Navigating Turbulence: A Deep Dive into the Enterprise Servers and Storage Markets

Navigating Turbulence: A Deep Dive into the Enterprise Servers and Storage Markets

Navigating Turbulence: A Deep Dive into the Enterprise Servers and Storage Markets

Welcome back to Forecast Fridays, where we predict the latest trends and projections in the tech industry. In this edition, we turn our attention to the enterprise servers and storage markets, both of which faced challenges in the fourth quarter of 2023.

Q4 2023 Performance Recap: Servers and Storage Face Headwinds

As anticipated, Q4 2023 proved to be a challenging period for both enterprise servers and storage. Server revenues experienced a substantial decline of 27.2% year–over–year (YoY). This drop was attributed to various factors, including unfavourable YoY comparisons with Q4 2022, lower prices in specific component categories compared to the end of 2022, and soft demand due to economic uncertainties.

However, the situation was slightly more optimistic than our forecast, with government tenders in Poland playing a significant role, contributing €75M in revenues–outperforming the UK and France and securing the second–highest spot in Europe.


Similarly, storage revenues saw a YoY decrease of 14.4%, driven by falling flash prices, a 13% decline in storage array revenues, and a notable 16.5% reduction in Hyper converged Infrastructure (HCI) revenues. Germany’s market size played a crucial role in the overall decline, with a 15% YoY drop in revenues. Notably, Poland stood out as one of the few European countries experiencing sales growth, recording a 15% increase in Q4 2023.

2024 Outlook: Anticipating positive H2 trends in servers

Looking ahead to 2024, the forecast for H1 remains cautious for servers due to unfavourable YoY comparisons and a fragile economic landscape. However, a more positive outlook is expected in H2, with potential interest rate cuts supporting datacenter investments. The overall economic situation will be the key determinant, with optimistic scenarios hinging on falling inflation and lower central bank interest rates, encouraging businesses to invest in infrastructure.

Factors such as pricing, impacted by RAM and SSD manufacturers’ Q4 2023 price increases, along with geopolitical events like the Red Sea situation, may further influence the market. Despite longer server refresh cycles, potential upgrades could bolster market performance. However, businesses may choose to hold onto legacy equipment until the impact of AI technology on server revenues becomes clearer.

In summary, the expected server revenue growth for the full year ranges between –3.7% and 4.1%, with flat performance at the midpoint.

Factors Driving Storage Market Growth in 2024

The outlook for enterprise storage is more optimistic for 2024 with +4% YoY as a midrange performance, despite Q1 2024 which we anticipate will decline between –16.2% and –7.6% YoY.

Flash price increases from Q4 2023 are anticipated to continue through H1 2024, positively impacting YoY comparisons. The surge in generative AI usage is predicted to drive increased demand for storage as data volumes escalate with the proliferation of AI applications.

Businesses will need to enhance storage capacity and performance to accommodate complex and data–hungry algorithms, making robust, scalable, and high-performance storage infrastructure essential. Additionally, demand for HCI may receive a boost from an expected server refresh cycle if economic conditions improve and budgets expand.

As the tech landscape continues to evolve, businesses must remain agile, adapting to emerging trends and economic shifts to stay ahead in the dynamic world of enterprise technology.

Stay tuned for more insights in the next Forecast Fridays instalment! Request your copy of the full report here.

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