploy and support mobile edge compute make us as the backbone of the AI economy and the partner of choice for players in the space,” Vestberg said during an earnings call last year. “We will power the best AI services for our customers. What set us apart with AI is our network’s mobile edge computing capabilities and deep fiber footprint. By processing data closer to the source we enable real-time AI application that requires security, ultra-low latency, and high bandwidth. This is where our network shines, opening up possibilities that simply weren’t feasible before.”

The carrier more recently signed a deal with Nvidia to power enterprise AI services and digital transformation efforts running over the carrier’s 5G private network and MEC infrastructure.

The offering stacks those components into a multitenant and scalable package designed to support enterprise-focused third-party applications. These include generative artificial intelligence (genAI), large language models (LLM), and vision language models; video streaming; broadcast management; computer vision; all the realities – AR, VR, and extended (XR); autonomous vehicles and robots; and IoT.

These new AI interface opportunities are expected to push further edge investments.

“As the focus of AI shifts from training to inference, edge computing will be required to address the need for reduced latency and enhanced privacy,” IDC’s McCarthy wrote in a previous report. “This trend not only optimizes operational efficiencies but also fosters new business models that were previously not possible with centralized infrastructure. Distributing applications and data to edge locations enables faster decision-making with reduced network congestion.”