JNPR - Earnings call transcript Q2 2018

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Operator

Greetings, and welcome to the Juniper Networks Second Quarter Fiscal Year 2018 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jess Lubert, VP of Investor Relations.

Jess Lubert

operator. you, Thank welcome and second XXXX quarter Good to call. conference afternoon, our

statements in Chief today, SEC and and furnished CFO might discussed are Today's and with These forward-looking and XX-Q, and current uncertainties, today other to me recent are our Executive These risks materially. call results on statements most expectations. Rami certain Officer. Joining risks Financial Rahim, the filed Officer; in subject our Chief Commentary filings. our Ken contains actual based are X-K differ our press release Miller,

Our Juniper forward-looking forward-looking to statements statements. speak no any only as of today, update undertakes and obligations

Our discussions in why today's non-GAAP financial information Relations can Investor section included information today of of results a our is useful we Reconciliation consider view Financial will the on non-GAAP results. website, company's press found Commentary the financial be on under release. include Reports.

Our on XQ which forward-looking on XXX, and adopted January are modified ASC under a guidance provided XXXX results X, retrospective XXXX, we basis.

remarks, prepared questions. up. to question will we take our over Rami. Following yourself now follow that, I to and With the Please one call one limit hand will

Rami Rahim

the guidance, revenue Enterprise revenue, We exceeded you. in improvement sequential June margin end Total $X.XX Thank results was of of earnings complemented high high the Non-GAAP discipline. to gross business of improvements as cost our share our end at higher seasonal guidance during $X,XXX everyone. better-than-expected Cloud and of verticals. Service and per Provider strong our quarter. continued results due million our the Good reported afternoon, in

is into some I'd guidance, the like following our factors. QX provide our While than by better QX which forecast, impacted were insight being results to

we business close the strong the previously a anticipated. and expected than a close in to experienced we quarter, bit of June sooner happened we First, to some QX Enterprise

over optimized platform, core market across products confident to the telemetry upgrade we markets next SRX that is our few remain not year. an offering strategy of position Second, expect to are having as will gaining important Service although our believe, on share. that later soft first industry's mindshare year-over-year our at strengthen confidence a a and expanding cases, and this quarters, us are growth most had a to XXX-gig and of during holding we are each High-End QX likely orchestration are pipeline some well quarter. factors only based programmable new goal including a right win Cloud track to that innovations our this certain to contribute in we high-performance mostly our My to confident QX and rich these In taking number Provider forecast continuing gaining on core conversations and help the believe or longer routing we we and the MX innovate across systems We for the industry-leading, our multi-cloud we December which, see leading that and footprint, of we quarter. new cards, markets. with to expected an of many orders are disrupting to platform, the as bit I'm Firewall line have materialize, customers. of in a the These our to function to timing, is our customers, the December return verticals, strong remain with bring regard, we're but timing and

highlights a for quarter. few Now of the

the quarter Strength technologies. marking experienced business Xth the growing momentum during across growth. year-over-year, year-over-year quarter, Enterprise was broad-based X% and of consecutive geographies, strong Our June verticals

are where of a in several sequential strong our due PTX a Cloud customers our offerings. the believe MX modest transitioning to execution seasonality improvement we compelling portfolio some expect largest saw Enterprise platforms. to While from during Enterprise vertical, remained and we We of QX, our our momentum

While over is quarters, persist lumpiness likely next our cloud in we in to few ASC business that this despite this pressure the process making the progress business. routing creating some through believe transition, is year-over-year we are

our second I highlight to quarter. routing cloud would that like of evidence June As quarter growth experienced business consecutive the our progress, of during sequential a

roughly of products ports PTX year basis for cloud QX, Our accounted we on compared ago. equivalent approximately during a XX% shipped routing XX-gig a to XX%

continue sequential and ASPs routing the business Based rest of on signs the cloud that on our a a we feedback rising is to are likely remain cloud engagements, Our we our from basis, requirements. stabilization the set's capitalize year. customer this footprint routing positioning see confident on holding to of think through trend customer we continue network the to

trends the Our during seasonal period. business Service experienced June normal Provider

to timing While do the sequentially we due we our during Provider the Service September sales deployment. the expected of improvement expect potential for the December see some decline to quarter, during period,

our We and efforts vertical service are over these next market to position peers. business of with to few which build-outs, share continuing We the gain XG differentiate should resonating in innovate to present the believe as in move forward our initiatives relative Metro for Juniper our are could years. and those and providers solutions this tailwinds

sequentially, Now declined Switching I our summarize Routing, performance would business like and year-over-year. Security. to Routing, increased In but our across

the In present this back but declined cloud our Though to strong Service and seeing growth vertical, MX for our year-over-year. a PTX a need our bounced soft products due not customers our of headwinds, transitioning cloud While during continued we're due which experienced recovery provides. quarter-over-quarter, creation to Switching, the increased the QX. Provider platform, the Provider dynamic uptake business following in are quarter-over-quarter service Service to capabilities year-over-year new we several architectural business, period the transition seasonal June within healthy to in

named a recently of that switching leveraging the year-over-year the recognizing leader a XXXX. high for excluding including very the Networking. for entire this growth will believe accounts. to business against validated customers year-over-year The business representing product EX QFX. value believe remains out see In declined in consecutive a which our our Based difficult growth. Cloud our our well-positioned network year-over-year, customer Routing, are concentrated hyperscale and by and enforcement double-digit architectural to Security we due our regarding the threats. Switching growth, Center Security, We was While we scale verticals, for believe more Gartner's Magic comparison quarter optimistic detection our business year, transition remain hyperscale growth We pipeline of lines, and QFX remain including full Data feedback, portfolio Quadrant optimistic and industry third strength portfolio across we of saw grew single-digit in remain for business, on impacting on XX% same the being outlook cyber compete competitive our year-over-year

We're an making seeing with capture efforts new with progress XXX account. roadmap are Contrail XX% expect wins grew executing a this we will quarter. begin compelling to We Multicloud on extremely carriers customer which X had in Contrail, believe revenue, Fortune several for Tier quarter, and we software shipping We momentum Enterprise our are the including and global product more our and three year-over-year. Enterprise capability

AppFormix verticals. and with Additionally, Enterprise new in Provider the Service wins gain traction continues to

professional have support which XXX X% experienced If revenue strong In lumpy XXX a business contracts we renewal While matter basis, on to of predict saw remains for change, services. to by truly our ASC summary, that to we remain our we the growth our quarterly of a ways deliver not year-over-year. return sometimes confident track in and we year-over-year, demand difficult innovating Services rate tax and and caused for business year. the to in an would accounting on end of increase are believe to customers. a the ASC are decline impact growth Service our while We

for positioning see their success. over dedication, I our especially want Juniper. thank is Ken, my We creating improved to right will stakeholders. to support confidence in thanks who which would more are executing results our work essential the of I partners our all turn continued now shareholders our change the to to detail. call business like for side to quarterly value long-term on I and and our for in to industry customers, the their and will of discuss in and hard financial employees extend

Ken Miller

were the share by Enterprise, midpoint led afternoon, all total all of results year-over-year of pace but in sequentially, line of also increased with a the growth second essentially increased margin non-GAAP declined which per and of was you, billion $X.XXX earnings year-over-year. everyone. due posted Service above Rami, trends, gross growth consecutive year-over-year, architectural sequential with of X% adoption at quarter of Provider The XX.X%, expected impact our reflects of Service change, driven year-over-year. quarter the declined recognition than revenues and verticals, non-GAAP $X.XX; headwinds revenue and ASC revenue across would guidance. growth good been Provider year-over-year quarter up of its by the We vertical Thank deployments. Without The better The continued X% second seasonal technologies. sequentially, XX%, and Cloud X% saw Enterprise to XXX. the the flat have Xth XX% this for all decline X%. in

confident in mentioned, with position our Rami cloud customers. our As we remain strategic

timing of However, the may deployments vary. continue to

the a third Routing XX%. momentum growing increased Security in quarter, double-digits over increasing and posted sequentially, continued, year-over-year and Security consecutive of the X% to positive Switching quarter During both quarter. growth, quarter

Cloud. due decline the and Without three due year-over-year, of saw declined Switching primarily have XXX. ongoing to year-over-year. were quarter, in product primarily for customers primarily deferred in XX% would one the revenue declined Cloud of was shift quarter, weakness XXX, deferred increased to the impact of in a top-XX Service the Routing In PTX basis. grew driven year-over-year six on reviewing Product Enterprise. Provider Provider. X% architectural the Our by business adoption the XX% second were and adoption a revenue year-over-year, ASC Service ASC the Cloud, our in

higher a year-over-year, higher the of to million non-GAAP Cuts Jobs due was X% to installments related revenue, are tax. Non-GAAP a decline to tax collections million flow and and prudent improvement including result sequentially. year-over-year revenue. gross XX.X%. operating increased cost was from and $XXX expenses was million related primarily These payments was and quarter, X% the the due payments. transition margin decline while U.S. The eight year-over-year, primarily for The to impact $XXX Cash annual operations quarter, Tax lower lower of the of sequentially, first reflect sequential declines the mix $XXX the of and the management. For tax higher Act,

In addition, $XX we million dividends. paid in

cash, and was cash June last versus total modest end of investment a $X.X increase quarter. equivalents billion, the balance the quarter at Our

on move Investor Before Relations of on which and site. CFO the the we guidance, answer our available the our Commentary you in to like on would detailed color part could I find provide some to question call,

materialize. as Our Enterprise, Service the QX taking business, Provider in QX of timing are to well revenue particularly stronger-than-expected and which guidance Cloud as certain longer deployments reflects

working related are largely we through in management mitigate is components, impact will this further which not this some addition, constraints lead industry-wide certain In could believe to significant At time, within Therefore, issue. our a factor supply we guidance. our be power times it to QX. able we

impact could our it However, results. future

to While return we quarter. the customer spending continue to to year-over-year difficult to and growth expect during dynamic predict, remains December

We in for and expect with non-GAAP margins time. to quarter remain over QX stable the volume gross improve

this could pace factors. of other as the However, impacted well be as improvement by mix,

to commitment We annual dedication to expenses their operating basis. thank and our a like be approximately year-over-year expect would I success. flat team In on for to closing, Juniper's non-GAAP continued

the call like would questions. open to I Now for

Operator

time, a question-and-answer we this be will session. conducting At

Long, comes proceed Our Tim BMO Please Markets. first Capital from your with question question.

Timothy Patrick Long

vertical more looking there at Cloud what the then and into bit a or Switching solutions. Cloud it don't a a product secondly, Cloud of still and base just competitive across – little question little kind on does talk it's And just where XXX insertion just and or so customers the root and customer topic, Rami, how else clarification; two delays; help you. Thank players just there? on about would delays, and you the testing broad is maybe the the solutions and maybe is. at into – assuming traction base? trying one maybe touch window bit, a the bit gig that could talk are about you give you a it get bay can if thinking the point you Is there a cause I'm on other customer something hyperscale you're Thank to just think the is those you. little you be, Yeah,

Rami Rahim

Thank Tim. you,

set good questions. So, of

coming routing, Certainly, cloud First, architectural as and goes from cloud about, it's gig with as the to far transition position routing MX shift XX all been talking same a XXX PTX, platform are the bear. our to gig to that we've scale-out.

view of multiple always the happen, our to playing coming centers data take is Predicting deployments easier exactly than quarters, globe, the full when that Our this said it's done. into the way. around and get the of has year as view especially going are transition – out to year, that going big in internationally, is terms been deployed

do confident extremely an very make I However, sure customers. that our want position strong to that with I remain just are all understand, in you Cloud we

QX customers As were you just Cloud of next heard X that the fact, our were, into designed from customers in already XX Ken, many deployed. top to be need in generation networks of

conversations or You of, so most completed stronger. our last we're needle couple good us. well, the of a ASP our been getting it indication PTX of offer a part just data at behind transition that's asked to not; with at seen engineering the pretty of the good down fact abnormally is our is takes about to of the but least significantly. I'll the for part, the how which at to Certification as products, here, customers been point either now declines that have completely about, that of and move – done stabilize, never software the starting sort broad-based or a maybe finally, several already a MX is only hyperscalers customers we've last that And talking the and transition result have quarters, over level rapid is

that the I more Tier in validated believe not in of being believe question So, quarter then around X cloud a by for glad already momentum I than than still because Enterprise, vertical. that. in confidence you a large across hyperscale XXX-gig Networking; for seeing of that the year for anything end interfaces, your we've before portfolio, incredible us the really XXX-gig as asked me is optimized. all give an take Gartner's is and are cloud in the good issue an these this is space; more And a announced well it Switching, of competitive this set products, broad Switching our do platforms, fundamental it's that issue. switching; a of as leader's all and two Magic XXX-gig and X point of Switching, the is will quadrant Routing that and inflection it factors that solid we the new Switching great take share next available as Routing year are the be I'm seeing to or momentum in We're opportunity in Quadrant on us we coming to at now are opportunity timing Tier share lot looking

So, early expect, us. playing going think we out that's very for of capturing helpful that as be to I our is intention wave and

Timothy Patrick Long

Okay. Thank you.

Rami Rahim

My pleasure.

Operator

Leopold, next Raymond question. Simon Please with James. Our comes proceed from your question

Simon M. Leopold

when what influence in expect to you year-over-year to it talk wanted about volume. Thank could in you growth, quarter, and if to I we margin, bit improved imply very return fourth much. to particular, levers a maybe that see little is, get would the I'm gross your really trying to

just how of get margin mix? would by And gross idea, much to so, Thank versus trying you. volume an driven the be I'm

Ken Miller

Thank you, Simon. questions. Good

we've this we as mentioned. year year-on-year is volumes both expect and the QX mix stating, largely to recover, been volume decline you related; and be we should as growth So

the on the as However, of as becoming namely product not impacts overall recover but a the see expect year. of the FYXXXX to beyond we mix We'll year. in seen, volume, do the kind improvement margin mixed this beyond throughout we've those levels remain and recovery because I Switching will MX a but get of year well mix expect piece bigger from this revenue some will back some PTX, us mixed this grows don't stream, to won't as headwinds I that stabilizes, grow volume side that. to headwinds

Simon M. Leopold

wanted Thanks. could to And if software quantify just as a I business. follow up, you see the

I revenue baseline. you've think, to recall, the X% are the I see past, me we XXXX, if today I understand of I was a where in help us think given just want metrics; software; X%; couple from to XXXX

Ken Miller

software so quarter and Yeah, year-on-year. did hold, we grew those still we XX% this say metrics

business recently rest lot excited our talked year; We've Contrail soon, we the about announced this outpace and which software to be Enterprise we to solution. that talked and a a from the about opportunity. very going perspective, think should drive Multicloud earlier lot in that a solution, our of product the Enterprise continues whole shipping center that's is really momentum businesses we're we've a growth actually, data software-led the So of –

Simon M. Leopold

But a X% portion revenue, but above as last below of it's XX%, year? the

Ken Miller

Yes.

Simon M. Leopold

you. Thank Great.

Operator

Kvaal, Instinet. question Nomura next from your Our Please question. proceed with Jeff comes

Jeffrey Thomas Kvaal

little was in are bit Verizon in third the there you more on a hoping Service dial they're sustainable gentlemen. or quarter to more being side a going back seems aggressive Provider on to the so. I are bit in push-out by a the that What like price, a that than mentioned a that's course, of of Thank my guidance. so and, you, mind, the quarter rather dynamics of shift

Rami Rahim

Thank you, Jeff.

some comments. start Ken me Let and additional maybe has

I their think, consolidation, that Provider unlimited dynamics speaking, generally data a M&A are it telcos recovery spend, the when the ability honestly, the their QX it's being prudent market all We activity, Service same did to comes with plans, invest. in see are more but to around space. good putting the from of pressure low, on a sequential

just Examples years. would the trusted deliver telcos to new from I'm telco looking or going services reputation of which for they architecture a large being for another be rolling from XG, that. next new I will initiatives. you we which over a play to solutions is will Now, this telco which of a quickly Tier out better such cloud is Juniper, we telcos, CapEx form see advisor be, And standpoint suggest to some but fact, would that out Europe, proud telcos, X very telco believe the the developing at won second X a do to offer than of in and cloud deployment of saw first same for that next-generation is several services, optimistic we're the are and next-generation better half. this sort the dynamics coming and to telco reports Tier Juniper in Enterprise the half specifically. cloud, of that deploying translate out of all

like quite the catalysts few over assumptions XG help the could but It's something hopeful we're I that years. something will be not next over into think other deployments this our that modeling Metro, in is of there quarters. next frankly, couple we're

Ken Miller

only second thing the in is the first The would we while add I a sequentially stronger half Service do Provider QX, we modest in our expect half. be expect to do than decline

heightened just pricing of we From kind So, seeing pricing it's anything point. pressure; pressure comes environment, unusual this game when pricing aren't pricing it's this been a at from normal a perspective. we beyond always perspective, at a anything point it to timing aren't seeing but a

Jeffrey Thomas Kvaal

Thanks, from might headwinds if and few maybe then reminding improve are Ken. that the – start we benefit we would we'll where of see memory quarters? the next to over starts And with the you us memory mind pricing pricing as

Ken Miller

Yeah, so been point, all year. it's stable at this

pricing We remain at beginning throughout expect point could seeing it this some We year, to next stable we're this but year. stable. favorable see

Jeffrey Thomas Kvaal

Thank you, both.

Rami Rahim

Jeff. Thanks,

Operator

next Company. comes Please Paul from Cowen with question. Our proceed question your Silverstein, and

Paul Silverstein

the the doesn't, response Ken, folks platform what just Rami, the to there's a type comments, taking at but new telcos we step-down clearly and or it. doing, hyperscale sure, that make close been going and any last in if your you be observed on new you're the pricing, expecting to cloud appreciate I to heard significant not I have basis, look the like-for-like with per-port of the MX with to not step-down anything having I question. question, platform want MX pricing, from

Rami Rahim

from performance telco announced and the monitor Cloud another have as the just platform introduced transition they seen and ship do remotely uptick result, question, recently we we've verticals, kinds in out PTX I'll just next in vertical, to saying, and the time of we've MX of close generation you and that, performance very, the silicone I Cloud a anticipating the up will just sort part of in But new in per-bit base, MX the look MX the that anything the to a that Silicon of asked. the amount reduce Thanks see tens seen that of that the to MX brings but for as over is, early of not like We a mean, Paul, I'm wide start the in next and we're generation, next-generation services expect. the in the ratio Penta the of of a for year playing pretty and all innovation on to deployed as again, kind that for as other per only PTX itself the The chasses for MX well will typically part thing each same delivering year. the very it's every that I first now a the anticipate substantial well to MX And for you're right, an we reduces just bid, I the are close around both its different. the line we are MX of of that enhance will the PTX. answer beyond economics glad aggressively cost deployed of substantial it's basis the of especially line the by to a primarily bring as think that yes, – world, space; the of telcos card. programmability, as opportunity upgrade. move many thousands an cards telcos a incentives not its matter the

Paul Silverstein

term you in most dynamics, expect business? folks we look the hoping given what we (XX:XX:XX) all modest the in growth hoping are decline? the standpoint a Provider share should to like Service routing, What's that Rami, talking seems as to others the it grow yourself, you pressures secular about Or from from of market place, And, as well accuse just gain. longer-term a competitive further for guess if longer Are run outlook perspective? best to as your

Rami Rahim

the couple routing telco TAM the for years, I've articulated. reasons of think of I for under I for the variety pressure Well, just next will mentioned, as be

telco the I space in telco However, and at couple space opportunity in the is way our a ways. look of the

there be the relevant that are very think especially gaining to lot is that, and to around traditional especially they're and penetrating routing and momentum very and deploying, of quickly international we that very Pacific. next-generation to there. have in low, I solutions beyond virtualization I by SDN; a mostly more think in we First, But accounts opportunity Europe an there expand accounts where remains in our footprint those Asia are are

that do as the portfolio us to opportunity that a So, into think PTX to I are strategy help the think real internationally, expanding that have product partnership we are strategy opportunity, are in reach we in an of MX, and around the now well market we as place go-to-market combination introducing that. new we that I our the the wrapping around putting and alliance a

So around our we where it's or share less especially penetration is up internationally, opportunity. really all have market much net new footprint,

Paul Silverstein

you. Thank

Rami Rahim

Paul. Thanks,

Operator

Rod Our next comes your from proceed Please question with Goldman Hall, Sachs. question.

Rod Hall

guys. taking hey, question. for Yeah, the Thanks

architecture kind to XG know telco MLCCs much commentary curious them, So, most up wanted don't that; the where back that is on to the had source just are to I – referred think elsewhere? first you commercial you and it and back if clarification MX stuff. come all just Ken, guys to be participation used to of I'm the there (XX:XX:XX) we much management there; do then wireless and think What little as think to that you a the as come expect you architectures how the about clarifying ask I Rami. Thanks content a trials have you I power how might up. changing? rollouts see I bit, lot prices And that's question, Do guys average. and be coming wanted are So, parts to telco able is in really the the are that for Juniper's then, you fixed going guess, people you on that

is; I'm it's you source margin impact can So, one, if as curious of material for margins. the Thanks. just or that what them, is there not

Rami Rahim

Thanks, Rod.

Let XG, the me good which around a question is start with question.

going XG participating architecture, solutions next-generation and as in projects XG XG. on that is in which our very a cloud customers globe start preparation XG cloud. services And telco accelerate happen already be, distributed means that built infrastructure our many in around be telco support is ways, a view, next will the going to First, much we're cloud-native to only with fully I the in these to year. for and anticipate more to deployments

that, a our with our mentioned and take to data around always and advantage well-prepared about. competing as see a particular, then, opportunity. fantastic Access, and projects, in we going particular, our alliance to that and are to goal yet, XG the a firewalls telco for we take closely go-to-market know, mobile from in Enterprise seen, or be are share. starting and largely and come less we've Metro, to achieve for, from pretty to this in you telcos, actually, quarter around and position XG Security quarter, in in our the or to we working more such finally, going are row. that Metro center for because for from had just come as happened compete Security to very results, a Core; from projects the so in strong of and out get is has position be they I far for refreshed good goal, security; would in transport saw in advancements a more in Secondarily, has That transported there it's for, just here, the opportunity. that particular, mobile are and we're we've earlier, as the partnership momentum Security telco be high-end, be XG. to partners now capacity to being for the we with opportunities a That anticipate again we strategy, ready of standpoint alliance And yet next-generation in the to haven't of and you result third

Ken Miller

a Yes. risk, And goods a there about, we mitigate any overall don't from margin sold times, sold, a related small lead talked issue. our cost the to but will supply-constraints of to be do margins we piece goods et to very impact they're able cost could perspective, due Rod, to On we we anticipate some our or of cetera. so this of as perspective, timing believe risk as be

Rod Hall

Great.

Okay. Thanks, guys. Appreciate it.

Rami Rahim

Thanks, Rod.

Operator

JPMorgan. question. next with Our question your comes proceed Samik from Please Chatterjee,

Samik X. Chatterjee

my I ask just the last taking about routing for of the questions. has quarters. for Thanks cloud routing XX% been of couple PTX want Hi. cloud around business. first to

So does to trend is quarter? with in think any there And, Or revenues. of this of you there more that Is is the there that? to was cloud bit it Security mix slowdown shift? stabilize terms additionally, sequential I here a of mentioned it sort a Is that? particularly something driving in more the or providers, one-off a go there

Rami Rahim

question, Thanks Samik. for the

just ASPs more happening ago That's said from as around we're will data happen but will routing is that do happening. actually I over was XX% what's we're the be PTX point this a couple offered rapidly. last that declining of the to hovering MX starting when expect just to would of at were that no is are of sort as they far us, second that of quarters. behind the I of So, PTX, the suggest couple themselves on fact it sort around cloud stabilize. hovering it's the transition going than several mean, the always XX% when for that transition transition move side, is I ASPs; longer to yes, least more to the quarters. rapidly We've bulk And exactly quarters XX%

for Security yet is portfolio bulk behind branch, I firewall primarily good seeing should year-over-year good midrange; it of the said think is we're in see I did and I data year, refresh; and because It then for end. Security next-gen for we the good question that about our the start in in a is, Security, the don't campus. of refresh. by And really next Cloud. high we in believe in anything is the fact in have we're timeframe. for I not Security say specifically due your What be What will momentum a to about it's growth needs seen seeing us, that growth center Security,

is that year large end in we high and that the as and some platform. half for in the telcos Security primarily this a new for applications of applications second for mobile used Now, centers, introduce data changes

Ken Miller

wasn't a forward. some deployments Enterprise-led perspective, I offset, new call in was strength offset trend trend; of I Cloud did the it by commentary going perceive but and sequential in some from partially basis. just mention there something Security wouldn't Yeah, a was it material a we it sequential a a being offset. from my timing that not Cloud Security It was was that

Rami Rahim

that Thanks Okay. for clarification.

the with So been our of Security for cloud number – in few it business very because always concentrated providers is a lumpy has so customers.

Samik X. Chatterjee

of in terms quarter of you ask, sort idea clarification. referring impacting kind the pull-forward us is fair mentioned I QX right. outlook what Got the Can sort to I from to some, with of close of of customers; what quantifying for any the revenues pull-forward strong is there All the that Enterprise from QX way here; it. QX that? a you give that's that impact just That's to Thanks on of to. had QX was of,

Ken Miller

at and performance going I've than to related So of guidance by quarter; is, – exceeded looked that our most better think we Enterprise our expected we impact the we it and that midpoint will $XX pattern in approximately that side. of the gets was the the less million, some QX QX-focused – is Enterprise kind negative going of to more about. the the we're magnitude a little a on and as QX it sequential little to Enterprise describes a But be the that result talking way have

Operator

Vijay Bank. comes from your question Deutsche next proceed Our question. with Please with Bhagavath

Vijay Bhagavath

how is Yeah, going? thanks. Hey, it Rami, Ken,

Rami Rahim

Hey, Vijay.

Vijay Bhagavath

of replace question when Hi. a you. XXX have, example, earliest footprint the the I gig the want revenue congratulations gig companies? Cloud other on gig would any it of be is cannibalize launch. mostly or you also I Thank – I you any incremental would quarter to or for to then at of XXX your mean, understanding have the product bigger-picture and XXX get on

Rami Rahim

Vijay. Thanks, question. Good

– for area been to gig. has next gig data some represents the gig always center. excited There's transition the always mean, XXX to comes very the right? cannibalization, and it's wide to XXX about the the opportunity I XXX true I it Juniper for all gig true this that's am certainly mean, when level of we've I gig, networking, seen big XX in very So, market for it and high-performance up. XXX high-performance strong opportunity to networking

be gig, for all it switching. that for As will cloud more And particular, the it I Juniper. but gig in provider many XXX up, cloud the plays else opportunity is, an start over as relates And years. demand to out to customers space, to and subside, the to especially this space expect the start anything of than adopt in XXX much

the but into strategy wanted across two we the entire teasers are market switching, provide and holistic silicon, product XXX-gig The than come honestly readiness. introduce to we we'll introduced to leverage platforms routing Juniper before both that that more end are merchant our well in that as just just we sure next-generation in the quite silicon what's So, – the will that of portfolio. for a introduce two, make actually announced, XXX-gig of as year, platforms that next-generation

slowly of will in that QX XXXX. market XXX-gig on in will kind the will start to as throughout opportunity deploy optics, the where we is soon The required. an As going anticipate, have be are happen to into enter build-outs cases and use available optics our market, then customers the the timeframe, to the capacity

Vijay Bhagavath

for quick unit I Is should how in what think margins; to up? into portfolio A view any heading we COGS perfect. it better? get on offshore Ken, to don't want (XX:XX:XX) just second better are margins; it know, get gross half? of volumes the will Is follow-on your more or to – the the Just of mix? Ken apportion margins creep you going your it Yeah,

Ken Miller

will primarily volume-related. most be Yeah, uptick immediate so the

lot a we their margin Beyond – overall to have clearly a that, revenue. a and would should say will that But lot chain these of of you piece know, continues be well. software value so be I discipline of efforts as the positive, engineering mostly be of supply focused That optimization efforts all and software bigger be will short-term margin and pricing volume. growth on underway,

innovation Beyond some that, it's product chain. to be led other with going primarily discipline supply in the

Rami Rahim

Yeah, to let me Vijay. that, add just

have shift of routing margin contributors to we the switching. said gross particular, been mix to So, pressure in had one shift, of and that the

around lot deliberately, with cloud opportunity. silicon the a product technology for our innovation especially QFX fed We switching – our switching, procuring world, the now especially and providers, especially all that their learned wave into of capture from next or deployments silicon very pipeline, our lessons the have center our vendors, those also, of have the from merchant to we're developing data way

So he about that's talks what when innovation. Ken means

that from help next-generation the learned margin made – but products quite can't won't I'm a our in You that a lessons we've help the immediately, changes and that will confident standpoint. gross lot

Operator

they deploy like, customers also what at wanted to in Badri When using? next of And What are I'm discuss of components you Suisse Badri, (USA) so, deployments. for really choice are clouds, your Credit they Securities products? get Sami to Contrail question. multiple a for use - into are if hardware opting comes take hardware multi-cloud the are, deployment? to Please what proceed trying type Thank to and to Contrail this Suisse. Sami from Credit question just LLC question. Our your with moment the I

Rami Rahim

Okay. great It's question. a

Let me start.

starts for to and Contrail has forth; a date. First, we've strategic routing not been with security. get been enterprises of as the our Contrail. like momentum, really time driver running hardware the and to all deployments, up them total Juniper of necessarily And from that, have great distributed from up, telcos And the telco deployments standpoint that of switching, of having with but conversations revenue, almost stood standpoint behave take a the they like inside of a of the for we're And get primary that opportunity telcos revenue cases service those Contrail thus and with primary so of services bit far mindshare around large quite from the providers. NFV-type to seen percentage customers business and use the cloud our pull-through and

cloud. about the have – environment Enterprise is, what into to multi-cloud market most CIO broadens basis, an to the combination a is weeks. the in Contrail we and gets virtual, to that that's and as switching as opportunity ongoing Enterprise, includes that move private routing Every done to well cloud, cloud just form, that cloud, within and there's the have that shape, And a believe public because control opportunity called for does is And how some within the I a to infrastructure Enterprise that is simplicity for physical connect on conversation potentially Contrail absolutely next shipped announced what public that way, product Multicloud for announced recently some a private pull-through space. solution to and firmly yes, cloud to So, the And security. they're that once public in variety for private solutions substantially, recently looking actually problem. that CIOs both based it point shifts strategic of is the Contrail thinking security, But Multicloud; the it we've do and few it or you with talk the in there we or and especially private even with of the Enterprise best cloud. Contrail on

– this Or like trying rate work how business? legacy would how even quantify public go into the pick Got I'm strategy is, an proof to So initial we're introducing been made market about just multiple you transition shortly. Badri attach for public concepts that in I'm clouds embarking regarding products versus just on. enablement side, they of customers or up And your or very rate this the to Sami into the touch The you with is business attach LLC just the the perspective. comment going then - Credit expect this think the been the just when Security clouds could maybe to to from Thank the that security that. Securities we on has encouraging. Suisse and you very of it. doing we've color super-excited our be we're on the interest should about (USA)

Just, reference. maybe of a point us if you like give

Rami Rahim

I three that more space or market quarters the competitive, that that's couple we're product a our of last think look over and of firewalls, making around the at focus in do there's so. where mostly it very seen amount a momentum. Security in go-to as There's has we well work that real the here-and-now tremendous and physical in as Well, in momentum been is on firewall a horizons. good intense portfolio certainly some we've question, of way. seeing it different to the And led

of security becomes second in the really and becomes for not essentially The becomes which time. great around applications products. our cloud, perimeter, physical that less security relevant virtual much over It private workloads, a horizon about now so is a public opportunity and securing

We're talk to Our do virtual you solution. some At Enterprise Contrail's which think SRX, to with seamlessly not multi-cloud that containerized now. about point, the work prepared our we can pull-through. Multicloud SRX, offer to that I quantifying

(USA) Badri you I much Thank think color. the so Sami Got this can second it. that Credit we the of Suisse year. we'll the LLC maybe at for do host in Securities - half Analyst that Event

Rami Rahim

pleasure. My

Operator

Our comes proceed your Please Notter, with next from George Jefferies. question. question

George C. Notter

a Routing business, Hi, the Cloud I among lot, there. XX%, a of mixture guys. I wanted going said couple Hey, think it's to been Thanks PTX ask, there and back quarters. you to of

the think because to year it's customers XX%. migrating for the off say and you that. what Do cloud into is Is baked lot. your second wondering Or look that margins? like. the timing terms I'm of guess, Thanks I the going hunch I that have and guidance that's more that that of half a wondering of revenue into PTX? just something would you in And have? I'm about how a visibility to the drift guess, up for said you MX above onto specific some of You continue timing you

Rami Rahim

within quarter-to-quarter the but PTX receiving there space, do be makes cases, cloud me believe is that it a on what confidence now next-generation architectures never process; large It I new use MX cloud the I basis, have mentioned, Yes. still of degree we're George, up. on that to over most design will of we're XXX% include end even PTX the build-out. the time, early to on platform because but hunch; that or with a of certification as have from will based really – comes difficult for we will of providers no, on that's the down leads our deployments sort the that The holistically, platform anticipate when high innings. understanding And deployment. I the – are percentage of we're it's cases predict ready sense XX% of it combination would happen completing, and be is and variety say I It drifting a which only the internationally, of the QFX some really the for to use the where based switching, than more those we it. specific that wins up a is an are drift

Ken Miller

take think a and couple will The for transition several quarters. years. we you of more will it Yeah, happen

Rami Rahim

It's of a years, transition... couple the of but enough

Ken Miller

Is behind us.

Rami Rahim

possible. becomes of very the believe, year-over-year next by we us, behind by year; the Cloud be ...will that end year, so growth in this

George C. Notter

very Super. Thank right. much. All you

Rami Rahim

you. Thank

Operator

with Our from proceed Please comes Capital Markets. James next question Loop question. Kisner, your

James Kisner

Yeah, thank you for taking questions. my

the on thinking you guys enough know, by different to dynamic the So, changing, recognizing imposed little the business obviously, a just not doing or are kind impact of trade the and of wondering, a far? here; I'm and business tack with you've seen chain, in you forward lot about your U.S. current going tariffs extent fortunate to Thanks. thus can risks so, situation, you China, countries be How the so opportunities is amidst comment to and far other are situation? you demand seen you've input customer on costs, supply the ongoing any your

Ken Miller

impactful. our they are so at been be implemented the situation Clearly, tariffs have If Yeah, no tariffs, additional this to had that basically monitoring closely. there could impacts have we're point, business. the

– at our right necessary be continue we guidance, adapt impacts monitor there of or impact a are our We to at potential into mitigate tariffs, looking we to to forward. will because but QX point, is don't going new nothing potential factored this as there now, expect material ways but results obviously, and our

James Kisner

Osborne a Okay. they Any potential call any you innovation effect separately, lot in pike And you all? all factored as there at or Have just that effect coming about talked into of anticipate portfolio here; down at it? you business? do thoughts the Thanks. wait-for your your

Rami Rahim

been XXX-gig because we've really in innovations around and announced concerned that lot not routing the optimized that in about I'm a switching. of platforms have

early that we wanted will time. very to from a intentionally capture it I but over the in phases, demand standpoint, happen think opportunity

too cannibalization So, concerned or I'm Osborning. about not

James Kisner

Thank you. right. All

Rami Rahim

you. Thank

Operator

Faucette, your Our Please next proceed Stanley. question with James comes from question. Morgan

James E. Faucette

a two Great. ASC if it, it, I the Thank impact on QX et I little cetera? you. the said I and and missed Ken, just you questions; of revenue, had apologize margins you quantify bit but can help us XXX quick

Ken Miller

On presume, you Or QX, I on mean? QX?

James E. Faucette

– your On QX, your going formulation forward. impacting Was guidance the of it at all?

Ken Miller

Yeah, no.

rules. the new perfectly doing be I'm old was with the So guidance on forecast all To not a you, rules. based XXX honest ASC under

QX small of. converted impact. the impact to and have off direction. net a impact. the about new similar was to for a rules the I million. QX, small there based consider direction $XX would There's company the a Any potential in could go that's that that is be guidance We given or what to other go quarter, the

the guidance that's the based rules business what So really is new pivoting we of. and are off under

James E. Faucette

different are becoming security talked that the having Obviously, process? terms leaders Security, networking decision-making sales it And way maybe Thanks. Rami, a guess, and changing people, about motion broader I'm on then, your great. in approach yet of that is sales dynamic or in That's are just your to also and the you wondering, changing involved engage Okay. with of more I in question, you've the Security.

Rami Rahim

question. Yeah, a it's good

you of with alone. just can't certainly, see product innovation momentum So, this kind

our have focus go-to in We upped market.

is We a the well working Security field Security within team I customers. out specialist the thing focuses We've sales. and solution the in incentives that finally, our entirely talks then, buyers have and to really think on built around created for us that's Security

we're but that cloud next-generation and to architecture, about a security, motion that accounts the selling – other around degree has routing, you'll actually learned I about I we well. we as it's of have end-to-end where now around security, around When to see helped switching think component think go cloud, not us. where and we switching, multi-cloud, a it's high selling at of really talk talk customers we're we it's our to orchestration, just correlation look also As are solutions products really

James E. Faucette

you. Thank Great.

Rami Rahim

My pleasure.

Operator

Fish, proceed comes question Please with Piper Jaffray. James your from next Our question.

James E. Fish

your Hey, guys. question. Thanks switching. come white up general for questions been Most the The essentially of my is box today have competition really thing hasn't answered. just that from only

curious through quarter. Just second view your the on

Rami Rahim

James. you, Thank

say, changed has I much would So from perspective. our not

of the these I truly box are information, are dimensions. all telemetry, access we and you of think customers choices, to that to standards-based truly flexibility, programmability economics; of and silicon having ahead about for different through the benefits the know, and care interfaces in white our lots real ability course, extract believe market I of the

comes that Koley, organization. world Bikash cloud CTO, thinking of our our throughout a infusing especially have from the R&D We kind entire company, that's this

on innovating side more of opportunity change the this right we're right of think I the us, for so same. for now

James E. Fish

that Service on Great. for bookings that Thanks. from maybe or was you, revenue? then, XXX, is X% And ASC impact Ken, to that

Ken Miller

Those are revenues.

numbers Services ASC ASC perspective. were Bookings XXX the So to would ASC from XXX the XXX impact – ASC all revenue-based. no XXX have to

James E. Fish

Thanks. Great. Okay.

Operator

from comes Rakers, proceed with Fargo. Please Aaron your question. question Wells next Our

Joe Quatrochi

see This I that do follow-up little timing a to could when more model? then, is that? refresh the I wondering opportunity opportunity; Aaron. MX how bit year. your on the we that's when to just from see next how launched do had about start think large you you if question, a of talk impact And quick an Quatrochi Great. the for Okay. was you Joe on a could about

Rami Rahim

the for Okay. Thanks Joe. question,

a in terms pretty First, broad-based. of the It dimensions. different has it's itself, number refresh of

for and delivery. out pretty is MX next to many And and both different services and seen first types of software going again. new this a be across hardware are the routing leverage. and we're part that right? of silicone that of there advancements telco a MX to in go deployments universal up year, of and which First that time slots The within chassis quickly, supports foremost, follow then chassis, on and with we And switching, opportunity technology the going platforms, cases use biggest time our and deployed side our and the introducing can all is we're empty we to all space, lot there have the

result iterations seen initial the four the broader we in case, since of think or three that happen equally deployed I as here, each technology, released introduction MX, in the is uptake of we've the out there. opportunity probably a telco specifically major platform of the different We're space. and faster the optimistic around about

move of at timing, we'd it year, months, customers introduce some that the terms that's but look next of sort In will to if typically average, in that on months part take the kind of certification six time. for timeframe; first nine of will the certification time faster, ballpark we

Joe Quatrochi

Perfect. Thank you.

Rami Rahim

My pleasure.

Operator

question with next proceed William Netis, Dmitry Please Blair. from question. Our comes your

Dmitry G. Netis

And but to coming, PTX. buying telcos now XX% is a to may there I how refresh of the want here for transition affect in sort squeezing of thanks your telcos? this telco to and and a the segment. Cloud MX an at, transition, say, are the me end in MX there's you, I dynamic call. know similar understand potentially your I of at Is PTX follow-up this bunch Thank just PTX. on

in you you telco controller Contrail to to so customers intelligence which years, transition level; words, next as something kind to box allows maybe the other out your customers intelligent hear there, of you the of to into that. potentially there And over allows of this transition would rather MX. versus MX? So, kind a of PTX of sucks SDN is – than in that at to to what use less there's about do a lot that the If which using an expect three, PTX I five percentage telco look love number

Rami Rahim

Okay. Thanks for the question, Dmitry.

use that conducive but near the again, ratio it Could because delivered. are use the of primarily, that's I And cases the In time? will it useful not that's is product transport. provider much applications cloud. MX around refresh connecting It's has understand in think it's very, the at routing delivery, think pace I are between centers to MX which optimized sell telco of connecting primarily like could, do the over the first, points of cloud why in telco together, network; conducive up the flexible the it most is to around a their it's and than the the it's the It's transport, space. inch that space, around not are and think data is fuzzy, delineation It's so into So peering telco, or PTX. success to number a enterprises space, lot going In you and – usually selling of far in transport more platform has telco the PTXs telco cases, for to PTX opportunity. space, we the real it's about for to happen nowhere to transport I space. that less to are movement there But to and transport. less reason, see to a changed quarters the delivery successful the the have and few so there. are that's PTX much. use it within going that of consumers that all mix mean, why certainly at over around very the stable makes service that I cases the been we're at in the or mostly within it the is Core MX happening very Yes, last been around services if packets look very service a

space telco fast transition I So, the this again, time. believe is happen nearly to that not in as going do over

over you think, don't I event, on on I can at provide this to our some color more expectations ratio maybe, now. analyst do we want right that again, time. the call

Dmitry G. Netis

Okay. I It's thank you much. I the was very very going helpful. to follow appreciate with explanation. But detailed that. up you, Thank

Rami Rahim

you, Dmitry. Thank

Operator

back Ladies to end the closing and like turn to gentlemen, I have we the call Jess reached remarks. would for session. of Lubert the question-and-answer

Jess Lubert

like an X. November all your hosting New you look in for we you York questions. Analyst make you, with on speaking during and that Thank you to Thank be We'd Day to quarter. operator. will aware forward meeting We the

Operator

conference. today's concludes This

your time. participation. You may for this lines your disconnect Thank you at

Jess Lubert	Juniper Networks, Inc.
Rami Rahim	Juniper Networks, Inc.
Ken Miller	Juniper Networks, Inc.
Timothy Patrick Long	BMO Capital Markets (United States)
Simon M. Leopold	Raymond James & Associates, Inc.
Jeffrey Thomas Kvaal	Nomura Instinet
Paul Silverstein	Cowen & Co. LLC
Rod Hall	Goldman Sachs & Co. LLC
Samik X. Chatterjee	JPMorgan Securities LLC
Vijay Bhagavath	Deutsche Bank Securities, Inc.
Sami Badri	Credit Suisse Securities (NYSE:USA) LLC
George C. Notter	Jefferies LLC
James Kisner	Loop Capital Markets LLC
James E. Faucette	Morgan Stanley & Co. LLC
James E. Fish	Piper Jaffray & Co.
Joe Quatrochi	Wells Fargo Securities LLC
Dmitry G. Netis	William Blair & Co. LLC

Juniper Networks (JNPR) 27 Jul 182018 Q2 Earnings call transcript