Infrastructure as a Service (IaaS) is today the backbone of modern IT architectures. Companies and governments rent computing power, storage, and network capacity as a service instead of investing in their own data centers. Globally, the growth of cloud infrastructure is impressive, but Europe is also following not only in size but especially in strategic ambition. The European IaaS market is expanding rapidly, not only due to technological and economic needs but also due to geopolitical priorities around digital sovereignty and reducing dependence on American hyperscalers.

Rapid growth: numbers that speak

The European cloud market - including IaaS and PaaS - is growing strongly with a compound annual growth rate (CAGR) of over 23% towards 2028, with the total market value expected to double to around €110 billion.

Newer forecasts show that European organizations are nearly doubling their spending on so-called sovereign cloud IaaS this year, from about $6.9 billion in 2025 to $12.6 billion in 2026, and possibly further to $23 billion in 2027 — in response to geopolitical uncertainties.

Growth drivers: business and strategic reasons

The growth is not without reason. There are needs and opportunities to be found in various areas. The following four are the most important

1. Digitalization and flexibility

Many European organizations are accelerating their digital transformation. IaaS provides scalable, efficient infrastructure that allows companies to roll out new services faster, reduce costs, and replace legacy systems.

2. Hybrid cloud and remote work

Hybrid IT environments remain the norm: cloud-based infrastructure combines on-premise systems with public and private clouds. This aligns better with flexible work patterns and rapid workload fluctuations.

3. Innovation agendas such as AI and data-intensive workloads

New technologies require more computing power and scalability. IaaS services with specialized hardware (e.g., GPUs for AI) are becoming essential to drive innovation.

4. Geopolitics and digital sovereignty: a European priority

Perhaps the most important factor in the European IaaS market: the current geopolitics, and especially the desire to reduce dependence on American tech giants.

The majority of the European cloud market - more than 70% - is currently dominated by American hyperscalers such as AWS, Microsoft Azure, and Google Cloud. This dominant position translates not only into market power but also into legal and strategic risks for European companies and governments.

European powers

Europe is responding to these challenges with concrete initiatives to strengthen digital autonomy and interoperability:

Gaia-X: A French-German initiative that provides a federated and transparent framework for sharing data and services within Europe under European values and control. It is not a cloud provider in itself but an ecosystem for digital sovereignty that facilitates interoperability between European IaaS providers.

Sovereign cloud projects: European organizations are focusing on cloud infrastructures specifically designed to meet European standards, with local control over data and processes.

Then there are regional providers, who focus on niches. European cloud providers are trying to gain market share in segments with strict privacy and compliance requirements, such as government and regulated industries.

The market reality: dominance remains, but dynamics change

Despite these strategic impulses, the dominance of American hyperscalers remains significant, while European cloud providers collectively hold only a small portion of the market. However, the demand for sovereign and European options is growing rapidly, leading to a clear trend: organizations want to make strategic choices that go beyond pure functionality, with attention to compliance, geopolitics, and autonomy.

The European IaaS market

The European IaaS market is growing not only due to economic benefits and technological trends but also due to geopolitical motives and the desire to strengthen digital sovereignty. European organizations no longer want to be fully dependent on external cloud giants but strive for more control over data, infrastructure choices, and strategic autonomy.

For IT decision-makers, this means that cloud strategies are increasingly becoming hybrid and multicloud — where technological innovation, legal frameworks, and geopolitical realities go hand in hand.