top of page

IT Revenue Growth Set to Slow to 7% in Q2 but Volume Sales are Recovering

Adam Simon, Global MD at CONTEXT
Adam Simon, Global MD at CONTEXT

Revenue growth through European distribution sales is forecast to decline from 17% in Q1 2023 to 7% in Q2, although sales growth will continue to recover into the second half of the year, according to CONTEXT, the global IT market intelligence company.

The figures come from the CONTEXT Channel Forecast Q2 2023 report, which predicts volume sales growth will increase from −9% in Q1 2023 to −6% this quarter, before becoming positive later in the year. Software and infrastructure spending are highlighted as the key drivers of growth in Q2 2023.

Opportunity and risk

As always, this latest in CONTEXT’s long-running series of quarterly forecasting reports identifies the main trends across PCs, enterprise servers and storage, displays, enterprise networking, and imaging.

The backdrop to Q2 2023 offers plenty of cause for optimism businesses in the channel”, said Adam Simon, Global MD at CONTEXT. “Ongoing digital transformation initiatives, public-sector investment, product refresh cycles and the prospect of improving macroeconomic conditions all present opportunities for growth.

However, there remains a risk of project slowdown as skills shortages continue to bite. Some categories, such as networking, continue to be impacted by supply issues while there is still excess stock of other products. Making comparisons with three strong years will make growth particularly tough for hardware sales.

Although consumer confidence is returning, levels are way below pre-Covid times and business confidence is undermined by persistent uncertainty.

In more detail

As stock levels improve overall, and prices start to decline after recent spikes, what does the report say about the five key markets?

PC sales in Q2 and beyond will primarily be influenced by demand. This will remain low, especially for SMBs and consumers, due to the current economic and geopolitical situation. Although distributor inventory has improved, excess stock is still an issue. Windows 11 upgrades will become a bigger driver of new sales as the year progresses although the biggest change is likely to be in Q2 2023.

Enterprise storage and server demand is dependent on an improved economic outlook and returning business confidence. SMB sales and investments in more powerful and energy-efficient servers and new-generation platforms should drive investment. Vendor price cuts could increase volume sales but will negatively impact revenue growth, while component shortages will fade from view as a significant issue for the channel.

Enterprise networking, which includes switches, routers, wireless access points and related software and licences, will see solid demand. This could be further fuelled by the resumption of delayed projects, although that depends on the macroeconomic picture. Order backlogs have declined significantly and so are having a smaller impact on revenue growth. Price increases will continue into Q2 2023 but fade in the second half of the year. Wireless sales will also slow as Wi-Fi 6 upgrades are completed.

Displays performed poorly in Q1 and consumer demand will continue to fall (since this market is fairly saturated) in Q2, threatening average selling prices (ASPs) and revenues. Although the situation is improving, component shortages persist, and the cost of logistics, shipping, storage and production is only just beginning to stabilise. Margins could be impacted by resulting price increases and longer lead times. However, there’s also optimism due to the prospect of resumed projects and refurbs, and the impact of new technologies like docking for desktop monitors, interactive Long Format Displays (LFDs) and direct-view LEDs (DVLEDs).

Imaging is seeing softening demand, especially in the consumer ink and laser segment. However, demand from SMBs remains strong, especially for mono single-function and colour laser multifunction printers (MFPs). The supply chain of most vendors is back to pre-pandemic levels and shipping costs have declined dramatically, stabilising hardware prices. We expect further promotions and price erosion to reduce excess stock, and future sales to be impacted by longer-term trends for hybrid working, cloud printing services, and a consumer shift to subscription models.



bottom of page