The UK's Competition and Markets Authority (CMA) has ended its cloud services market investigation, with the conclusion that "competition is not working well."

After just under two years of consideration, the regulator has concluded three key areas inhibiting competition in the UK's cloud computing sector: market concentration, with Amazon Web Services (AWS) and Microsoft taking the lion's share (each with between 30 and 40 percent); technical and commercial barriers including egress fees, high capex requirements and incompatibility of clouds; and Microsoft's software licensing practices, which the CMA says impact Google and AWS' ability to compete.

Following on from the CMA's provisional findings in January of this year, the government department has decided to move ahead with plans for further investigation into AWS and Microsoft to determine if they hold "strategic market status" (SMS).

The summary report added: "This [SMS designation] would enable the CMA to impose targeted and bespoke interventions to address the concerns we have identified, including with respect to features where there are specification risks around the design of effective market interventions," noting that "Measures aimed at Microsoft and AWS would address market-wide concerns by directly benefiting most UK customers and producing wider indirect effects by altering the competitive conditions for other providers."

The CMA said it will keep "under review" possible other SMS designation investigations, and will discuss these further in early 2026.

This ruling remains somewhat vague, with no clear plan for reform laid out.

In a recent academic whitepaper by Professor Peter Whelan of the University of Leeds, Whelan writes of the idea of SMS investigation that, effectively, "the CMA will recommend that remedial action should be taken later under a different legal regime entirely (provided that the conditions underpinning action in that regime are met)."

He later adds: "Such an approach inherently suffers from three crucial drawbacks. These drawbacks relate to the long timescale at issue, uncertainty about the nature of the final remedy under the DMCCA, and the conducting of untested, complicated legal processes that presumably will be heavily contested by Microsoft."

The summary report dedicates an entire section to Microsoft's software licensing, noting that the company does not make certain products available to Google and AWS, and "these restrictions mean that AWS’ and Google’s competitive offerings are directly affected by Microsoft’s licensing practices."

The CMA added that certain software products are used "disproportionately on Azure" and that "given the very large difference, this is at least partly because some customers’ choice of cloud is influenced by Microsoft’s licensing practices."

Under technical and commercial barriers, the CMA maintained that egress fees are indeed a deterrent from moving cloud providers, and that the large cloud providers are benefiting from their broad offerings of products, ability to price lower due to economies of scale, and ability to overcome barriers to entry such as high capex investments.

In total, the investigation found that less than one percent of customers move cloud providers yearly.

Notably, the CMA found that cloud credits were not harming competition, nor were committed spend agreements. Regarding those agreements, the CMA said: "Providers can profitably compete against these and, accordingly, in their current form and application, they do not harm competition in cloud services markets."

A key issue throughout the investigation has been the UK government and public sector's dependence on US hyperscalers - notably AWS and Microsoft, which the CMA said is "consistent with their overall position in cloud services markets."

The report stated that: "Public sector procurement policy aims to maintain competition from public sector customers, including by requiring competitive tendering of contracts, and greater competition in cloud services would create greater choice for public sector customers. We suggest that the UK government should continue to monitor the outcomes of public procurement of cloud services and drive best practice in the application of procurement frameworks."

On the subject of AI - an issue that has become more important since the CMA's investigation kicked off - the CMA noted that while Microsoft, AWS, and Google are all strong "vertically integrated providers," it does not think AI offerings are currently skewing the market.

"Whilst AI-related cloud services are likely to be an increasingly important part of the offer from cloud service providers, current evidence from customers and providers suggests that AI is yet to materially alter the competitive dynamics in cloud services," the CMA wrote.

Revenue from AI, the report noted, is growing but “still a relatively small part of their businesses.”

Industry response to the findings has been mixed. Understandably, as both AWS and Microsoft have been placed under further scrutiny, the companies have expressed disappointment with the outcome.

A Microsoft spokesperson said of the result: “The CMA Panel’s most recent publication misses the mark again, ignoring that the cloud market has never been so dynamic and competitive, with record investment, and rapid, AI-driven changes. Its recommendations fail to cover Google, one of the fastest-growing cloud market participants. Microsoft looks forward to working with the Digital Markets Unit toward an outcome that more accurately reflects the current competition in cloud that benefits UK customers.”

AWS, echoed much of this, adding: "The Inquiry Group’s final report disregards clear evidence of robust competition in the UK’s IT services industry, which cloud computing has revolutionised by dramatically reducing costs and expanding customer choice and flexibility.

"The action proposed by the Inquiry Group is unwarranted and undermines the substantial investment and innovation that have already benefited hundreds of thousands of UK businesses. It risks making the UK a global outlier at a time when businesses need regulatory predictability for the UK to maintain international competitiveness. We will continue to engage constructively with the CMA as they consider their next steps.”

Google, meanwhile, has been positive about the findings, with Chris Lindsay, VP of customer engineering EMEA, at Google Cloud describing the report as a "watershed moment."

Unsurprisingly, others feel that the conclusion does not go far enough. Civo CEO Mark Boost said of the latest report: “This feels like a repeat of the provisional decision, but only with softer edges. The CMA has identified the same issues but failed to follow through with the urgency that the market needs," later describing it as "a gesture, not a reset."

Wasabi VP and GM of EMEA, Kevin Dunn, added: "While the CMA recommends a new probe in the future, customers need more support from cloud providers today to help manage their spend - 51 percent of UK companies told us they have exceeded their budget in the last year. Wasabi will continue to enable our customers to freely access their information without hidden costs or data mobility constraints.”

The CMA is set to publish the full findings later today. DCD will update this story as more information becomes available.