A new era of sovereign cloud: Balancing innovation and compliance to accelerate AI-driven transformation in regulated sectors
In a rapidly evolving digital world, governments and regulated industries are increasingly seeking solutions that uphold both innovation and compliance. The United Arab Emirates (UAE) is at the forefront of this global shift, pioneering a blueprint for sovereign digital transformation. In a major step forward, Microsoft and Core42 — a G42 company specialising in AI infrastructure and sovereign cloud solutions — have joined forces to introduce a robust sovereign public cloud model tailored for the UAE’s regulatory and technological landscape.
Their collaborative whitepaper, “Balancing Innovation and Compliance in the AI Era,” presents a compelling case for why sovereign-enabled public cloud is not merely an option but a necessity.
The Rise of Sovereign Cloud in the UAE
According to IDC, public cloud spending in the UAE reached $2.95 billion in 2024 and is expected to grow at a CAGR of 21.7%, reaching $6.47 billion by 2028. AI and cloud have been identified as the top two investment priorities for UAE organisations in 2025. Against this backdrop, the Core42 Sovereign Public Cloud powered by Microsoft Azure is emerging as a cornerstone of digital transformation.
This innovative solution seamlessly integrates Microsoft’s hyperscale infrastructure with Core42’s ‘Insight’ platform, offering a secure and scalable environment designed specifically for the UAE’s key sectors — including government, finance, healthcare, and energy.
“This collaboration is designed to empower UAE organisations to harness the full potential of AI and cloud capabilities while ensuring data sovereignty and regulatory compliance,” said Sherif Tawfik, Chief Partnership Officer – AI & Cloud for Sovereignty, Microsoft.
More Than Compliance — A Platform for Transformation
The sovereign public cloud is engineered to uphold data residency, encryption, access control, and compliance reporting, effectively removing the historical tension between innovation and regulation. Core42 and Microsoft’s solution provides:
- In-country data centres
- Advanced encryption and confidential computing
- Pre-configured regulatory policy packs
- Automated compliance monitoring
- Integration with national security operations
These features enable transformative use cases across industries:
- Finance: AI-driven fraud detection and regulatory compliance aligned with CBUAE, ADGM, and DIFC frameworks
- Healthcare: Predictive diagnostics and secure EHR systems integrated with Nabidh and Malaffi
- Government: Digital identity services, citizen data protection, and AI-powered public services
- Energy: Real-time analytics and secure geospatial data handling in oil and gas operations
“Our collaboration with Microsoft ensures that we provide a cloud environment that fosters innovation while upholding the highest standards of data sovereignty,” said Adrian Hobbs, CTO of Core42.
Aligning with National Ambitions
This initiative is closely aligned with the UAE’s long-term vision. Abu Dhabi is investing AED 13 billion to become the world’s first AI-native government by 2027. The sovereign public cloud platform, which supports more than 11 million digital interactions per day, is an essential pillar in this transformation.
Globally, the sovereign cloud trend is accelerating. The whitepaper forecasts that global sovereign cloud spending will nearly double from $133 billion in 2024 to $259 billion in 2027.
A Framework for Technology Leaders
The whitepaper offers a clear strategy for CIOs and CTOs looking to transition to sovereign-enabled cloud environments. Key steps include:
- Classifying data under the UAE’s Smart Data Framework
- Prioritising workloads based on sensitivity
- Tracking KPIs like uptime, latency, and incidents
- Choosing sovereign-ready providers with proven regulatory and innovation credentials
Looking Ahead: A Cloud Without Compromise
The Microsoft–Core42 partnership represents more than just infrastructure — it’s a future-proof ecosystem for secure, AI-native innovation in an increasingly regulated world. By delivering a sovereign cloud that supports compliance, scalability, and sector-specific transformation, the UAE is demonstrating that digital sovereignty and technological leadership can go hand in hand.
In an age where data is both an asset and a liability, the UAE’s sovereignty-first approach provides a model for nations worldwide — a digital future where innovation thrives without compromise.
