More than half (54%) of European companies are using AI, marking a milestone in the transformative potential of this technology. However, although adoption has reached a tipping point, most companies are still not able to leverage AI’s full potential.
These are the findings of our latest study, ‘Unlocking Europe’s AI Potential’, which looked at how 17,000 businesses across Europe are navigating the AI era. While these numbers speak to rapid adoption, they also warn of potential missed opportunities.
The gap between adoption and transformation
54% of businesses are now using AI, up from just 33% two years ago. However, there has been little progress among adopters to take advantage of advanced AI: embedding it into core business processes, building custom solutions, and deploying systems that can plan and execute complex workflows. It increased by just 1% over the past year to 22%. This is important. That’s because advanced adopters are 55% more likely to report significant increases in productivity than those who remain at basic use. The gap between these two groups is widening. Helping basic adopters (58%) reach advanced AI usage could unlock EUR 191 billion in GVA in Europe.
Nowhere is this more evident than in agent AI. These systems don’t just help; Complex workflows can be autonomously planned and executed end-to-end, reducing innovation cycles from years to months. However, only 24% of European companies have heard of agent AI, and only 3% have deployed agent AI. Early adopters report faster decision making, increased operational efficiency, and increased scalability. Companies that are implementing these technologies today will see even greater benefits as the technologies mature.
“Innovation cycles that once took 10 years now unfold in months. To keep pace, Europe must move forward with the speed and ambition it has shown throughout its history.” Tanuja Randery, Managing Director, AWS Europe, Middle East, and Africa. “While there are some high-performing regions across the continent, we don’t yet have the amount of innovative AI use we need. Europe has all the ingredients for AI leadership, including world-class research, a skilled workforce, and established infrastructure, with a proven ability to produce global champions. Yes, companies have given us a clear roadmap for what they need to do to leverage these strengths, but time is ticking. Choice, speed and scale will determine the next global AI champion. Now is the time to realize the lost generation of innovation or take the risk.”
Companies clearly recognize the issues that are holding them back
Regulatory complexity: To scale across Europe, companies must navigate 27 different regulatory frameworks. Currently, 42% of total technology spending is spent on compliance, and 81% of companies report an increase in compliance costs over the past three years. This is capital that can potentially fund innovation.
Skills gap: Building AI literacy across your workforce, education system, and leadership team is fundamental. However, half of companies cite the AI and digital skills gap as a hurdle to adoption. Companies reporting these gaps are 35% less likely to be advanced adopters.
Access to finance: 43% of companies lack a dedicated budget for AI, and the fifth report has limited incentives and external support for innovation. Access to capital and the confidence to deploy it remains a challenge across the continent.
Startup: European early warning system
If things continue like this, Europe risks losing talented innovators. 38% of European startups are considering relocating outside Europe to scale, rising to 51% for the fastest growing startups.
Losing them means losing the businesses most ready for next-generation AI. 78% of startups say they are ready for next-generation AI tools, including agent AI, compared to just 19% of companies overall.
If frontier companies leave, Europe risks losing startup talent and the flywheel they create: jobs, supply chains, future investments and the next generation of technology leaders.
Plans to accelerate Europe’s AI future
Europe has the ingredients to lead, including world-class research, a technology sector worth around $4 trillion, and around 40,000 funded technology companies. 1 Three actions can accelerate change.
- Make the public sector Europe’s leading AI adopter: Governments will deploy AI across public services and streamline public procurement, enabling startups, scale-ups and small and medium-sized enterprises to adopt solutions.
- Incentivize investment in AI: Streamline access to growth capital, give government incentives to companies that scale from Europe, and reform size-based rules to ensure companies are not penalized for exceeding growth milestones.
- Build AI readiness: Embed AI literacy across education systems, support public-private partnerships to improve workforce skills, and provide dedicated funding to help businesses develop their AI strategies.
AWS continues to work closely with European governments to support businesses across the continent. Last year, AWS provided $1 billion in cloud credits to startups developing generative AI solutions as part of the AWS Education Equity Initiative, and also committed to providing $100 million over the next five years to help underserved learners acquire AI and cloud computing skills.
The room for action is shrinking. European companies have embraced AI, but now they need the conditions and confidence to transform with AI.
Read the full report to learn what’s at stake for Europe’s AI future.
