Summary Under the proposed Cloud and AI Development Act (CADA), Article 2(9) defines a "small mid-cap" (SMC) by reference to point 2 of the Annex to Commission Recommendation (EU) 2025/1099 of 21 May 2025 on the definition of small mid-cap enterprises. CADA does not restate the SMC thresholds in its own text; it points to that Recommendation. The category captures enterprises that have outgrown the SME definition but are not yet large enterprises — the "missing middle". SMCs are named alongside SMEs in CADA's support provisions, including the Centres for AI (Article 5) and national strategies (Article 7). As CADA is a proposal, the wording could change before adoption.

Detail

CADA's enterprise classifications are designed so that support reaches the full spectrum of European business, not just micro-enterprises or large incumbents. The "small mid-cap" is the category for scaling firms in between.

The definition

As proposed, Article 2(9) provides:

"'small mid-cap' or 'SMC' means a small mid-cap enterprise as defined in point 2 of the Annex to Commission Recommendation (EU) 2025/1099".

The proposal's footnotes identify that instrument as Commission Recommendation (EU) 2025/1099 of 21 May 2025 on the definition of small mid-cap enterprises. CADA therefore does not hard-code SMC turnover or headcount figures in its own text. The substantive thresholds live in Recommendation (EU) 2025/1099; for the precise criteria, that Recommendation is the authoritative source. In broad policy terms, SMCs are understood to sit above the SME thresholds (which under Commission Recommendation 2003/361/EC require fewer than 250 staff and turnover up to EUR 50 million or a balance sheet up to EUR 43 million) but below the scale of large enterprises.

Why CADA includes SMCs

Including SMCs alongside SMEs is a deliberate policy choice. Recital 3 of the proposal frames the commitment to technological sovereignty as supporting the competitiveness and sustainability of the Union's industry and economy, "in particular of small and medium-sized enterprises ('SMEs') and small mid-caps ('SMCs')". The thinking is that SMCs play a distinct role — they can scale up innovations that start-ups originate, without the capital reserves of global hyperscalers — so naming them ensures they are not overlooked in the move toward a sovereign European cloud and AI stack.

Relevance to cloud providers and data-centre operators

For providers, the SMC classification connects to concrete support provisions:

  1. Experience and Acceleration Centres for AI (Article 5). Article 5(2)(b) tasks the Centres with accelerating "the broad adoption of cloud and AI technologies at regional and local levels, notably for SMEs, SMCs and public sector bodies." SMCs are an express beneficiary of the technical expertise, facilities and skills support the Centres provide.
  2. National strategies (Article 7). Article 7(2)(b) requires national strategies to include measures to accelerate cloud and AI development and adoption "particularly among public sector bodies, SMEs and SMCs", so SMC providers can expect targeted national measures.
  3. Procurement context (Articles 32 and 33). CADA uses procurement to drive demand for European cloud and AI. The Union added value criteria (Article 32) reward contributions to the European ecosystem. Note that the 25% procurement objective in Article 33(4) is framed specifically around innovative SMEs, not SMCs — so SMCs benefit from the broader ecosystem and support framing rather than from that particular numerical target.
  4. Sovereignty framework. The framework introduced in Article 16 applies to cloud computing service providers generally, regardless of size. SMCs, with more resources than micro-enterprises but smaller global supply chains than hyperscalers, can be realistic candidates for recognition at one of the Union assurance levels and so for serving public-sector buyers.

What this means for you

If you run a cloud or data-centre business in the EU, working out whether you are an SMC is a strategic step.

  • Verify against the Recommendation. Consult Commission Recommendation (EU) 2025/1099 for the SMC criteria. If you have outgrown the SME definition but are not yet a large enterprise, you may qualify.
  • Engage the Centres for AI. The Centres (Article 5) are tasked with supporting SMCs; use them to test technologies and build skills.
  • Watch your national strategy. Article 7 strategies must address SMEs and SMCs; look for measures relevant to your stage of growth.
  • Consider the sovereignty framework. As an SMC you may be well placed to seek recognition at a Union assurance level, aligning your operations with the Annex II criteria to become a credible European supplier for public-sector tenders.

Common misconceptions

"SMCs are the same as SMEs." They are distinct. Article 2(9) anchors SMCs to Recommendation (EU) 2025/1099, while Article 2(8) anchors SMEs to Recommendation 2003/361/EC. SMCs sit above the SME thresholds.

"CADA only helps small businesses." The proposal expressly names SMCs in its definitions and in support provisions such as Articles 5 and 7, recognising that scaling firms are part of building a sovereign ecosystem.

"The thresholds are written into CADA." They are not. Article 2(9) refers out to Recommendation (EU) 2025/1099, so the numerical criteria live there and can track wider EU industrial-policy definitions without amending CADA.

"SMCs are outside the sovereignty framework." The framework applies to cloud computing service providers regardless of size. SMCs are eligible to seek recognition at the Union assurance levels just as other providers are.

Related

This is general information about a draft EU regulation, not legal advice.