More Revenue. Less Profit. What iomart’s FY2026 Reveals About Mid-Market Hosting.

A year ago, iomart Group rebranded its cloud services division, replaced its CEO, and completed a £57 million acquisition it called the cornerstone of a new strategy. By February 2026 it had issued a profit warning, guiding that full-year adjusted EBITDA would fall below analyst expectations and that the company was on course for an adjusted loss before tax. At the halfway point of FY2026, net debt had reached £109.6 million, with February guidance pointing to a year-end figure of £98–107 million. The revolving credit facility that carries this debt must be refinanced or repaid by June 30, 2027. The share price has fallen sharply over the past twelve months, leaving a company that generated £143.5 million in annual revenue in FY2025 trading at a fraction of that figure.

iomart is a publicly listed, Glasgow-based managed hosting and cloud services provider, and one of the larger mid-market operators in the UK. Its situation is not unique. It is, however, unusually well-documented, because AIM listing requirements force a transparency that private operators avoid. What the numbers show is a problem the entire mid-market hosting sector is navigating: a product base built on managed infrastructure is losing customers to hyperscalers faster than new services can replace the revenue. The split between what is growing and what is not explains both iomart’s results and the trajectory of the wider market.

What Is Growing Across the Sector, and What Is Being Abandoned

The product trends across mid-market hosting and managed services providers in 2025–2026 show a clear and consistent divide.

Growing:

• Microsoft cloud partner services: Azure, Microsoft 365, Copilot, and Microsoft security products. Within iomart, the Atech segment grew 16% in H1 FY2026. Microsoft-connected services now represent approximately 30% of iomart’s group revenue, up from 7% in H1 FY2024. For operators with high-tier Microsoft certifications (Advanced Specializations, Solutions Partner designations) this is currently the most reliable source of new contract wins in the sector.
• Managed cybersecurity: M&A activity across the MSP sector in 2025 was heavily concentrated in managed security. Private equity has been the dominant acquirer in this space, attracted by the recurring revenue profile and the structural difficulty enterprises face in building security operations capability in-house.
• AI infrastructure and bare metal: AI workloads increasingly run directly on bare metal hardware rather than virtualised environments, because GPU utilisation is significantly higher without the overhead of a hypervisor layer. Providers with physical infrastructure able to offer GPU-enabled dedicated servers are seeing demand they were not previously positioned to capture.
• European sovereign cloud: US tariff uncertainty and European data sovereignty requirements are prompting enterprises to diversify away from US-headquartered cloud providers. OVHcloud is explicitly targeting a “Defence Vertical.” Regional providers including Hetzner and Scaleway are gaining enterprise customers who would previously have defaulted to AWS or Azure.

Declining:

• Self-managed infrastructure: Customers managing their own virtual machines on a provider’s hardware are migrating either to fully managed services or to public cloud. This is the product iomart explicitly identifies as the primary driver of its customer churn.
• Legacy private cloud managed services: The category where hyperscaler pricing is most directly felt. An enterprise that previously ran workloads on a provider’s managed private cloud can often replicate that setup on Azure or AWS at a lower total cost, with better tooling and no single-vendor dependency.
• Unmanaged VPS: VPS at the commodity end of the market competes on price against public cloud instances and has no structural advantage in that competition. Providers that have not added managed services on top of raw VPS are experiencing margin compression or volume decline, or both.
• Traditional shared hosting: Consistent underperformance relative to managed and dedicated alternatives on performance benchmarks. The commercial pressure to move is growing as site performance has direct implications for search visibility.

iomart’s FY2026 results are what this split looks like when it runs through a single company’s income statement.

A £57 Million Acquisition Funded by Debt, Into a Declining Core Business

In October 2024, iomart acquired Atech Support, a Microsoft-focused managed services provider, for £57 million. The strategic logic was straightforward: enterprise IT spending was flowing to Microsoft Azure, Microsoft 365, and Microsoft security products, and Atech held the certifications and the customer relationships to capture it. Atech had grown its revenue at 18% annually over the three years before the acquisition. iomart funded the deal by drawing on its existing credit facility, which had to be expanded from £100 million to £125 million to accommodate it.

The problem was timing. At the same moment the acquisition was adding £57 million in debt, iomart’s core business was shrinking. In the six months to September 2025, the iomart Cloud Services division (the traditional managed hosting operation) saw revenue fall approximately 10% year-on-year. The cause: customers migrating away from self-managed infrastructure and legacy private cloud products. iomart’s own filings describe “accelerated customer churn in self-managed and certain private cloud managed services.” This churn cost the group approximately £4.7 million in annualised recurring revenue in FY2025 alone.

The result is a squeeze that is now visible in every line of the income statement. In H1 FY2026, group adjusted EBITDA fell 24% year-on-year to £12.9 million, even as reported revenue rose 25%, because most of that revenue growth came from consolidating Atech, which operates at margins well below the legacy business it is supplementing. Net debt at the same point stood at £109.6 million, representing 3.65x last-twelve-months EBITDA as stated in the company’s own filing.

Three Leadership Changes in Twelve Months

The financial picture would be concerning on its own. The leadership timeline compounds it.

• May 2025: CEO Lucy Dimes announces the Atech rebranding, positioning iomart around a Microsoft-first identity. Weeks later, she departs. No public reason given.
• May 2025: Richard Last, the independent non-executive chair, assumes an executive chair role to lead the company through the transition.
• February 11, 2026: CFO Scott Cunningham announces his departure on the same day the company issues a profit warning, stating adjusted EBITDA will come in below the lower end of analyst expectations.

Cunningham had served as CFO for over seven years. A profit warning and a CFO departure in a single announcement is a combination that markets read clearly.

iomart’s auditor also changed in December 2025, with Grant Thornton UK LLP replacing the previous firm for the year ending March 2026. A change of auditor during a period of financial stress introduces uncertainty into the audit trail at precisely the moment continuity has the most value.

UKCloud Liquidated. Rackspace Restructured Its Debt. OVHcloud Disappointed Its Investors. The Pattern Is Real.

The managed hosting sector has produced several visible casualties over the past four years, each with a different cause on the surface and the same structural problem underneath.

UKCloud, a UK sovereign cloud provider, entered liquidation in October 2022. Its former CEO attributed the failure to government policy favouring hyperscalers over domestic providers. Ofcom’s own investigation documented that AWS and Azure had been offering free cloud credits to UK public sector clients at a scale no domestic provider could match. UKCloud had built its business on the assumption that government would pay a premium for UK-sovereign infrastructure. That assumption proved wrong when the alternative was free.

Rackspace Technology, one of the largest US managed hosting operators, underwent a significant debt restructuring in 2024, announcing $275 million in new financing and a debt exchange with creditors to reduce its obligations. In Q1 2026, Rackspace reported revenue of $678.1 million and net income of $8.3 million, a meaningful recovery. But its private cloud segment still declined 6% year-on-year. Growth came entirely from public cloud managed services: the same direction iomart is trying to pivot to, just further along in the process.

OVHcloud, Europe’s leading cloud provider, crossed €1 billion in annual revenue in FY2025 and disappointed its investors anyway. Revenue grew 9.3% on a like-for-like basis, but the company’s 2026 guidance was received poorly by analysts. OVHcloud is not in distress, but its margins remain under pressure and its stock reflects uncertainty about whether European mid-market providers can hold their ground as hyperscaler investment continues to accelerate.

These are not outlier stories. They are data points in a pattern: top-line revenue held up by acquisitions or nominal growth, underlying margins compressing, debt taken on to fund strategic pivots that have not yet delivered at the pace the balance sheet requires.

Your Provider’s Balance Sheet Is Your Business Risk

For any company whose operations depend on a managed hosting provider, iomart’s situation raises a question worth asking about your own supplier: which direction is the recurring revenue moving?

A provider whose core business is contracting while a newer, lower-margin business grows to compensate is in a different risk position than one with organic growth across its product lines. The danger is not necessarily imminent. iomart has a credit facility in place until June 2027 and is actively reducing costs while growing its Microsoft services book. But a refinancing deadline is a known event with an uncertain outcome, and how it resolves will depend on factors no individual customer controls.

The practical checks worth running on any managed hosting provider before a renewal or a new contract:

• Is the provider growing recurring revenue organically, or is reported growth driven by acquisitions that inflate the top line while the underlying business shrinks?
• What is the net debt position relative to EBITDA? Above 3x constrains strategic flexibility and signals that the business is not self-funding its pivot.
• Does the provider hold current vendor certifications in the product areas you use? Microsoft certifications, in particular, must be renewed and reflect active investment. Lapsed or missing certifications are a signal that a product line is being managed for decline rather than growth.
• Has there been leadership turnover in finance or at the executive level in the past twelve months? The combination of a profit warning and a CFO departure in a single announcement is a pattern that warrants attention before a long-term commitment.

None of these are reasons to terminate a relationship immediately. They are reasons to have a contingency plan, and to make sure that plan is not theoretical.