New research shows cloud infrastructure spend now averages nearly 10% of revenue, with 89% of CFOs reporting direct profit erosion and 97% implementing formal governance.
Cloud Capital today announced new research revealing that cloud infrastructure costs are now one of the biggest sources of financial volatility and margin compression amongst start-up SaaS and technology companies. In response, CFOs are tightening their grip on cloud governance and exerting new financial discipline over cloud decision-making.
The new report titled ‘The Cost of Compute: What 100 CFOs Reveal About Cloud Infrastructure’s Impact on the P&L’ captured detailed insights from a study of 100 CFOs and senior financial decision makers within SaaS and technology businesses of up to 1,000 employees across the US and UK, revealing a start-up sector under pressure:
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Cloud spend now averages 10% of revenue
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Nearly one quarter of CFOs report cloud costs consuming 13–20%+ of revenue
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It is the second highest cost for businesses, ranked just behind staff salaries
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AI and ML already account for 22% of total cloud spend
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89% say rising cloud costs have eroded company profitability
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97% have now formalised cloud governance policies
The research points to a structural shift in the last 12-18 months where cloud cost management has moved into the office of finance. Cloud is now the second-largest cost after headcount – typically 6% to 12% of revenue in SaaS businesses and as high as 30% to 40% in AI-native companies.1 And while engineering teams historically owned cloud optimization, the financial weight and unpredictability of cloud spend have driven CFOs to assume responsibility directly or to implement joint Finance–Engineering ownership models.
The research delved further into this and found that when Finance gets involved in cloud cost management, forecast predictability doubles: 32% of Finance-involved teams achieve highly predictable forecasts (less than 5% monthly variance) compared to 16% of Engineering-owned teams. COGS confidence increases 50%, and reported visibility improves 25%. Cloud Capital believes the gap is structural, not incidental.
Edward Barrow, CEO and Co-Founder at Cloud Capital, commented: “CFOs report month-to-month variability of 5–10% as standard. Right now, cloud’s unpredictability is disproportionate to its size and completely out of line with what CFOs expect from any other major expense. That’s the financial tension driving this shift toward tighter governance and Finance ownership.”
When asked about their focus for 2026, improving forecast accuracy (44%) tops the list of cloud cost priorities for CFOs and finance leaders at young, fast-growth technology companies, alongside increasing forecast accuracy (44%). However, when it comes to AI investments which now represent 22% of total cloud spend, finance leaders are taking a balanced approach. 72% say they would accept short-term cost increases for AI features that drive user growth, even if it temporarily compresses margin, signalling a willingness to trade near-term profitability for long-term competitive advantage.
Casey Woo, Co-Founder and CEO at Operators Guild, provided his analysis of the findings: “Cloud has moved into the top tier of operating costs. AI workloads already account for nearly a quarter of that spend. Forecast variance is hitting ranges that would be unthinkable for any other major cost center. And margin performance tracks directly with how well teams can see, model, and govern this spend.”
Edward Barrow continued: “Cloud infrastructure is now central to business performance but as costs rise so does the pressure on finance teams to predict, justify and optimise spend. The findings underline a maturity gap between cloud adoption and financial control. For CFOs, the next frontier is establishing agile, data-driven financial governance that can balance innovation with cost predictability.”
“We are addressing one of the digital economy’s most pressing inefficiencies: the mismanagement of cloud infrastructure, a $294 billion market. This challenge will only intensify as AI’s share of cloud spend continues scaling at pace.”
Other key takeaways include:
• 71% of businesses re-forecast cloud costs at least quarterly.
• 80% increased cloud spend in the past 12 months; 73% expect further increases.
• Only 26% of CFOs describe their cloud spend alignment with forecasts as ‘highly predictable’.
• 62% have fully implemented cloud governance policies.
• 92% of tech start-ups lack a dedicated FinOps function to manage cloud spend
