What To Expect From Juniper After A Sustained Period Of Revenue Declines

by Trefis Team
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Juniper Networks (NYSE:JNPR) recently announced its third quarter results, reporting a 6% decline in net revenues to $1.18 billion. Revenues were slightly higher than the midpoint of the guided range at the end of the previous quarter. While Juniper’s core revenues have declined in recent years and through the current year, routing revenues picked up in the September quarter to partially offset the fall in revenues. For the September ended quarter, combined product revenues were down 9% to $795 million while services revenues also fell 1% to $385 million. Juniper’s non-GAAP operating margin stood at 20% for the quarter, which was 2 percentage points higher than the midpoint of the guided range. As a result, both non-GAAP net income and non-GAAP diluted EPS were over 15-20% higher than expectations at $194 million and $0.54, respectively. Going forward, we expect the trends from Q3 to continue through the December quarter as well. We have summarized our expectations on our interactive full year Juniper results forecast dashboard. If you disagree with our forecasts, you can change the key drivers including segment revenue and margins to gauge how changes will impact Juniper’s results for the year.

Segment Trends

We forecast Juniper’s core switches revenues to decline by around 13-14% on a y-o-y basis to $1.9 billion for the full year. On the other hand, routing revenues picked up in Q3 after a facing revenue declines in the first half of the year. Revenues were up in the September quarter due to strong demand for the company’s enterprise routing portfolio including the MX204 and the MX10003 products. We expect full-year routing revenues to be around 5-6% lower over 2017 levels at $910 million, mainly due to the revenue declines in the first half of the year. Comparatively, security revenues were up by 2-3% through the first half of the year after witnessing high single-digit declines last year. This trend continued through the September quarter as well. Our full-year forecast for combined product revenues stands at $3.13 billion, compared to $3.45 billion in 2017. Our full year forecast for services stands at $1.56 billion, roughly flat over prior year levels.

In terms of margins, Juniper reported a non-GAAP operating margin of 20% for Q3. This was sequentially up from around 17% in Q2 and 12.5% in Q1. Despite the sequential improvement, margins are much lower than 25-27% through 2017. Going forward, the company expects its Q4 operating margin (non-GAAP) to remain in the 20% range. As a result, we forecast full year adjusted margins to be less than 20%. Accordingly, net income and EPS is forecast to be around 20% lower on a y-o-y basis to $610 million and $1.74 per share, respectively.

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