Greetings, and welcome to Juniper Networks First Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn this conference over to your host Mr. Jess Lubert, VP of Investor Relations. Please go ahead, sir. You may begin.

Thank you, operator. Good afternoon, and welcome to our first quarter 2021 conference call. Joining me today are Rami Rahim, Chief Executive Officer; and Ken Miller, Chief Financial Officer. Today’s call contains certain forward-looking statements based on our current expectations. These statements are subject to risks and uncertainties and actual results might differ materially. These risks are discussed in our most recent 10-K, the press release and CFO commentary furnished with our 8-K filed today and in our other SEC filings. Our forward-looking statements speak only as of today and Juniper undertakes no obligation to update any forward-looking statements. Our discussion today will include non-GAAP financial results. Reconciliation information can be found on the Investor Relations section of our website under Financial Reports. Commentary on why we consider non-GAAP information a useful view of the Company’s financial results is included in today’s press release. Following our prepared remarks, we will take questions. Please limit yourself to one question and one follow-up. With that, I will now hand the call over to Rami.

Good afternoon, everyone, and thank you for joining us on today’s call to discuss our Q1 2021 results. We delivered strong results during the March quarter. Revenue exceeded our expectation, and we experienced year-over-year growth across all verticals and geographies. Product orders experienced mid-teens growth year-over-year, and we grew backlog on both a sequential and year-over-year basis. Momentum was especially strong in our Cloud and Enterprise verticals with Cloud orders growing nearly 30% year-over-year, and Enterprise orders growing more than 20% year-over-year. While our Service Provider orders slightly declined year-over-year, even here the results exceeded our expectations. Near-term visibility is strong, and given the momentum we’re seeing, we now expect to grow our business 4% to 5% in 2021 on a full year basis. The success we’re seeing is due in large part to deliberate actions we have taken to both strengthen our portfolio and enhance our go-to-market organization. Our focus on leading the industry is delivering simplified operations and a superior end user experience, what we call Experience-First Networking is resonating in the market. And our deliberate focus on specific customer solutions is enabling us to accelerate our success across the areas we serve. We’re seeing good early interest in Apstra, 128 Technology and Netrounds, which are not only strengthening our position in several attractive end markets, but also enhancing the success of the broader Juniper portfolio. Our go-to-market organization is executing well and the investments we’ve made over the last few years are paying off in the form of improved productivity and customer diversity. We’re continuing to invest in both product differentiation and our go-to-market organization. I remain confident these actions will not only position us to benefit from a any potential improvements in end market conditions, but also to capture share as several large industry transitions unfold. There are several opportunities that are beginning to play out, where we feel strong about our position. First, the enterprise transition to AI-driven cloud operations, where our Mist AI offering, which was enhanced by the acquisition of 128 Technology, helps customer streamline operations, reduce costs and optimize end user experiences. This client-to-cloud differentiation is truly resonating. We believe the enterprise transition to AI-driven cloud architecture is likely to present a significant disruptive force in the campus and branch networking market, where we maintain significant sustainable advantages over all competitive platforms. Second is the Cloud and Service Provider transition to 400-gig systems, where we’re continuing to see success, both in wide area as well as data center use cases. Our 400-gig solutions are highly competitive, and we remain optimistic in our ability to not only protect our footprint, but also to capture net new opportunities in hyperscale, cloud major and Service Provider accounts. Last but not least, the Service Provider 5G and metro markets, which we view as a large opportunity, that is likely to see healthy growth over the next several years. We are playing to win in the Service Provider vertical and believe our investments in automation technologies, such as Netrounds and the introduction of new metro-oriented solution such as the award winning ACX7100 family should position us to gain share in this attractive portion of the market, where historically we’ve had limited presence. I firmly believe we’re taking share and that the investments we’re making will position us not only capitalize on the big market opportunities that will unfold over the next few years, but also to see broader market success that decreases our sensitivity to macro trends. We believe our plans will enable us to emerge from the pandemic stronger than we entered, and deliver sustainable top and bottom line growth over the next several years. Now I’d like to provide some additional insight into the quarter and address some of the key developments we’re seeing from a customer solutions perspective. Starting with our automated WAN solution, which saw strong double-digit revenue growth year-over-year, and exceeded our own expectations in Q1. We experienced strength with both our Service Provider and Cloud customers, each of which delivered double-digit sales growth year-over-year. We grew in all geographies year-over-year, and momentum is healthy entering the June period. In the Service Provider vertical, our diversification strategy is continuing to yield positive results, and we remain optimistic regarding the outlook for our cloud network offering, which combined our new ACX product with our Paragon Automation portfolio. We believe these solutions are highly competitive and well-positioned to win in one of the fastest growing portion of the Service Provider routing market. As I mentioned previously, we are playing to win in the Service Provider market, and I remain optimistic regarding the outlook for our automated WAN solutions in this important vertical. I’d also like to highlight that our automated WAN portfolio had particularly strong orders from our cloud customers in Q1. While our strength was across multiple hyperscale accounts, we also saw improved activity with our largest cloud customer following several quarters of softer demand. Our cloud pipeline remains strong, but we are optimistic regarding the outlook for our wide area solutions, particularly in areas where we maintain incumbency, and are well-positioned to benefit from forming a big tailwind, that are likely to start ramping later this year. And for the year, we are confident in our outlook for our automated WAN solution, we expect 2021 results to be slightly above the high-end of the long-term forecast range we provided at our February Investor Day, calling for a 1% decline to 3% growth. While our cloud-ready data center solutions declined 10% year-over-year during Q1, orders grew nearly 30% year-over-year due to broad based strength across our Cloud, Enterprise and Service Provider customers. Win rate improved and we saw a material increase in average deal size in the quarter. Apstra exceeded our expectation, and is already enabling us to win data center opportunity we likely wouldn’t have been able to secure if we hadn’t completed the deal in January. Customer interest in our cloud-ready data center portfolio is high, and we remain optimistic regarding the outlook for this business. While the Q1 revenue decline in our cloud-ready data center business was almost entirely due to expected weakness at a single large customer, orders with this customer also materially improved in the quarter and should positively impact results in future periods. For the year, we believe our cloud-ready data center business remains on track to achieve the long-term forecast range we highlighted at our Investor Day, looking for 5% to 9% growth, despite the slow revenue start to the year. Finally, our AI-driven enterprise solution experienced double-digit growth year-over-year, and exceeded expectations in the March quarter. Our Mist AI differentiation continued to resonate in the market as new logos nearly doubled in Q1 and Mist orders experienced another quarter of triple-digit growth with a record number of deals greater than $1 million. Our Mist client business of wireless LAN, wired access,, Marvis Virtual Network Assistant and associated EX pull-through approximately doubled year-over-year, and we saw record EX pull through in Q1. In addition to strength with large Fortune 500 customers, we’re also experiencing continued strength in the channel and improved momentum with smaller commercial accounts, which highlights the value of our AI-driven enterprise offering to customers of all sizes and across all verticals. We believe Mist AI continues to offer unique and market leading differentiation, resulting in the best user and operator experiences. To enhance this leadership, we continue to bring new innovations to market that should further accelerate our success in future periods. Some of the innovation we’ve recently announced include the industry-first campus switch that’s optimized for AI-driven cloud operation, the EX4400, which provides customers with ease of set up, best-in-class fabric management, security, scale and AI-driven troubleshooting to find needle-in-haystack problem like misconfigured VLANs and bad cables. Add to that, the Mist-ification of our SRX branch gateway, which allows automated on-boarding and configuration using Mist AI and the cloud coupled with simple SD branch router and security configuration via the same platform as wired and wireless access. And the integration of 128 Technology’s Session Smart routing with Mist WAN Assurance and Virtual Network Assistant capability to deliver the industry’s first AI-driven SD-WAN solution, which includes customizable service level and proactive problem resolution on top of the already unique Session Smart capabilities of Juniper’s SD-WAN solutions. While it remains early, we’re seeing strong customer interest in 128 Technology’s Session Smart routing capabilities in the field. We closed multi-million dollar deals with managed service providers in Europe and LATAM, had a significant expansion with a large global enterprise and won opportunities in the U.S. federal vertical. We are excited about our Mist-ification of 128 Technology and are focusing our attention on sales enablement and leveraging the Juniper go-to-market organization to accelerate 128 Technology’s success. I remain encouraged by the momentum we’re seeing in this business and remain confident our AI-driven enterprise solutions are likely to see double-digit growth in 2021. Our Security revenue experienced strong results during the March quarter and orders exceeded expectations in the period. Strength was especially notable in the high-end of the market, although we saw growth across all customer verticals and product families. We believe our Connected Security strategy is resonating in the market and that the convergence of networking and security provides us with a competitive advantage in the portions of the market, where we are currently focused. We’re also benefiting from recent third-party validation, highlighting the superior efficacy of our products from reputable firms such as Gartner’s ICSA and cyber ratings. We believe these dynamics will continue to provide tailwinds in future quarters and should enable us to grow our security business during the current year. Our software and related services revenue grew 7% in the March quarter. A strong growth in our ratable subscription offering such as Mist and healthy uptake of our Flex on-box software offerings were partially offset by lower sales of certain older products that carry a high level of perpetual software. ARR grew 28% year-over-year in the period driven by a combination of Mist subscription, ratable security software offering and the related services associated with these software offering. Software orders were particularly strong in the quarter, rising more than 70% on a year-over-year basis due to broad-based strength across verticals and used cases. We’re seeing ongoing strength in the ratable subscription offering and improved adoption of our on-box Flex licenses, which are seeing traction across all of the customer verticals we serve. Based on the momentum we’re seeing, we remain optimistic regarding the outlook for our overall software business as well as the long-term ARR target we presented at our recent Investor Day. I would like to mention that our services team delivered another solid quarter and continue to grow on a year-over-year basis due to strong renewals and service attach rates. Our services team continues to execute extremely well to ensure our customers receive an excellent experience. I would like to extend my thanks to our customers, partners and shareholders for their continued support and confidence in Juniper, and I especially want to thank our employees for their hard work and dedication, which is essential to creating value for our stakeholders. I will now turn the call over to Ken, who will discuss our quarterly financial results in more detail.

Thank you, Rami, and good afternoon everyone. I will start by discussing our first quarter results and end with some color on our outlook. We ended the first quarter of 2021 at $1,074 million in revenue and non-GAAP earnings per share of $0.30, both above the mid-point of our guidance. Revenue was up 8% year-over-year, with growth across all verticals and geographies. Looking at our revenue by vertical, on a year-over-year basis, Service Provider grew 17%, Cloud grew 3% and Enterprise grew 1%. As expected, all verticals declined on a sequential basis. Orders were strong in the first quarter, with growth in the mid-teens on a year-over-year basis, with particular strength in our Cloud and Enterprise verticals. As we discussed at our Investor Day in February, this is the first quarter of our updated revenue reporting, pivoting from technology categories to customer solutions. The customer solution categories are automated WAN solutions, cloud-ready data center and AI-driven enterprise. As we have discussed, this change better aligns our revenue reporting to key growth drivers that is aligned with our strategy. Looking at revenue by customer solution, automated WAN solutions increased 22% year-over-year, with both MX and PTX product families posting year-over-year growth. Cloud-ready data center revenue decreased 10% year-over-year, while the timing of shipments impacted revenue results, order saw strong growth in the quarter. And finally, the AI-driven enterprise revenue increased 12% versus last year. Our Mist and EX product family both grew year-over-year. As Rami mentioned, total software and related services revenue was $143 million, an increase of 7% year-over-year. And our annual recurring revenue or ARR grew 28% year-over-year. Total security revenue, which includes security products as well as services related to our security solutions, was $163 million, an increase of 11% year-over-year. In reviewing our top 10 customers for the quarter, five were Cloud, four were Service Provider and one was an Enterprise. Our top 10 customers accounted for 31% of our total revenue as compared to 33% in Q1 2020. Non-GAAP gross margin was 59.3%, which was above the mid-point of our guidance, primarily due to higher revenue. If it weren’t for the pandemic-related elevated logistics and other supply chain related costs, we would have posted non-GAAP gross margin of approximately 60%. Non-GAAP operating expenses increased 3% year-over-year and 2% sequentially, in line with our guidance range. Non-GAAP operating margin was 12.1% for the quarter, which exceeded our expectations. We exited the quarter with total cash, cash equivalents and investments of $1.8 billion. The sequential decline was primarily due to the repurchase of our remaining debt that was refinanced last quarter and the cash outflows associated with the acquisition of Apstra. Cash flow from operations was $180 million. From a capital return perspective, we paid $65 million in dividend, reflecting a quarterly dividend of $0.20 per share, and repurchased $125 million worth of shares in the first quarter. Turning to our guidance. As I’m sure you are aware, there is a worldwide shortage of semiconductors impacting many industries. Similar to others, we are experiencing ongoing supply constraints, which have resulted in extended lead times. We have invested to strengthen our supply chain and have increased inventory levels over the course of the last year. We continue to work closely with our suppliers to further enhance our resiliency and mitigate disruptions outside of our control. Despite these actions, we believe extended lead times will likely persist for the next few quarters. While the situation is dynamic, at this point in time, we believe we will have access to sufficient semiconductors supply to meet our full year financial forecast. Looking specifically at the second quarter, at the mid-point of guidance, revenue is expected to be up 5% year-over-year. We expect to see sequential growth across our Cloud and Enterprise verticals, while Service Provider is expected to remain approximately flat. We expect our second quarter non-GAAP gross margins to benefit from higher volume and incremental software mix, which should more than offset unfavorable product mix trends and potentially higher component costs related to supply constraints. We expect non-GAAP operating expense to increase sequentially, primarily due to the investments we are making to take advantage of future market opportunities. Moving on to our expectations for 2021. We have updated our full year revenue growth and profitability expectations to account for the upside we expect to experience in the first half of 2021. We now expect full year revenue growth of approximately 4% to 5%, a point of which is expected to come from recently acquired assets. Our revised top line outlook is 100 basis points higher than our previous expectation of 3% to 4%. From a vertical perspective for 2021, Enterprise revenue is expected to grow the fastest, Cloud is expected to grow toward the high-end of our long-term model range, and Service Provider is now expected to be flat to slightly up versus last year. At this time, our revenue and non-GAAP earnings expectations remain unchanged for the second half of the year relative to the forecast we provided during our Q4 2020 earnings call. While non-GAAP gross margin can be difficult to predict, we continue to expect non-GAAP gross margin to be approximately 60%, consistent with what we’ve said on our Q4 2020 earnings call, as well as at our February 2021 Investor Day. We expect full-year non-GAAP gross margin to benefit from higher volume, improved service margin and incremental software mix, which should more than offset unfavorable product mix trends and potentially higher component costs related to supply constraints. Full year non-GAAP operating margin is now expected to be flat to slightly up versus 2020 levels. We expect non-GAAP OI&E to remain near Q2 2021 levels through the course of the year. In closing, I’d like to thank our team for their continued dedication and commitment to Juniper’s success, especially in this challenging environment. Now I’d like to open the call for questions.

At this time, we’ll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Rod Hall with Goldman Sachs. You may proceed with your question.

Yes. Hi, guys. Thanks for the questions. I guess, I wanted to dig into this order volume in a couple of ways. One, maybe, Ken, you could talk about book-to-bill or could you give us a book-to-bill number? And then secondly, more qualitatively, the software orders that are so strong, could you guys dive into a little bit of color on that, what particular things are driving that? Is it Mist or just give us some prioritization of where those software orders are coming from? Thanks.

Thanks for the question, Rod. Let me start with the software, and then I’ll pass it over to Ken. So obviously, very pleased with the momentum in our software business, 70% year-over-year growth in orders, particularly pleased with our momentum at 28% year-over-year. So the way we’re running the business right now is we have an intense focus on our customer solutions, AI-driven enterprise, cloud-ready data center, and automated WAN. Each of these solutions has an embedded and a meaningful software component that we have invested in that drive significant differentiation in the market, and that ultimately delivers on our strategy of Experience-First Networking. So you can’t sell an AI-driven enterprise solution without actually also selling a meaningful software component along with it. That is what is driving the momentum especially in off-box software offerings like Mist. And then I know it’s early, but increasingly in solutions like Apstra as well. In addition to that is the Flex licensing model. This is a really simple on-box licensing model that gives customers the flexibility to choose what particular features and scale they want along with the traditional systems that they deploy in their network. So that combination is working very well for us. I feel very good about our ability to achieve our long-term targets that we provided to you in the recent analyst event, and I think we’re going to continue to see good solid momentum in the software space.

And I’ll just on the software side, we did see very strong bookings growth of 70%-plus. You see revenue was at 7%. The delta there, if it’s not obvious is really mostly in our backlog where we did book some software orders that we haven’t yet shipped or fulfilled, and also there is a growing piece of deferred software revenue, which is actually shows up predominantly in our service deferred revenue. So we are seeing some of the bookings, even when we fulfill it, it doesn’t show up in revenue right away as it gets recognized over time and that’s really our ARR business, which is also a very strong grower for us this quarter. From a book-to-bill perspective, we don’t disclose the number, Rod, but I can tell you, it’s clearly over one. I mean we grew backlog both year-over-year and sequentially. We don’t typically grow backlog sequentially in Q1. This is something that due to the kind of unexpected order strength that we saw, the mid-teens orders growth really resulted in a backlog growth quarter for us, and a book-to-bill greater than one.

Great. Okay. Thanks a lot, guys.

Sure.

Our next question comes from the line of Amit Daryanani with Evercore. You may proceed with your question.

Thanks for taking my question as well. I guess, I have one question and a follow-up. On the Enterprise side, maybe to start with, it appears that your solutions especially wrap with Mist is resonating well with customers, but as I think about the positivity that you have around Enterprise, is only to think about how much of that is really driven by a cyclical up-shift given budget is getting better on the Enterprise side versus perhaps share gain that Juniper seeing versus their incumbents?

Yes, Amit, I have no doubt in the Enterprise, we’re taking share and it’s on the back of some really meaningful and differentiated solutions and technologies that we’ve introduced into the market. And in the Enterprise space there might be some COVID related tailwinds in some areas of the Enterprise, but there are a lot of headwinds in certain segments of the Enterprise, and I think the team has done a phenomenal job of pivoting rapidly to focus in areas where the Enterprise spending is going to be more COVID resilient, and then add to that the differentiation that we’ve built, both organically and inorganically. In AI-driven enterprise, we powered by Mist, double-digit growth, pretty much every customer vertical, new logos are growing very rapidly at 2x year-over-year, a record number of million dollar deals. Like I said, I’m very confident that this is share taking growth.

Got it. And then if I could just follow-up on the supply chain side, I think you implied that 70 basis point margin headwind from logistics supply chain issues in the quarter. How do you see that number stack up as you go through the year? And then did you have any revenue that you put on the table into the supply chain issues as well?

Before I let Ken answer that specific question, I just want to say, this is a worldwide shortage that’s affecting practically every tech company across all industries. So what Juniper is experiencing, I don’t think is unique. Having said that, I have a lot of confidence in the strength of our supply chain team. I think they are navigating the current situation phenomenally well. And as Ken mentioned in his prepared remarks, we’ve invested in our supply chain, really starting over a year ago, that’s helping us right now. So there is no doubt there are going to be some challenges that we need to work around, but I have a lot of confidence in the strength of the team and the relationships that we have with our suppliers in pulling through this. And Ken, maybe provide some additional color.

Yes. And as we mentioned, the impact in Q1 was about 70 basis points, and that is predominantly logistics in kind of some of the COVID related costs that we’ve be talking about the last couple of quarters and the freight cost for paying per kilogram are still significantly elevated versus pre-COVID levels. We expect that to be maintained over the next couple of quarters. It is difficult to predict when that’s going to normalize, but I do expect that to normalize eventually, but I do think it’s going to take a few more quarters for that to normalize. In addition to that, we are starting to factor in some potential costs to creep from a component perspective due to the supply constraints that we’ve mentioned before. So we have factored in some costs, component cost to increase into our current forecast. We still believe 60% is the right target for us on a full-year basis for this year, despite some of these incremental costs, but it’s something we’re watching very closely and we’ll obviously be managing it aggressively as we have been, and we’ll continue to keep you guys updated as we go. There is a fair amount of uncertainty there, but based on our current expectations, we feel that the 60% target that we have for the year still holds true. From a revenue loss perspective, we are seeing extended lead times, so that means an order that we would book might not recognize in the same period as it would have otherwise. However, we feel that the revenue results we just posted in Q1, the guidance we just put out there for Q2 are quite strong based on the demand strength that we’re seeing and we feel good about our ability to procure the supply we need to hit our revenue forecast.

Our next question comes from the line of Simon Leopold with Raymond James. You may proceed with your question.

Thank you. I appreciate that. First, I wanted to see if maybe you could unpack your cloud vertical a little bit. And where I’m going with this question is we’ve gotten the impression that you tend to be disproportionately stronger and what’s often called Tier 2, Tier 3 as opposed to hyperscale. Is there some insight you can offer to help us understand the dynamics of maybe breaking up that cloud vertical? Thanks.

Yes, Simon. Thanks for the question. Our position in the cloud vertical including hyperscale is actually quite unique. The share that we have with hyperscale routing, in particular, is second to none in the industry, I believe. So the strength that we saw in Q1 was actually very broad-based, certainly, hyperscale contributed to that momentum. And the nice thing about the hyperscale momentum that we’re seeing right now is that it’s not just about one or even two accounts, that it’s fairly well distributed, there is good amount of diversification within hyperscale. After that, the cloud majors which are the smaller cloud providers, international cloud providers, they have also contributed to that momentum. So in Q1 we saw double-digit growth in routing, again, based on the footprint that we enjoy. Switching was down, but only because of a particular use case in one customer that essentially a wide area use case. I’ve actually talked about that in the last one or two earnings calls, but I will note here that even in that use case we’ve now started to see a resumption of spend by our large customer that deploys it in this manner. And then orders up 30%, nearly 30% year-over-year, again is indicative of the position that we have. I mean I think the way you should look at cloud providers today is, there is certainly competition that’s happening for future build-out especially 400-gig, I feel very good about the competitive nature of our solutions, the engagement with our cloud provider customers. But I think will bode well for us in the future especially as you get into the second half of this year and next year. But then to benefit from the investments, the hyperscale and the broader cloud major customers have today, you need to have the footprint, and we have the footprint.

Thank you.

And just to…

Sorry. Go ahead, Ken.

Sorry, Simon. I just wanted to clarify in aggregate, so if you look at our cloud vertical in aggregate, our hyperscale number is the larger piece, it’s bigger than our Tier 2, Tier 3, our cloud majors piece. But it is predominantly as Rami mentioned, it’s the wide area networking use cases are routing footprint that we’ve enjoyed there for so many years, where we’re seeing growth on the cloud majors of the Tier 2, Tier 3 side is really in the data center side. And that’s where we’re seeing more mix toward switching in the cloud-ready data center solutions to the Tier 2, Tier 3 and we’re obviously kind of break into the hyperscale and data center side. But right now, our footprint is predominantly on the automated WAN solutions.

Great. Appreciate that. Just as my follow-up. I wanted to see if we could talk a little bit about your intentions in terms of market share on the enterprise campus both switching and wireless LAN. What’s a realistic expectation for how many points of market share? Do you think you could take in a year? And what’s your objective. Do you – is your sort of goal to get to a 10% level in some time, help us understand the milestones we should look forward? Thanks.

Yes. Well, I think we’re focusing on areas of the campus and branch market that are fastest-growing that I think we’ll see the quickest recovery post-COVID. And even now, where there are some meaningful headwinds in certain segments of the enterprise, because of COVID, we’re doing really well. And I think, again this is on as a result of the significant differentiation that we have in the market. And I would also just add that, that differentiation is very difficult to replicate. I mean, we now have a five years of AI-driven solution building and learning that happened in the market, that’s given our capabilities really some solid differentiation. And this is going to be the fastest growing vertical for Juniper, enterprise all up and campus is a very significant component of the enterprise. And as a result of that, we have been taking share over the last several years and I think we’re going to continue to take meaningful share going forward.

Our next question comes from the line of Samik Chatterjee with JP Morgan. You may proceed with your question.

Hi, this is Joe Cardoso on for Samik Chatterjee. My first question is just on the Service Provider vertical, it’s sounding much better than when you guys last spoke on it. So first of all, is that a fair comment, and if so can you help us understand what is driving the improved outlook and visibility there?

Yes, I’d be happy to. So obviously delighted with the Service Provider momentum in Q1, strong revenue performance, now partially explained by a need to compare relative to last year, but I would say that it did exceed our expectations, including from an order standpoint. And what I really like about our performance in the Service Provider space is the diversity, both from the standpoint of geography, that is not a North America phenomenon or a European phenomenon. It’s broad-based across every geography, the diversity of solutions and technologies, so we’re seeing strength in routing as you would expect, but we’re also seeing strength in security as Service Provider gear up for 5G deployments; platforms, MX has always been a workhorse in the Service Provider space and we continue to invest in new line cards, new software capabilities, but we’re starting to see some good PTX momentum and solid 400-gig wins in competitive bids with the Service Provider. And last but not least, I will add that. Tier 1 spending – Tier 1 U.S. Service Provider spending has actually been weak over the last year or so as we’ve outlined in previous earnings call or calls. But we’ve actually seen a bit more, let’s say, signs of life or resumption in spending by some Tier 1 operators as well which is encouraging. Add to that the differentiation, we’ve introduced the system in the Q1 time frame, our Paragon Automation suite and this really addresses a real need in the market for the types of tools that customers are looking for, for planning and provisioning and insights and assurance. And then, we also launched our cloud metro strategy, which is really our big push into the metro space, and announced two new ACX metro platforms and that we shipped, one of them already ACX7100, which is a 5G ready, high density, high capacity solution to address the future of 5G metro build-outs, and that’s a net new opportunity for Juniper, that we traditionally not had any meaningful presence here, but we expect that to contribute to our revenue performance over the next few years. So it’s for that reason that we’re now tracking up to the high end of our long-term model for this full year 2021.

Yes, Joe. As you heard in our prepared remarks, we did bring the full year outlook up from a revenue perspective, it was 3% to 4% earlier in the year now, we’re up of 4% to 5% on a full year basis. The vertical that actually came up the most was our Service Provider vertical. We were talking before about it being further stabilization. If you recall 2020, we were down 4% a full year basis and we thought we would get closer to zero this year from negative four to something closer to zero that’s the further stabilization. We’re now calling a SP based on the strength of the first half to be flat to slightly up on a full year basis, which as Rami mentioned is more in line with our long-term model, actually the high end of our long-term model, whereas previously we were kind of tracking toward the low end. So we are seeing some strength in SP, particularly here in the first half.

Thanks, guys. Appreciate the color on that. And then my second question is just on the acquisitions. You spent a lot of time in the prepared remarks, highlighting the different acquisitions you recently completed in contributing the better outlook in part due to them. I guess, just kind of diving in there, is there a particular acquisition that you guys would highlight driving the better outlook or has it been more broad-based? Any color would be appreciated. Thank you.

Yes, well. So we recently crossed the two-year anniversary since the close of Mist and that continues to do phenomenally well for us, and Mist is no longer a WiFi solution, Mist is an architectural approach that cloud-delivered AI-powered solution to everything from client to cloud and what we’re seeing is the business all up under the Mist umbrella, doing incredibly well, right. Like I said, doubling new logos, record number of million dollar deals, et cetera. The other acquisitions are still a little bit newer, so it’s still earlier. But I’m very encouraged, based on what I’m seeing thus far. Apstra, as an example has seen early interest from many customers. The pipeline is very solid. And it’s clear that there are many customers out there that are looking for the ability to deploy private cloud, but are fearful of the operational complexity of private cloud, and Apstra provides the best solution that’s truly multi-vendor. So it’s not just working on top of Juniper underlay, but any vendors underlay solution to provide that seamless, easy, intent-based private cloud experience. There is a need in the market, and I firmly believe we have the best technology for it right now. 128 Technology, again there the Mist-ification of that technology, under the Mist umbrella is happening very rapidly. So we’re introducing more and more capabilities. The second half of the year is going to be really important for ramping up that solution, but even on a stand-alone basis, we’re closing multi-million dollar deals with managed service providers. We’re seeing expansions of existing franchises that we have with 128 Technology. Federal government is especially interested in the security aspects of 128 Technology. So even though it’s early, I’m actually quite optimistic about what we’re seeing thus far.

Our next question comes from the line of Aaron Rakers with Wells Fargo. You may proceed with your question.

Hi, this is Jake Wilhelm on for Aaron. First of all, congrats on a great quarter. I was wondering, if you could talk a little bit about your visibility into your customers inventory levels? And maybe how that has changed?

I’m sorry, you broke up a little bit there, Jake, could you repeat that the question on that…

Sorry about that. I was wondering if you could talk about visibility into your cloud customers inventory levels and how that has changed?

Got it. So yes, I mean with our cloud customers, first the momentum – since the beginning of the year has been phenomenal. It’s always difficult to predict cloud demand on a quarter-by-quarter basis. However, I would say that if you take a look at how their businesses are doing. I haven’t seen the latest headlines today, but I suspect they are doing quite well. And I suspect, they’re going to continue to do quite well and they cannot fuel that business without ongoing investments in their networks. So if the sort of the thrust of the question here is, is there demand that’s happening within the cloud provider space that’s trying to get ahead of some of the supply constraints in the industry? I believe, that yes, there is probably some of that that’s happening right now, but I don’t believe that’s the only thing that’s happening. I think we’ve executed well. We preserved our footprint within the cloud vertical. We’ve engaged as partners to our cloud customers. It’s been broad-based across hyperscale and the cloud majors and it’s for that reason that we now expect the full year in the cloud to be more on the high end of our long-term model.

Yes. And just as a reminder, we saw bookings growth in the cloud vertical nearly 30%, revenue was at a 3% clip. So clearly we’re building some backlog in the – with the cloud vertical as well. We expect revenue to be up sequentially from a cloud perspective.

Great, thanks. And then maybe kind of as a follow-up, I know you touched on this a little bit earlier, but could you talk about any inflationary pressures you’re seeing and component pricing?

Yes. So at this point, it is really difficult to predict. We’re obviously working with our suppliers. We have long-term contracts in many cases, long-term pricing contracts, et cetera. So we’re not expecting it to be, I would say super material. However, we are expecting there to be some impact and we are factoring that into our long-term model at this point. But it is early, it’s something we’re adapting on a regular basis. We do think it could have some impact. It probably will have some impact. We don’t think it’s going to be enough to take us off our full year gross margin target of 60% at this point.

Our next question comes from the line of Tim Long with Barclays. You may proceed with your question.

Thank you. Two questions if I could. Rami, maybe you can update us, I think Ken mentioned something about the strength in the cloud vertical and still looking for some of those 400-gig wins in the hyperscalers. So could you kind of update us on progress there, and maybe if you could just work in kind of what you’re seeing across that customer base and the rest of the customer base as far as white boxing as a risk? And then secondly on the Service Provider side, could you talk a little bit about the competitive landscape, obviously Huawei does have some struggles and Nokia seems to be struggling a little bit as well across their businesses. So can you talk about in the context of a favorable industry backdrop, how you see kind of competitive advantages at this point? Thank you.

Sure, Tim. So let’s start with the cloud provider space in particular 400-gig. Things are progressing very well and 400-gig I feel increasingly confident that we’re going to be able to win 400-gig footprint and this is a broader market in across both the hyperscale cloud providers, as well as the Tier-2, 3 or the cloud major, cloud providers as well. Now that the competitive solutions are out in the market, the competitive bake-offs are happening, we sort of get a good feel of what’s out there and how the differentiation we had hoped to achieve is actually fairing out with practical testing and I feel good. I mean let’s just say that. We’re winning especially in wide area use cases. And this is across both the hyperscale as well as the smaller cloud provider. And then even in the data center, we’ve one 400-gig data center use cases. We’re not yet ready to announce a hyperscale 400-gig data center win at this point, but we’re going to continue to aggressively go after the full market that’s out there, both wide area and data center. And on the SP competitive front, there – our solutions, our strategy is very much based on the strengths and the merits of our own products, our wide area capabilities, our automation capabilities and I feel very good about that. We’ve listened closely to our customers. We understand what they want. And I think we were delivering solutions and have delivered solutions that addresses their biggest needs and requirements. With Huawei sort of issue that’s out there and whether that presents an opportunity for us? The answer is yes. I think we do see some opportunities right now. The results of some concerns about Huawei, they’re going to sort of play out in time. This is never going to be a sort of an overnight thing, share shift typically happens in time frames of the year, but the good news is, we do see that there are opportunities and customers that are rethinking some of the decisions that they have made in specific geographies around the world.

Our next question comes from the line of Meta Marshall with Morgan Stanley. You may proceed with your question.

Great, thanks. I just wanted to ask about the security kind of segment that you alluded to, I mean just in – I guess how far integrated or how far down the pipeline, are you in integrating 128 into kind of the portfolio, so that it can be kind of a cross-sell and cross-Mist in the Enterprise portfolio? And then just with the security portfolio have grown year-over-year without the inclusion of 128? Thanks.

Yes, so let me start and then Ken you can add some more colors on the specific question. So 128 has become an integral part of our AI-driven enterprise strategy, which is really around everything from client to cloud with ease of automation, simplicity of day-to-day provisioning and there is a security architecture element to this, because it provides visibility into applications, it integrates seamlessly with our on-prem security offering. And then over time as we introduce more cloud-based security offerings that will integrate seamlessly with that, and so that has – still early days with 128 Technology. But as I mentioned, the win rate is solid, the customer interest is solid, the pipeline that’s being built is solid. And I have a lot of confidence that it’s going to be a successful acquisition in the long-term.

Yes. Security all up, which includes products and services grew 11% in the quarter. Products actually grew better more than services, services had modest growth, products actually was driving most of that 11% growth. And yes, it would have grown without 128 T. In fact, all three of the recent acquisitions Apstra, 128 T, as well as a Netrounds, accounted for less than 10% of revenue in the quarter. On track to the full year plan, we expect it to be about a point in aggregate of growth for Juniper. So call it $45 million or so in total revenue for the year. So we’re on track for that although Q1 was less than $10 million as expected.

Our next question comes from the line of George Notter with Jefferies. You may proceed with your question.

Hi, guys. Thanks very much. I realize this is probably a relatively small part of your revenue stream, but I wanted to ask about your exposure in the rural broadband market. Obviously, lots and lots of new stimulus dollars coming into that space, certainly needs there, I think in terms of the LAN piece and routing piece. Can you just talk about what percentage of sales might be coming from that end market and how you might see that growing going forward? Thanks.

Yes, I don’t even know if we have that figure off the top of our head. Maybe Ken can pull something up, but I’ll tell you this, we’ve actually had over the last two years or so as part of the sales restructuring that we did a deliberate focus on Tier 2, Tier 3 service providers with an eye on tapping into some of the broadband sort of rural stimulus dollars that are making their way into the market. So there is no doubt that Biden’s infrastructure deal, if it actually manages to pass, is going to present some opportunities for us. And I think we’re well prepared for it. It really is – it’s not a matter of technology. We’ve got the goods, we’ve got the products, we have the solution. Automation in fact becomes especially important for the rural areas where typically you are going to just have to deal with a lot more density of products in sparse geographical areas, but I think it’s just a matter or sort of seeing the stimulus dollars actually weave their way into actual spending.

Yes. Unfortunately, we do not break out our business, our automated WAN solutions business in that way. So we can’t share with you the numbers, but as Rami mentioned, we’re focused on diversifying that business. And we’ve seen tremendous success over the last couple of years diversifying and I think we’ll continue to do that going forward.

Our next question comes from the line of Sami Badri with Credit Suisse. You may proceed with your question.

Hi, thank you for giving me the slot to ask a question. One thing, Ken, I think in your prepared remarks you talked about the cloud growth, and that the new guide, I may have misheard you but you said that the way it’s trending, is coming in at the higher end of your long-term growth model with a cloud customer. And I know you kind of gave some granular data points regarding the revenue outlook and the Service Provider flat to slightly up, kind of I think that was the message. Could you just kind of give us the same kind of dynamic or unpack it for Cloud so to just get a better idea on what that vector looks like as it pertains to the company?

Yes, absolutely. So at Investor Day, we talked about Cloud, the long-term model for Cloud being plus 1% to 5%, so 1% to 5% growth on a kind of a three-year CAGR basis, our long-term model basis. This year, we actually expect to be the high-end of that range. So we’re thinking closer to their 4% to 5% range, or higher end of that 1% to 5%, based on the strength we’re seeing at the start of the year. Previously for Cloud, our previous guidance for the year was just, it would be growth, right. And now we’re actually quantifying it to the high end of that kind of 1% to 5% range. That’s a change from 90 days ago.

Our next question comes from the line of David Lloyd with UBS. You may proceed with your question.

Great. Thanks, guys. And if you guys covered this I apologize. My line went off for a little bit. Can you – Ken, can you kind of touch on the contribution from the acquisitions in the first quarter, and whether that show up, I’m assuming most of it showed up in the Enterprise segment and it sounds like it was somewhere between $5 million and $10 million? And then just a quick follow-up on this weighing out there, but I think about sort of the commentary for the full year guidance, does it imply based on your Cloud and Service Provider commentary that some of the back half of the year. Enterprise revenue growth should be sort of double-digits, that’s sort of what you’re intimating by sort of the guidance that you laid out there? Thanks.

Yes. So on the acquisition front, I mean we – for Q1, the revenue was less than $10 million in aggregate, in line with our expectations for the quarter. So we’re off to a strong start, but Q1 was less than $10 million. So relatively immaterial, and most of that would have showed up in Enterprise, given the customers, accelerate the products predominantly being cloud-ready data center and AI-driven Enterprise oriented revenue products. We’re still on track for the full year to get to a 1% in aggregate growth across $45 million, give or take for the year, from revenue perspective. And we do think these acquisitions as we said before will be dilutive in FY2021 by about $0.05, and that’s something that we expect to pressure in the second half and actually be accretive here in 2022. So while they are a bit of a drag on overall earnings this year, we expect them to enable us to expand margins in 2022 and beyond. Second part of your question, I’m sorry, one was about the acquisitions. What was the second part of your question?

When you think about the rest of the guidance, does that imply sort of Enterprise revenue in sort of double digits in the back half of this year, given sort of where Cloud will be in terms of either for the rest of the year?

Yes, I mean so Enterprise we expect to be our fastest growing vertical. I think if you do the math, you’re going to get to kind of the numbers you’re talking about. We expect it to be our fastest growing vertical. We do believe AI-driven Enterprise will be double-digit growth, cloud-ready data center, we talked about being toward the middle of the long-term model, which is kind of high-single digit growth. And those are predominantly Enterprise, although, we obviously sell those solutions to Service Provider as well as Cloud.

Operator, we’ll take two more questions.

Our next question comes from the line of Alex Henderson with Needham. You may proceed with your question.

Thank you very much. So when you guys start talking about Mist, you spent a fair amount of time talking about how it generates upsell into other products imposed through a multiple of the initial sales over time. I haven’t really heard much update on that. In fact, if anything in the last quarter, it seemed like it had been at the lower end of the multiple benefit. Can you talk a little bit about what kind of upsell you’re seeing and I get it that it’s become an architectural sale, but to what extent there is an upsell around what has traditionally been more standardized products like rackables switches and so forth?

Yes, let me start and then maybe Ken you can add some more color. I honestly I’m scratching my head a little bit about where your comments around sort of slowdown. We don’t see anything of that nature in the AI-driven Enterprise where Mist plays. I did mention in my prepared remarks, that if you take a look at orders for Mist all up, that includes all Mist products, right, the wireless, wired switching, associated software capabilities it doubled on a year-over-year basis, and it’s no longer a small business for Juniper, and really it’s now starting to contribute meaningfully. The innovation is phenomenal here. I mean the pace of innovation, we just announced and launched in fact and we’ll ship very shortly, if we haven’t already, a new breed of campus wired switch in the form of EX4400, which is our first true cloud native, Mist-optimized wired switch that’s intended for rapid, fast adoption, zero touch provisioning, all the aspects of the Mist solution that you’ve come to expect and love and their access points now applying to this next generation wired solution, and that’s just us really pouring fuel on the fire of the AI-driven business that is essentially powered entirely by Mist today.

Yes, I would just add that we mentioned in the prepared remarks that our EX pull-through related to Mist is actually a record in Q1. So we have a lot of EX that we’re selling are because of the Mist kind of solution is actually the all-time high. And we’re obviously continuing to sell more subscriptions as well, and the subscriptions, they don’t show up in revenue right way, obviously they are recognized gradually over time. So a big part of our ARR growth that we mentioned of 28%, is also very much tied to the full Mist solution, not just necessarily the Wi-Fi. So in aggregate we talked about in Investor Day that we think the lifetime value of the kind of the pull-through, if you will, the non-wireless LAN solution is about 2.5 times the Wi-Fi business. So that’s something we’re still in very early innings of that. And we’re still leading largely with Mist itself, and then pulling through the rest of the solution. But as we see the lifetime value and these customers continue to grow with EX and other parts of the portfolio. We feel confident in that kind of 2.5 times ratio that we put out there.

Our next question comes from the line of Paul Silverstein with Cowen. You may proceed with your question.

Thanks, guys. Appreciate you squeezing me in. Question for Ken or question for Rami or both of you, total gross margin, it sounds, if you already stated this, I apologize, but it from what I read it doesn’t sound like, but it seems your guidance. But if I go back to last quarter, you did sell more constructive looking out beyond this year. Any changes you’re thinking about where gross margin could go and what timeframe?

So you’re right. We have not changed our guidance for gross margin. We did change our guidance for revenue. We increased it by a point and we’re not bringing gross margin up, and typically you would expect with volume, you would see some increase in gross margin and some of the reason for that Paul, is some of these supply constraints, some of the semiconductor shortages, we are factoring in some incremental costs and quite honestly, there is still some uncertainty there. So I just want to, at this point we’re keeping our margin targets the same. Beyond this year, I think on things we control like software mix and optimization within our services organization, et cetera. I feel very good. That said, some of the things that have less control on whether it be COVID-related freight costs or even some of these semiconductor shortages, it makes it very cloudy. So at this point, we have really no update beyond this year. We expect to be able to manage to the 60% target for this year, but beyond that, really no change to our outlook at this point.

And Paul we have...

Ladies and gentlemen...

I think Paul, he had a question for me, but maybe we lost him already.

Ladies and gentlemen, we have reached the end of today’s question-and-answer session. I would like to turn this call back over for closing remarks. You may disconnect your lines at this time. Thank you for participation. Enjoy the rest of your evening.