Juniper Networks Headquarters in Sunnyvale

What’s Wrong With Juniper Networks?

The networker issued an earnings warning for Q3, saying its revenues will be hurt by lower than expected cloud-related sales. Wall Street is trying to determine if it’s a blip, or a signal of broader softness in cloud.

After two quarters of strong cloud-related sales growth, Juniper Networks this week announced its revenue from cloud equipment softened substantially in the third quarter of 2017, resulting in an earnings warning that sent shares plunging more than 6 in early trading today.

The Sunnyvale, Calif., IT networker issued preliminary financial results estimates for Q3 Wednesday, indicating that revenue would now be in the range of $1.25 and $1.26 billion, down from earlier estimates of $1.29 and $1.35 billion.

The announcement fueled speculation about whether the softness in cloud-related sales was a blip unique to Juniper Networks, or a canary in a coal mine foreshadowing weakness in the broader cloud sector.

“The miss is bemusing the Street,” said one report in Barron’s today. “Some are not entirely sure how much of this is Juniper’s fault, and how much this is generally a shortfall in cloud spending for the quarter or the rest of the year.”

Those concerns put pressure on shares of other networkers at the start of trading today, with Cisco Systems down 1.5 percent, and Arista Network down a half percent.

Juniper Networks offered little detail beyond stating that the drop resulted from “lower than expected revenue in our cloud vertical.”

“We are confident in our company strategy, product roadmap and strong positioning with our cloud provider customers as we continue to navigate and disrupt a very dynamic industry,” Juniper Networks CEO Rami Rahim said in a statement. “Although we are disappointed in our lower than anticipated revenue, we remain focused on operational excellence, cost efficiencies and delivering long-term, sustainable growth.”

Full preliminary results will be released during an earnings call webcast on Oct. 24 at 2 p.m.

 

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