While Juniper's stock dropped 8% post-market on Tuesday and Juniper reported a 2.3% drop in its service provider business, analysts remain optimistic for the networking company's outlook in 2022. The company brought in $1.2 billion in revenue for Q1 2022, up 9% year-over-year.

"[Juniper] management provided a consistent sales forecast, despite greater supply chain challenges and mix pressuring product gross margin. We attribute the weak after-hours trading to the margin issues," said the analysts at Raymond James & Associates in an email newsletter.

Raymond James analysts weren't surprised by supply chain problems, which they expect to continue this year. But they are encouraged by Juniper's "strong order patterns and the growing backlog now over $2B."

Supply chain issues persist

Speaking Tuesday during Juniper's Q1 earnings call, CEO Rami Rahim explained that while demand hasn't waned for its MX Series product, which are SDN-based routers, supply chain constraints have presented challenges in "our ability to procure the components and ship the product." As a result, the company has shipped "a little bit less MX," he said.

In addition, Rahim said Juniper shipped more wireless access points but reaped less revenue from those sales: "we shipped a little bit more mixed access points, which at the time of shipment carries a relatively low margin compared to the rest of our portfolio but obviously, as we sell more software and we recognize that software, which happens over time, it is margin-positive over the long run."

Juniper's service provider segment also took a hit from supply chain and shipping issues, creating a backlog of product orders. That backlog rose 35% year-over-year, sending the grand total to nearly $2 billion. The service provider business dropped 2.3% year-over-year, or about $10 million, but the hit wasn't nearly as substantial as when it dropped a whopping 14% YoY in Q1 2020 at the start of the COVID-19 pandemic.

Cloud and enterprise power

On the flip side, Juniper's cloud business grew 13% and its enterprise segment was up 18.5%. Rahim said this is the first time Juniper's enterprise business has been the company's largest customer vertical.

"Cloud and enterprise strength more than offset a modest decline in our service provider vertical, which was due entirely to the timing of shipments as a result of supply chain challenges," said Rahim.

Juniper's cloud-ready data center solutions business, which includes the Apstra intent-based networking service, also grew 20% YoY, which included the addition of a new "top 10 cloud provider" data center customer, added Rahim. The AI-driven enterprise segment, supported largely by the company's Mist AI portfolio, grew 33% YoY and exceeded $400 million in annualized revenue in Q1.

Looking ahead, CFO Ken Miller forecast Q2 revenues of $1,255 million, plus or minus $50 million, or year-on-year growth of about 7%.

Related posts:

— Kelsey Kusterer Ziser, Senior Editor, Light Reading