Juniper Networks’ software business grew 28 percent year over year during its latest quarter, outpacing the rest of its business.
“We’re seeing momentum with Contrail and had several new customer wins in the quarter, including three global Tier 1 carriers and a Fortune 500 enterprise account,” said Juniper CEO Rami Rahim, according to a Seeking Alpha transcript. The company plans to start shipping its Contrail Enterprise Multi-Cloud software this quarter, “and we think that’s going to drive a lot of momentum in the whole enterprise data center solution, which is really a software-led solution,” Rahim added.
But software revenue wasn’t enough to push the networking company back to year-over-year growth.
Revenue Drops 8%
The company reported net revenue of $1.2 billion for the second quarter, an 8-percent year-over-year decline and an 11-percent increase compared to the first quarter.
Non-GAAP operating margin was 18.5 percent, a decrease from 24.2 percent in the second quarter of 2017, but an increase from 12.3 percent in the first quarter of 2018.
Its routing business, which brought in $490.6 million, increased sequentially but declined 14 percent year over year.
As in previous quarters, Rahim characterized 2018 as a “transition year” for Juniper as its cloud customers shift from MX routers to PTX routers. “Our PTX products accounted for approximately 80 percent of cloud routing ports we shipped on a 10-gig equivalent basis during Q2, compared to roughly 60 percent a year ago,” he said. Later on the call he added that, “our view of the full year in terms of that transition has always been this is going to take multiple quarters, and it’s playing out that way.”
Rahim also touted the company’s plans to offer 400GbE within its routing and switching portfolio. It will start selling these products by the end of the year, he said.
Switching revenue, at $254.8 million, also increased quarter over quarter but dropped 8 percent compared to last year, driven by weakness in cloud and service provider sales.
Juniper’s security business reached $79.5 million in revenue, growing 16 percent year over year and representing a third consecutive quarter of year-over-year growth.
Lowered Q3 Guidance
Juniper did lower its guidance for the third quarter. Rahim cited better-than-expected Q2 enterprise business and the timing of some cloud and service provider deployments, which he said are “taking longer to materialize” than expected.
For the quarter ending Sept. 30, Juniper expects to generate revenues between $1.14 billion to $1.2 billion, and it forecast adjusted earnings per share of between $0.41 cents to $0.47 cents. This sent Juniper stock on a downward trajectory in after-hours trading on Thursday. Shares were down almost 10 percent as of Friday morning.
Rahim said he remains confident that Juniper will see a return to year-over-year growth during the fourth quarter of 2018. “While our business remains lumpy and sometimes difficult to predict on a quarterly basis, we remain confident that we are on track to deliver a return to growth by the end of the year.”