Consultative AI Sales Will Drive Channel Growth Throughout 2026: Circana

‘We know the channel is very agile when it comes to identifying an opportunity and then how do I take advantage of that to grow their business? And I think we’re already seeing that acceleration already beginning now,’ says Circana’s Mike Crosby.

[What follows is a transcript of the above video]

Jennifer Follett, vice president of U.S. content and executive editor, CRN: This is Jennifer Follett with CRN and I'm here with Mike Crosby of Circana. Mike, thanks for joining me.

Mike Crosby, executive director, Circana: Hey Jen, how are you?

Follett: I'm doing well. We are here, I think you’d say, in the back half of 2025. So you and I are going to talk a little bit about what the first half looked like, what we’re expecting for the rest of the year, and then we’re going to look ahead. So why don’t we jump right in. How did the first half shape up?

Crosby: Yeah, and I think it’s really timely that we’re going to have this conversation because there’s certainly a lot of dynamics going on overall the environment. But the good news is we definitely saw positive growth in the first half and specifically around hardware, software and cloud, which are the three areas that we tend to look at in an aggregated way as well. All three were up.

So hardware was certainly up, and we’ll talk about what some of those key drivers were. Software was also still up to a positive, a little bit slower growth than what we had seen previously, but still positive, up about 3 percent. And then cloud continues to still see good growth and good expansion, still running about 21 percent on the growth overall. I’d mentioned hardware too, hardware specifically, up about 3 percent combined, but most of that was driven by a pretty significant impact of the PC refresh that we’ve been talking about. So we continue to see good growth and good momentum, both on desktop, on notebook, as well as server and workstation.

So all in all, we’re seeing the refresh of those devices that were purchased back in 2020 and ’21 really starting to reach that end of life. And we’ve already seen a pretty good momentum, we saw it start really kind of late 2024 and then heading now through 2025. The expectation is we’re going to continue to ride that tailwind, especially since it’s aligning too with the[Microsoft] Windows 10 sunset scheduled for October 14. There are these converging tailwinds that are helping drive hardware.

But, again, collectively, on the first half, 4 percent overall was the overall growth number. But again, we got contribution from all three of those areas, which was really good.

Follett: Were there any surprises, anything that shook out differently than you expected it to?

Crosby: A couple of areas, like desktops was over indexed a little bit, so we already had a nice growth number for desktops, but we did see a little bit faster acceleration on desktops, specifically in some of the areas that they tend to be a little bit higher concentration: within health care or banking and finance, we definitely saw the numbers increase. Previously, you might have seen more of a migration away from desktop to notebook. Here we just saw a straight upgrade and pretty strong growth and expansion going on there. We’re also starting to see some additional momentum coming back to server.

So as we see servers now and as we talk to a number of either small, midsize or enterprise companies, a lot of them that were all in earlier with cloud, now you see a lot of that coming back towards the middle a little bit where now I think the more comfortable position to be in is that area somewhere in the middle where there is still some on-prem capability that again companies like, like the security, like the control and managing costs a little bit, and at the same time still utilizing all the things that the web provides as a value using the cloud. So I think you’re seeing more and more of this balance of this hybrid model, but what that also translates to is some increases in server as well, which has been good news.

Follett: So what about the rest of this year? What are we expecting?

Crosby: So the rest of the year we still feel like for the second half, and we’ve already seen it, there’s still an expectation of momentum that we’re still going to climb right up to the sunset date of Windows 10. However, it’s been a little bit slower adoption as we looked at where we were. We’re still sitting at about 50 percent roughly that’s migrated to Windows 11, and there’s still a pretty significant portion of the marketplace of the install base that’s still operating Windows 10 or older. Now what’s interesting is there’s going to be some challenges around that, especially through those highly regulated industries, those like health care or banking and finance or utilities, that are mandated and have mandated regulatory components to what they have supported. So there’s going to be a real need for an acceleration to be able to make sure that obviously they’re in compliance, especially in these larger industries. These are also some of the larger businesses as well.

So look for, I think, midsize and enterprise, some nice acceleration on the PC side. Collectively though, to answer your question, we’re going to see it cool just a little bit. We’ve already seen the economy slow down just a little bit. We saw some of the more recent numbers come up. There’s some concerns that are growing a little bit on a cooling economy and unemployment. We’re also seeing inflation that continues to uptick a little bit. And I think now there’s real questions on if ultimately the tariffs will stand or not, ultimately pending a Supreme Court decision that’s going to be made here fairly quickly, a little bit, again, of uncertainty that brings this back.

And, again, with uncertainty the challenge for B2B is where we see a lot of uncertainty, we see a lot of folks kind of sit on the sidelines. Do I want to make a capital investment? Do I want to wait? Am I moving where in many cases, I’ve already moved supply chains and facilities and other organizations. There’s just a lot of that uncertainty that tends to cool the economy a little bit. We do think also that because we’re expecting this to soften just a little bit and again still watching inflation and unemployment, likely we’re going to see a couple of moves by the Fed. We think probably high confidence we’ll see likely in September could be a quarter point, and potentially one additional quarter point cut likely in December. [Editor’s Note: The Federal Reserve cut interest rates by a quarter point on Sept. 17] But then there would also be, I think, some additional planned cuts in 2026. So wrapping all that up, I think second half, we think it’s still going to be positive, but it’s going to be a little bit cooler. We’ll still get the benefit of some of the PC refresh and some of those activities, but with the added uncertainty of kind of where we sit today there’s likely be a little bit of a dampening effect on the second half.

Follett: And when you put it all together, if it all flows the way you expect it to, what would that put us at for 2025 as far as growth?

Crosby: So 2025, that puts us between 4 percent and 5 percent of the overall number. So I think we’re in pretty good shape there from an overall total. At the same time, we came in, the first half was a little bit hotter. We definitely saw some pull forward that ultimately occurred. But beyond that, I think we’re going to be in reasonable shape. The question is going to be now as we lean into 2026, we still have a pretty robust outlook. We’re still looking at revenue, still tracking between a 4 percent to 5 percent increase on a year over year basis. Now what’s going to be interesting is we’re seeing unit counts though come down as we start to see the impact of tariffs, and mix is certainly being a factor in that we will tend to see ASPs [average selling prices] elevated a little bit, which will tend to prop up the revenue number a little bit higher, but you’re likely to see a little bit more downward pressure on unit counts. We also think too on the PC side that I keep coming back to because it’s such a core category for a lot of it and a catalyst for a lot of other growth that we see: Midsize and enterprise really have kind of led this initiative between the second half of ’24 and then through 2025. Most of the growth has been coming out of those larger businesses that tend to need a little bit longer runway to manage through their large fleets of devices and ultimately get them into the position where they need to be. Small business, because of just all the volatility, and again, a lot of the uncertainty, small businesses tend to stick with technology a little bit longer. And I think where they have less operating flexibility as well, so they will tend to drag a little bit. I think you’re going to lean more heavily on small business, probably on the PC refresh, that’s going be leaning into 2026, where most of the larger [companies], I think a good chunk of them, had already been taken care of back in 2025.

A couple of areas to watch, I think, as we lean into next year as well: Software, we’re still expecting to see software growth, but we are expecting to see software and services just cool a little bit. Less on the services side and more on the software side. I think there’s still some ongoing lingering questions around AI and AI’s contribution, not only to efficiency, but also potentially some impact on seat license counts. And if there are companies hiring less employees, ultimately there’s a lower or a lesser need ultimately for seat licenses. So it’s an area that’s still very, very early, but it’s something that we’re watching very, very closely just to try and anticipate what are some of these impacts of AI, because again, it’s still very, very early.

We are expecting hardware to be a little bit softer though. It’ll be about a 3 percent increase year over year. Again, still lingering on PCs, but you’re still looking at storage. and some other areas that are looking to do reasonably well as we head into next year.

The big question I think for so many people that I speak to on a regular basis is really just again as it relates to tariffs. That even if we do see that these tariffs ultimately based on the decision are no longer in place, not all of them, but most of them, say 70 percent to 75 precent of them, how will that translate into maybe lower costs, lower pricing?

I think the challenge is going to be because of all the investment and all the things that have already been done, that’s not likely to move anything materially lower until likely the second half of 2026, even the latter part of 2026. So, you know, I think there’s just all of this as we’ve talked many times about the uncertainty of these and the volatility that it can bring and what it tends to do is get people to kind of step back and wait and saying, “Maybe it’s just better to evaluate and make decisions ultimately where we’d have more information.” And until we do, that would be the only thing that I think would be an area to watch again in ’26, depending on what the outcome is of this.

Follett: Let’s look at that Windows 10 piece a little more. Historically, you look back at other transitions like this. Where do we sit today as far as the speed at which the transition is being made? There’s always some that do it ahead of time. There’s always some that lag and wait even past the deadline. So are we in the norm in this transition right now or further ahead or behind than you’d expect?

Crosby: Yeah, great question. Traditionally, we have not seen it, the migration, occur as slowly as we are now. Normally what we had seen, it was a fairly clean process, the transition was fairly clean, like to Windows 10. It occurred fairly, fairly smoothly. But keep in mind, there’s a couple of different things that are going on with Windows 11 versus Windows 10. Windows 11 has both a physical security element to it with this TPM chip, along with what they have with obviously software that’s intertwined within the OS relative to security. So the challenge is there’s like a double requirement that’s putting added pressure on folks to mandatorily upgrade the physical hardware to be able to operate the new OS, where previously that really wasn’t the case.

Follett: You need a more robust system for this transition, right?

Crosby: Exactly. And so normally these OS reps last about 10 years of support and this has been, it’s taken us a pretty significant amount of time even to get to this 50 percent, and it’s been definitely slower than what we had seen previously. So I think you add in those security elements and that mandatory upgrade on the physical hardware certainly puts some additional wrinkle into some of the speed of the migration from [Windows] 10 to [Windows] 11.

Follett: What’s the messaging you think that our solution provider audience could use to help get some of these reluctant customers over the hump?

Crosby: Well, I think there’s a ton and one, obviously, a core element of Windows 11 is really security and that is still a consistent worry depending on who you talked with, if it’s a small business, midsize or enterprise, the concern ongoing is how secure is my network or my devices and am I maximizing all the things that I have? I think that is still the primary. Beyond that though, you’re also going to see, obviously, better performance as you’re putting more heavier workloads on some of these devices. With AI and other elements that are tied to this, there’s added requirements that are there and I think it’s going to be about productivity. And it’s going to be ultimately, am I secure in my environment? But also am I able to maximize all the values that the new technology is bringing? Because that can be, in many cases, a competitive advantage. And where you’re tending to lag, you’re also going to have some lingering support issues that go on with older devices as well. So that’s why we’ve seen traditionally on about a four-year refresh is usually about the that we’ve been seeing, but I there’s more at stake here because of the added security elements to it. And I think as you add AI, it’s certainly, you don’t want to be the one that isn’t able to take advantage of some of the latest in innovation because that is, that’s a huge differentiator in many businesses. And I think they need that to maintain their competitiveness. So I think it’s going to be a pretty significant factor.

We’re also anticipating on this Microsoft has provided the security bridge, this patch, this ESU, that is available. And you will see that utilized for probably, we believe, more small businesses than necessarily midsize and enterprise, but we still feel like that at least provides some element of a bridge in between. In many cases, and not all, it may not meet all the requirements of some of these highly regulated industries on its own. But they’re going to also have to continue to show that they’re still migrating over to the latest in the fully supported OS, but it’s something that will give a little bit of a bridge which can help. So that way there’s not going be this mass, at the end if we don’t meet the requirements at the end of the sunset of Windows10, does it ultimately provide some window of transition? And ultimately that was the plan and I think that’s likely to still be taken advantage of. Again, we tend to think it’s going to be a little bit more on small, maybe some midsized business, but less on these highly regulated or larger enterprise-type of companies.

Follett: These conversations around the Windows 10 sunset was one key element to why the industry felt like customers would migrate toward AI PCs. How has that shift been going? I think when we spoke about the first half in the past, I think it was maybe like 1 percent or 2 percent of purchases were AI PCs, I can’t remember. Are we seeing growth there at the levels that we thought we would, are we on track there?

Crosby: We are, and I think you are seeing a higher rate of adoption. What’s interesting, you’re seeing a higher rate of adoption in consumer than you are necessarily in B2B. And I think part of the B2B challenge was clearly around compatibility and making sure. So not only was there many initiatives around testing and validating these new devices and how compatible it was with software that you were operating, but also it was brand new technology that was operating in these pretty dynamic environments. So I think what you get with B2B is you get a little bit longer test and validate kind of phase of where we are. But I think what you’re seeing now is in acceleration where there’s an understanding now, and there’s more use cases that are clearly defined around the value proposition of what AI can bring.

What is interesting though is we’re seeing not necessarily the mix skew heavily towards the 40 TOPS or above and more of the high-performance AI devices as much as we’re seeing more of what we segment as an AI Basic configuration that has an NPU on board, but might be operating at less than 40 TOPS.

And so you’re seeing businesses deploy these, but I think less to the level that I think was the original expectation of what is going to be the requirement and the need. I think businesses have found, do I need to put the most high-performance device across the entire organization? Or do we limit those to only those areas that are going to be driving a lot of heavy AI workloads and then more of the general use employee, maybe the individual contributor, still needs AI capability, but can we utilize maybe a little bit lower-grade device to be able to make it more cost effective, but yet still make sure they’re getting exposed to technology. So we’re seeing that happen a little bit more.

But again, as we normally see it, there’s a little bit longer runway from innovator, early adopter until ultimately we start to get this now maturing kind of growth ramp. We are seeing more, but I think it’s still going to take a little bit more time.

Follett: Let’s stay on that AI theme for a little bit. I talked to channel partners at our XChange event, for example. I know you were there as well. You really heard the full gamut of someone on one end that says, “It’s overhyped, so much buzz, I'm tired of hearing about it,” to “I'm all in, I'm making sales, I'm helping my customers figure this thing out.” What’s the healthy way for a solution provider to think about this new opportunity?

Crosby: Well, and I do think to your point, there’s a huge opportunity for solution providers to be able to provide that consultative approach to their customer. Because I think depending on the size and the sophistication of their customer, they may be at one end of the spectrum to your point saying, “Tell me more about AI and how can I utilize this to make my business more efficient, more effective, etc.”, at a very entry level. To the point you may have a more sophisticated company that says, look, I want to utilize you guys to augment some of the things that we’re doing within these use cases that we’ve defined. So I think the important point can be the broader, and this is what we shared at XChange, the more expertise that we have the ability to coach and advise between those two ends of the spectrum, that’s the real opportunity for growth with a service provider. Because they can leverage their expertise and knowledge, but they can also help map a little bit of a best practice ultimately for these companies that are still very, very early in it. I think the common thing also throughout this is use-case definition. And as we saw initially when AI was launched, it was really talking, it was really speaking much more towards the hardware and the capability of the hardware. And I think what lagged was what’s the defined use case and where and how can I utilize this to effectively improve my business overall. And those are still evolving as weas we are seeing that go today. So I think the hardware got a little bit out in front. And I think now as we get a little bit more time, we’re seeing these more refined use cases come into play. And that’s again, what we’re seeing a lot of service providers say, I know this specific area around accounting and finance, right? I know this specific area and workload and ways that we can use agentic AI for customer support and other things. So we’re finding some specialization too with service providers, as well as kind of that overarching, “here’s across the spectrum,” but then they’re starting to identify these use cases and then figuring out ways that they can augment that with their own services. And that’s what’s really turning into some really impressive things. And I think there’s a lot of creativity coming from the channel in doing that. And I think they’re, again, that’s what we know. We know the channel is very agile when it comes to identifying an opportunity and then how do I take advantage of that to grow their business? And I think we’re already seeing that acceleration already beginning now.

Follett: A lot of solution providers, they have to figure out how to sell AI-focused technology, but they also have to figure out how to use it themselves. And they’re starting to grapple with the impact of AI on their own workforces and where can they find efficiencies. In some cases, people are talking about replacing low-level techs or level one, level two support with AI. What are some of the concerns you see in that realm?

Crosby: Yeah, it’s a great question. One of the things that we’ve had so many conversations as of late with regard to AI and what are the kind of the potential maybe unforeseen consequences of AI where certainly there’s efficiencies that can be gained and cost advantages, etc. But at the same time, how does that relate ultimately to how organizations work and how are they structured today? And to your point, I think you can take a very short view and unfortunately, I think a lot of the tariff impact has driven this, where we saw a lot of companies are saying, look, I have to find a way to absorb a significant chunk of this, this impact tied to tariff and not necessarily be able to translate that down to higher pricing to my customer. So what do I do? I have to lower my costs and my operation overall. And so they look at things that are typically one of the highest percentages, it’s headcount. And so what they look at is not the middle tier or even the senior tier that’s carrying a lot of the workload, but it’s that entry-level employee that’s coming in or relatively low within the organization that typically is the bench, as we always hear it referred to as building a bench. You want to be able to bring in entry-level employees, educate them on the culture, educate them on the business overall, and then in five years, you’ve got that next tier available. What we’re seeing now is that’s where AI is starting to enter within these organizations and I think businesses are making decision, “I can not hire the entry level, I can put AI in now and take advantage of those efficiencies. It won’t necessarily hurt me organizationally today.” But in five years ultimately now you start to see gaps Organizationally and then what does that lead to in in additional areas where now you’ve got a real hole? In the organization and how do you manage that? So think these are the things a lot of businesses are grappling with: they see all the good and they see the efficiencies and the cost-effectiveness and all the elements to AI. At the same time, I don’t know if they’ve seen it translate now to what’s the cause and effect ultimately of that and how does that impact my organization? Maybe not today, but maybe in five years. And I think that’s going be the critical thing to watch and the critical thing to understand because I think businesses can get caught and be surprised, which surprise is never good, obviously in business and that way.

Follett: So maybe let’s look ahead, 2026, particularly, let’s say the first half, where should solution providers be placing their bets for success?

Crosby: I think you’re going to see a lot of it as an extension of what we’re already seeing now as we talked about. We still believe there’s going to be nice growth and opportunity with a longer tail again on a lot of this device refresh that’s likely to occur. We’re going to see that continue to be a play. But I think as we just talked about here, I think this is where you’re going to augment your services with AI and a larger install base that’s now going to be occurring within those device refreshes and where and how they can figure out ways of opportunity. It could be the OS migration and deployment services that we’ve seen a lot of these solution providers do. It could be life cycle management and the life planning on some of the devices. It could be managed security services, or maybe they’re doing something that’s going to augment where a lot of these businesses are. So think those are three areas of taking advantage of still growth in hardware, still growth in cloud and software, but this is where you can start to integrate your augmented AI services, of, or elements of AI within kind of their offering. So I think they can certainly participate in ways, and I think that’s going to continue to be an evolving thing. But everything that I talked about and everything that I had heard at the last XChange as well is that I think you have a very, I think a very optimistic group of service providers that are understanding and seeing the opportunity out in front of them. And they’re now moving as quickly as they can to now reinforce with value-added services tied to that. And I think as we still see the devices continue to refresh again, and as we still see reasonable momentum and reasonable growth next year, this is where I think the opportunity can be for them.

Follett: What about the margin opportunity around services? Does that remain as strong as it has been historically?

Crosby: It’s actually still strong and even a little bit stronger. We just saw on the PPI numbers that came out, some of the things that you’re looking at is we didn’t see the upstream costs go down, which was the hope on hardware. We actually saw those go up. We also were seeing services costs going up as well. So typically that wouldn’t be subject to any kind of a tariff or tariff impact, but we are seeing elevation on services as well. Sio we’re seeing services are being impacted at least from an increase that’s going on. But I think they’re also taking on more diverse and more high value types of services as it relates to AI. And I think that’s where any time that we have a little bit more of a vertically oriented service or a collective solution between hardware and services, that tends to be a margin header where we tend to get more compression on margins as we see more broader, more horizontal-positioned services tends to be a cost improvement versus them doing it themselves. And that’s the difference. So as long as I think we can stay in front and leverage some of the AI capability, use case definition, augment their services with what customers are doing, that’s all high margin, high value. And I think there’s a real opportunity for that to still continue.

Follett: So Mike, I know you have looked a little bit into your crystal ball. What can you tell us about 2027?

Crosby: In 2027, again, the expectation is we’re going to start to see some general improvement, not only around the tariffs. The expectation is based on the algorithm, that we should see some additional negotiation and start to see that tariff impact alleviated a little bit. That drives still a good positive growth number up about 5 percent. We’re looking at about $73.4 billion in2027. A nice balance, though, of hardware, software, and services. Hardware is going to normalize, though. We expect hardware, especially on the PC side, now that we get into that refresh cycle and we’ll start to see slow down a little bit, but the expectation is you should start to see some networking. You’re going to see also things like displays as an example. If you look at monitors today, monitors are actually lower and underperforming a little bit versus PCs because monitors are in between this PC refresh cycle. Even though you still get some gain when you’re refreshing a PC and you get an attached to the new monitor, typically monitors last a little bit longer. I mean, they’re operating five to seven years. And so you might see a little bit of a spike in an elevation on some of these other categories that maybe aren’t tied to the PC one-to-one on the attached, but you’ll see it follow that normal cycle.

So couple on the macro side, like that you’re going to see interest rates are going to be lower. You’re going to see an opportunity for businesses to invest and I think you’re going to continue to see capital investment go on. You’re going to see cost of capital being lower so it’s certainly going to be an impact. I think you’re going to start to see some benefits of some of the tax improvements that came out of the most recent legislature from Washington that it should start to help impact to a positive on the on business-to-business side of the equation. And so I think what you’re looking at is a bit more of a normalizing in ’27, but again a nice growth number balanced and we still see a little bit of an improvement in unit volume where in 25 that’s when we saw the compression a little bit on units and ASPs were propping up the revenue number a little bit. We think that’s going to find a little bit more normalization as we get to 2027.

Follett: Great. Well, we have covered a lot of ground today, Mike. I really appreciate you joining me and sharing your insight on where solution providers can find growth both throughout this year and into the future. So thank you very much.

Crosby: You’re welcome. Thanks for having me. Appreciate it.