Strong interest in AI is propelling the growth of cloud services in Europe, as reported in the latest industry analysis by Information Services Group (ISG). The EMEA ISG Index™ reveals a 14% increase in the combined market, comprising managed services and cloud-based as-a-service (XaaS), reaching an annual contract value $(ACV.SI)$ of $9 billion in the second quarter. This growth is primarily driven by a 34% rise in XaaS, despite a 4% decline in managed services due to economic uncertainties. The report highlights significant growth in the Infrastructure-as-a-Service (IaaS) market, which surged by 41% to $7.4 billion, while Software-as-a-Service (SaaS) rose by 20% to $2.5 billion. However, Business Process Outsourcing (BPO) saw a 16% decline, with IT Outsourcing (ITO) remaining stable. ISG maintains its forecast of 1.3% revenue growth for managed services for the year, while raising its cloud-based XaaS growth prediction to 21%, reflecting robust AI-driven demand. Despite ongoing macroeconomic and geopolitical challenges, AI's prominence continues to drive the market, with digital sovereignty and sovereign clouds identified as potential growth areas.