AWS and SAP Join Forces: Europe Bets €7.8B on Cloud Independence
Amazon Web Services and SAP have struck a deal that could reshape the future of Europe’s cloud market. At the heart of this alliance is one clear goal—help Europe claim digital independence in a world where data often falls under foreign jurisdiction.
The plan is ambitious. AWS will build a European Sovereign Cloud with a €7.8 billion investment stretching to 2040. SAP will plug in its sovereign cloud tools, giving businesses access to its most trusted software on infrastructure that meets Europe’s strict sovereignty rules. The first site, set to open in Brandenburg, Germany by late 2025, will act as the launchpad.
Regulation Forces the Issue
This partnership didn’t appear out of thin air. Europe’s regulators have steadily turned up the heat. The GDPR, Schrems II rulings, and the upcoming NIS2 framework have rewritten the rulebook for data management. Traditional cloud offerings, with servers scattered across borders, often can’t pass the test.
For banks, hospitals, and government agencies, the stakes are high. They want modern cloud tools, but they can’t risk violating data residency laws. Add in fears about U.S. extraterritorial access laws like the CLOUD Act, and the tension only grows.
As one industry analyst put it, “The real test isn’t the announcement—it’s whether courts and regulators accept this as truly shielded from foreign claims.” That’s exactly the gap AWS and SAP are trying to close.
What’s Different This Time
Plenty of “sovereign cloud” projects have come before, but many fell short, offering watered-down versions of real services. This one promises to be different.
AWS says its European Sovereign Cloud will operate with EU-based staff in sensitive roles, run on EU-only governance structures, and avoid outside dependencies. From day one, SAP’s Business Technology Platform and Cloud ERP will be available. That means European customers won’t just get basic storage and compute—they’ll get enterprise-ready applications running on sovereign infrastructure.
The Brandenburg hub is just the start. Over time, AWS says the sovereign region will match the capabilities of its standard EU regions, only wrapped in a sovereignty-first framework.
Why This Matters for SAP and AWS
For SAP, this removes a key roadblock. Its RISE initiative and S/4HANA cloud migration push have met resistance in Europe, where many customers didn’t want to move sensitive workloads into non-sovereign clouds. Now, those conversations get easier.
For AWS, the move is about staying competitive. Microsoft and Google have already introduced EU-specific governance models. Without a credible sovereign offering, AWS risked being locked out of government contracts and highly regulated industries.
The €7.8 billion commitment also plays well politically. It promises jobs, technology transfer, and a signal that American tech giants are willing to invest directly in Europe rather than just extract value from it.
Winners, Losers, and Grey Areas
Public agencies and regulated industries stand to gain the most. They’ll finally get access to advanced cloud services that tick sovereignty boxes. But there’s a catch—until the first region goes live in late 2025, customers will still need complex hybrid setups.
Policymakers may cheer the project for raising sovereignty standards across the market, forcing competitors to follow. Still, critics worry that outsourcing sovereignty to American hyperscalers—no matter how many EU staff or governance structures they use—could undercut the EU’s goal of building its own cloud champions.
And let’s be honest: legal questions don’t vanish overnight. Laws like the CLOUD Act will only be truly tested when someone challenges them in court.
The Investment Reality
Markets love bold numbers, and €7.8 billion is certainly eye-catching. But analysts urge patience. The first region won’t be live until the end of 2025, and significant workloads may not migrate until 2026 or later.
Procurement cycles in the public sector are notoriously slow—sometimes two years or more. Real demand won’t be proven by letters of intent but by signed contracts with hard commitments.
There’s also the pricing angle. Sovereign clouds cost more to run because of EU-only operations and extra governance layers. That means higher prices for customers and tighter margins for providers. Historically, sovereign offerings see slower adoption compared to mainstream services.
Challenges on the Ground
Execution will make or break this project. Will AWS launch with a full portfolio of services, or will customers face gaps compared to its standard EU regions? Will SAP’s Business Technology Platform deliver the same features without performance trade-offs? Any hiccups here could slow adoption.
Another challenge is avoiding isolation. Without a strong partner ecosystem—think analytics, AI, and industry-specific tools—the sovereign cloud risks becoming a silo rather than a thriving platform.
What Comes Next
Several watch points stand out. The EU’s upcoming Cybersecurity Certification Scheme will decide whether sovereign hyperscaler models can handle Europe’s most sensitive workloads. Early customer deals across different industries will signal whether demand is broad or concentrated in just a few big contracts.
And of course, execution will be under the microscope. Investors and customers alike should focus on tangible milestones—contracts, deployments, and feature parity—not just big announcements.
The AWS-SAP partnership is a bold bet on Europe’s digital sovereignty. But turning that bet into lasting change will take more than headlines. It will require years of careful execution, customer trust, and regulatory acceptance.
And in today’s climate, where infrastructure and AI investments grow larger by the quarter on the headlines and tech giants often fuel an endless cycle of PR hype without matching, verifiable transactions, investors have every reason to stay sharp.
House Investment Thesis
| Aspect | Summary of Key Points |
|---|---|
| Overall Assessment | Strategically significant, but warrants extreme caution due to hype, long revenue timeline, and policy risks. Cash conversion is slow and dependent on execution. |
| Context / Why Caution is Warranted | Proximity to "circular-financing" hype (e.g., Nvidia funding OpenAI, which uses Oracle cloud). This can inflate near-term demand optics without proving durable, end-customer demand. |
| Real vs. "Story" Risk | Real: AWS has a documented €7.8B EU buildout through 2040, with the first sovereign region (Brandenburg) targeted for end-2025. SAP will offer BTP and Cloud ERP there. Story Risk: Assumptions of full AWS service parity on day one and immediate, broad SAP acceleration. Reality will likely involve a phased service catalog and slower adoption. |
| Key Risks / Red Flags | 1. Backlog Quality: Scrutinize signed, funded deals vs. letters of intent; beware vendor-financed demand. 2. Revenue Timing: First region live end-2025; revenue impact delayed by migration/procurement cycles (12-24 months). 3. Policy Risk: EU sovereignty rules (EUCS) and CLOUD Act concerns could still change, impacting which providers can win sensitive workloads. 4. Margins: Sovereign controls cost more; watch for margin impact. 5. Partner Ecosystem: A thin partner ecosystem at launch will slow adoption. |
| Scenarios | Bull (2026+): On-time launch, broad services, favorable policy, accelerating SAP RISE wins. Base: On-time launch but phased services; steady, meaningful revenue by 2H-2026. Bear: Policy/certification hurdles, lingering service gaps, muted customer adoption. |
| Investment Positioning (Not Advice) | Fade near-term "instant TAM" hype. Treat 2025 news as option value for 2026-27 revenue. Demand proof points: signed contracts, detailed service catalog at launch, and evidence of broad, multi-tenant demand (not just a few mega-deals). |
NOT INVESTMENT ADVICE