KeyBanc Capital Markets' Q1 IT VAR and security-channel survey, covering responses from 36 partners, portrays a mixed yet broadly durable spending environment for IT products and services. Survey respondents cited elevated component pricing, geopolitical uncertainty, and disruption from artificial intelligence as key influences on activity.
Despite those headwinds, the proportion of partners reporting they met or exceeded plan rose to 88%, up from 81% in the prior quarter. KeyBanc analyst Eric Heath reported that the net effect of higher component prices produced a pull-forward of demand, notably across server, storage, and networking equipment. Expectations for public-cloud expenditure also ticked up modestly in the survey responses.
KeyBanc singled out positive implications for several large technology companies based on the survey findings. The firms identified by the bank include Dell Technologies, Hewlett Packard Enterprise, Cisco Systems, Palo Alto Networks, CrowdStrike and Microsoft.
At the same time, the survey surfaced cautionary signals about budgeting and public-sector demand. The outlook for IT budgets in 2026 moderated to a projected 2.5% increase, down from a 5.3% projection in the previous quarter. Heath noted that the shift in the 2026 budget outlook may be linked to memory and CPU pricing pressures and broader macroeconomic uncertainty.
Trends in U.S. federal spending also weakened in the survey, with 33% of channel partners expecting declines in fiscal 2026 business from federal customers. That contrasts with the overall gains reported across many partner books of business.
Cloud spending expectations remained a relative bright spot. Eighty-seven percent of respondents anticipate similar or faster growth in public-cloud usage going forward, and partners collectively expect 55% of workloads to ultimately migrate to the cloud.
Security-related demand held steady to slightly better, according to the survey. Security VARs reported year-over-year revenue growth of 11.6% and an improved outlook for 2026 in the security segment.
Bottom line - The KeyBanc Q1 channel survey shows a market absorbing component-cost and geopolitical pressures while still generating pockets of strength, particularly in infrastructure, cloud migration, and security. The results point to potential benefits for several major vendors even as budget growth and federal spending trends present uncertainties.