OVHcloud public cloud growth hits 20% as AI investments ramp up

OVHcloud’s latest quarterly results show a mixed but improving picture, with its public cloud segment emerging as the primary growth driver. While overall revenue rose 6.9% year-on-year to €289.6 million, the company’s public cloud revenue surged 20.2%, outpacing slower growth in private cloud (4.0%) and web hosting (2.0%). The disparity underscores OVHcloud’s ongoing shift toward higher-value cloud services, even as legacy segments continue to weigh on margins.

The company’s focus on European sovereignty and AI appears to be resonating with enterprise buyers. A recent €180 million sovereign cloud contract with the European Commission, alongside planned acquisitions like voice AI specialist Gladia, signals OVHcloud’s intent to carve out a niche in regulated and compliance-sensitive markets. However, the path to scaling these initiatives remains challenging, particularly as hyperscalers dominate AI infrastructure and developer ecosystems.

Growth drivers and segment shifts

Public cloud now accounts for 22.7% of OVHcloud’s quarterly revenue, up from a smaller base but still dwarfed by private cloud (60.1%). The segment’s rebound follows strategic adjustments, including the launch of VPS 2027 offerings and expanded multi-availability-zone (AZ) deployments in Paris and Milan. These moves align with broader enterprise demand for regional cloud solutions, particularly in sectors like finance, defense, and public administration, where data residency and compliance are non-negotiable.

Corporate sales restructuring has also played a role. OVHcloud has reorganized its sales teams across six countries to better target large accounts, a shift reflected in its net revenue retention rate of 102%. While modest, this figure suggests existing customers are expanding their spend, offsetting churn in hosted private cloud—some of which is tied to Broadcom’s VMware pricing changes. The company’s new Premier 2027 servers for managed VMware vSphere are positioned as a migration alternative, though the long-term impact of this strategy remains unclear.

AI and sovereign cloud: differentiation or distraction?

OVHcloud’s AI ambitions are taking shape through acquisitions and product development. The pending Gladia deal would integrate speech-to-text capabilities into OVHcloud’s AI Lab, while the recently unveiled OVHai Workspace—a collaborative AI platform with end-to-end encryption—targets enterprise workflows. These initiatives mirror broader industry trends but face stiff competition from hyperscalers with deeper pockets and more mature AI tooling.

The company’s sovereign cloud credentials received a boost from the European Commission contract, though such framework agreements often translate slowly into commercial adoption. Sovereignty alone may not bridge the gap in service breadth, tooling, or support depth that separates OVHcloud from larger providers. For now, the company’s appeal hinges on its ability to combine compliance-focused infrastructure with competitive pricing—a balancing act that could strain margins as AI investments ramp up.

Financial discipline and regional dynamics

OVHcloud reaffirmed its fiscal 2026 guidance, including organic revenue growth of 5–7%, an adjusted EBITDA margin above 2025 levels, and positive levered free cash flow. The latter is critical for infrastructure providers, where capacity expansion and hardware costs can quickly erode profitability. The company’s adjusted capex target of 33–35% of revenue (excluding pre-financed stock) reflects this caution, though AI infrastructure demands could test these limits.

Geographically, France remains OVHcloud’s largest market (48% of revenue), but growth is accelerating elsewhere in Europe (7.4%) and internationally (8.6%). This diversification is essential for reducing reliance on its home market, though the company’s European identity—both a strength and a constraint—may limit its appeal in regions where hyperscalers dominate.

What to watch

The coming quarters will test OVHcloud’s ability to sustain public cloud momentum while integrating AI services and scaling corporate sales. Key risks include execution challenges in sovereign cloud deployments, margin pressure from AI infrastructure costs, and competition from both hyperscalers and smaller European providers. For enterprise buyers, the company’s value proposition remains tied to its ability to deliver compliant, regionally available cloud solutions without sacrificing performance or cost efficiency.