Thanks in part to an increase in service provider revenues, Juniper Networks beat analysts' expectations in its Q2 earnings on Tuesday.
Juniper posted second-quarter net income of $61.2 million, or 18 cents per share, up from $46.2 million or 3 cents per share last year. Revenues for the quarter decreased to $1.086 billion from $1.102 billion last year.
Analysts polled by Thomson Reuters estimated earnings of 34 cents per share on revenues of $1.05 billion for the second quarter.
On a sequential basis, Juniper's service provider revenue increased by 16.2% in Q2, but was down 2.5% year-over-year. Cloud revenue increased 9% from the previous quarter while enterprise posted a modest 1.1% increase. Year-over-year, cloud was down 1.5% while enterprise grew 0.2%.
The service provider increase was notable for Juniper as it faced some continued supply chain issues during the second quarter due to the coronavirus pandemic.
"Although we are seeing some COVID-19 related capacity benefits, we believe much of the service provider order strength we experienced is attributable to our diversification efforts across customers and products over the last few years," Juniper Networks CEO Rami Rahim said on the earnings call, according to the Seeking Alpha transcript. "To this point, we are continuing to see improved momentum with several of our U.S. cable customers as well as Tier 2 and Tier 3 carriers in international markets. We are also seeing increased carrier adoption of our switching and security offerings in addition to our traditional routing platforms.
"We believe we remain well-positioned with our service provider customers and that our continuing efforts to diversify our customer base and increase the breadth of our offering should benefit this business through the remainder of the year."
Rahim said that based on some of Juniper's service provider customers pulling back on spending in future quarters, he expected the service provider business would likely to see a mid-single digit decline in 2020.
"We saw really strong switching momentum among our telco customers and e-security," Rahim said." We have a strong mobile and especially (our) 5G related security solution that's seeing some really great demand with our customers.
"I think that to the extent that we are in a new normal relative to telco spending dealing with capacity constraints, that should last. And there is a meaningful element that's just not COVID related at all and that's really a matter of execution and that's where I just think we are executing really well."
On a year-over-year basis, routing revenue was down 3.3%, switching declined 3.2% and security was down 1.4%. Services revenues increased 1.4% year-over-year while software revenue declined over the same time frame. Of Juniper's top-10 customers in Q2, six were cloud, three were service provider and one was an enterprise.
Rahim also highlighted Juniper's first 400G wins during the June, which he said were across the geographies that it serves. Despite those customer wins, Rahim said 400G revenue opportunities would begin in earnest early next year and become a more a material driver through the course of the year.
"While our initial wins are for wide area use cases, these opportunities represent net new footprint and increased confidence in our ability to deliver the system density, programmability, power footprint and software needed to gain share in both wide area and data center used cases," Rahim said. "While our pipeline of 400 Gig opportunities is healthy and we are encouraged by recent wins we secured, many of the bigger opportunities we are targeting have yet to be decided."
Looking ahead to the third quarter, Juniper expects adjusted earnings of $0.43 per share, plus or minus 5 cents per share, and revenues of about $1.125 billion, plus or minus $50 million. Analysts currently estimate earnings 43 cents per share and revenues of $1.1 billion.
"Despite healthy momentum entering the second half of the year, the macro environment remains very uncertain and our longer term visibility remains limited, particularly with respect to the trajectory of our enterprise business," Rahim said. "As a result, we are continuing to offer limited full year guidance and would encourage you to build your model conservatively."