As we enter 2026, the hosting industry faces a familiar but intensifying challenge. In the 2026 Web Hosting Trends Report, produced by CloudLinux together with our partner WebPros, around 65% of hosting providers reported revenue growth in 2025. But that growth is getting harder to keep.
Price competition (cited by 29% as the top threat to profitability) and rising costs (28%) are squeezing margins from both directions. Hosting providers are growing, but the cost of sustaining that growth is rising too.
Hosting providers identified price competition (29%) and rising costs (28%) as the two biggest threats to profitability. The margin squeeze is real, and it comes from both sides.
When providers look for growth that doesn't compound margin pressure, one area stands out: VPS and dedicated hosting. 26% identified it as their biggest growth opportunity, ahead of shared hosting (22%) and cloud servers (17%).
The driver is straightforward. Customers outgrow shared hosting. Whether it's an e-commerce store hitting resource limits, an agency managing dozens of client sites, or a growing business that needs dedicated performance, the ceiling of shared hosting eventually becomes real. Some customers start on VPS from day one because their requirements demand it.
But here's the challenge: 56% of VPS providers say their biggest difficulty is competing on price with unmanaged cloud providers. That's a fight most traditional hosts can't win, and shouldn't try to. Unmanaged VPS is a commodity. Managed VPS is a service, and that's where the margin is.
The data shows providers understand this. 29% differentiate their VPS through fully managed service, and 22% through superior support. Only 14% compete primarily on price. At the same time, 34% say educating customers on the value of managed VPS over cheaper unmanaged alternatives is a significant challenge.
Value-added services have emerged as the top lever for growing ARPU. 50% of hosting providers plan to expand professional services, ahead of bundling premium tiers (39%), reselling third-party products (36%), and targeting higher-value customer segments (36%).
This tracks with a broader shift: providers are evolving from pure infrastructure into technical partners that offer hands-on help with performance, security, site building, and maintenance.
But scaling services without scaling the processes behind them is a recipe for margin erosion. It's telling that 84% of providers rate automation as a top priority when evaluating new tools. Services may be the growth engine, but automation is what keeps that engine from stalling.
Price sensitivity is the leading reason customers leave: 56% of providers cite it as a key churn driver. But it's not the only force. 41% report customers migrating to SaaS platforms like Wix and Shopify, drawn by simplicity and fewer decisions to make.
What keeps customers from leaving? When the report asked providers why customers choose them for WordPress hosting, speed came out on top at 55%, ahead of price (47%) and support quality (45%).
This suggests that while price is what pushes customers away, performance is a major reason they choose to stay. Providers who invest in speed create a stronger value proposition, one that makes it harder for customers to justify switching to a cheaper or simpler alternative. Performance issues also show up as a direct churn factor: 29% of providers cite slow websites as a reason customers leave, reinforcing that speed matters for retention, not just acquisition.
The report reveals where hosting teams actually spend their support time:
These are the day-to-day realities that eat into margins. And they're driving investment decisions: the top technology priorities for 2026 are improving performance (44%), strengthening security (43%), and automating operations (41%).
AI is the trend providers expect to have the biggest impact in 2026 (53%). But when asked what AI capabilities they value most, the answers are practical:
Customer support is already the most common AI use case (36% of providers use it there today), and it's clearly delivering value. But the wish list points forward to a more embedded, operational role: systems that detect threats before they cause tickets, and flag performance issues before customers notice. The strongest demand is for AI that works in the background, built into the tools providers already rely on.
As an ecosystem partner, WebPros brings a critical operational lens to the report.
The data confirms what many providers already experience: most run multiple control panels (cPanel at 64%, Plesk at 31%, DirectAdmin at 23%), often alongside no-panel servers (20%). This diversity enables flexibility, but it also increases operational complexity as fleets grow.
Providers express strong interest in simplifying this:
For providers running mixed environments, the biggest efficiency gains will likely come from infrastructure software and control panels that bridge these different systems rather than adding to the tool sprawl.
The data paints a picture of a hosting market that is growing but under increasing pressure to grow efficiently. Providers that succeed in 2026 will be those that recognize where growth creates operational drag, and invest to stay ahead of it. That means:
For a complete look at the data and industry benchmarks, download the full 2026 Web Hosting Trends Report.
The CloudLinux product portfolio is designed around the pressures highlighted in this report: margin protection, upmarket growth, retention through performance, and operational efficiency at scale.
From CloudLinux and Imunify to AccelerateWP, MAx Cache, the VPS Bundle, and the Seahawk WordPress services partnership, each product addresses constraints hosting providers face as they grow. Explore our products and special offers:
Special offers: VPS Bundle, Wordpress Services (Powered by Seahawk)