Microsoft and Amazon expected to face EU digital competition scrutiny over cloud services

Microsoft Corporation (NASDAQ: MSFT) and Amazon.com, Inc. (NASDAQ: AMZN) are expected to face heightened European Union competition scrutiny of their cloud computing businesses, according to a report indicating that the European Commission is leaning toward bringing Amazon Web Services and Microsoft Azure under the bloc’s Digital Markets Act. The expectation stems from three market investigations the Commission opened in November 2025, two of which assess whether AWS and Azure should be designated as gatekeepers despite not meeting the DMA’s standard thresholds for size, user numbers, and market position, while a third examines whether the law is even fit to regulate cloud computing. Notably, Alphabet’s Google Cloud has reportedly avoided similar scrutiny owing to its less significant role in the European market. A gatekeeper designation would subject the two American hyperscalers to obligations around interoperability, customer switching, and fair data access, with non-compliance carrying potential fines of up to 10 percent of global annual turnover. The development matters because it signals that the world’s two dominant cloud providers are moving toward a new and uncharted regulatory regime in one of their most important markets, even if the practical impact will unfold slowly over several years.

Why are Microsoft and Amazon expected to face EU gatekeeper scrutiny over their cloud services?

The expectation reflects mounting regulatory consensus about cloud market concentration. Multiple competition authorities, including the United Kingdom’s regulators, have concluded that AWS and Azure hold significant market power and that features such as switching barriers limit competition, and the European Commission’s investigations build on that growing body of evidence. When several regulators reach similar conclusions, designation becomes more likely.

The competitive context is the sheer dominance of the hyperscalers. Together with Google Cloud, AWS and Azure account for roughly two-thirds of global cloud infrastructure spending, and their control over the infrastructure underpinning everything from banking to artificial intelligence has made Brussels view cloud as strategically critical to European competitiveness and sovereignty. Concentration at this scale invites regulatory attention almost inevitably.

The second-order driver is that cloud has been a conspicuous gap in DMA enforcement. Cloud computing is listed as a core platform service under the DMA, yet no cloud provider has been designated a gatekeeper because the hyperscalers’ enterprise-contract model makes it hard to count individual users, so the Commission is now using qualitative criteria to close that gap. The move corrects what regulators saw as an anomaly in the law’s application.

How could the Digital Markets Act apply to AWS and Microsoft Azure despite missing standard thresholds?

The mechanism is a qualitative designation provision. While AWS and Azure do not meet the DMA’s quantitative thresholds for size, user numbers, and market position, the law allows the Commission to designate a gatekeeper that nonetheless has a significant impact on the internal market, serves as an important gateway for business users, and holds an entrenched, durable position. This provision is the legal route around the threshold problem.

The competitive implication is that designation would add cloud to the list of services already regulated at both companies. Amazon is already a designated gatekeeper for its online marketplace and Microsoft for its operating system, so adding AWS and Azure would extend existing obligations into cloud computing, subjecting the providers to rules on self-preferencing, interoperability, and data access. The companies are familiar with the regime, but cloud is new territory within it.

The risk, and a key uncertainty, is that the DMA’s existing remedies may not fit cloud markets. The law’s predefined obligations were designed for consumer-facing services like app stores, not business-to-business cloud infrastructure, which is precisely why the Commission opened a third investigation into whether the DMA can effectively address cloud practices at all. Designation could therefore precede, rather than follow, the creation of cloud-specific rules, limiting its immediate effect.

What cloud practices like egress fees and licensing terms are driving the EU’s competition concerns?

Several specific practices have drawn regulatory scrutiny. Egress fees, the charges customers pay to move their data out of a cloud provider, have been flagged as a barrier that locks customers in, and reducing switching costs is a central concern for regulators seeking to make the market more contestable. High switching costs are the practical obstacle to competition that the DMA aims to address.

The competitive context centers heavily on Microsoft’s software licensing. Microsoft has faced particular criticism, including from rivals and cloud-competition advocates, over terms that effectively charge customers more for running its software in competing cloud environments, a practice critics argue entrenches Azure’s position. Licensing terms that disadvantage rival clouds are among the most-complained-about behaviors in the sector.

The risk for the providers is that interoperability and multi-cloud obligations could reshape their economics. If designated, the companies could be required to facilitate switching, guarantee interoperability with competitors, and ensure fair data access, measures that would lower the barriers that currently help retain customers. Such remedies target exactly the lock-in dynamics that support hyperscaler margins and market share.

Why did Google’s cloud business reportedly avoid the EU scrutiny facing Amazon and Microsoft?

Google Cloud’s smaller European footprint appears to be the reason. Reports indicate that Google avoided the gatekeeper scrutiny applied to AWS and Azure because of its less important role in the bloc’s cloud market, where it trails the two leaders, illustrating that the Commission is targeting the most dominant providers rather than the sector uniformly. Market position, not nationality alone, is shaping who faces scrutiny.

The competitive implication is nuanced for Google. Avoiding gatekeeper obligations in cloud is a near-term regulatory reprieve, but it also reflects Google Cloud’s weaker competitive standing in Europe relative to AWS and Azure, which is a mixed signal about the strength of its business there. Escaping regulation because you are smaller is not entirely a compliment.

The risk and irony is that regulation could reshape competitive dynamics in unexpected ways. If AWS and Azure face new switching and interoperability obligations while Google Cloud does not, the regulatory asymmetry could affect how the three compete for European customers, potentially creating openings for the unregulated provider. Regulation aimed at the leaders can inadvertently alter the competitive balance.

What should investors weigh on Microsoft and Amazon given the long timeline of EU cloud regulation?

For Microsoft and Amazon, the near-term financial impact is minimal. The market investigations are expected to conclude around November 2026, after which any designated company would have six months to comply, and cloud-specific remedies are unlikely to take effect before 2028, so the regulatory process is slow and the immediate effect on cloud revenue is negligible. This is a long-dated overhang, not an imminent threat.

The competitive context is that the scrutiny reflects the strategic importance of cloud to both companies and to Europe. AWS and Azure are central profit engines, and Europe is a major market, so even gradual regulation matters strategically, particularly as cloud becomes the foundation for AI deployment. The long-term direction is toward more constrained operating conditions in Europe.

For investors, the development is a manageable regulatory risk rather than a near-term catalyst. The potential for fines up to 10 percent of global turnover sounds severe, but applies only to non-compliance, and the likely remedies center on interoperability and switching rather than structural breakups or revenue caps, so the practical effect is more about operating constraints than immediate financials. The prudent stance is to treat EU cloud regulation as a slow-building strategic consideration for Microsoft and Amazon, weighing it alongside the broader trend of intensifying global scrutiny of the hyperscalers, while recognizing it is unlikely to move the stocks materially in the near term. This is general analysis rather than investment advice.

Key takeaways on what the EU cloud scrutiny means for Microsoft, Amazon, and the cloud computing industry

• Microsoft and Amazon are expected to face EU scrutiny of AWS and Azure under the Digital Markets Act, per a report on the probes’ likely direction.
• The expectation stems from three market investigations opened in November 2025, two assessing gatekeeper status and one assessing the DMA’s fitness for cloud.
• The Commission can designate gatekeepers using qualitative criteria even though AWS and Azure miss the DMA’s standard thresholds.
• Designation would add cloud to obligations already applied to Amazon’s marketplace and Microsoft’s operating system.
• Key concerns include egress fees, switching barriers, interoperability, and Microsoft’s restrictive software licensing terms.
• Google Cloud reportedly avoided scrutiny due to its less significant role in the European market, reflecting its weaker position there.
• The DMA’s existing remedies were designed for consumer services and may need adaptation to fit business-to-business cloud markets.
• The timeline is long, with investigations concluding around November 2026 and cloud-specific remedies unlikely before 2028.
• Non-compliance fines can reach 10 percent of global turnover, but likely remedies focus on switching and interoperability, not breakups.
• For both mega-caps, this is a slow-building strategic overhang rather than a near-term financial or stock catalyst.