Natural Language Processing Market Size, Share, Forecast, & Trends Analysis Offering (Solutions, Services), Organization Size, Application (Sentiment Analysis, Chatbots & Virtual Assistant, Others), Sector (IT & Telecom, BFSI, Retail & E-commerce, Others), Geography - Global Forecast to 2031

Natural Language Processing Market Size & Forecast

The Natural Language Processing Market is expected to reach $164.9 billion by 2031, at a CAGR of 29.2% from 2024 to 2031. Natural language processing (NLP) is the application of AI to process and analyze text or voice data in order to understand, interpret, categorize, or derive insights from the content. Examples of NLP include email spam filters, spell checkers, grammar checkers, autocorrect, language translation, sentiment analysis, semantic search, and more.

The growth of the market is driven by factors such as the rising adoption of smart devices, the growing demand for NLP-based applications for customer support, and the rising demand for NLP tools in call centers. Moreover, the rapid adoption of cloud-based technologies and increasing applications of NLP in the healthcare sector are expected to offer market growth opportunities.

However, the limitations in the development of NLP technology restrain the market's growth. Additionally, data privacy & security concerns pose challenges to the market's growth.

The adoption of virtual assistants & chatbots and the growing demand for speech analytics solutions are the key trends observed in the natural language processing market.

Natural Language Processing Market Growth Drivers

• Rising Adoption of Smart Devices

In the last few years, NLP-based smart devices have been used in almost any application, from smart healthcare, smart retail, and smart manufacturing to smart home automation systems to improve efficiency and optimize operations. Market players offer NLP-integrated smart devices such as smart home assistants, smart home security products, smart speakers, smart health monitoring devices, humanoid robots, and touch-screen assistants. The demand for such smart devices is increasing rapidly among consumers. The growing trend of connected devices, increasing popularity of home automation systems, and surge in demand for NLP-based security products are improving the demand for NLP solutions and services, supporting the growth of the NLP market.

• Growing Demand for NLP-Based Applications for Customer Support

Market players are focusing on enhancing customer experiences by addressing challenging human-software interactions and meeting today's customer expectations through advanced NLP-based applications. Enterprises are leveraging various NLP applications to automate tasks such as understanding, analyzing, and responding to client feedback. This allows agents to focus on more complex missions and customer support issues while NLP-powered software handles self-service technologies, FAQs, or virtual assistant solutions for simpler queries. Moreover, marketing and sales teams are utilizing NLP applications to enhance strategies, brand image, and competitive positioning. Therefore, the growing demand for NLP-based applications in customer support is driving the growth of the NLP market.

Following Are the Major Examples of NLP Applications in Customer Service:

• Customer service chatbots
• Product recommendation conversational systems
• Customer sentiment analysis
• Customer satisfaction and trend spotting

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Natural Language Processing Market Trends

• Rising Adoption of Virtual Assistants & Chatbots

Most organizations are adopting virtual assistants & chatbots. Leading industry experts expect this trend to continue over the coming years. Organizations are adopting virtual assistants & chatbots to communicate with businesses and brands via messaging apps. Product marketing, brand engagement, product assistance, sales, and support discussions are common uses of conversational bots. Companies are deploying chatbots with various communication channels, such as messaging apps like WhatsApp or Facebook Messenger, mobile applications of enterprises, social media apps, & email and SMS. Virtual assistants & chatbots provide benefits such as 24×7 customer engagement, improved lead generation & recommendations, and enhanced customer service standards. Agents are freed from more repetitive tasks to focus on more complex and valuable work, boosting efficiency and contact center performance by improving resolution times. These benefits have encouraged their wide-scale adoption across sectors such as IT & telecommunication, call centers, healthcare, and BFSI.

Natural Language Processing Market Challenge

• Data Privacy & Security Concerns

Although NLP solutions such as OCR solutions, IVR systems, document analytics solutions, speech analytics solutions, CXM solutions, and digital assistant and chatbots are extensively used across different sectors, rising data security and privacy concerns pose a serious challenge to the adoption of NLP solutions. NLP-based systems deal with confidential business data such as medical or healthcare records and customers' sensitive information. As a result, it becomes essential for market players to provide adequate security to consumers' data to avoid data breaches, theft, and misuse by unauthorized personnel. Organizations must take preventive measures and frame stringent data protection mandates while developing NLP solutions. Thus, companies must utilize various deep learning models to enhance data privacy and protect customers' data in response to these challenges. The rising need to integrate data privacy and security features in NLP solutions makes it difficult for market stakeholders to remain competitive.

Natural Language Processing Market Opportunity

• Increasing Applications of NLP in the Healthcare Sector

The healthcare sector offers significant market growth opportunities due to the increasing applications of NLP solutions across various areas including clinical practice, hospital management, personal care, public health, and drug development. Healthcare professionals are increasingly utilizing NLP solutions and services to extract relevant information from patient records, including medical history and medication allergies. Moreover, the rapid deployment of NLP in healthcare, including applications like clinical trial matching, speech recognition, and clinical documentation, is opening up avenues for market players to capitalize on the growing demand for NLP solutions in the healthcare sector.

Natural Language Processing Market Analysis: Key Findings

By Offering: In 2024, the Solutions Segment to Dominate the Natural Language Processing Market

Based on offering, the natural language processing market is broadly segmented into solutions and services. In 2024, the solutions segment is expected to account for the larger share of 72.0% of the global natural language processing market. The large market share of this segment is attributed to the rising adoption of NLP among enterprises to analyze data and discover insights, automate time-consuming processes, and help them gain a competitive advantage.

However, the solutions segment is projected to register a higher CAGR during the forecast period. The rising focus of market players on product development and enhancement is expected to drive the growth of this segment. For instance, in December 2022, Kaleyra, Inc. (U.S.) launched a new lineup of chatbots for WhatsApp Business that will allow businesses to create advanced conversational experiences on the platform. With a daily volume of over 100 billion messages, WhatsApp provides a convenient and efficient way for businesses to connect with their customers in real time.

By Organization Size: In 2024, the Large Enterprises Segment to Dominate the Natural Language Processing Market

Based on organization size, the natural language processing market is segmented into large enterprises, small & medium-sized enterprises. In 2024, the large enterprises segment is expected to account for the larger share of 62.0% of the global natural language processing market. The large market share of this segment is attributed to factors such as the strategic IT initiatives developed by large enterprises, the increasing demand for managing large volumes of customer-level data, the early adoption of advanced technologies across retail, manufacturing, healthcare, and automotive sectors, and the rising need for improved insights into customer responses.

However, the small & medium-sized enterprises segment is expected to register a higher CAGR during the forecast period. The growth of this segment is driven by the increasing need for contact center analytics solutions among small organizations, notable benefits offered by NLP solutions for small & medium-sized enterprises, and the growing adoption of cloud-based NLP solutions & services among these enterprises.

By Application: In 2024, the Speech Recognition Segment to Dominate the Natural Language Processing Market

Based on application, the natural language processing market is broadly segmented into sentiment analysis, chatbots & virtual assistants, machine translation, text summarization, market intelligence, speech recognition, and other applications. In 2024, the speech recognition segment is expected to account for the largest share of 40.0% of the global natural language processing market. The large market share of this segment is attributed to the rising use of NLP for improving the accuracy, robustness, and features of speech recognition systems.

However, the chatbots & virtual assistants segment is expected to register the highest CAGR during the forecast period. The increasing need to capture valuable customer data and insights, provide brands with actionable feedback to optimize their products, services, and marketing strategies, and deliver personalized recommendations, content, and offers tailored to individual preferences and behavior are expected to drive growth in this segment.

By Sector: In 2024, the IT & Telecommunications Segment to Dominate the Natural Language Processing Market

Based on sector, the natural language processing market is broadly segmented into IT & telecommunications, BFSI, retail & e-commerce, healthcare & life sciences, transportation & logistics, government & public sector, media & entertainment, manufacturing, education, food & beverages, and other sectors. In 2024, the IT & telecommunications segment is expected to account for the largest share of 23.0% of the global natural language processing market. The segment's large market share can be attributed to the rising adoption of speech analytics and sentiment analysis solutions in IT & telecom call centers to analyze business conversations, the increasing need to gather actionable information, and the increasing demand for NLP-based network solutions in the telecommunications sector.

However, the healthcare & life sciences segment is expected to register the highest CAGR during the forecast period. The growth of this segment is driven by the rising applications of NLP in healthcare, including areas such as clinical trial matching and clinical documentation, the widespread adoption of AI chatbots and virtual scribes, and initiatives by governments and companies to deploy chatbot solutions for providing healthcare data.

Geographical Analysis

In 2024, North America is expected to account for the largest share of 35.0% of the natural language processing market. North America's significant market share can be attributed to the growing adoption of digital assistants and chatbots in the BFSI, retail, and IT & telecommunications sectors, the rising demand for cloud-based NLP solutions & services, the presence of well-established NLP solution providers, and the growing demand for speech analytics solutions.

However, the market in Asia-Pacific is projected to register the highest CAGR of 31.0% during the forecast period. The growth of this regional market is driven by government initiatives aimed at increasing the adoption of digital assistants, chatbots, sentiment analytics solutions, OCR solutions, and IVR systems, along with market players' efforts to launch NLP solutions such as chatbots and emotional intelligence solutions. Furthermore, the growing popularity of cloud-based NLP solutions and NLP-based applications across the region contributes to the growth of this market. For instance, in May 2021, Pluszero Inc. (Japan) launched "Nekonote," a data creation service to improve its accuracy in Japanese natural language processing. Additionally, in February 2021, ITOCHU Techno-Solutions Corporation (Japan) launched SmartBERT, an AI natural language processing engine, utilizing the deep learning technology of Intumit Inc. (Taiwan).

Natural Language Processing Market: Key Companies

The report offers a competitive analysis based on an extensive assessment of the leading players' product portfolios and geographic presence and the key growth strategies adopted by them over the past 3–4 years. Some of the key players operating in the natural language processing market are Google LLC (U.S.), Microsoft Corporation (U.S.), Amazon Web Services, Inc. (a subsidiary of Amazon.com, Inc.) (U.S.), Oracle Corporation (U.S.), IBM Corporation (U.S.), NVIDIA Corporation (U.S.), QUALCOMM Incorporated (U.S.), Baidu, Inc. (China), Verint Systems Inc. (U.S.), SAP SE (Germany), Intel Corporation (U.S.), Adobe Inc. (U.S.), Genpact Limited (U.S.), SAS Institute Inc. (U.S.), and NetBase Solutions, Inc. (U.S.).

Natural Language Processing Industry Overview: Latest Developments from Key Industry Players

• In March 2023, Microsoft Corporation (U.S.) launched its Dragon Ambient eXperience (DAX) Express. This solution represents the next breakthrough for healthcare and a major milestone in Microsoft's journey to automate clinical documentation at scale. DAX Express is an automated clinical documentation application integrated into the workflow that is the first to combine proven conversational and ambient AI with the advanced reasoning and natural language capabilities of OpenAI's GPT-4.
• In July 2022, SAP SE (Germany) acquired Askdata (U.S.), a startup focused on search-driven analytics, to strengthen its ability to help organizations make better-informed decisions by leveraging AI-driven natural language searches.
• In November 2021, IBM Corporation (U.S.) introduced natural language processing (NLP) enhancements for its IBM Watson Discovery. These planned updates are designed to help business users in industries such as financial services, insurance, and legal services enhance customer care and accelerate business processes by uncovering insights and synthesizing information from complex documents.
• In November 2021, QUALCOMM Incorporated (U.S.) launched the world's most advanced mobile platform, Snapdragon 8 Gen 1.

Natural Language Processing Market Research Summary:

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