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If cloud-provider X is providing a managed-service A , which is otherwise available as an open-source project Y. Does X need an agreement from Y to run the managed service ? If X does a bad job of providing value from Y, isn't X showcasing Y in a bad-light as well?

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software licenses allow for this, so in this scenario there is generally already an agreement between the creators and the consumers / distributors over what uses of the product are considered fair.

Depends on how Y is licensed. A lot of open source projects are now specifically adding clauses preventing AWS etc. from offering their product as a hosted service.

Well, pseudo-open source licenses. They're certainly not OSI approved, which is the benchmark most go by. And it's not really a "lot," in part because most organizations won't touch open source software that isn't on a usually fairly short list of licenses approved for use.

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