Smart City Tech to Expand Rapidly by 2034
New York, Monday, 9 February 2026.
A new report forecasts a 22.9% compound annual growth rate in the smart cities market through 2031. The growth is driven by connected tech, with North America leading revenue.
Market Growth and Key Drivers
The global smart cities market is set to experience substantial growth, with a projected compound annual growth rate (CAGR) of 22.9% from 2024 to 2031 [1][2]. This expansion is fueled by the increasing integration of technologies such as IoT (Internet of Things), AI (Artificial Intelligence), big data, and cloud computing in urban areas [1]. Key drivers for this growth include rising urban populations and government initiatives aimed at developing digital infrastructure [1]. These technologies aim to improve urban efficiency, sustainability, and the overall quality of life for residents [4].
Regional Market Dynamics
Currently, North America leads the smart cities market in terms of revenue, holding a 33% market share [1][2]. However, the Asia-Pacific region is emerging as the fastest-growing market, demonstrating a significant interest and investment in smart city technologies [1][2]. Europe accounts for 21% of the market share [2]. This regional dynamic indicates a global interest in adopting smart city solutions, with varying levels of implementation and investment across different regions [1][2].
Leading Segments and Applications
Within the smart cities market, smart transportation and smart energy management are identified as leading segments [1]. These areas are crucial for addressing urbanization challenges and improving the efficiency of city services [1][4]. The applications of smart city technologies are diverse, including smart governance, smart buildings, smart healthcare, smart public safety, and smart waste management [1]. For example, Sunnyvale, California, showcased AI applications in city operations in January 2026, highlighting AI’s broad urban impact [1]. Also in January 2026, Hiroshima City Bus partnered on smart mobility initiatives [1].
Industry Developments and Strategic Focus
Several key players are active in the smart cities market, including IBM Corporation, Siemens AG, Schneider Electric, Ericsson, and Honeywell International Inc [2]. These companies are developing and deploying various smart city solutions, driving innovation and market growth [2]. A strategic focus for 2026 is the convergence of 5G and IoT technologies, along with the development of predictive analytics platforms, which are expected to be core growth drivers [2]. In January 2026, IBM launched an AI-driven urban analytics platform for U.S. smart cities, and NEC Corporation released a disaster-resilient smart city platform in Tokyo [2].