The cloud vertical continues to dampen Juniper Networks’ revenues, according to executives on the company’s third quarter 2018 earnings call yesterday. For the three months ending Sept. 30, cloud revenues declined 28 percent year over year and 11 percent sequentially. Overall, the company reported net revenues of $1.179 billion, a decrease of 6 percent year over year, and a decrease of 2 percent sequentially. Non-GAAP net income was $191 million, a decrease of 10 percent year over year and an increase of 12 percent sequentially, resulting in diluted earnings per share of $0.54.
“While we remain optimistic regarding our long-term prospects, we are also seeing some challenges in the market, particularly within the cloud vertical where we believe several of our customers are running their networks harder and the pace of deployments are proceeding more slowly than we previously anticipated,” said Juniper CEO Rami Rahim, according to a transcript of the earnings call.
The company is not expecting a material improvement in cloud revenue during the fourth quarter. This is a departure from earlier forecasts of a return to year-over-year growth in the fourth quarter. Juniper now expects the mid-point of its revenue guidance to reflect a year-over-year decline due to the slower pace of expected deployments in cloud.
Overall, Juniper is expecting $1.220 billion in sales at the mid-point versus the $1.255 billion of analysts’ consensus.
Rahim has been asking for investor patience for several quarters as cloud providers transition from MX routers to PTX routers. The PTX gear provides lower margins, but he says revenues will even out after the transition as the company satisfies its existing hyperscale cloud providers and garners new cloud business. On yesterday’s call he said, “I do think 2019 all up will be a growth year for us in the cloud based on the visibility that we have, the timing of deployments.”
He said that currently most of the company’s big cloud projects are PTX-based. And he sees an opportunity to expand Juniper’s cloud footprint with its PTX offering as well as its upcoming 400G portfolio, which it recently announced.
“We’re doing everything that’s necessary to maintain our footprint where we already have incumbency, and of course there’s a large footprint that exists among the major cloud providers,” Rahim said. “There is a deliberate strategy to move into a new footprint, especially closer to and into the data center with our switching portfolio.”
A Little Blue Sky
There were a few bright spots in yesterday’s earnings report. The company touted its recent partnerships with Ericsson and Nutanix.
Security was another bright spot in the third quarter, growing 8 percent year-over-year and rising for a fourth consecutive quarter. And while the company’s service provider revenue declined 6 percent year-over-year, the business grew 4 percent sequentially and “performed better than we expected,” said Rahim. He attributed the improvement to Juniper’s strong relationships with many of its top service provider customers.