The latest CONTEXT forecast reveals mixed fortunes for enterprise server and storage versus networking markets in 2024. We anticipate that the former will experience year–over–year (YoY) revenue growth in the upcoming year due to a probable refresh cycle, potential interest rate reductions and a rise in component prices. But networking sales are likely to slump on the back of tougher YoY comparisons.

Optimism for server and storage sales

Overall for 2024, CONTEXT predicts a range of -0.4% to 7.6% revenue growth in servers, versus -22.2% to -19.4% in 2023. In storage, it’s a similarly positive picture: 2024 will see growth between -0.2% and 7.7% versus -8.2% to -5.6% in 2023.

There are several reasons for our optimism. Although strong Q4 2022 and Q1 2023 performance will negatively impact revenue growth comparisons in the coming two quarters, things will soon improve.  It is certainly true that following the 2023 downturn, the cost of SSDs and RAM will bring greater revenue in the following year.

Meanwhile, a server refresh cycle is due in 2024–with newer, more energy–efficient platforms incentivising businesses to upgrade their datacentre infrastructure to reduce costs and emissions. AI–centric platforms may also be a draw for IT buyers keen to renew their server fleet. Finally, we could see a boost in spending in Poland as EU funds are unblocked following the election of a more liberal administration. And expected interest rate declines should also spur business investment later in the year.

Networking sales to slump until mid-2024

Networking revenue sales through distribution have been strong since the end of 2022, driven by Wi–Fi 6 investment and backlog going through, following component shortages. However, YoY comparisons will mean significant revenue declines until at least Q2 2024. We’re predicting a range of -10.2 to -1.3% YoY revenue growth for 2024, versus 10.9% to 13.1% for 2023.

A reduction in office space next year will further hit performance due to hybrid working, which will hit switching sales–even as it spurs investment in cloud and networking software. Networking appliance prices peaked at the start of 2023 due to component shortages, and these are expected to decline, dragging down prices, especially in the switching segment next year. However, there is some light at the end of the tunnel. Wi–Fi certification in mid–2024 may drive appliance sales, while interest rate cuts may encourage more business investment in the second half of the year.

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