GCC Smart Cities Market Poised to Reach USD 907 Billion by 2032

The GCC Smart Cities and Digital Transformation market is on a rapid growth trajectory, expected to expand from USD 145.54 billion in 2024 to USD 907.12 billion by 2032. This represents a remarkable compound annual growth rate (CAGR) of 25.70% from 2025 to 2032, according to a report by DataM Intelligence. The region, which comprises Saudi Arabia, the UAE, Qatar, Kuwait, Oman, and Bahrain, is entering a pivotal phase in digital transformation, driven by government-led initiatives and significant investments in advanced technologies.

Governments across the GCC are heavily investing in megaprojects and innovative technologies, such as artificial intelligence (AI) and 5G networks. These efforts are transforming the landscape of urban development and infrastructure. Major initiatives, including NEOM, The Line, and Lusail Smart City, are setting global benchmarks for integrated digital urban development. Over the past two years, the region has seen a surge in funding directed towards smart grids, autonomous mobility, urban surveillance systems, digital hospitals, fintech ecosystems, and sustainable infrastructure supported by big data and AI.

Investment Surge in Digital Infrastructure

Between mid-2024 and early 2025, GCC governments announced over USD 67 billion in commitments to digital transformation projects, marking one of the most aggressive smart infrastructure build-outs worldwide. This is indicative of the region’s ambition to transition from early-stage digital adoption to fully connected smart-city ecosystems.

Key factors propelling this growth include:

– A rapid rollout of 5G technology, with both the UAE and Saudi Arabia achieving over 97% population coverage.
– The introduction of significant AI programs, such as the UAE’s USD 100 billion AI Vision and Saudi Arabia’s USD 40 billion AI fund initiated in 2024.
– Increased government spending on digital initiatives, with Saudi Arabia allocating USD 6.4 billion for digital transformation for the fiscal years 2024-2025.

The GCC’s potential is further enhanced by its ability to attract global technology giants like Microsoft, Google Cloud, Oracle, and Huawei, fostering long-term partnerships in digital infrastructure.

Market Segmentation and Technology Trends

In 2024, hardware dominated the market, accounting for an estimated 52% share, valued at USD 75.7 billion. This was driven by deployments of IoT sensors, smart meters, and 5G equipment across various megacity projects. Software platforms, including cloud-based applications and AI systems, contributed nearly 31% of the market, valued at USD 45.11 billion.

The technology landscape showcases that AI led the segment with a 29% share, valued at USD 42.2 billion, powering applications like facial recognition and predictive infrastructure management. Following closely, 5G technology represented 23% of the market, valued at USD 33.47 billion, positioning the GCC among the global leaders in 5G penetration. IoT solutions accounted for 18% of the market, showcasing the extensive deployment of active IoT endpoints throughout the region.

Transportation emerged as the leading application segment in 2024, generating USD 39.8 billion, supported by investments in autonomous mobility and smart traffic control systems. Other significant sectors included buildings and infrastructure, which generated USD 33.1 billion, and energy and utilities, valued at USD 27.4 billion.

The demand for digital transformation initiatives is also evident in the government sector, which accounted for 48% of total market demand in 2024, primarily due to government-led smart city initiatives.

Recent announcements underscore the GCC’s commitment to further advancements in digital infrastructure. Saudi Arabia unveiled USD 12.4 billion in new tenders for digital transformation under its flagship programs. Meanwhile, the UAE committed USD 4.2 billion for the expansion of AI and digital public services, while Qatar allocated USD 1.6 billion for improvements to mobility and energy automation systems in Lusail Smart City.

As the region continues to invest in technology and innovation, decision-makers can expect significant shifts in public service operations, with AI-driven automation projected to reduce manual tasks by 40–60% in various ministries. The advancements in autonomous mobility and smart manufacturing are anticipated to foster economic diversification away from oil dependence.

The GCC Smart Cities and Digital Transformation market is set for an exciting decade of growth, positioning the region as a leader in digital innovation and urban development.