Summary Points
- A study shows Germany’s mid-sized Mittelstand firms cut AI spending in 2025.
- Mittelstand’s AI budgets fell to 0.35% of revenue, trailing wider corporate averages.
- Geopolitical concerns, digitalisation hurdles and slow ROI dent investment momentum.
Germany’s iconic Mittelstand firms dialled back their artificial intelligence investments in 2025, even as AI spending rose among larger companies.
A new study by management consultancy Horvath found that AI expenditure across 200 surveyed mid-sized companies fell to 0.35% of revenue in 2025. This figure dropped from 0.41% a year earlier, signalling a retreat in AI commitment among this crucial economic segment.
By contrast, the average across all companies increased to 0.5% of revenue, underscoring a widening investment gap. The study’s authors said the divergence leaves the Mittelstand roughly 30% below the broader market on AI spending.
Consultancy lead Heiko Fink said geopolitical tension has unsettled many mid-sized executives. This unease is prompting firms to prioritise cost optimisation over ambitious technology bets.
Fink also noted that early examples of AI use failed to deliver expected efficiency gains. That shortfall has further dampened enthusiasm for larger AI budgets.
The report highlights bureaucratic hurdles as a persistent challenge for digital transformation. Slow progress on digitisation has stalled AI rollout in many Mittelstand companies.
Concerns about data protection and digital sovereignty also weigh on investment decisions. These issues complicate efforts to adopt AI tools that depend on cloud or cross-border data flows.
The retreat in AI investment among mid-sized firms contrasts with stronger corporate tech spending overall. Larger firms have continued to increase AI budgets to fuel competitiveness and innovation.
Industry watchers warn that the investment gap could grow, leaving medium-sized firms behind. Without accelerated digital transformation, the study says, the technology gap could pose strategic risks.
Medium-sized companies form the backbone of the German economy, spanning manufacturing and services. A sustained lag in AI deployment could weaken their competitive edge globally.
For Europe’s broader AI landscape, this trend points to a concentration of innovation among larger players. Smaller companies may struggle to attract talent, scale AI systems or comply with evolving regulations.
That could reduce overall productivity gains from digital tools across the economy. Policymakers have stressed the need for support programs to help SMEs embrace digital technology.
Enhanced training, funding incentives and streamlined regulations are among proposed measures. Such initiatives aim to close the investment divide and spur innovation across all business sizes.
The study’s findings provide a snapshot of how macro-economic and geopolitical pressures influence tech strategy.
As digital competition intensifies, the Mittelstand’s investment choices will have wider economic implications.
