In terms of sales, Juniper Networks is doing well. Q2 revenue, at $1.27 billion, was up 8% year-on-year and beat analyst consensus of $1.26 billion.

Juniper's Service Provider segment, which posted a 2.3% year-on-year decline in the previous quarter, also returned to positive growth. Enterprise growth was in the mid-teens, although Cloud – primarily due to a strong performance in Q2 FY21 – only managed a slight increase in turnover.

Analysts at Rosenblatt Securities pointed out in a research note that Juniper built $250 million in additional backlog during Q2, bringing the total up to $4.4 billion. That's about a sixfold increase compared to six quarters ago.

Figure 1: Juniper gross margin for Q2 was 56.2%, missing Rosenblatt Securities' estimates.
(Source: Sundry Photography/Alamy Stock Photo)

With strong revenue growth visible in the pipeline, Juniper ratcheted up FY22 top-line guidance from between 7% and 9% growth year-on-year to over 10%.

In another sign of sales confidence, Juniper also introduced FY23 revenue growth guidance of "at least mid-single digits," which, Rosenblatt Securities noted, is sooner than it typically provides the next year's outlook.

Earnings squeeze

Adjusted EPS of $0.42, however, missed the consensus of $0.45. This was primarily because of lower gross margins from paying suppliers more.

"The company saw a meaningful uptick in the number of supplier de-commits during 2Q FY22," said Rosenblatt Securities. "Juniper did not want to let its customers down, so it paid higher expedite fees to secure supply."

"Automated WAN products, which are mostly service provider routers, exceeded [revenue] expectations by growing 17% year-on-year," continued the research note "We believe this is the area where Juniper most paid up for supply, and saw lower gross margins."

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Juniper gross margin for Q2 was 56.2%, 1.7 percentage points below Rosenblatt Securities' estimates. Q3 gross margins are guided at 56.5%, which is 2 percentage points below previous expectations.

"We have taken actions to improve delivery of our products to customers," said Juniper's CFO, Ken Miller in prepared remarks. "While some of these actions are likely to impact profitability over the next few quarters, they are enabling us to better meet customer demand, which should have positive long-term implications for our business. We remain focused on driving improved profitability and expect margins to improve in 2023."

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– Ken Wieland, contributing editor, special to Light Reading