Natural Language Understanding Market Size - By Component, Deployment Mode, Organization Size, Technology, Application, End Use, Growth Forecast, 2024 – 2032

Natural Language Understanding Market Size

The global natural language understanding market size was valued at USD 19.3 billion in 2023 and is estimated to register a CAGR of 20.1% between 2024 and 2032. The increasing adoption of AI-powered solutions across various industries, the growing demand for enhanced customer experience, and the rising need for efficient data analysis are key factors driving the demand for NLU solutions.
 

Companies are increasingly investing in NLU technologies and leveraging strategic acquisitions to enhance their market presence and capabilities. For instance, in February 2024, Databricks acquired Einblick, a natural language processing technology company, to enhance the query capabilities of its data intelligence platform that allows users to interact with their data more intuitively and efficiently.
 

Additionally, the growing emphasis on multimodal AI is significantly driving the NLU market. As organizations aim to develop more advanced AI systems that integrate various data forms such as text, speech, and images, the demand for sophisticated NLU solutions is increasing. It enables machines to process and interpret multiple types of inputs simultaneously, creating more contextually aware and accurate interactions. The multimodal AI market is expected to grow from $1.2 bn in 2023 to $13 bn by 2032, with an annual growth rate of over 30%. This surge emphasizes the rising adoption of AI technologies that can combine linguistic and visual data.
 

Natural Language Understanding Market Trends

The increasing demand for advanced text analysis solutions is significantly driving the natural market. Companies are introducing innovative NLP solutions to enhance the efficiency and effectiveness of data management. For instance, in March 2023, Kensho Technologies unveiled its latest Natural Language Processing (NLP) solution called Kensho Classify. Kensho Classify unlocks the value of large volumes of text and documents by making content more discoverable, facilitating smart search, content recommendations, and streamlining research and analysis.
 

The pandemic has accelerated the adoption of NLU-powered chatbots and virtual assistants across various sectors, including healthcare, e-commerce, and customer service. This trend is expected to continue, driving demand for advanced solutions that can handle complex queries and provide more human-like interactions.
 

An emerging opportunity in the NLU market lies in the integration of NLU with Robotic Process Automation (RPA) for automating complex, knowledge-based tasks. For instance, in July 2024, Digital Workforce announced a partnership with Sema4.ai to integrate AI Agents into its Outsmart business process automation platform, combining RPA with the adaptability of Large Language Models (LLMs).
 

The natural language understanding (NLU) market faces challenges such as the complexity in understanding context and nuances in human language, as well as data privacy and security concerns. Many organizations are hesitant to adopt NLU solutions due to the potential risks associated with processing sensitive information. Additionally, the lack of skilled professionals in NLU technologies poses a significant challenge for companies looking to implement and maintain these advanced systems.
 

Natural Language Understanding Market Analysis

Based on component, the market is divided into solution and service. In 2023, the solution segment was valued at over USD 16 billion. The increasing demand for NLU-powered applications such as chatbots, virtual assistants, and text analytics tools is driving growth in this segment. These advanced solutions leverage cutting-edge technologies such as deep learning and transformer models to analyze and understand human language in various contexts. By offering capabilities such as intent recognition, entity extraction, and sentiment analysis, it enable organizations to automate customer interactions, improve decision-making processes, and gain valuable insights from unstructured text data.
 

Based on deployment mode, the natural language understanding market is categorized into cloud-based and on-premises. The cloud-based segment is anticipated to register a CAGR of over 18% from 2024 to 2032. The rapid adoption of cloud computing and the increasing need for scalable, flexible NLU solutions are driving the demand for cloud-based deployment.
 

It offers several advantages, including lower upfront costs, easier scalability, and the ability to access advanced NLU capabilities without significant infrastructure investments. These solutions enable organizations to quickly implement NLU technologies and easily update them as new advancements become available. The integration of cloud-based NLU with other cloud services, such as data analytics and machine learning platforms, further enhances their value proposition, making them an attractive option for businesses of all sizes.  
 

North America dominated the natural language understanding market with a major share of over 35% in 2023. The U.S. is witnessing significant growth driven by the presence of major technology companies and a robust startup ecosystem. Investments in research and development, coupled with the early adoption of AI technologies, have positioned the country at the forefront of NLU innovation. Additionally, the increasing focus on enhancing customer experience and automating business processes across various industries is propelling the adoption of NLU solutions in the nation.
 

In Europe, there is a growing emphasis on enhancing customer experience through AI-powered solutions, including NLU technologies. Enterprises across sectors such as retail, banking, and telecom are increasingly leveraging NLU for automated customer support, personalized marketing, and voice assistants. As a result, the rapid adoption of AI-driven customer experience solutions is positioning Europe as a key player in the market, with strong potential for continued growth and innovation across various industries.
 

Asia Pacific is rapidly emerging as a significant player in the natural language understanding market, driven by robust economic growth and increasing digitalization efforts. Countries such as China and India are heavily investing in AI research and development, with a particular focus on natural language processing for their diverse linguistic landscapes. The proliferation of e-commerce, digital banking, and smart city projects is supporting the adoption of NLU solutions in various applications.
 

Natural Language Understanding Market Share

Google, Amazon Web Services (AWS), Microsoft Azure hold a significant market share of over 12% in natural language understanding industry. These major players are focusing on continuous innovation and strategic partnerships to enhance their market position. They are investing heavily in research and development to introduce more advanced NLU models that can understand context, handle multiple languages, and integrate with other AI technologies.
 

Additionally, key players such as Amazon and Google are also prioritizing the development of more efficient and accurate NLU models. They are focusing on reducing the computational requirements of NLU systems while improving their performance, making these technologies more accessible to a wider range of businesses. This focus on efficiency and accessibility not only helps them meet the growing demand for NLU solutions but also addresses the needs of organizations with limited resources.
 

Natural Language Understanding Market Companies

Major players operating in the natural language understanding industry include:

• Amazon Web Services
• Cerebras Systems
• Cloudera
• Google
• IBM
• Meta Platforms (Facebook)
• Microsoft Azure
• Oracle
• Salesforce
• SAP SE
   

Natural Language Understanding Industry News

• In July 2024, Majarra, a digital content provider in the MENA region, announced the landmark acquisition of Lableb, a startup in Arabic AI and Natural Language Processing (NLP). This strategic move strengthens Majarra’s leadership in Arabic digital innovation and marks its entry into the rapidly growing AI sector.
   
• In July 2024, Viewbix Inc. announced that it had signed a securities exchange agreement to acquire a 19.99% stake in Metagramm Software Ltd., a software company specializing in AI and Natural Language Processing (NLP) communication solutions. This acquisition aims to strengthen Viewbix’s position in the AI-driven communication space by leveraging Metagramm’s expertise in NLP to enhance its product offerings.
   

The natural language understanding (NLU) market research report includes in-depth coverage of the industry with estimates & forecast in terms of revenue ($Bn) from 2021 to 2032, for the following segments:

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Market, By Component

• Solution
  • Software
  • Platform
• Service
  • Consulting services
  • Implementation & integration
  • Training & support

Market, By Deployment Mode

• Cloud-based
• On-premises

Market, By Organization Size

• SME
• Large enterprises

Market, By Technology

• Statistical
• Rule-based
• Hybrid

Market, By Application

• Virtual assistants
• Customer experience management
• Sentiment analysis
• Information extraction
• Question answering systems
• Others

Market, By End Use

• BFSI
• Healthcare
• Retail & e-commerce
• Telecommunications
• IT & telecom
• Automotive
• Government
• Others

The above information is provided for the following regions and countries:

• North America
  • U.S.
  • Canada
• Europe
  • UK
  • Germany
  • France
  • Italy
  • Spain
  • Russia
  • Nordics
• Asia Pacific
  • China
  • India
  • Japan
  • Australia
  • South Korea
  • Southeast Asia 
• Latin America
  • Brazil
  • Mexico
  • Argentina 
• MEA
  • UAE
  • South Africa
  • Saudi Arabia