It is not an absolute requirement. It is often preferred from EU-based customers to store their data in EU-based data centers because then that data is subject to EU law, which can make things easier for your customers with their own legal compliance.
edit because I was incorrect It is a requirement for EU users for their data to be subject to GDPR. It is not a requirement to store that data in the EU to be compliant with the law.
https://gdpr.eu/what-is-gdpr/#:~:text=The%20regulation%20was....
https://www.cnbc.com/2022/01/18/fines-for-breaches-of-eu-gdp...
https://www.enforcementtracker.com/
It has also been ruled recently that pop-ups asking EU users to opt-in or opt-out of data sharing, where cookies etc can pass their data to the U.S., are also outside the GDPR.
https://www.forbes.com/sites/martyswant/2022/02/02/europes-n...
https://www.brookings.edu/research/the-court-of-justice-of-t...
There were updates by Meta, Google etc based on recent ruling to update their terms and to change where & how they were storing data. The recent rulings could have major impact on Google Analyitics etc
Although it might be pragmatic to do so given the last few agreements with the US on this were shot down in court.