CFOs are reallocating 2026 budgets to prioritize growth-driving functions over headcount expansion
There’s a structural shift happening in the way companies are thinking about growth. CFOs are placing less emphasis on adding people and more on building capabilities that drive performance, namely revenue-driven functions like sales and marketing, and foundational systems like IT. This isn’t about trimming costs randomly. It’s targeted. It’s about getting more value from fewer variables. Artificial intelligence and automation now enable productivity at scale, and executives are evolving their budgets to reflect that.
Instead of investing heavily in headcount and compensation, businesses are funding initiatives that support scale without the proportional increase in labor. That’s smart. It’s also sustainable. These decisions aren’t driven by fear or cost-cutting, they’re strategic bets on long-term ROI. If a system can achieve something a team needed to do manually in previous years, we should deploy that system and allocate the leftover resources to new growth.
Gartner’s research shows a clean break from past cycles of headcount growth. This signals a broader realization across the executive space: people still matter, but scale, speed, and performance now matter more.
Sales and IT budgets are set for significant expansions
Double-digit increases are coming in sales and IT budgets. Not for show. Not because everyone else is doing it. Because they work. Gartner’s research shows 28% of CFOs expect sales and IT funding to grow by over 10% in 2026. That’s not trivial. Sales fuels revenue. IT now keeps the engine running, firmware, data, AI, cybersecurity, SaaS, everything needed to move faster and build better.
CFOs are no longer splitting hairs between tech for cost efficiency and tech for innovation. They’re realizing both are the same. You can’t innovate without control. You can’t control without precise systems. Expanded IT budgets reflect the mounting demands of digital process automation, AI deployment, and rising SaaS expenses. These are not nice-to-have tools, they’re now base infrastructure.
Sales and marketing investments signal where organizations believe growth will come from. If you’re a C-suite leader, take note. The attention is shifting from purely operational investments to customer-facing, revenue-generating strategies. Nauman Abbasi at Gartner said this well, sales and marketing now define growth, and IT provides the structure to make it sustainable. That’s the new operating model. It’s smart, lean, and scalable.
Technology investment remains the top priority across all sectors
Technology budgets are leading the shift across industries. CFOs are making bold moves, 75% are increasing tech investment in 2026, and nearly half expect double-digit growth. That’s not a trend. It’s a clear signal that technology is seen as essential business infrastructure. Whether it’s AI, cybersecurity, or cloud platforms, these are areas organizations can’t delay on.
Some sectors are moving faster than others. Financial services are leading with around 15% average growth in tech spend, while manufacturing is slower at 6%. That’s driven by regulatory environments, threat exposure, and how fast teams are modernizing. But the takeaway is the same: technology spend is no longer optional. It’s being treated as a core input to scale, stability, and long-term survivability.
What’s happening here is deliberate. Boards and executive teams understand that outdated systems slow companies down. Modern platforms make better decisions faster. And as digital infrastructure becomes embedded in how day-to-day work gets done, the smartest companies are staying ahead by investing now rather than reacting later.
Nauman Abbasi, Vice President Analyst at Gartner, put it simply, technology keeps showing up as the most consistently growing budget category in every sector. Not because it’s trendy, but because it gets results. That’s what C-suites should be watching closely.
Human resources budgets are contracting as companies leverage automation and AI to maintain efficiency
HR is one of the few major departments seeing budget cuts. It’s not random. It’s linked closely to the broader slowdown in headcount growth. Just 29% of CFOs are planning to raise HR budgets in 2026. Meanwhile, 22% expect them to fall. That’s a sharp optimization move, especially when average HR budget growth is projected to drop from 2.4% in 2025 to just 0.7% in 2026.
Automation and AI continue to replace repetitive tasks, recruiting workflows, onboarding, routine performance tracking. As these tools prove reliable, the need for larger HR teams shrinks. And with hiring slower than in previous years, businesses don’t need the same level of HR operational bandwidth.
This doesn’t mean HR becomes irrelevant. It means HR becomes smarter. Leaders who understand this will start reshaping those functions to drive more value per person. Investing in the right platforms now reduces the long-term need for extra roles. In markets where operational precision matters more than scale, that’s a competitive advantage.
These cuts should be seen less as reductions and more as reallocations. Time, budget, and attention are moving to areas where they generate better returns. C-suites can support that shift and drive longer-term value without compromising capability.
Salary growth is moderating
The pace of salary increases is cooling off. After years of aggressive wage growth in response to labor market pressure, compensation strategies are stabilizing. Gartner’s data shows pay growth falling from 6.1% in 2024 to 5.4% in 2025, with a further slowdown to 4.5% in 2026. This isn’t about scaling back intent, it’s about recalibrating priorities.
Companies aren’t pulling away from talent. They’re putting more weight on systems that raise productivity across the board. Salaries are still growing, but more selectively. High performers will continue to see strong returns on value creation, but across the broader workforce, the focus is shifting toward performance optimization.
This correction reflects larger shifts in how value is measured. Teams are leaning on digital tools to reduce redundancy and automate routine work. That reduces the need to outbid competition for roles that can now be supported, or enhanced, by AI or integrated platforms.
Executives should see this not as a hiring problem but a strategic moment. It’s about aligning pay with impact under new conditions. If businesses build the right tech stack and support it with a performance-driven culture, they’ll deliver more return, without inflating costs unnecessarily.
Headcount growth is contracting as automation and AI optimize productivity
Headcount expansion is slowing sharply, not because demand is falling, but because output is being redefined. CFOs now expect just 2% growth in overall workforce size in 2026, down from 6% in 2025. Only 21% of finance leaders plan staff increases between 4% and 9%. That’s down from 31% the year before. Companies are clearly choosing fewer hires, driven by gains in productivity from automation and enterprise-wide tech.
This is a structural shift. AI and automation have matured to the point where they reliably complete tasks that required multiple roles in previous years. Reporting, forecasting, documentation, and transaction processing are increasingly automated inside finance, operations, and HR. That lowers the marginal value of increasing headcount in many teams.
Nauman Abbasi at Gartner described this development as “a structural pivot,” not a cycle. He’s right. Businesses that used to grow by adding people are now scaling by optimizing output. The focus has shifted. The agenda is now about making the most of every hire, not hiring to keep up with demand.
If you’re leading a company, recognize that growth isn’t tied to how many people you’ve hired. It’s tied to how efficiently those people, and your systems, perform. That’s where budget and leadership attention needs to sit.
Investments in AI for finance are scaling up
AI isn’t theoretical anymore. It’s being implemented inside core finance workflows, especially where speed, accuracy, and cost control matter. Nearly 60% of CFOs plan to boost AI investment in the finance function by 10% or more in 2026. Another 24% expect to increase AI budgets by 4% to 9%. The majority aren’t testing anymore, they’re building.
Efficiency is the key driver. Finance leaders want faster reporting, cleaner forecasting, and fewer manual tasks slowing down cycles. Automation is handling repetitive work, allowing leaner teams to focus on analysis and decision-making. This isn’t about replacing finance teams. It’s about enabling them to operate with higher precision and less friction.
However, there’s a gap between ambition and investment scale. About 47% of CFOs currently allocate just 1% to 5% of their finance tech budgets to AI. That shows most organizations are still early in rollout. AI is present, but not yet fully integrated into back-end systems or end-to-end workflows. Still, momentum’s building as standard finance software increasingly offers AI capabilities as part of core packages or add-ons.
What’s changing now is the mindset. Early results are converting skepticism into confidence. More CFOs are pushing broader implementations in forecasting, variance analysis, and financial planning. These systems reduce errors, improve decision timelines, and make operations easier to audit and scale.
Nauman Abbasi, Vice President Analyst at Gartner, summed it up: “CFOs recognize that AI is no longer just an experiment, it’s fast becoming a core enterprise capability.” That’s the signal. AI is no longer off to the side. It’s moving into the foundation of how finance gets done. If you want speed, clarity, and scale, this is where you invest.
The bottom line
The future isn’t waiting for perfect conditions. It’s being built by companies that know how to adjust fast and act with precision. The data is clear, CFOs aren’t just shifting budgets, they’re redefining how businesses operate. Headcount and compensation growth are giving way to scalable systems and performance-driven strategies.
This pivot isn’t about spending less, it’s about spending smarter. Investing in AI, IT, and revenue engines like sales and marketing delivers more return with less drag. It puts control back in the hands of leadership, not in legacy structures or runaway overhead.
For business leaders, the takeaway is simple: growth is no longer measured by size, it’s measured by speed, accuracy, and adaptability. The companies that understand this, and align their investments accordingly, won’t just keep up. They’ll lead.
