Worldwide spending on cloud infrastructure totaled $102.6 billion in Q3 2025 — up 25% year over year and marking the fifth straight quarter of cloud-infrastructure growth in excess of 20%, according to Omdia. The wider cloud computing sector is now worth around $943 billion in total and is slated to pass the trillion-dollar mark at some point early next year.
There is something buried in that number worth paying attention to. The worldwide virtual private server market reached $5.2 million in 2025, from $2.6 billion in 2018. Mordor Intelligence estimates it will hit $10.66 billion by 2030, with a 15.5% CAGR. And unlike the headline-grabbing hyperscaler spending spree, VPS growth is being fueled by a very different buyer: small and medium-sized businesses (SMBs) aren’t suspending their disbelief anymore — they’re reaching for a calculator and realizing that they can in fact calculate what they spend on infrastructure.
SMBs Now Spend More Than Half Their Tech Budgets on Cloud
IDC’s mid-2025 analysis confirmed a milestone — SMBs are now allocating over 50% of their technology budgets to cloud services. Cloud spend among these businesses jumped 31% year-over-year through H1 2025. The public cloud currently hosts 63% of SMB workloads and 62% of SMB data.
Of course, that spending isn’t all going to AWS or Azure. Much of this is going straight to VPS hosting — the practical sweet spot between shared hosting and full cloud platform deployment. According to a 2025 Liquid Web study, 88% percent of hyper-growth companies experienced increase in speed, uptime and revenue after making the switch from shared hosting. 40% have migrated specifically to cloud VPS, and another 27% went with managed VPS.
The share of managed VPS is growing faster than the market as a whole — 16.5% CAGR for managed VPS compared to 11.9% for VPS overall. According to Mordor Intelligence, managed services represented 68.4% of VPS revenues with that shift driven as providers bundle in DDoS protection, automated backups and 24/7 monitoring into basic plans.
US Hyperscalers Will Spend $660–$690 Billion on Infrastructure in 2026
What’s happening in the United States is difficult to exaggerate. The five biggest cloud and AI providers in the United States — Amazon, Microsoft, Alphabet (the big tech holding company now housing Google’s wings as well as those of more exotic subsidiaries), Meta and Oracle — plan to invest $660 billion and $690 billion on capital expenditure in 2026. That’s nearly double 2025 levels. Capital intensity, measured in capex as a percent of revenue, is poised to be between 45 and 57 percent for all top four.
Three-quarters of that overall sum — approximately $450 billion — is being spent directly on AI infrastructure: servers, graphics processors, data centers and networking gear. AWS crossed an annualized revenue run rate of $142 billion in Q3 2025. Google Cloud’s backlog jumped 55% in one quarter to more than $240 billion. Just this week Amazon revealed a $23-billion data center expansion in Ohio and there is talk about the half-a-trillion-dollar Stargate Project that’s planned across multiple states.
Investment in tech equipment and software reached 4.4% of US GDP by 2025 — just about on par with the peak year for the dotcom bubble. Data center deals reached a record $61 billion in 2025, according to CNBC, and US data centers were estimated to be an 11 gigawatt capacity shortfall, according to Goldman Sachs.
This spending tsunami matters for VPS because it’s reshaping infrastructure economics at every level. When hyperscalers pour hundreds of billions into compute capacity, that investment eventually trickles down through the data center ecosystem — improving availability, reducing costs, and expanding the infrastructure that mid-tier hosting providers rely on.
Europe’s Sovereign Cloud Spending Will Triple by 2027
The European picture looks completely different from the US — and that difference is creating massive opportunities for regional hosting providers.
Gartner’s February 2026 projections show European sovereign cloud IaaS spending will more than triple from $6.7 billion in 2025 to $23.1 billion in 2027. That growth rate — roughly 83% in 2026 alone — outpaces both the US (29%) and China (26%). The worldwide sovereign cloud market is forecast to hit $80 billion in 2026, up 35.6% from the prior year.
The driver isn’t abstract policy. It’s concrete anxiety. American tech companies control more than 70% of Europe’s cloud infrastructure, and the US CLOUD Act allows authorities to compel data access regardless of where it’s physically stored. A Gartner analyst put it plainly: CIOs across Western Europe are asking whether they can still rely on US-based digital infrastructure. 61% of CIOs in Western Europe say geopolitical risks will restrict their use of global cloud providers.
The European Commission responded in October 2025 with a €180 million tender for sovereign cloud services — the first to directly implement the EU’s Cloud Sovereignty Framework, which scores providers across eight measurable sovereignty objectives covering data localization, legal jurisdiction, and supply chain transparency. France’s government is actively ditching American tools like Zoom and Microsoft Teams for homegrown alternatives. The European Data Act now requires data portability and residency guarantees.
European providers are capturing real market share from this shift. OVHcloud crossed €1 billion in annual revenue in FY 2025. Hetzner, Scaleway, and other regional players are seeing increased adoption as businesses choose VPS solutions from providers with in-country data center infrastructure. For companies operating under EU jurisdiction, the calculation has changed — hosting with a local provider isn’t just a cost decision anymore, it’s a compliance and sovereignty requirement.
55% of US Small Businesses Used AI in 2025 — Most Shared Hosting Can’t Handle It
AI is accelerating the migration from basic hosting to VPS in ways that weren’t visible even 18 months ago. A national US survey found 55% of small businesses used AI tools in 2025, up from 39% in 2024. The US Chamber of Commerce reported that 58% currently use generative AI, and 82% believe adopting AI is essential for staying competitive. SMBs are allocating an average of 17.4% of their IT budgets specifically to generative AI initiatives.
These AI workloads need compute resources that shared hosting simply cannot provide. GenAI-specific cloud services grew 140–180% in Q2 2025 according to Synergy Research Group. Running AI automation workflows, deploying chatbots, or processing AI-generated content requires dedicated CPU and RAM allocations — exactly what VPS provides.
The pattern is visible globally. In the EU, 41.2% of large enterprises used AI in 2024 versus 11.2% of small firms — but that gap is closing fast. OECD data from G7 countries shows AI adoption in core business functions reaching 6.1% in the US and climbing, with significant room for growth. As even small companies begin running AI tools operationally, shared hosting environments where resources are split across dozens of accounts become a bottleneck.
92% of surveyed organizations now run containers in production and 91% use Kubernetes. VPS providers have responded with container-ready environments and auto-scaling capabilities. For an SMB running an AI-powered customer service bot alongside their e-commerce platform, a $20-$50 monthly VPS plan delivers the isolated resources needed without the complexity of managing a full cloud deployment.
The CAPEX-to-OPEX Shift Saved Companies Up to 66% on Infrastructure Costs
The financial mechanics of this migration are straightforward. Industry data shows organizations can achieve up to 66% reduction in compute, storage, and networking costs when moving on-premise workloads to cloud infrastructure. Around 80% of companies that completed migration reported significant cost benefits.
Instead of sinking $15,000–$50,000 into server hardware that starts depreciating immediately, companies pay predictable monthly costs that scale with actual demand. That shift from capital expenditure to operational expenditure is particularly critical for startups — it can determine whether a product launches at all.
But it’s not just about direct costs. Cybersecurity spending alone forced 61% of SMBs to increase their security investment in 2025. Physical server maintenance, cooling, redundancy, fire protection, environmental monitoring — these layers add up in ways most companies don’t properly account for until the bills arrive. Deloitte’s analysis found organizations with mature cloud financial practices achieve 30–40% cost reduction, and an estimated $21 billion was saved by companies implementing FinOps tools in 2025 alone.
Cloud waste remains a real factor though. Flexera reports that waste averaged around 30% of cloud budgets, and 49% of organizations say costs came in higher than expected. VPS pricing inherently addresses this because monthly costs stay relatively flat unless a business deliberately scales. For companies that got burned by unpredictable consumption-based cloud bills, VPS sits at that sweet spot between scalability and cost control.
Data Center Spending Headed Toward $1 Trillion by 2030
The infrastructure buildout behind all of this is enormous. Data center equipment and infrastructure spending reached $290 billion in 2024, according to IoT Analytics, with the market projected to exceed $1 trillion annually by 2030. In the US alone, North American data center capacity is expected to increase eightfold — from 5.6 GW in 2024 to 44 GW by 2030.
Nvidia’s CEO called AI infrastructure the largest buildout in human history. Hyperscalers raised $108 billion in debt during 2025 to fund construction, with projections of $1.5 trillion in total debt issuance over the coming years. Amazon is building out Ohio. Microsoft is opening what it calls the world’s most powerful data center in Wisconsin. Elon Musk built a 100,000-GPU supercomputer inside a shuttered factory in 122 days.
This wave of construction directly benefits the VPS market. More data center capacity means more availability for mid-tier providers, better connectivity, improved redundancy, and ultimately lower costs for businesses renting virtual infrastructure. Asia-Pacific is the fastest-growing region for VPS at a projected 16.1% CAGR through 2030, driven by government digital-economy initiatives and data center investment in India, Indonesia, and Australia.
Meanwhile, the European cloud infrastructure market — which saw an average annual increase of 32% since 2017 — reached approximately €282 billion in 2024 for infrastructure services alone. European providers may not have the scale of US hyperscalers, but the sovereign cloud movement is channeling billions toward building capacity that specifically serves regional hosting needs.
Where This Goes in 2026
The VPS market is projected to roughly double by 2030. Several forces will shape the next 12–18 months specifically.
Zero-cost egress pricing — first rolled out by UpCloud in April 2025 — is spreading as a competitive differentiator against hyperscalers that still charge for outbound bandwidth. Managed services will capture an even larger revenue share as provider competition pushes more features into standard plans. Container-based VPS deployments expanded 2.9x between 2025 and 2029 projections, and hybrid VPS is expected to represent 42% of deployments by 2030.
Sovereign cloud regulations will keep pushing European businesses toward local providers. Forrester expects European tech spending to hit €1.5 trillion in 2026 for the first time, with cloud, AI, cybersecurity, and sovereignty as primary drivers. Gartner projects that 75% of enterprises outside the US will have digital sovereignty strategies by 2030.
For SMBs that are still running aging on-premise hardware or stretched shared hosting plans, the math only goes in one direction. The companies that switched early are reporting measurable improvements in uptime, performance, and operating costs. The ones still holding out are running the same calculations and reaching the same conclusion — just later.
Sources: Omdia Cloud Infrastructure Q3 2025, Gartner Sovereign Cloud IaaS Forecast Feb 2026, Mordor Intelligence VPS Market Report 2025, IDC SMB Cloud Spending H1 2025, Synergy Research Group Q3 2025, Liquid Web 2025 HGB Report, IoT Analytics Data Center Equipment Report 2025, CreditSights Hyperscaler Capex Estimates 2026, Flexera 2025 State of the Cloud, IMARC Group VPS Market Analysis, Deloitte FinOps Report 2025, US Chamber of Commerce SMB AI Report 2025, European Commission Cloud Sovereignty Framework Oct 2025, Forrester European Tech Spending Forecast 2026, OECD SME AI Adoption Report 2025
