The European Union is preparing a significant escalation in its drive for technological independence, with officials considering new rules that could restrict governments across the bloc from using American cloud providers to process sensitive public-sector data.

The discussions, now taking place inside the European Commission ahead of a major “Tech Sovereignty Package” expected later this month, mark one of the clearest signs yet that Europe is moving to reduce its dependence on U.S. technology infrastructure amid worsening geopolitical and economic tensions with Washington.

According to officials familiar with the talks, cited by CNBC, the proposed measures would not completely ban U.S. cloud companies from operating in Europe’s public sector. However, they could sharply limit the ability of American providers such as Amazon Web Services, Microsoft, and Google Cloud to host or process highly sensitive government information in sectors including finance, healthcare, and judicial systems.

“The core idea is defining sectors that have to be hosted on European cloud capacity,” one European Commission official told CNBC.

The move pinpoints growing alarm in Europe over what policymakers increasingly see as a vulnerability: the bloc’s overwhelming dependence on U.S. technology firms for critical digital infrastructure.

For years, American hyperscalers have dominated Europe’s cloud market, providing the backbone for everything from government databases and hospital systems to banking operations and enterprise computing. But that dependence has become politically sensitive as relations between Brussels and the administration of Donald Trump have deteriorated over trade disputes, industrial policy, defense spending, and technology regulation.

European officials have also become increasingly concerned about the implications of the U.S. CLOUD Act, a 2018 law that allows American law enforcement authorities to request data from U.S.-based companies regardless of where the information is physically stored. That legislation has fueled fears within Europe that sensitive public-sector information hosted on American platforms could ultimately fall under U.S. legal jurisdiction.

As a result, digital sovereignty has rapidly evolved from a niche policy issue into a central strategic priority for the European Union.

The upcoming “Tech Sovereignty Package,” expected to be unveiled on May 27, is designed to strengthen Europe’s autonomy in key technological sectors, particularly cloud infrastructure, semiconductors, and artificial intelligence.

The package is expected to include the Cloud and AI Development Act and Chips Act 2.0, both aimed at encouraging the growth of European-controlled alternatives to dominant U.S. and Asian technology providers.

One Commission official said the current discussions focus specifically on public-sector workloads rather than private companies. Still, the proposals could fundamentally reshape the cloud computing landscape across Europe because government contracts are among the most valuable and strategically important parts of the market.

Under the proposals being discussed, governments and public institutions handling highly sensitive information could be required to use sovereign European cloud infrastructure or platforms operating under stricter European oversight.

“U.S. cloud providers could face restrictions in certain sensitive and strategic sectors,” one official said.

The discussions underscore how Europe is increasingly viewing technology infrastructure through the lens of national security and geopolitical resilience rather than simply efficiency or cost. That shift has accelerated dramatically since the outbreak of multiple global crises in recent years, including the pandemic, semiconductor shortages, the war in Ukraine, and escalating tensions between the United States and China.

European policymakers now worry that dependence on foreign-controlled technology systems could leave the bloc exposed during future geopolitical confrontations or economic disputes. The Commission itself acknowledged earlier this year that Europe faces a “significant problem of dependence on non-EU countries in the digital sphere,” warning such reliance could create vulnerabilities in critical sectors.

The latest cloud sovereignty discussions also reflect broader concerns that Europe risks falling permanently behind the United States and China in the global technology race. American firms currently dominate cloud infrastructure globally, with Amazon Web Services, Microsoft Azure, and Google Cloud controlling the overwhelming majority of the European cloud market.

European alternatives remain comparatively small and fragmented, though governments across the bloc are increasingly trying to change that. France has emerged as one of the strongest advocates of technological sovereignty. Earlier this year, Paris announced plans to deploy a government-developed video conferencing platform called Visio across state institutions by 2027, replacing services such as Microsoft Teams and Zoom in many official settings.

The European Commission has also begun directly funding sovereign cloud projects. In April, Brussels awarded a €180 million tender to four European cloud initiatives intended to supply infrastructure for EU institutions and agencies. One of the projects includes a partnership involving French defense and aerospace company Thales and Google Cloud, illustrating the complex balancing act Europe faces between reducing dependence on U.S. firms while still leveraging their technology.

The cloud sovereignty push could carry major implications for global technology competition. For American cloud giants, Europe represents one of the world’s most important markets. Any restrictions on handling government data could create both financial and reputational challenges, while also encouraging other regions to pursue similar digital sovereignty strategies.

The proposals also arrive at a moment when cloud infrastructure is becoming even more strategically important because of the explosive rise of artificial intelligence. AI systems require enormous amounts of computing power, storage, and data processing, making control over cloud infrastructure increasingly central to economic competitiveness and national security.

The EU’s strategy appears aimed not only at reducing foreign dependence, but also at ensuring Europe retains greater control over the infrastructure underpinning the next generation of AI-driven economies.

A European Commission spokesperson described the broader package as “about Europe waking up and getting its act together.” The spokesperson added that the initiative would “improve opportunities for sovereign cloud offerings” and support “a more diverse set of cloud and AI service providers.”

However, the proposals face political and practical hurdles. This is because any final measures would require approval from all 27 EU member states, many of which maintain deep technological and commercial ties with U.S. companies. It is also believed that limiting access to American cloud platforms could increase costs, reduce efficiency, and slow innovation for European public institutions.

Peloton delivered a modest but symbolically important quarter on Thursday as the connected fitness company returned to profitability, beat Wall Street revenue expectations, and signaled that its long-running turnaround effort may finally be gaining traction after years of declining demand and financial pressure.

The company reported fiscal third-quarter revenue of $630.9 million for the period ended March 31, ahead of analysts’ expectations of $617.6 million, according to LSEG data. Earnings per share came in at 6 cents, slightly below forecasts of 7 cents.

Peloton posted net income of $26.4 million, or 6 cents per share, a sharp reversal from the $47.7 million loss recorded during the same period a year earlier.

The results underscored a gradual stabilization at a company that became one of the biggest corporate winners of the pandemic-era stay-at-home boom before suffering a painful collapse as gyms reopened, demand weakened, and consumers pulled back discretionary spending amid inflation and higher interest rates.

“The first order of business in earnings is reporting how you did financially, and we feel like that was a pretty good quarter in terms of where we are strategically,” CEO Peter Stern told CNBC.

The latest quarter suggests Peloton’s strategy is increasingly shifting away from relying solely on hardware sales toward building a broader recurring-revenue ecosystem centered on subscriptions, partnerships, and digital fitness services.

While equipment demand remains under pressure compared to the company’s pandemic peak, Peloton said growth in equipment sales and subscription revenue helped improve profitability and cash generation.

Free cash flow jumped nearly 60%, an important metric for investors closely monitoring whether Peloton can sustain its recovery without returning to aggressive borrowing or restructuring. For the full fiscal year, Peloton raised the lower end of its revenue forecast, projecting annual sales between $2.42 billion and $2.44 billion.

The company’s subscription business once again emerged as the financial backbone of the business. Subscription revenue rose 2% year over year to $428 million and exceeded analyst estimates, while connected fitness subscription revenue reached $202.9 million, also ahead of expectations.

However, beneath the stronger financial performance, Peloton continues to face structural challenges. Its paid connected fitness subscriber base fell to 2.66 million from the prior year, signaling that while existing members remain engaged, the company is still struggling to meaningfully expand its core user base in a more competitive and economically pressured environment.

That decline highlights a central issue facing Peloton’s long-term growth ambitions: how to evolve from a pandemic phenomenon into a sustainable global fitness platform. The company has spent the past two years attempting to reinvent itself through cost reductions, leadership changes, pricing adjustments, and strategic partnerships aimed at broadening its reach beyond high-end home exercise equipment.

One of the most notable moves came last month when Peloton partnered with Spotify to make more than 1,400 fitness classes available to Spotify Premium subscribers. The agreement gives Peloton access to significantly wider international audiences while potentially introducing its fitness content to users who may never purchase Peloton hardware.

Stern indicated the partnership had already been incorporated into the company’s guidance because negotiations had been underway for an extended period.

“We’re really excited about our deal with Spotify, that allows us to reach Peloton members in a lot more countries and is also a high margin revenue for us,” Stern said.

Importantly, Spotify users accessing Peloton content are not counted as Peloton subscribers, meaning the partnership could eventually become an additional monetization layer without artificially inflating subscriber metrics.

The strategy is seen as part of a broader shift underway across the fitness industry, where companies increasingly view digital content distribution and subscription ecosystems as more stable revenue streams than hardware sales alone.

Peloton is also attempting to diversify its customer base beyond home users. In March, the company launched new Bike and Tread products designed specifically for commercial gyms and high-traffic fitness centers, marking an effort to expand deeper into institutional fitness markets.

That push could help Peloton capture additional recurring revenue from hotels, corporate wellness programs, and fitness chains at a time when consumer spending remains uneven. The company has simultaneously leaned on pricing changes to improve margins, even as consumers face mounting economic pressure.

Peloton recently raised prices on both its equipment and subscription plans, a move Stern defended as necessary after years of keeping pricing largely unchanged while expanding the platform’s content offerings.

“We’re really sensitive to the fact that people feel stress in this economic environment, and it’s impacting different people in really different ways,” Stern said.

“That being said, we feel like the price changes that we made in Q2 – it was time. We had added a tremendous amount of value over the succeeding three or four years since we previously made any change in our subscription prices.”

The company’s ability to raise prices without triggering a sharper subscriber decline may indicate Peloton still retains strong brand loyalty among its core users, even after years of operational turbulence.

Still, the road ahead remains complicated.

Peloton continues operating in a consumer environment shaped by elevated borrowing costs, inflationary pressure, and shifting exercise habits as more people return to gyms and outdoor activities. The company also faces growing competition from traditional fitness brands, streaming platforms, and technology companies entering the digital wellness space.

At the same time, investors increasingly want evidence that Peloton can evolve into a scalable subscription-driven business rather than remain dependent on cyclical hardware demand. The company’s latest results suggest progress toward that transformation, but the decline in connected fitness subscribers shows the turnaround is still incomplete.

Peloton’s recovery effort is now being closely watched across corporate America because it represents a broader test of whether pandemic-era digital consumer brands can reinvent themselves after the extraordinary conditions that fueled their initial growth disappeared.

For now, Wall Street appears cautiously encouraged that Peloton is at least moving back toward financial stability after several turbulent years marked by layoffs, executive shakeups, inventory problems, and collapsing demand. The challenge ahead will be proving that the company’s improving profitability can translate into durable long-term growth.