RESEARCH REPORT
Europe's AI reckoning
Reinventing industries for a new era
10-MINUTE READ
June 25, 2025
In brief
- European workers are less productive than their US counterparts—companies must accelerate AI adoption to close the gap.
- More than half of the 800 large European organisations surveyed have not yet scaled a truly transformative AI investment.
- To realise the potential of AI, business leaders must boost AI capabilities in areas such as data, cloud and talent.
Part A: Sizing and seizing the opportunity
In The Future of European Competitiveness, former European Central Bank chief, Mario Draghi, sounded the alarm about Europe’s economic health. The search for solutions has become more urgent as geopolitical tensions rise.
A key issue is productivity. In 1996, the output of European and US workers was the same. Today, the average European worker produces just 76% as much as their American counterpart. Persistent underinvestment in technology is the clear root cause.
AI is not a silver bullet, but it can be powerful. When combined with human expertise, AI offers a clear path to productivity growth and greater resilience—essential to meet Europe’s economic, social and environmental ambitions.
56%
of large European organisations have yet to scale a truly transformative AI investment
46/100
average AI capability score of European companies
€200 bn
potential boost to European business revenues from closing AI capability gap
How can European organisations accelerate AI adoption?
Scale up AI-powered business reinvention investments
- This research examines how many organisations are scaling large, transformational gen AI investments—what we call ‘strategic bets’. These bets go beyond incremental value. They promise to drive industry-specific, process-level efficiencies that boost productivity, innovation and revenue growth.
- Large European companies (>$10 billion in annual revenue) are on par with US peers in scaling strategic initiatives. But after decades of lagging on tech investment, Europe must now accelerate to increase European competitiveness.
- Critically, Europe must turbocharge AI adoption among smaller firms that form the backbone of the regional economy. More than two-thirds (69%) of organisations with $1 billion - $9.9 billion in annual revenues have not yet scaled a single strategic AI initiative.
48%
of Europe’s largest companies have scaled a strategic AI bet - level with US peers
31%
of smaller peers have done the same
Develop “cognitive digital brains” to become AI-ready
- European organisations must strengthen the AI capabilities needed to scale strategic bets—from talent and data governance to the use of foundation models.
- Today, the largest European organisation score an average of 54 (out of 100) on our index measuring the development and deployment of AI capabilities, equal with US peers.
- However, organisations in the next revenue bracket down score just 39. This gap matters: larger companies are 3x as likely to have integrated autonomous AI agents into various functions.
- By strengthening their AI capabilities, organisations open the door to new ways of working. The end-goal is a ’cognitive digital brain’—a connected system that organises, processes and acts on data about businesses and the wider world in real-time.
Address digital sovereignty risks through a three-layered decoupling approach
- Architecture - Use sovereign or private cloud for critical workloads to regain control over data.
- Legal - Operate with European and global trusted entities to reduce exposure to extraterritorial laws.
- Supply chain - Maximise open-source solutions to reduce dependence on proprietary software.
Coordinated action across the region
Individual company actions will only take Europe so far. To raise the regional bar and realise the promise of AI, European policymakers should:
1. Help smaller entities to level up on AI
- Expand access to compute capacity and high-quality data, as well as the funding advice, networking and training to boost sector-specific AI solutions.
2. Nurture a sovereign European AI ecosystem
- Partner with European cloud providers and AI producers, while enabling innovation from trusted global players as they develop sovereign solutions and local legal entities.
3. Develop a coordinated industrial strategy
- Ground a federated AI ecosystem—underpinning a competitive and value-driven AI economy—in interoperability, cross-industry and cross-border collaboration and regulatory alignment.
Part B: The AI opportunity for 10 key sectors
Part B of this report delves deeper into these 10 critical European industries:
| Aerospace and Defence | Industrial |
| Automotive | Life Sciences |
| Banking | Public Service |
| Consumer Goods & Services | Telecommunications |
| Energy | Utilities |
For each, we explore AI adoption rates and sector-specific challenges as well as opportunities. Emerging success stories highlight how world-leading companies across the region are realising the potential of AI.
From ambition to altitude, together
How Europe rises to the twin challenges of shifting geopolitics and maximising AI potential will shape its growth trajectory in the coming years. Today’s turmoil is also an opportunity to accelerate the regional economic reform agenda. Larger companies must embrace AI faster—and smaller peers must follow their lead.
Now is the moment for Europe to lead by example—by turning principles into action and creating a resilient, inclusive and innovative AI ecosystem. One that safeguards its autonomy, creates new jobs, nurtures domestic talent, fuels economic growth and upholds the region’s identity and values in the digital century.