A few weeks ago, CONTEXT revised down its overall 2023 forecast for revenue sales growth through European IT distribution. It was lowered from 1.6% growth for the year to -3.3%, and a big part of that decision was influenced by the feedback we received on commercial bookings. The cumulative impact of the war in Ukraine, the high cost of living, the cost of capital and high interest rates has led to sinking business confidence-not just in the EU but also China and the US.

This in turn has had a significant impact on the enterprise storage and server markets. But there's also optimism that things may turn around by the end of the year.

What happened in Q2?

The enterprise server market experienced a notable YoY decline in revenue sales growth in Q1 (3.8%) and an even bigger drop in Q2 2023 (-11.7%). The latter figure was much greater than even our pessimistic forecast of +1.6% for the quarter. Performance was worst in the UK (-38%) and Italy (-29%), although it held up in in Spain, France and Germany. Volume sales growth fared little better, declining -21% across Europe distribution. This was driven by a 26% YoY drop in the two-socket segment.

Decline in the storage space has been flatter overall in recent quarters thanks to seasonal upgrades. But revenue growth fell significantly from 17.3% in Q1 2023 to -9.5% in Q2, thanks largely to the poor performance of the storage array segment (-13%) and especially hybrid and flash arrays. The HCI segment recorded a slight revenue increase in Q2 of 2.9%, thanks to strong performance in the UK (15%) and Italy (53%).

What's next for servers and storage?

Continued economic uncertainty remains a dark cloud hanging over the commercial market, and will negatively impact both server and storage revenues for the remainder of the year. CFOs will need to carefully balance demand for new technologies and projects against reduced budgets. Other factors potentially influencing revenue sales are component pricing and availability, especially in AI-ready components. Comparatives from last year will also likely drag down server and storage growth figures for the rest of 2023. Those double-digit server sales in 2022 are not going to be replicated in 2023, as they were driven mainly by the clearing of backlogs last year.

However, there are still reasons to be optimistic. Inflation is slowly receding across the EU and there remain opportunities for the channel thanks to enterprise digital transformation efforts, public sector investments, product refreshes and the drive for sustainability. We're hopeful of an improved 2024.

To access the full forecast, please request the report here.