Regulation, platformisation and MSP growth reshape security investment priorities across Europe

London, UK - 25th March 2026 - The European cybersecurity market is entering a phase of structural realignment in early 2026, as investment shifts away from traditional protection layers towards identity, infrastructure and managed services, according to new insights from global market intelligence firm CONTEXT.

Latest analysis from CONTEXT shows the cybersecurity market declined by -4.6% year-on-year in the first weeks of 2026, following a strong close to 2025. The slowdown is being driven primarily by weakness in the corporate reseller channel, while small and medium reseller segments continue to grow.

At the same time, significant divergence is emerging across key security segments, highlighting a fundamental shift in how organisations are prioritising cyber defence.

“Security spend isn’t disappearing, it’s being reallocated,” said Joe Turner, Global Director of Research at CONTEXT. “What we’re seeing is a clear move away from standalone protection tools towards integrated platforms, identity-centric security and infrastructure designed to meet regulatory and operational pressure.”

Traditional segments are now under pressure. Network security is down 8% year-on-year, while endpoint protection continues its decline, reflecting the ongoing transition towards integrated XDR and SaaS-based security platforms. Data security has also fallen sharply, down 33%, as organisations pause following major encryption and compliance investment cycles linked to GDPR and the eIDAS Directive.

In contrast, growth areas are being driven by compliance, automation and the need to secure increasingly complex environments. Identity and access management is up 25%, fuelled by zero trust adoption and regulatory requirements such as NIS2, with increasing focus on securing machine identities including APIs, bots and connected devices. Infrastructure-related security, alongside SIEM, SOAR and vulnerability management, is also expanding as organisations invest in visibility, incident response and automation to meet stricter reporting obligations.

These shifts are unfolding against a backdrop of intensifying regulatory and geopolitical pressure. Recent EU cyber sanctions, the proposed Cybersecurity Act 2, and sovereign cloud initiatives such as France’s Visio rollout are all contributing to a more controlled and compliance-driven security landscape across Europe.

“The regulatory environment is now one of the biggest drivers of security investment,” Joe added. “Organisations are not just buying protection, they are buying the ability to demonstrate compliance, respond in real time, and manage risk across increasingly distributed systems.”

One of the most significant growth areas is the rise of Managed Service Providers (MSPs), which are expanding rapidly despite the broader market slowdown. Germany has seen MSP growth of 72% year-on-year, with the UK and Ireland up 42% and Italy up 6%.

This surge is being driven by regulatory outsourcing and a persistent cybersecurity skills shortage, as organisations look to external partners to manage 24/7 operations and meet strict incident reporting timelines.

“MSPs are becoming the operational backbone of cybersecurity for many organisations,” said Joe Turner. “With regulatory deadlines tightening and a well-documented talent gap, businesses are increasingly buying outcomes rather than tools.”

CONTEXT expects the cybersecurity market to remain uneven in the near term, with continued pressure on traditional segments offset by strong growth in identity, infrastructure and managed services.

As organisations navigate this transition, the firm highlights the importance of aligning security investment with regulatory requirements, platform strategies and evolving threat models. “This is not a downturn, it’s a reset,” Joe Turner concluded. “The organisations that adapt fastest to platform-based security, identity-first models and service-led delivery will be the ones best positioned for what comes next.”

 About CONTEXT

CONTEXT is a B Corp certified provider of market intelligence and analytics for the global technology industry. The company works with leading manufacturers, distributors and investors to support strategic decision-making through advanced forecasting, analytics and data management. CONTEXT systems track more than £200 billion in annual technology sales transactions, supported by a global team of over 400 professionals operating in more than 35 countries.

Press contact
Funda Cizgenakad
T: +44 7876 616 246
E: Funda@contextworld.com