Explainable AI Market Report 2025

This report covers market characteristics, size and growth, segmentation, regional and country breakdowns, competitive landscape, market shares, trends and strategies for this market. It traces the market’s historic and forecast market growth by geography.

The explainable ai market size has grown exponentially in recent years. It will grow from $8.1 billion in 2024 to $9.77 billion in 2025 at a compound annual growth rate (CAGR) of 20.6%. The growth in the historic period can be attributed to rising adoption of AR and VR, demand for the XR displays, growth for displays, high demand for AR devices, economic growth.

The explainable ai market size is expected to see exponential growth in the next few years. It will grow to $20.74 billion in 2029 at a compound annual growth rate (CAGR) of 20.7%. The growth in the forecast period can be attributed to increasing adoption in educational games, increasing implementation of gesture-based computing, rising usage of smartphones, increased usage of connected devices, growing adoption by healthcare and educational sector. Major trends in the forecast period include technological development in micros displays, adoption of new technology, development of extended reality technologies, develop a new in-vehicle display imaging system, integration of advanced technology in ERD.

The anticipated increase in the adoption of the Internet of Things (IoT) is poised to drive the growth The growing adoption of the Internet of Things (IoT) is expected to significantly drive the growth of the explainable AI (XAI) market. IoT refers to a network of interconnected physical devices equipped with sensors, software, and technologies that enable them to collect and exchange data. As IoT systems become more widespread, the need for explainable AI to interpret and provide transparency in AI-driven decision-making becomes crucial. XAI helps users understand how AI models make decisions, fostering trust and improving the reliability of IoT systems. For example, in 2023, Ericsson reported that the total number of IoT connections reached 15.7 billion, with projections indicating a 16% increase to 38.8 billion connections by 2029. This surge in IoT adoption is driving demand for explainable AI solutions to ensure transparency, trustworthiness, and more effective decision-making in IoT ecosystems. Therefore, the increasing adoption of IoT is fueling the growth of the explainable AI market.

Prominent entities in the explainable AI market are strategically embracing partnership approaches to fortify their offerings and extend their market presence. A strategic partnership denotes a collaborative arrangement between two or more entities, typically businesses, aimed at achieving mutually beneficial and enduring objectives. As an example, in July 2023, Fujitsu Limited, a Japan-based information and communications technology company, forged a partnership with Informa D&B, a Spain-based marketing and information company. The collaboration seeks to enhance decision-making by leveraging Fujitsu's explainable AI to transparently process and analyze data. This strategic move addresses the imperative need for advanced AI solutions to mitigate risks, particularly in areas such as financial fraud. XAI contributes insights into decision-making, fostering transparency and trust while minimizing biases.

In March 2024, Apple Inc., a US-based technology company, acquired DarwinAI for an undisclosed amount. This acquisition enables Apple to enhance its capabilities in machine learning and deep learning applications by leveraging DarwinAI's advanced artificial intelligence technology. DarwinAI, a Canada-based AI startup, specializes in providing an end-to-end solution designed to improve product quality and boost production efficiency, offering Apple valuable tools for optimizing its AI-driven processes and products.

Major companies operating in the explainable ai market report are Amazon Web Services, Alphabet Inc., Microsoft Corporation, Intel Corporation, International Business Machines Corporation, NVIDIA Corporation, Salesforce Inc., Equifax Inc., SAS Institute Inc., Mphasis Limited, Fair Isaac Corporation, Databricks Inc., Alteryx Inc., Amelia US LLC, Temenos Headquarters SA, BuildGroup LLC, C3.ai Inc., Data Robot Inc., Tredence Analytics Solutions Pvt. Ltd., ArthurAI Inc., DarwinAI Corp., ISSQUARED Inc., H2O.ai Inc., Fiddler Labs Inc., Ditto Labs Inc.

North America was the largest region in the Explainable AI market in 2024. The regions covered in the explainable AI market report are Asia-Pacific, Western Europe, Eastern Europe, North America, South America, Middle East, Africa. The countries covered in the explainable AI market report are Australia, Brazil, China, France, Germany, India, Indonesia, Japan, Russia, South Korea, UK, USA, Canada, Italy, Spain.

The explainable AI market consists of revenues earned by entities by providing services such as interpretable models, local explanations, feature importance analyses, rule-based explanations, model-agnostic approaches, customization, and configuration. The market value includes the value of related goods sold by the service provider or included within the service offering. The explainable AI market also includes sales of high-speed pick-and-place operational tools, controller systems, vision systems, and conveyor systems. Values in this market are ‘factory gate’ values, that is the value of goods sold by the manufacturers or creators of the goods, whether to other entities (including downstream manufacturers, wholesalers, distributors, and retailers) or directly to end customers. The value of goods in this market includes related services sold by the creators of the goods.

The market value is defined as the revenues that enterprises gain from the sale of goods and/or services within the specified market and geography through sales, grants, or donations in terms of the currency (in USD, unless otherwise specified).

Explainable Artificial Intelligence (XAI) is an artificial intelligence system strategically designed to offer clear and comprehensible explanations of its decisions or outputs. Its purpose extends to describing an AI model, delineating its anticipated impact, disclosing potential biases, and aiding in the characterization of model accuracy, fairness, transparency, and outcomes within AI-powered decision-making processes.

The primary types of software within explainable AI encompass standalone software, integrated software, automated reporting tools, and interactive model visualization. Standalone software denotes a computer program capable of running as a separate process without dependency on other software or services. This includes various methods such as model-agnostic methods and model-specific methods. End-users benefiting from explainable AI span diverse sectors, including banking, financial services, and insurance (BFSI), retail and e-commerce, information technology/information technology-enabled services, healthcare and life sciences, government and public sector, media and entertainment, manufacturing, energy and utilities, telecommunications, and other verticals.

The explainable AI market research report is one of a series of new reports that provides explainable AI market statistics, including explainable AI industry global market size, regional shares, competitors with an explainable AI market share, detailed explainable AI market segments, market trends and opportunities, and any further data you may need to thrive in the explainable AI industry. This explainable AI market research report delivers a complete perspective of everything you need, with an in-depth analysis of the current and future scenario of the industry.

The revenues for a specified geography are consumption values that are revenues generated by organizations in the specified geography within the market, irrespective of where they are produced. It does not include revenues from resales along the supply chain, either further along the supply chain or as part of other products.

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