Juniper Earnings Preview: Will Growth In Services Be Enough To Offset Product Revenue Declines?

by Trefis Team
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Juniper Networks (NYSE:JNPR) is scheduled to announce its second quarter results on July 26. Juniper’s core product sales have declined in recent years, which has been accompanied by a fall in product gross margins. This trend continued in the most recent quarter as well. Growth in services revenues has only partially offset the decline in product sales. For the June quarter, Juniper’s gross margins are expected to be up sequentially, but are still  likely to be considerably lower on a y-o-y basis.

We forecast Juniper’s core router and switches revenues to decline in double digits to $485 million and $240 million, respectively. Security revenues are expected to be 5-6% lower on a y-o-y basis to $65 million. On the other hand, we forecast services revenues to increase by low single digits to over $400 million. Resulting net revenues are projected to be almost $1.2 billion, slightly higher than the mid point of the company’s guided range. Juniper’s operating margin (non-GAAP) is expected to be around 6-7 points lower over Q2’17 at around 17.5%. It should be noted that while the expected operating margin is considerably lower on a y-o-y basis, it is a sequential improvement of around 5 percentage points, and margins are expected to return to previous year levels by the end of the year. Accordingly, net income and EPS are also expected to be over 25-30% lower on a y-o-y basis to $156 million and $0.44 for the quarter, respectively. We have summarized Q2’18 expectations on our interactive earnings preview dashboard for Juniper. If you disagree with our forecasts, you can change the key drivers including revenue growth by segment and margins for Juniper to gauge how changes will impact its EPS for the quarter.

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