European organizations will nearly double their spending on sovereign cloud infrastructure as a service (IaaS) this year, as geopolitical tensions cause them to rethink their reliance on US hyperscalers.

European investments in sovereign IaaS are expected to grow from $6.9 billion in 2025 to $12.6 billion in 2026, according to a forecast by Gartner published Monday — an increase of 83%. The figure will almost double again in 2027, Gartner predicts, reaching $23.1billion, as geopolitical uncertainty persists.

It’s not just Europe: overall, businesses will spend $80.4 billion on sovereign cloud IaaS this year, according to Gartner, with that number rising to $110 billion in 2027. The majority of demand will come from public sector organizations, followed by heavily regulated industries and critical infrastructure such as energy and telecoms firms.

Digital sovereignty has been discussed for years in Europe, but concerns around the dependence on US cloud providers – which account for the majority of the European cloud market – have sharply risen as the relationship between the US and Europe becomes strained.  

“What started to happen in ‘25 is now going into ’26,” said Rene Buest, senior director analyst at Gartner, with ongoing uncertainty from European organizations about how political changes could affect the IT and digital landscape.

Many European organizations are worried they could be shut off from vital cloud services for political reasons — as happened to senior staff at the International Criminal Court last year. 

Some also view investment in sovereign cloud services as a way to boost the domestic cloud provider landscape. There’s a growing number of European organizations committing to spend a certain percentage of annual revenue on local IT providers, according to Buest.

At the same time, a mass exodus isn’t expected or even realistic, said Buest. That’s because it’s too expensive and complicated for the vast majority of organizations to decouple entirely from existing providers, even if they want to. 

As a result, much of the forecast spending increase on sovereign cloud IaaS (80%) will involve either new applications or older on-prem workloads/applications that were previously earmarked for hyperscalers, according to Gartner. 

Still so-called “geopatriation” is likely to occur to some extent. Gartner predicts that businesses globally will move 20% of their existing workloads off hyperscalers’ clouds and on to local cloud providers by 2029 because of sovereignty concerns. (The figure is slightly higher for Europe.) 

There are a variety of conceivable scenarios here: a bank could move its core banking systems off a hyperscaler, for instance, or a SaaS provider might want to run on local infrastructure. 

This is bad news for hyperscalers, of course, yet US-owned sovereign cloud services are expected to attract some of the reallocated IaaS spend, according to Gartner — even if local providers are likely to benefit most. 

US-based IaaS vendors have been busy building and launching “sovereign” cloud services billed as an alternative for European customers. 

Yet, there are questions around the level of real sovereignty afforded by hyperscaler-owned services. 

Take AWS’s European Sovereign Cloud (ESC), for example, which launched in Germany last month. The data center is run by European residents and citizens, and technically separate from wider public cloud systems. It also operates under a subsidiary incorporated in Germany. Ultimately, it remains part of AWS, a US-owned company that’s subject to laws such as the Cloud Act or Foreign Intelligence Surveillance Act. 

Google, Microsoft, Oracle, also market cloud services as sovereign. 

A better approach for US hyperscalers might be to partner with local providers. There are already several examples of this. Google licenses its technology to S3NS, a French subsidiary of Thales, for example, while Bleu, a joint venture between Capgemini and Orange, uses Microsoft technology.

These arrangements are not fully sovereign, as they involve a reliance on software updates from a US technology provider, for instance. But they remove questions about ownership and the potential for a “kill switch.”

It’s not enough for hyperscalers to treat digital sovereignty purely as a security, regulatory or compliance topic, said Buest. “This is a mistake they are making, and because of that, they will also lose market share,” he said.