While the demand for compute is blowing up, the supply side hasn't caught up. That gap is the entire opportunity.
Something has started to shift in the European cloud space. It is not arriving in the form of launches, It is arriving in the form of experiments.
Providers that spent a decade selling machines, bandwidth and storage are beginning to reach up the stack: Managed runtimes, hosted inference, exactly the layers where the value has moved. Early attempts mostly mostly boil down to a model or two, no billing, no SLA and no promises about behavior under load. Put out to find out whether anyone wants the thing at all.
The products are minor. The reaction to them is not.
Each release refuels an ongoing debate on forums like Hacker News and Reddit. Engineers talk to each other candidly, and the argument is never really about the product. It is about whether Europe even has the capacity, to build this layer at all.
Two things surface every time, and they sit awkwardly together.
Europe has providers. It does not have a contender.
There is no shortage of European companies operating at this layer. National ones, regional ones, telco-backed, retail-conglomerate-backed. There have been new entrants arriving for a decade. What Europe does not have is a product an engineer would choose purely based on its merits. The jurisdiction should be treated as a bonus rather than the justification. Currently, all of the options at this layer that actually win on capability, tooling, throughput and reliability is built somewhere else.
That is the real gap, and it is a technical one. Not a shortage of providers. Not a shortage of demand, as we will get to. A shortage of maturity: infrastructure that holds up under production load, ships the features that make workloads economical, and would survive the day the compliance requirement expires.
Note what that implies. Entrants have existed for years and none of them has closed the distance, so the problem is not effort and it is not absence. It is approach.
It also explains why the sovereignty markup lands as an insult rather than a trade-off. Paying more is defensible when you get something for it. Paying more for less, and being asked to call it a principle, is not.
One developer summarised the bind: hard to make the regulatory gods (and the devs) happy at the same time.
Read the parenthesis. Compliance and engineering are treated as two separate constituencies, satisfied separately, and European infrastructure is widely assumed to be incapable of satisfying both at once. That is not an outsider's critique of the category. It is how the category's own buyers describe it to each other when no vendor is in the room.
The demand side has already moved
The appetite is not in doubt anymore, and it is no longer expressed in position papers. It is expressed in procurement.
Roughly six in ten Western European CIOs say they intend to increase their use of local cloud providers.
The legislative machinery has moved with it. The EU Cloud and AI Development Act, proposed on 3 June 2026 as the centerpiece of the Tech Sovereignty Package, would introduce four graduated assurance levels governing which providers can serve the public sector and critical infrastructure. On 25 June 2026 the Commission reached a preliminary position that the two largest cloud services in the EU should be designated as gatekeepers under the Digital Markets Act — the first time the law has been pointed at infrastructure rather than consumer platforms, on grounds of lock-in and switching costs.
And yet. European providers still only hold around 15% of their own regional market, a figure that has been flat since 2022 while the market itself grew roughly sixfold. The hyperscalers hold about 70%.
Sentiment moved. Spend didn't. Which tells you the constraint is not political will, and never was. The constraint is product.
Residency was never the argument
The reason data residency stopped being persuasive has a date on it.
On 10 June 2025, a hyperscaler's French legal director was asked before a Senate inquiry, under oath, whether he could guarantee that French citizens' data would never be transmitted to US authorities without French approval. His answer was "No, I cannot guarantee that", adding, that it had never happened so far.
Nothing had failed. The EU regions existed. The encryption existed. The EU-resident staff existed. The certifications were all in order. None of it was relevant to the question, because the question was about jurisdiction, and jurisdiction sits upstream of every control a provider can implement.
This is the distinction that matters, and it is worth stating plainly:
A certification describes how a provider behaves. Jurisdiction determines who can compel it to behave differently.
You can buy the first. It is a process, an audit, a renewable badge. You cannot buy the second. It is a fact about where a company is incorporated, who ultimately owns it, and which courts can reach its officers. No amount of architecture converts one into the other.
The interesting thing about the Cloud and AI Development Act is that it concedes exactly this. The lower assurance levels are satisfiable through localisation and process, which is why EU subsidiaries of foreign providers largely qualify. The higher levels turn on ownership, control, and demonstrated independence from third-country influence.
The sovereignty markup is the real risk
The objection, that you pay a premium for a worse product, is the one worth taking seriously, because it is the failure mode that would waste this entire moment.
If European infrastructure sells only because a regulation obliges someone to buy it, then it is a tax with a flag on it. Products built for that market get built for auditors. They win the tender and lose the developer, and the developer is the one who decides whether the contract gets renewed in three years. While procurement can create a floor, in addition to the high electricity prices, do European companies really need a second basic utility shooting up in price to the point where that creates negative pressure on their international competitiveness?
Europe built its own car industry. It did not do it by asking Europeans to buy worse cars for patriotic reasons. It did it by building cars people wanted, that happened to be built here. The cloud is overdue for the same thing.
Four questions worth asking instead
If you are deciding where compute should live, the useful questions are not about badges.
- Who owns the entity, and whose courts can compel it? Not where the servers are. Not where the support team sits. Ask in writing, and keep the answer.
- What happens to the workload if a jurisdiction changes its mind? Sanctions, export controls, and licence terms are faster to change than architecture is.
- Am I paying a premium for jurisdiction, or is jurisdiction a property of something that is better anyway? If the answer is the first one, the decision will be reversed by whoever inherits the budget.
- Could I leave? Egress economics and interoperability are the actual measure of independence. Everything else is a preference.
Where we sit
The reason to think a European entrant can compete is not that it will match hyperscaler capital expenditure. It won't; roughly €10 billion a quarter goes into European capex from the incumbents alone. Matching that is not a strategy.
The way through is product. European infrastructure has to win by making deployment feel simpler, cheaper to operate, and easier to trust — not by asking developers to accept a weaker experience for jurisdictional reasons.
That is where LILY comes into play: a European cloud platform designed around a smaller operational surface. The point is not to publish the machinery. The point is that a developer should be able to connect a repository, configure the application, and run it without owning the layers that usually sit between code and production. The jurisdiction is a fact about where we are incorporated and where the machines are. It is not the reason to use us.
The moment is real, and it is currently a demand-side moment. Whether "European cloud" ends up meaning a procurement category or a technical one is still open. Making the regulatory gods and the developers happy at the same time is not a law of nature. It is a product gap.
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Europe has no shortage of cloud providers. What it does not have is one an engineer would choose on merit, with the jurisdiction as a bonus rather than the justification.
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