An ongoing business that intends to remain ongoing has to charge current customers based on the replacement cost of consumable items used to service those customers.

That's why for example gasoline prices react almost immediately after something affects (or even threatens to affect) the price of crude oil, even at gas stations that have just filled their storage tanks and will be selling that already purchases gas for quite a while.

Most of us don't usually thing of computer hardware as a consumable but to a hosting business it effectively is.

Because in a free market, making rational choices about pricing in line with the industry allows you to build capital to further expand, which coincidentally also lets you buy more RAM.

They are not raising prices for existing contracts, only new ones.

They will need to buy new hardware too I guess…

The above assumes that other providers will not do their own adjustments.

Where are you moving to?

Can you tell more about their subpar latency?

I've been using Hetzner for many years, both personally and for business use, and I've not seen any noticeable issues regarding the latency.

Granted, my use cases are webapps/backends that are not particularly latency sensitive, and are primarily used from a few European countries.

For what's worth, I've seen cases where download speeds from Hetzner are considerably higher than from AWS eu-central-1.

For the record, those providers already charged a significant premium for the equivalent compute you could get at Hetzner and OVH. The margins have decreased but they've had a profit margin on compute for a long time.

Yes, and they will to preserve margins at some point. They're just doing a huge Mexican standoff, waiting for others to move. All smaller clouds have raised some prices already.

They'll probably wait for summer, the world cup finals, or whatever's last big US government thing is so it flies under the radar.

Step change makes sense for a smaller provider. You bait people to build on top of you with the best prices, then rug pull and hope the switching costs and economic frictions delay the attrition.

Because heroku and aws were 10x previous hetzner price

idk if you're comparing like-for-like here. I think on EC2, other customers can balloon up to fill your idle time because they're running on the same physical hardware. What this is talking about is renting hardware that is exclusively earmarked for your usage, so your compute is not fungible with other customers. It's more correctly priced against buying your own hardware and maintaining it yourself.