European cloud services sector shows resilience despite slowdown - CONTEXT

Consistent growth in network security allowed the market to remain strong

Western European economies’ cloud services market has not been affected by this year’s one per cent dip in Infrastructure and platform-as-a-service (IaaS/PaaS), according to market intelligence firm CONTEXT.

The research tracked cloud services sold via distribution across 11 software-as-a-service (SaaS) product segments.

These segments include endpoint protection, identity and access management, network security, as well as office applications, which together make up for around 80 per cent of total SaaS revenues.

SaaS witnessed a slight increase through European IT distribution, with a five per cent uptick across March and April in the UK, France, Germany, Spain, and Italy.

Network security has particularly shined this year, as the sector went through a consistent upward trend during the past three months.

Endpoint protection has begun to rebound after a period of weaker performance.

On the other hand, office applications have remained relatively flat so far this year.

Predictions

Looking ahead, further acceleration in SaaS is expected in Q2 FY25.

This push could be fuelled by Microsoft’s introduction of two new three-year cloud solution provider (CSP) offerings for E3 and E5 licences.

This would give customers the option to move away from traditional enterprise agreements and prepay either annually or upfront for the entire term.

“While we’ve observed a seasonal Q1 slump, which typically follows a strong December quarter driven by annual prepay subscriptions and financial year-end, the overall cloud revenue trend remains positive,” said Chris Vallenduuk, regional director APJ at CONTEXT.

“The recent slowdown is consistent with historic patterns and not indicative of any systemic weakness.”

“The fundamental demand for cloud services remains intact, and distribution continues to play a crucial role in bringing these services to market.”

This positive evolution follows good trends in Europe during the first half of 2025, as PC desktops sales ramped up across the continent.

AI PCs sales also soared in the region, now accounting for 50 per cent of all notebook sales through European distribution.

While cybersecurity sales also surged 18.1 per cent year-on-year in Europe, the UK was this time left out, as performances in the country dropped seven per cent due to “a tougher year-on-year comparison.”