More than half of partners expect flat or declining revenues despite AI boom

Only 44 per cent of European partners are seeing revenue growth, according to Omdia, as soaring infrastructure investment benefits some parts of the channel far more than others

The tech industry is enjoying an AI-fuelled spending boom. For much of the European channel, however, the money isn’t flowing through.

More than half of European partners expect revenues to remain flat or decline year on year, according to Omdia, despite surging investment in AI infrastructure and datacentres.

Presenting the analyst firm’s third-quarter channel sentiment findings at Canalys Forum, CRN heard from chief analyst Alastair Edwards who revealed that just 44 per cent of surveyed partners were seeing revenue growth, with a similar divide emerging in profitability.

“Not everyone is on board that rocket ship,” Edwards told partners. “In fact, many of you in the channel are not today seeing that level of growth.”

The figures appear to expose an uneven market, where a handful of technology segments and larger businesses are capturing much of the investment while other partners face difficult trading conditions.

Not all channel growth is created equal

Nevertheless, Edwards cautioned against interpreting the findings as evidence that more than half the channel is failing.

Even successful partners are experiencing sharply different performance across their businesses, with infrastructure hardware delivering particularly strong growth.

Enterprise investment in AI is driving demand for modernised networks, compute, storage and security. But rising hardware prices are also inflating market growth figures, masking weaker demand in some areas.

“We have a really complex situation of price rises driving value growth, but volume growth in certain areas is actually declining,” said Edwards.

Those increases are also forcing customers to reconsider their spending. Midmarket businesses, in particular, are weighing whether to proceed with infrastructure refreshes or extend the life of existing equipment. Semiconductor shortages, unpredictable pricing and supply constraints are adding to the uncertainty.

Who is actually making money in the channel?

Omdia identified distributors as the fastest-growing channel segment, benefiting from their ability to secure inventory and finance increasingly expensive infrastructure deals.

Larger resellers are also outperforming, capturing major datacentre projects that smaller partners may lack the resources to deliver.

Simon Williams, CEO of Trustmarque Ultima, agreed that the hardware opportunity is substantial, but questioned how widely its benefits are being shared.

He said a relatively small number of companies are making significant money from AI hardware, with much of the purchasing concentrated among hyperscalers and very large global enterprises.

Williams argued that services remain essential to longer-term channel growth.

“We’ve got a lot of clients who’ve bought Copilot licences. They bought ChatGPT, and they’re not using them, or they’re not getting the value out of them,” he said.

That creates opportunities for partners to help customers with adoption, governance, security and AI cost management, rather than relying solely on infrastructure sales.

Partner specialisation separates the winners

Edwards, meanwhile, said technical expertise is becoming an increasingly important differentiator.

“The more specialised the partners, the more successful they’re being,” he said.

He highlighted AI architecture, cybersecurity, networking and datacentres as areas where partners with deeper capabilities are finding opportunities.

However, in the datacentre market, supplying equipment is no longer enough. Customers increasingly need partners capable of configuring, deploying and managing complex infrastructure. But developing those capabilities presents another challenge.

Edwards said the challenge for partners is developing the skills needed to take advantage of emerging opportunities, particularly as demand for AI expertise continues to outstrip supply.

Omdia expects investment in AI infrastructure, digital sovereignty and cybersecurity to create further opportunities for the channel, although its latest findings suggest growth remains concentrated among particular partner segments and areas of technology spending.