Research Updates

London, 21 February 2023 – Notebook and desktop unit sales plunged in the first four weeks of 2023, falling by −44% and −23% year-on-year respectively, on the back of low consumer confidence and muted business investment, according to CONTEXT, the global IT market intelligence company.

Revenues also fell sharply as a result of the drop in demand driven by the economic climate, geopolitical uncertainty and the cost-of-living crisis. Education deals have also dried up since last year, making comparisons unfavourable.

The amount of excess stock held by distributors across Europe has fallen from a high of 20–30 weeks’ worth six months ago to around 10 weeks now – but this is the result of promotions and heavy discounting in the second half of 2022. Alongside ageing stock, there is still a glut of low-end notebooks in some places, and the cost of inventory is rising everywhere. It is unsurprising, therefore, that distributors trying to avoid a repeat of last year’s overstock are sometimes reluctant to take on new products.

SMB channel hit hard

All channels are starting 2023 with revenues and sales much lower than those of the previous two years, but the biggest difference in notebook revenues is in the SMB channel as smaller sellers are more acutely affected by rising costs – not least of energy – and are having to think about cash flow more carefully during the current downturn.

The gap in revenues from notebooks is not as wide for retailers and etailers, reflecting a stronger-than-expected drop in demand in commercial sales since the end of 2022. 

Germany weak

There has been a particularly weak start to 2023 for notebook revenues in Germany where consumer confidence is low and businesses cautious. There have also been very few education sales there, whereas, in Spain, Q4 activity in this sector has spilled over into 2023 leading to a better January. We expect there to be more deals for education notebooks sales in both Spain and Italy in the first half of the year.

Cause for optimism

Revenues from Windows systems have seen a downward trend since the start of the year, but those from Apple systems have recently rallied off the back of new products: some 16,000 M2 Pro-based MacBook Pros were sold at an average of around €2000 per SKU in January. Chrome revenues are down in line with demand from the education sector, and we expect this gap to continue throughout the year.

The drop in PC sales is to be expected given that the economic downturn is worse than was anticipated a year ago. The volatile geopolitical situation is causing businesses to pause investment while consumers continue to suffer from inflation and high energy prices. However, there’s still room for optimism: we can expect product refreshes and pent-up demand to pick the market up by the end of the year, and in particular in the course of 2024.

Follow us on Linkedin 

London, 17 August 2022 – The number of PCs sold declined almost −14% year-on-year in Q2 2022 with sales of mobile computing devices, notebooks, workstations and tablets slumping by −15% and those of desktops by −7%. Despite this, revenue held up well, falling by only −4% which is towards the optimistic end of the range predicted by CONTEXT, the IT market intelligence company.

The latest CONTEXT Forecasting Report predicts that sales will continue to drop as spending on mobile devices returns to normal after the pandemic and the geopolitical situation continues to have an impact. CONTEXT expects education and consumer demand to be significantly lower than last year, which matters because education was particularly strong in 2021. Business sales will also suffer but to a smaller extent. While supply has greatly improved over the first half of this year – and will continue to do so – it is not expected to recover fully.

CONTEXT notes an excess of entry-level stock in the business and consumer markets so expects distributors to reduce prices to try and move stock out, as they did at the end of Q2. At the same time, there are still product gaps at the high end of the business market – thanks to missing components and logistics difficulties – which are making planning difficult and uncertain for many companies.

Even so, the assumption is that growth in the second half of this year will be better than in the first half because of an easier year-on-year comparison and the fact that at least some excess stock will be sold out. 

Pessimistic scenario

Confidence and demand are low and mobile computing stock levels remain high, making sell-through harder. There are only isolated pockets of growth and any investment goes to mobile, rather than desktop computing.

Optimistic scenario

Demand improves as offices reopen, although it remains susceptible to pricing of mobile computing devices. Supply at the high end of this market segment improves and momentum builds as desktop installations are refreshed.

London, 28 June 2022 – Anticipation of a bumper summer of events could drive growth in revenues from sales of large-format displays (LFDs) as high as 35% year-on-year in Q2, according to CONTEXT, the IT market intelligence company.

CONTEXT’s latest IT channel briefing report discusses factors that have affected sales of monitors and LFDs through European distributors, including the aftershocks of the pandemic that will continue to have an impact for the rest of the year.

Growth in the consumer market is negative for the first time in 24 months as gamers and other would-be buyers spend their money on other things, leading to a supply glut. In the coming months, rising inflation may also begin to reduce consumer demand. As offices reopen, it is the commercial market which is driving overall sales – although supply chain issues, component availability and expensive logistics costs are still pushing up prices and delaying lead times.

There is little innovation in the consumer market: higher resolutions, bigger screens and higher refresh rates account for most of the changes in new models. On the business side, manufacturers are looking at products such as USB-C docking monitors to support the new trend for hybrid working.

The numbers for Q2

The good news is that revenue from displays and LFDs is likely to grow by double digits in Q2 even with unit sales stumbling. A pessimistic forecast – based on a scenario where component shortages persist into the second half of the year, consumer demand declines significantly, lead times increase and ASPs drop as demand for gaming monitors sinks – would see unit sales of monitors decline by 6.7% year-on-year in Q2 2022 but revenue increase 14.3% over the same period. For LFDs there’s a brighter forecast: unit sales growing by 22.4% and revenue sales surging by 24.8%.

CONTEXT’s optimistic scenario assumes an increase in the availability of business products, recovering consumer demand and the product mix shifting towards more expensive models. That would see unit sales of displays grow by 1.2% year-on-year in Q2 and revenues by 22.7%. For LFDs, the positive scenario also means a tilt towards more expensive products as the impact of the pandemic reduces and the prospect of summer events encourages more investment. Should that happen, CONTEXT predicts unit sales increasing 33% and revenue growth hitting 34.9%.

London, 28 June 2022 – Anticipation of a bumper summer of events could drive growth in revenues from sales of large-format displays (LFDs) as high as 35% year-on-year in Q2, according to CONTEXT, the IT market intelligence company.

CONTEXT’s latest IT channel briefing report discusses factors that have affected sales of monitors and LFDs through European distributors, including the aftershocks of the pandemic that will continue to have an impact for the rest of the year.

Growth in the consumer market is negative for the first time in 24 months as gamers and other would-be buyers spend their money on other things, leading to a supply glut. In the coming months, rising inflation may also begin to reduce consumer demand. As offices reopen, it is the commercial market which is driving overall sales – although supply chain issues, component availability and expensive logistics costs are still pushing up prices and delaying lead times.

There is little innovation in the consumer market: higher resolutions, bigger screens and higher refresh rates account for most of the changes in new models. On the business side, manufacturers are looking at products such as USB-C docking monitors to support the new trend for hybrid working.

The numbers for Q2

The good news is that revenue from displays and LFDs is likely to grow by double digits in Q2 even with unit sales stumbling. A pessimistic forecast – based on a scenario where component shortages persist into the second half of the year, consumer demand declines significantly, lead times increase and ASPs drop as demand for gaming monitors sinks – would see unit sales of monitors decline by 6.7% year-on-year in Q2 2022 but revenue increase 14.3% over the same period. For LFDs there’s a brighter forecast: unit sales growing by 22.4% and revenue sales surging by 24.8%.

CONTEXT’s optimistic scenario assumes an increase in the availability of business products, recovering consumer demand and the product mix shifting towards more expensive models. That would see unit sales of displays grow by 1.2% year-on-year in Q2 and revenues by 22.7%. For LFDs, the positive scenario also means a tilt towards more expensive products as the impact of the pandemic reduces and the prospect of summer events encourages more investment. Should that happen, CONTEXT predicts unit sales increasing 33% and revenue growth hitting 34.9%.

London, 08 September 2022 – Revenue from sales of laser multi-function printers (MFPs) through European distributors have been driving the imaging market in Q3, according to CONTEXT, the IT market intelligence company.

CONTEXT’s depth of data enables it to offer unique analyses of the European IT distribution channel. Its Revenue Trend Index (RTI) plots performance using the 2021 average weekly revenue as a baseline which is assigned a value of 100. It shows 2022 business printer sales peaking in Week 30 with an index score of around 115 thanks to demand from public tenders, the opening of new offices and office refurbishments in several countries. 

High-end laser devices, in particular MFPs, were behind much of this increase: revenues from inkjet MFPs and single-function printers (SFPs) were below the baseline. Laser MFP revenues began to rise above the index baseline in Week 28 and reached a value of 125 in Week 30. Although this has since fallen, revenues from the category remain well above the baseline and have also outperformed the same period in 2020.

ASP increases drive revenue growth

Business sales of laser devices rebounded in most major European countries, with performance in Germany, Italy and Poland being particularly strong due to solid sales of both mid- and high-end devices. This pattern indicates strong demand from organisations small and large.

Price increases and a shift in product mix have helped to keep revenues growing. Vendor list prices and distributor Average Selling Prices (ASPs) for models aimed at consumers and businesses rose steadily during August with vendor Average List Prices reaching nearly €124 for consumer printers and € 555 for business devices at the end of the month. Increased sales of high-end consumer devices contributed to rising distributor ASPs after the June/July slump caused by promotional offers to clear excess stock of entry-level printers.

London, 25 August 2022 – Unit sales of print hardware declined sharply year-on-year in Q2 2022 with lower demand, especially for consumer printers, and falling sales of entry-level and high-end business printers, according to CONTEXT, the market intelligence company.

Revenues held up a little better, due to increased Average Selling Prices (ASPs), sales of more expensive consumer models and the purchase of mid- to high-priced business devices for newly reopened offices. Both figures were very close to the forecast made in CONTEXT’s Q2 forecasting report. 

Declining ink cartridge sales led to a sharp drop (of 18%) in unit sales of consumables but a lower fall (only 7%) in revenues from this sector of the market. CONTEXT’s pessimistic-scenario forecast was spot on in terms of these revenues, although sales were significantly worse than anticipated. 

Demand is softening as life returns to ‘normal’ after the pandemic. Markets are approaching saturation, there is no longer the urgency created by the crisis, and high inflation is sapping consumer demand. However, promotions designed to reduce inventory excess are likely to support sales of consumer devices during Q4 and into the beginning of next year, according to the CONTEXT Forecasting Report Q3 2022.

Individuals and organisations are choosing products more carefully, and distributors and vendors are focusing on growing sales to businesses, particularly Small and Medium Businesses (SMBs). Although ink sales are falling, toner sales are increasing thanks to the return to the office which will be the main driver of the printer market for the rest of the year and during the first half of 2023. This return could also mean Managed Print Services are primed for a comeback over the next six to twelve months. 

The supply chain is still a key factor. While overall demand is declining slightly and supply is improving (meaning that backlogs which CONTEXT has seen building up in the last year are getting smaller), high-end multifunction business printers are still being hit by delays that are expected to last until at least the end of the year. Global shortages have left businesses competing for the same raw materials, and some key components remain in short supply. The combination of price increases, supply pressures and continuing transportation issues will not be alleviated anytime soon. 

A potential vendor shift to other go-to-market routes, including online sales (either directly or through resellers) is likely to have an impact on distributors. 

Finally, growing environmental concerns leading to public- and private-sector adoption of paperless policies are having a negative impact on the printer industry, and this will only build over the years to come.

London, 1 June 2023 –  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 our 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. 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.

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

Follow us on Linkedin 

London, 16 May 2023 – Infrastructure-as-a-service (IaaS) revenue growth dropped 9% between Q4 2022 and the first quarter of 2023, but is likely to bounce back later this year as cyclical trends return and organisations work through their cloud challenges, according to CONTEXT, the global IT market intelligence company.

CONTEXT data on distributor sales in the top five markets in Europe – the UK, France, Germany, Italy and Spain – reveals that IaaS revenue growth has regularly fallen: from a peak of 50% year-on-year (YoY) in Q4 2021 to just 13% in Q1 2023, although there was a brief upward blip in Q2 2022.

Software-as-a-service (SaaS) growth has also been in steady decline since Q2 2021, when revenues increased by 41% YoY, but has staged a comeback over the past two quarters. In Q1 2023, it was 14%, surpassing that of IaaS for the first time since Q3 2021.

In 2021, cloud services revenue growth had been trending significantly higher than that of software and licences, but it fell sharply from a high of 38% in Q4 2021 to just 9% in Q3 2022. Revenues from sales of software/licences have remained steady and surpassed those of cloud services in Q3 2022. However, the pattern of growth in both sectors is closer than at any point in the past two years.

In Q1 2023, distributors saw revenues from sales of Software & Licenses grow by 17% YoY, whereas those from cloud services were up by only 14%.

Getting back on track

To understand why, it helps to look at a study from Swiss cloud vendor SoftwareOne. It finds that 93% of CIOs expect IT budgets to increase in 2023 – most of them saying it is because of increased spending on cloud services. There are multiple reasons for this, including inflation, over provisioning of cloud resources and the impact of inefficient “lift and shift” approaches. Some 83% of CIOs expect IT budgets to increase in 2023. But most also expect increased spending on cloud services, leaving 83% believing they will be asked to do more with less.

The research also highlights that 72% of CIOs admit technical debt will negatively impact digital transformation in 2023. Much of this debt may have accrued during the pandemic when organisations rushed projects and applications into production.

The fall in IaaS revenue growth the CONTEXT data shows over the past few quarters could, therefore, be the result of IT leaders trying to deal with challenges like over provisioning and lift and shift by squeezing more from their budgets or optimising their current investments. The recent stabilisation of cloud services growth and the narrowing of performance between this sector and software/licences, may imply steadier spending than the reactive investments we saw during the pandemic. It could also signify that technical debt is finally under control.

If that is the case, we can expect a further acceleration in cloud services growth – as long as digital transformation projects pick up. This bodes well for 2023, especially if combined with a cyclical bounce-back in IaaS spend of the sort we saw in Q2 2022.

Follow us on Linkedin 

full content in research-updates/3d_printing page

full content in research-updates/3d_printing page