Key Takeaways:
The European Commission is set to designate Microsoft Azure and Amazon Web Services as gatekeepers under the Digital Markets Act, a move that would impose the bloc's toughest competition rules on cloud infrastructure for the first time.
The Commission will unveil preliminary findings as early as next week stating that both cloud platforms appear to meet the DMA's gatekeeper requirements, according to people familiar with the matter. A final decision is expected by the end of 2026, though the timeline could shift.
"The cloud market has reached a level of concentration where the largest players can dictate terms to customers," said Margrethe Vestager, the EU's competition commissioner, in a statement accompanying the November market investigation. "Interoperability and the ability to switch providers without prohibitive cost are essential for a competitive digital economy."
If designated, Azure and AWS would face obligations including interoperability requirements, curbs on customer lock-in practices, and restrictions on self-preferencing. Non-compliance carries fines of as much as 10% of global annual turnover, rising to 20% for repeated breaches. The DMA already applies to six gatekeepers — Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft — but those designations covered services like app stores and messaging, not cloud infrastructure.
The Commission opened its formal market investigation in November after concluding that Microsoft and Amazon "occupy very strong positions" in the cloud market. The probe followed a series of high-profile outages that underscored the risks of concentrated infrastructure: an AWS outage lasting 15 hours disrupted operations at Apple, McDonald's, and Epic Games, while Azure failures prevented Alaska Airlines check-ins and halted voting in the Scottish Parliament.
Cloud Concentration and the European Response
US hyperscalers control roughly 70% of European cloud infrastructure revenue, according to industry estimates. European providers including OVHcloud, Hetzner, and Scaleway have long argued that the dominance of AWS and Azure creates structural barriers to competition, particularly through data egress fees and complex licensing terms that make switching prohibitively expensive.
The last time the EU applied the DMA to a new service category, Apple and Meta were fined EUR 500 million and EUR 200 million respectively for non-compliance. Extending the framework to cloud would represent the most significant expansion of the law's reach since it took effect in 2023.
Political and Market Implications
The timing is politically charged. The DMA has drawn criticism from the Trump administration, which has framed EU tech regulation as targeting American companies. Adding cloud to the scope would put Brussels on a direct collision course with Washington's two largest cloud providers at a moment when transatlantic trade talks are already strained.
For investors, the regulatory risk is material. Azure and AWS are the primary growth engines for Microsoft and Amazon, respectively. Cloud revenue at Microsoft rose 21% year-over-year to $41.3 billion in the March quarter, while AWS generated $27.2 billion, up 19%. New compliance costs and operational restrictions could pressure margins in a business where operating margins already run above 35%.
Microsoft and AWS declined to comment on the preliminary findings. The Commission has not confirmed the timeline, but if the designation proceeds, both companies will spend the remainder of 2026 negotiating the terms of their European operations under the most consequential tech regulation in the world.
This article is for informational purposes only and does not constitute investment advice.
