Southeast Asia’s digital economy is expected to reach 368 billion dollars in gross merchandise value in 2026, representing 17 percent growth from the previous year, according to the 11th annual e-Conomy SEA report released by Google, Temasek and Bain and Company. The regional digital economy is also projected to exceed 1 trillion dollars by 2035.

The growth comes despite a challenging macroeconomic environment. Elevated inflation, higher interest rates and volatility in energy prices caused by geopolitical developments are weighing on household purchasing power and consumer demand across Southeast Asia. Digital businesses are increasingly using artificial intelligence to improve customer targeting, personalize services and support spending growth, helping partially offset these pressures.

Generative AI adoption has expanded rapidly across the region. The report estimates that 243 million people, equivalent to 58 percent of Southeast Asia’s working population, are now using generative AI. Adoption has scaled four times faster than the rollout of mobile internet, highlighting the growing importance of AI across consumer and business applications.

E-commerce remains the largest component of the region’s digital economy, with gross merchandise value expected to reach 226 billion dollars in 2026, an 18 percent increase from the previous year. Online travel is projected to reach 59 billion dollars, growing 10 percent year on year. AI-powered tools are increasingly being used to improve product discovery, purchasing decisions and travel planning.

AI is also contributing to a rebound in technology investment. Southeast Asia’s digital economy attracted around 21 billion dollars in funding during the first half of 2026, compared with 11 billion dollars during the whole of 2025. Large data centre investments accounted for a significant portion of the increase, including major deals involving STT GDC and DayOne Data Centers.

The expansion of data centre infrastructure reflects rising demand for AI computing capacity and digital services. Built data centre capacity in Southeast Asia increased to 5.8 gigawatts in the first half of 2026 from 4 gigawatts at the end of 2025.

The report indicates that Southeast Asia still has significant room for further digital growth. Digital gross merchandise value is forecast to grow at an average annual rate of 13 percent and reach approximately 1.14 trillion dollars by 2035. However, the region continues to face risks from weaker consumer demand, energy-price shocks and potential changes in global AI-related investment.