What is the Explainable AI Market Size?
The global explainable AI market size is calculated at USD 11.28 billion in 2025 and is predicted to increase from USD 13.33 billion in 2026 to approximately USD 57.90 billion by 2035, expanding at a CAGR of 17.77% from 2026 to 2035.
Explainable AI Market Key Takeaways
- North America dominated the market with the largest size of 41% in 2025.
- Asia Pacific is expected to expand at the fastest CAGR of 25% from 2026 to 2035.
- By component, the solution segment accounted for the largest segment of 83% in 2025.
- By component, the service segment is expected to hold a significant market share in the forecast period.
- By deployment, the on-premise segment generated more than 56% of the revenue share in 2025.
- By application, the fraud and anomaly detection segment registered the largest market share of 24% in 2025.
- By application, the drug discovery and diagnostics segment is expected to grow significantly.
- By end-use, the IT & Telecommunication segment contributed to the largest market size of 19% in 2025.
- By end-use, the retail and e-commerce segment is expected to dominate the market with the largest market share in the forecast period.
Market Overview
Explainable artificial intelligence is the technology in artificial intelligence that is developed to provide human interpretation explanations for the decision-making process. Explainable AI is used in several industries such as healthcare, automobile, internet and telecommunication, and others. The modern era is almost dependent on emerging technologies and technological innovations. Artificial intelligence is one of the most promising technologies emerging in recent times for organizational growth. The explainable AI is also known as interpretability. Interpretability allows industries/end-users to understand the model of learning and the explanation behind the judgments in light of the real-world issues that are attempting to address. Explainable AI enhances the operations like trustworthiness, transparency, fairness, and accountability of Artificial Intelligent systems.
Explainable AI Market Growth Factors
Explainable AI is used for the organization's development and market growth of it. The continuous technological development in regions like North America and Asia-Pacific has resulted in a major expansion in the growth of the market. The explainable Ai is used for the detection of cybercrime. The accessibility and accuracy of solutions and services offered by explainable AI have highlighted its importance in multiple sectors.
Explainable AI is used for the detection of the problem and increases confidence and elimination of biases in the organization. Explainable AI detects the mistakes and flaws of the system and gives solutions with newer insights. The growth of the explainable AI market is driven by the rising requirements to improve inventory management for better recalling clients by proving the significant retention strategy by providing building trust, improving customer satisfaction, and providing transparency.
Explainable AI Market Outlook
- Market Growth Overview: The Explainable AI market is rapidly expanding due to increasing demand for transparent, interpretable, and trustworthy AI systems across industries.
- Global Expansion:The market is growing worldwide as organizations in emerging regions adopt AI for healthcare, finance, and manufacturing, creating opportunities for XAI solutions that ensure accountability and regulatory compliance.
- Major Investors:Major investors include technology companies, venture capital firms, and research institutions, providing funding, innovation support, and partnerships to accelerate the development and deployment of explainable AI solutions.
Market Scope
| Report Coverage | Details |
| Market Size in 2025 | USD 11.28 Billion |
| Market Size in 2026 | USD 13.33 Billion |
| Market Size by 2035 | USD 57.90 Billion |
| Growth Rate from 2026 to 2035 | CAGR of 17.77% |
| Largest Market | North America |
| Fastest Growing Market | Asia Pacific |
| Base Year | 2025 |
| Forecast Period | 2026 to 2035 |
| Segments Covered | By Component, By Deployment, By Application, and By End-use |
| Regions Covered | North America, Europe, Asia-Pacific, Latin America, and Middle East & Africa |
Market Dynamics
Drivers
Rising collaborative activities between human and artificial intelligence
Collaboration between humans and AI is essential to meet regulatory and compliance requirements. Explainable AI enables organizations to provide justifications and evidence for the decisions made by AI systems, ensuring transparency and compliance with regulations. Human collaboration in the interpretation and explanation of AI decisions helps meet legal obligations and regulatory standards. Collaboration between humans and AI facilitates continuous learning and adaptation. Human experts can share their knowledge and expertise with AI systems, enabling them to learn from human feedback and adapt to evolving circumstances. This collaborative learning process improves the AI system's performance over time. Overall, the collaboration between humans and AI drives the growth of the explainable AI market by leveraging the strengths of both parties.
Restraints
Performance limitations
In highly competitive industries, organizations may prioritize the performance of AI models over interpretability. If black-box models consistently outperform explainable AI models, businesses may be hesitant to adopt explainable AI solutions due to concerns about losing a competitive edge. There is often a trade-off between model interpretability and performance. As models become more interpretable, they may simplify or omit certain complex relationships in the data, leading to a potential decrease in performance. Addressing these performance limitations requires ongoing research and development efforts in the field of explainable AI.
Opportunities
Rising education and awareness about AI
Education and awareness about AI create opportunities for the explainable AI market by fostering understanding, addressing concerns, promoting regulatory compliance, bridging the gap between technical and non-technical stakeholders, empowering users, and encouraging research and innovation in the field of explainable AI. Education and awareness initiatives can inspire researchers, developers, and innovators to explore and advance the field of explainable AI. By highlighting the importance and potential applications of explainability, these initiatives can attract talent, investment, and resources toward developing novel techniques and solutions. This creates a positive feedback loop, where increased research and innovation drive further growth in the explainable AI market.
Segment Insights
Component Insights
The solution segment dominated the market in 2025, the segment is expected to continue to witness a noticeable growth during the forecast period. The growth of the segment is attributed to the increasing adoption of AI technologies in multiple industries. Fraud detection is the major part where the explainable AI works. Explainable AI detects fraud and creates insightful solutions to it. In the technological era, cybercrime is one of the major challenges for the government as well as private organizations.
The service segment is expected to grow at a significant rate during the forecast period. The growth of the segment is attributed due to the increase in the services regarding the AI platform. The AI consulting services work to help the organization adopt AI solutions that are interpretable, transparent, and accountable.
Deployment Insight
The on-premises segment holds the largest share of the market with the largest market share. To build explainable AI on-premises, businesses employ a variety of methods, including rule-based systems, decision trees, and model-based explanations. Due to its security advantages, major businesses choose XAI installed on-premises across a variety of industry verticals, particularly in the BFSI, retail, and government sectors. The system employs machine learning to evaluate massive amounts of data, spot possibly fraudulent activity, and offer concise and honest justifications for its judgments.
Application Insights
The fraud and anomaly detection segment dominated the market in 2025. The segment is expected to maintain growth during the forecast period. Fraud and anomaly detection often require a combination of machine-learning algorithms and human expertise. Explainable AI models facilitate collaboration between human analysts and AI systems. By providing interpretable outputs, these models enable analysts to identify patterns, generate insights, and contribute their domain knowledge to enhance the overall detection capabilities.
End-Use Insights
The IT and telecommunications segment dominated the market in 2025, the segment will continue to grow at a significant rate during the forecast period. The It and telecommunications sectors generate massive amounts of data from multiple sources, the data is valuable for training AI models. Explainable AI solutions enable these sectors to leverage their data effectively and derive actionable insights. The requirements for consumer interactions and network logs from the IT and telecommunications sectors support the growth of the segment.
On the other hand, the retail and e-commerce segment will grow at a robust pace during the forecast period. Along with a globally expanded consumer base, e-commerce businesses are susceptible to fraud. The risk in online transaction fraud and inventory management has raised the requirements for explainable AI solutions and services by retail and e-commerce businesses.
Regional Insights
U.S. Explainable AI Market Size and Growth 2026 to 2035
The U.S. explainable AI market size accounted for USD 1.90 billion in 2025 and is predicted to be worth around USD 10.01 billion by 2035, growing at a CAGR of 18.08% from 2026 to 2035.
North America dominated the global explainable AI market in 2025, the region is predicted to maintain its dominance during the forecast period. The rapid adoption of technology along with the presence of massive information technology (IT) infrastructure supported the growth of the market in North America. The nations such as the United States and Canada are observed to be the largest contributors to the market. The willingness to adapt advanced technologies for operational solutions and services by multiple industries/end-users promotes the growth of the explainable AI market in the region.
U.S. Market Trends
The explainable AI market is growing in the U.S. due to strict regulatory requirements, such as FDA and GDPR, that demand transparency and accountability in AI systems. Rising emphasis on fairness, trust, and ethical AI in sectors like healthcare, finance, and manufacturing is driving adoption. Additionally, major investments in AI technologies and the need for clear, interpretable insights for decision-making are accelerating market growth.
What Makes Asia Pacific the Most Opportunistic Region in the Market?
Asia Pacific is expected to be the most attractive region for the explainable AI market during the forecast period. Favorable economies, emerging technological hubs, adoption of generative services, and the presence of key players to promote technological advancements are a few factors that are expected to accelerate the market's growth in the Asia Pacific.
Multiple technology-based startups and companies in the region are actively involved in the development of explainable AI solutions, the market in Asia Pacific is witnessing fierce competition which is observed to lead the introduction of advanced AI-based services.
China Market Trends
China's explainable AI market is driven by smart city initiatives, government mandates for responsible AI, and strong demand in the finance and healthcare sectors. Key trends include a focus on data privacy, balancing cloud and on-premise deployments, and deploying XAI solutions for fraud detection, all supported by robust state-led AI development programs.
What Drives the Market in Europe?
The explainable AI market in Europe is driven by stringent data protection and AI regulations, such as GDPR and the EU AI Act, which require transparency and accountability in AI systems. Growing adoption of AI across healthcare, finance, and manufacturing sectors, coupled with investments in ethical and trustworthy AI solutions, further fuels market growth. Additionally, a strong focus on research and innovation in AI technologies supports the development and deployment of explainable AI across industries.
Germany Market Trends
Germany is a major contributor to the European explainable AI market due to its strong industrial base, advanced AI research ecosystem, and strict regulatory focus on transparency and data protection. The country's emphasis on Industry 4.0, smart manufacturing, and digital transformation in sectors like healthcare and finance drives high adoption of XAI solutions. Additionally, substantial government and private investments in AI innovation further strengthen Germany's leadership in the region.
Top Companies Operating in the Explainable AI Market & Their Offerings
- DataRobot, Inc.: DataRobot, Inc. provides comprehensive explainable AI abilities integrated throughout its end-to-end AI platform to guarantee transparency, auditability, and trust in AI models.
- Ditto.ai: Ditto.ai provides explainable AI technology aimed on delivering accountability and transparency, mainly through a partnership with Tata Consultancy Services (TCS), allowing transparent AI for industries such as finance, energy, and healthcare, assisting businesses in implementing AI responsibly with clear, understandable decision-making, though a few sources mention a different Ditto AI for dating/content.
Other Major Companies
- Amelia US LLC
- BuildGroup
- DarwinAI
- Factmata
- Google LLC
- IBM Corporation
- Kyndi
- Microsoft Corporation
Recent Development
- In June 2023, Reprocell announced the launch of advanced commercial services ‘Pharmacology-AI'. The launch of new services was followed by the completion of the first excellerate project by the National Center for Digital Innovation.
- In June 2023, IBM announced the launch of a new platform for organizations ‘IBM Watsonx'. The new platform released by IBM allows companies to accelerate operations with artificial intelligence solutions.
- In May 2023, the Singapore government collaborated with Google Cloud, to make the availability of artificial intelligence to the public sector agencies in the city-state through the new AI cloud platform.
- In May 2023, the government of Singapore announced the collaboration with Google Cloud. The collaboration aims to assure the availability of artificial intelligence platforms for public sector agencies through AI cloud platforms.
Segments Covered in the Report
By Component
- Solution
- Services
By Deployment
- Cloud
- On-premises
By Application
- Fraud and Anomaly Detection
- Drug Discovery & Diagnostics
- Predictive Maintenance
- Supply Chain Management
- Identity and Access Management
- Others
By End-use
- Healthcare
- BFSI
- Aerospace & Defense
- Retail and e-commerce
- Public Sector & Utilities
- IT & Telecommunication
- Automotive
- Others
By Geography
- North America
- Europe
- Asia-Pacific
- Latin America
- Middle East and Africa
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