Juniper beats 1Q expectations but component shortages are worrisome

Juniper’s good news is slightly tainted by the prospect that, like so many companies in this sector, it could be negatively impacted by the ongoing semiconductor shortage. (Image by StartupStockPhotos from Pixabay)

Juniper Networks continues to be a networking turnaround story. The company reported first quarter revenues of $1.07 billion, which beat Wall Street's expectations and is an increase of 8% year over year.  

Perhaps most surprising was the growth in Juniper’s service provider business, which has historically been a weak area for the company. Juniper’s service provider business saw a 17% increase in revenue to $438 million compared to the first quarter of 2020.  

“We are playing to win,” said Juniper CEO Rami Rahim, adding that he believes the company is taking share away from its competitors.

Juniper executives provided added color on the company’s service provider vertical market, noting that Juniper’s automated WAN solution was driving a lot of this growth in this market and the cloud market, and they expected that momentum to continue. “We are confident in our automated WAN solution, and we expect in 2021 that it will be at the high end of our guidance,” Rahim said.

Rahim also noted that Juniper’s $450 million acquisition of 128 Technology last October and its artificial intelligence-driven network portfolio, contributed to the company’s growth. Juniper is in the midst of incorporating 128 Technology’s Mist AI capabilities into its portfolio of products.

Related: Juniper Networks drives AI into SD-WAN with Mist

“We are pleased with the momentum in our software business. We’ve seen a 70% year-over-year growth in orders,” he said. “Each solution has a meaningful software component that drives differentiation in the market … You can’t sell an AI-driven solution without a meaningful software component,” Rahim said.

Financial analyst firm Cowen noted that Juniper’s first quarter results are encouraging, particularly because they indicate the company is improving its competitive position in the enterprise, cloud and service provider markets.

But 128 Technology isn’t the only acquisition helping Juniper capture market share. Rahim noted that the company’s acquisitions of Apstra and NetRounds are broadening its product portfolio, which is appealing to customers.

Besides the service provider business growth, Juniper’s cloud business also grew 3% to $271 million compared to the same quarter in 2020, and its enterprise business posted $366 million in revenues, a 1% increase year over year.

Component concerns

But Juniper’s good news was slightly tainted by the prospect that, like so many companies in this sector, it could be negatively impacted by the ongoing semiconductor shortage. The company warned that it may need extended lead times for its products, but also added that it believes it has sufficient semiconductor supply to fulfill its full-year financial forecast.

“This is a worldwide shortage, and it is affecting nearly every tech company. Juniper is not unique. But I have confidence in the strength of our supply chain,” said Rahim. “We have invested in our supply chain, and it is helping us now.”

In other metrics, Juniper’s product revenue ended the quarter with $672 million, a 10% increase over the same quarter in 2020. Service revenue was $402 million, a 3% increase year over year.

Despite the chip challenge, the company is forecasting revenue growth of 4% to 5% for this year, which is higher than previously expected.