European startups and their investors are bracing for a hike in cloud computing costs that could hit growth ambitions and delay profitability, amid fears that US tariffs could force hyperscalers to ramp up prices.
US president Donald Trump sent markets around the world into meltdown earlier this month, after unveiling a sweeping package of import taxes on trading partners from around the world. While Trump eventually reduced most of the tariffs, it remains unclear if or when he will reinstate them.
The cloud computing industry is dominated by a handful of hyperscalers based in the US, such as AWS (Amazon Web Services), Microsoft Azure and Google Cloud. Should Trump’s tariffs start to hit their bottom lines — due to taxes on imported servers, equipment and components like semiconductors — some costs may be passed onto customers, founders and VCs tell Sifted.
“Tariffs are a genuine worry right now,” says Robert Marino, CEO of Qubit Pharmaceuticals, who warns his company’s operational costs might be impacted if cloud providers raise prices.
“These providers inevitably pass higher costs down the chain, resulting in more expensive cloud computing and data services,” he tells Sifted. “For startups running lean operations, absorbing these additional costs can directly constrain growth and competitiveness.”
While the loudest alarm bells sounded among hardware startups — which were more likely to be selling physical products into the US — after tariffs were announced earlier this month, there’s now growing concern among founders and VCs the region’s software companies will suffer too.
European tech’s vulnerability
A little over 70% of Europe’s cloud market is held by AWS, Microsoft Azure and Google Cloud, according to consultancy firm BDO.
“For industry giants like AWS, Microsoft Azure, and Google Cloud, tariffs increase operational costs significantly,” says David Linthicum, founder at US-based consultancy Linthicum Research, which advises companies on cloud computing.
“While these hyperscalers initially absorbed costs to retain market share, the prolonged trade pressures are now forcing them to re-evaluate their pricing models,” Linthicum tells Sifted.
Cloud infrastructure provider Ori Industries, a London-based company which sells access to AI compute, could be forced to increase its prices if tariffs push up its costs, according to founder and CEO Mahdi Yayha.
Ori rents space and power from 17 data centres around the world, fitting them with its own servers. If tariffs force Ori’s suppliers to raise prices, this could have a knock-on effect on the price of components, which are shipped from across the globe and used to build the physical servers its cloud platform runs on.
“If your cost goes up then you need to adjust price like any other service that might be affected by tariffs,” he tells Sifted.
French VC Revaia is advising companies to proactively review cloud cost structures, says Alice Albizzati, founding partner at Revaia.
“It’s about strengthening resilience ahead of time, for instance, by renegotiating cloud infrastructure pricing but also improving efficiency to reduce cloud usage and traffic.”
Several of Revaia’s portfolio companies are already speaking to tax and legal counsel to model tariff scenarios as they look to renegotiate deals with their cloud providers and reduce cloud consumption for the effect potential tariffs might have, she tells Sifted.
Some VCs are also concerned that there could be secondary effects from a broader rise in cloud computing costs and tariffs generally.
Christian Noske, a Berlin-based partner at deeptech VC NGP Capital, tells Sifted that he’s preparing for budget cuts at startups’ biggest customers.
“Given the potential massive impact of tariffs on the Fortune 1000, we believe budgets will be cut, delayed or price pressure will reduce annual contract value for startups,” says Noske.
He expects the data in Q2 to show longer sales cycles and lower contract value than Q1. All of his portfolio companies are worried about this impact, he tells Sifted.
For many startups, right now the word is one of uncertainty. While US president Donald Trump has temporarily backtracked on some more severe tariffs, there are fears that they could rise again and semiconductors — which have thus far remained exempt from import taxes — could be hit eventually.
“For hyperscaler-reliant businesses, especially software companies, the compression of gross margins could delay break-even, and force them to potentially pass on higher costs through up-pricing,” says Albizzati.
“Growth plans definitely need to be revised.”
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