Key Takeaways
- A new report by CloudLinux and WebPros says that hosting providers are making more money. That's right alongside rising energy, infra, and support costs.
- Smaller hosts may be at a disadvantage compared with the bigger players who can offset those extra costs.
- Throw in AI and security issues into the mix, and it's clear that today's hosting stack is getting even more complicated and expensive to keep up with.
Web hosting is truly in its own renaissance: It’s gone through the rebirth from being solely an infrastructure provider to an active web partner for anyone who needs a website.
It looks like it’s going well, too: 65% of providers reported revenue growth in 2025, with a third seeing growth between 6% and 20% or more, according to WebPros and CloudLinux’s 2026 Web Hosting Trends Report. Average revenue per user (ARPU) is also climbing, especially as VPS, dedicated, and managed services become more popular.
That’s not as surprising as it seems, CloudLinux’s CEO, Igor Seletskiy, told HostingAdvice.
“Those handling it well are doing the same things: introducing new services to their customers, automating security, and continuously improving website performance to keep customers loyal,” he said. “It’s that simple — and it work.”
For example, IONOS’s adjusted EBITDA margin (a company’s core operating profitability) went up to 29% in 2024, up from 27.4% in 2023. Basically, more of each dollar went to profit rather than operating costs.
And GoDaddy‘s doing well too. The company reported its operating income was up to 26% in 2025. When you look at where all of the money is going, 36% goes to delivering the service itself, 17% goes into technology and development, and 6% goes toward customer care. Just like IONOS, a percentage of its revenue becomes operating profit.
The market is obviously on an upswing, and providers have probably never felt more indispensable. But that may be exactly where the problems begin, especially for the smaller players.
“This year’s data makes one thing clear: hosting providers are operating in a far more disciplined and competitive environment,” said Craig Millman, Chief Commercial Officer at WebPros. “Those outperforming are expanding services, strengthening customer relationships, and investing in automation, performance, and security – with AI increasingly playing a practical role behind the scenes.”
“At WebPros, we see this shift firsthand across our global partner ecosystem,” Millman added. “Our focus remains on delivering the platforms and integrations that help providers scale profitably, simplify operations, and compete with confidence.”
The Margin Squeeze Is Really Real
More than half of providers in WebPros and CloudLinux’s survey said pricing wars (29%) or rising costs (28%) are their biggest profitability threats.
It’s not just a competition between who offers the lowest entry rates, but how much it actually costs to continue supporting a mass wave of customers who want very specific setups.
It doesn’t help that data centers — the very things that house customers’ servers — are major energy-suckers. According to Pew, U.S. data centers used more than 4% of total U.S. power consumption, and projections show that figure could reach 426 TWh by 2030. That’s a 133% increase in six years.
Uptime Institute’s 2025 spending outlook also found 72% of operators expect to spend more on power, and another 42% say power is the biggest unit-cost increase over the past year.
It’s not great news, but at least large providers can offset their costs via bulk server buying and PPA energy contracts. Not to mention that utilization is much better because of the larger customer base.
Think about it: If a provider has 1,000 customers and five leave, that’s a 0.5% hit. The servers are still mostly full. If a smaller provider has 100 customers and five leave, that’s 5% of its revenue gone. So one could definitely argue that revenue is a different story for the smaller hosts.
Are they — the smaller, private ones — able to scale efficiently without it costing an arm and a leg? Or are they just taking on the extra costs while hoping to keep their customers happy?
Some are taking on those extra costs. And it’s partly because commoditization is very real in the web hosting market right now.
Nearly 30% of providers admit they fear low-cost providers, 17% fear SaaS builders like Wix and Shopify, and 15% fear hyperscaler cloud competitions. All of them are cheaper and offer the solutions some people are looking for at first glance.
It’s those folks — the SaaSers, the hyperscalers, the cheap hosts — that people are fearing. They’re the ones able to sell on price first, and product second.
Because industry experts have told us time and time again that customers aren’t buying hardware or servers. They’re buying one thing:
“People stopped chasing AI features and started looking for hosting that helps them ship something real,” Saulius Lazaravičius, Hostinger’s VP of product, previously told HostingAdvice. “Value became less about novelty itself and more about outcomes: performance, cost efficiency, smart integrations, and tools that actually support the way they work.”
Meanwhile, providers still have to maintain the actual infrastructure that supports all of it.
It’s also a bit of a paradox. While hosting is more sophisticated than ever, the end user has no idea what’s actually going on behind the scenes. Their perception of value versus cost is skewed automatically.
There Are Elephants in the Room
In the survey, 26% of respondents said that VPS and dedicated hosting are the biggest opportunities. Another 28% say that high-performance managed WordPress demand will be a major point of growth in 2026. And 22% expect specialized eCommerce hosting to follow suit.
This makes sense considering the major jump in the managed services segment over the past year. It would also explain why managed VPS and dedicated segments have been skyrocketing in the market as well.
But the math is also simple: More WordPress/VPS/dedicated/managed customers mean more servers, and more servers mean more APIs, plugins, integrations, and security endpoints.
It’s actually hitting email pretty hard: Providers say email issues (42%), CMS and app problems (39%), performance (35%), and security (35%) consume the most ticket volume.
Gmail, Microsoft, and the broader spam-detection ecosystem have raised the bar to near-enterprise standards for everyone. Because what was once upon a time “I want an email address with my website” is now an entirely separate stack of considerations, including MFAs, bots, phishing and blacklist monitoring.
It’s not just email though. It’s the elephant in the room.
AI is why 53% say outdated or vulnerable software is a top risk when expanding the footprint in the security aspect. It’s the same percentage that says AI-driven automation will have the biggest impact in 2026.
These aren’t concerns because providers don’t know email, or because hosts can’t run servers on CMSes, or because infrastructure is weak. It’s because there are new email cybersecurity expectations; because customers use outdated plugins that constantly expose issues; because the attack surface has multiplied thanks to AI and the tool sprawl that comes with it.
While hosting providers may be more profitable than ever, it’s clear they’re also carrying more responsibility, more technical debt risk, and more operational load than at any point in the industry’s history.
Tim Timrawi, CEO of Sharktech, told us that smaller providers are waking up to the realization that hyperscalers basically own the systems their customers depend on, and it’s not an easy thing for the mid-to-small sized hosts to cope with.
“We desperately need collaboration,” he said. “We need to create a place where we can sit, talk about our problems, talk about what we see as a problem and a solution — and be able to work together.”
