Greetings. Welcome to the Juniper Networks Q3 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] Please note this conference is being recorded. I will now turn the conference over to your host. Jess Lubert, you may begin.

Thank you, Operator. Good afternoon. And welcome to our Third 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-Q, 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. We ask that you please limit yourself to one question so that as many people as possible who would like to ask a question have a chance. 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 Q3 2021 results. We experienced very strong demand during the September quarter and delivered a fifth consecutive quarter of year-over-year growth, even though supply chain challenges impacted revenue in the period. Orders saw another quarter of mid-teens year-over-year growth when adjusted to account for extended lead time. On an unadjusted basis, orders grew by more than 50% year-over-year for a second consecutive quarter. And our ending backlog is now increased by more than $1 billion at compared to year-end 2020. Order momentum was strong [Indiscernible] vertical, customer solution, and geographies. With each of these categories experiencing growth well into double-digit territory. Needless to say, our team is executing extremely well. Our strategy is working. And investments we have made in technologies that enhance customer operations and improve the end user experience, what we call experience-first networking are allowing us to differentiate across the markets we serve. we serve. This technical differentiation along with the investments we've made in our go-to-market organization are paying off and enabling us to take share and capitalize on some of the big market transitions that are beginning to unfold across the verticals we serve. This is particularly true in the enterprise market, where customers are increasingly recognizing the value delivered by platforms such as Mist and Astra, that dramatically reduced deployment time, eliminate trouble ticket, and reduced meantime to resolution for network problems. These platforms are not only enabling us to win new logos in the campus and the datacenter, but also to pull through other Juniper products that present meaningful opportunities to expand with customers over time. In the Cloud and service provider vertical, we're seeing strong early adoption of our 400-gig capable platform due to the strength of our Juniper bulk operating system, our differentiated silicon capabilities, and the deep engagement we maintained with these important customers. These factors are not only enabling us to maintain our core franchises, but also to secure new footprint, including a large new Hyperscale wind deployment that should present tailwinds for our business over the next few years. I'm also encouraged by the early customer interest in our metro routing portfolio, which did direct a large and fast-growing market where historically we have in place. We expect this opportunity to steadily ramp through the course of next year as new products come to market and service provider 5G investments steadily increase. The bottom line is that I remain very optimistic regarding our future prospects despite the supply chain challenges we are currently navigating. I believe these challenges are likely to prove transitory in nature. And the strong order momentum we're seeing and the backlog we have developed set's us up extremely well to deliver improved growth and profitability in 2022 and beyond. While it remains early, and we'll provide a more detailed 2022 outlook when we report our Q4 results based on current backlog and the August strength we're continuing to see in the market. We currently expect to deliver at least mid-single digit sales growth and at least a point of Operating Margin Expansion in 2022. Our expectations for 2022 do not assume a material improvement in supply chain constraints. Now I'd like to provide some additional insights into the quarter and address some key developments we're seeing from a customer solutions perspective. Starting with our automated WAN solutions, while revenue declined year-over-year due entirely to supply chain constraints, we experienced another quarter of strong order growth with solid momentum in both our service provider and Cloud segment. We saw healthy demand across both our NF and PTF product family and strong adoption of our newer products, as well as our automation software portfolio. Our 400-gig solutions are performing well and enabled us to not only protect our existing footprint, but also to secure new wins that includes several large opportunities with our Cloud customers, including the hybrid scale opportunity I previously referenced. Driven in part by these opportunities, our Cloud orders saw a second consecutive quarter up triple-digit growth year-over-year. While we are continuing to see strong customer demand for our automated LAN solution, these products are currently the most impacted by supply chain challenges. As a result, we continue to expect revenue from this segment to be within the range of our long-term model calling for a 1% decline to a 3% growth this year despite the strong demand, we are seeing. Our Cloud-Ready Data Center solutions experienced 26% year-over-year revenue growth in Q3, and another quarter of encouraging order trends from our Cloud enterprise and service provider customers. We continued to see strong momentum with new logos and deal greater than $1 million. As I mentioned last quarter, Astra is creating a significant buzz in the market, which is not only leading to more software opportunities, but also full-stack datacenter wins. Customer interest in our Cloud-Ready Data Center portfolio is high. And we continue to be optimistic about the outlook of this business. Based on the momentum we are seeing; our Cloud ready datacenter business is now tracking to meet or exceed the high end of our long-term model looking for 5% to 9% growth year-over-year. Finally, our AI driven enterprise solutions significantly outpaced the market and grew 35% Year-over-year. Our mid AI differentiation continues to win in the market as wireless orders experienced another record quarter with triple digit growth and a record number of deals greater than $1 million. Our mystified revenue of wireless LAN, wired access, Marvis Virtual Network Assistant and associated EX pull-through, nearly doubled year-over-year. And we experienced record EX pull-through in the period. With this pull-through revenue growing more than 200% year-over-year. This momentum enabled EX to achieve the highest level of sales since 2014. We expect this momentum to continue in future quarters as customers increasingly recognize the value of AI driven Cloud operations, including new and innovative features such as EVPN - VXLAN fabric management in the Mist Cloud, which has launched this quarter. On a year-to-date basis, our mystified revenue has more than doubled year-over-year. We're also seeing very positive results with our AI -driven SD-WAN solution, which earned Juniper distinction as the only visionary in the Gartner WAN Edge Magic Quadrant published last quarter. We saw a record quarter for our Session Smart Router portfolio acquired from 128 technology with triple-digit year-over-year growth and [Indiscernible] in various sectors like retail and banking, plus especially strong traction with the federal government. In addition, branch SRX developed last quarter hit a two-year high. The pipeline for our AI-driven SD-WAN is strong, as both prospects and partners are gravitating towards the unique benefits provided by Juniper AI off with assured client to Cloud experiences. We are particularly encouraged by the number of full stack multi-million-dollar wins we're seeing in the campus and branch. Where companies are turning to Juniper for a combination of their wired access, wireless access, and [inaudible 00:10:45] retailer and leading international construction company in Europe and managed services providers in North America and Europe. This highlights the value of our AI driven enterprise offerings to customers and partners across all verticals and all Geo's. We believe that this AI continues to offer unique and market-leading differentiation, including self-driving operation and predictive actions driven by our virtual network assistant, Marvis, resulting in the best user and operator experiences. I am very pleased with the momentum we're seeing in this business. And now we expect our AI driven enterprise solution to see at least 20% growth in 2021. Our security revenue experienced strong results in Q3, with total revenue growing 9% year-over-year. Product revenue increasing by 16% year-over-year, which marks a third consecutive quarter of double-digit product growth. Strength with broad-based across our high-end, mid-range and branch SRX products, as well as our virtual SRX offerings. Our connected security strategy is gaining traction in the market because the convergence of networking and security provides us with a competitive advantage. And we continue to receive third-party accolades on our solutions from organizations such as ICFA and Net fax open often besting all competitors in head-to-head tech. We believe our technical strength in both security and networking will continue to provide tailwinds in future quarters and should enable us to grow our security business during the current year. Our software momentum, accelerated in Q3. Software and related services revenue grew 67% year-over-year as we experienced growth with ratable subscriptions, solid uptake of our Flex software licenses, and strong sales of certain perpetual onbox licenses. ARR grew 34% year-over-year, driven by a combination of mid subscription, ratable security software offering, and the related services associated with these software offerings. We experienced a record software orders in the quarter due to broad-based strength across verticals and customer solutions. Momentum is strong in both rattible subscriptions offerings, as well as on bluff flex licenses. Based on the momentum we're seeing, we're currently tracking ahead of the long-term total software and ARR target we presented at our recent Investor Day. I'd like to mention that our services team delivered another solid quarter and continued to grow on a year-over-year basis, due to strong renewal and service to tax rate. 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. 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 third quarter results and [Indiscernible] some color on our Outlook. We ended the third quarter of 2021 at $1 billion 189 million in revenue. Slightly below the midpoint of our guidance, but up 4% year-over-year and 1% sequentially. The modest revenue shortfall as compared to our guidance, was due to the negative impact of supply chain constraints. Non-GAAP earnings per share was $0.46 in line with our guidance. During the third quarter, momentum and product orders remained strong, showing exceptional year-over-year growth for the second consecutive quarter. We saw significant order growth across all verticals, all geographies, and all customer solutions. Some of this order strength continues to be attributable to industry supply chain challenges that are causing certain customers to place orders early in an effort to secure supply when needed. Even, after adjusting for these early orders, total product orders are estimated to have grown in the mid-teens year-over-year. This is the third consecutive quarter of mid-teens bookings growth after adjusting for early orders. It's important to mention that our backlog has increased by more than $1 billion relative to the start of the year. Looking at our revenue by vertical on a year-over-year basis, Cloud grew 20% Enterprise grew 7%, and service provider declined 6%. We've got double-digit Year-over-year order growth in service provider. However, the timing of shipments due to supply constraints impacted revenue. Turning to customer solutions on a Year-over-year basis, Cloud-Ready Data Center increased 26% and AI-driven enterprise increased 35%. Automated Land Solutions revenue was negatively impacted by supply constraints and declined 12% Year-over-year. However, orders grew double-digits versus the last year. Total software and related services revenue were $204 million, which was an increase of 67% Year-over-year and ARR grew 34% year-over-year. As Rami mentioned, we are pleased that our software-related metrics were at record levels in the third quarter and are tracking ahead of the targets we shared at our Investor Day in February. Total security revenue was $160 million, growing 9% year-over-year. Security product revenue grew 16% year-over-year. In reviewing our top 10 customers for the quarter, 6 were Cloud, 3 were service provider, and 1 was in enterprise. Our top 10 customers accounted for 31% of our total revenue consistent with the third quarter of 2020. non-GAAP gross margin was 60.1%, which was above our guidance midpoint, primarily driven by favorable product and customer mix. If not for elevated supply-chain costs due to COVID-19, we would have posted non-GAAP gross margin of approximately 61.5%. Non-GAAP Operating Expense increased 8% year-over-year and was essentially flat sequentially, slightly below our guidance midpoint. Non-GAAP Operating Margin was 16.6% for the quarter, which slightly exceeded our expectations. We exit the third quarter with total cash, cash equivalents and investments of $1.8 billion. Cash flow from operations was $137 million in the third quarter. From a capital return perspective, we paid $65 million in dividends, reflecting a quarterly dividend of $0.20 per share and repurchased $50 million worth of shares in the third quarter. Now, I would like to add some color on our guidance, which you can find details in the CFO commentary available on our Investor Relations website. Consistent with prior quarters in 2021, the worldwide shortage of semiconductors and other components is impacting many industries. Caused in part by the continuation of the COVID-19 pandemic. Similar to others, we are experiencing ongoing component shortages, which has resulted in extended lead times and elevated costs of certain products. We continue to work to resolve the effect of the supply chain challenges at an increased inventory levels and purchase commitments. We are working closely with our suppliers to further enhance our resiliency and mitigate the effects of recent disruptions outside of our control. We believe that even with these actions, extended lead times and elevated costs will likely persist for at least the next few quarters. While the situation is dynamic, at this point in time, we believe we will have access to sufficient supplies of semi-conductors and other components to meet our financial forecast. At the midpoint of our guidance, revenue is expected to grow 3.5%. This would be at the sixth consecutive quarter of year-over-year revenue growth. We expect our fourth-quarter non-GAAP gross margin to decline sequentially due to higher costs related to supply constraints and product mix. If not for the elevated supply chain costs, we would have forecasted non-GAAP Gross Margin of approximately 61%. We believe these elevated supply chain costs will prove to be transitory over time, but will likely remain elevated for the next several quarters. I'd like to point out that despite an expected sequential decline in non-GAAP gross margin in Q4, on a full-year basis, our guidance remains approximately 59.5%, which is in line with what we provided previously. While there is a lot unknown about the future due to the pandemic and other macroeconomic uncertainty, we would like to provide a few comments on our outlook for 2022. Presuming no further COVID-19 related economic deterioration, based on the current order momentum we're seeing and the anticipated Q4, 2021 ending backlog, we expect at least mid-single-digit revenue growth on a full-year basis in 2022. In addition, we expect to see at least 100 basis points of Non-GAAP Operating Margin Expansion on a full-year basis. This guidance is not dependent on improvements in lead times or easing of industry supply chain constraints. We expect to see seasonal patterns from a revenue Non-GAAP gross margin, and Non-GAAP operating expense perspective. As a reminder, our Non-GAAP gross margin tends to be sequentially lower in the first quarter with gradual volume-related improvements about the course of the year. In addition, operating expense is typically sequentially higher in the first quarter due to the reset, and variable compensation and fringe costs. In closing I would like to thank our team for their continued dedication and commitment to Juniper's success. Especially in this challenging environment. Now, I would like to open the call for questions.

At this time, we will be conducting a question-and-answer session. [Operator Instructions]. We also remind everyone to limit themselves to only one question. One moment, please, while we pose for questions. And our first question is from Rod Hall with Goldman Sachs, please proceed with your question.

Hi, guys. Thanks for the question. I guess I wanted to check the number on automated WAN if that was down Year-over-year in the quarter, but then it seems like you've got a lot of opportunity as you head into next year. And I just wanted to see what you're thinking, what happened in the quarter? Maybe you give us a little bit more color, but also was it -- was that supply mainly, and how does that look for you next year as you look out the next 12 months? Thanks.

Thanks for the question, Rod. So, the short answer is, it's absolutely supply-chain limited. It just so happens that as you might imagine, for automated when the predominant product is routing, routing is when a more complex products that we need to build. They use the most amount of the sophisticated semiconductor components. And for that reason, the discrepancy between revenue and orders is going to be greater for automated WAN and by connection also for the service provider. Having said that, I'm very pleased with both our service provider and our automated WAN momentum, especially from a booking stand point I should mention every solution area automated WAN Cloud ready datacenter and the AI driven enterprise had order growth of over 50%. It's just that the automated WAN had a biggest impact from when it came to supply chain challenges. I really like the fact that our newer products that we've introduced into the market line cards for the MX, line cards for the PTX are performing very well. That's something that we monitor closely. We've talked a lot about the Metro opportunity, which in large part hasn't really positively helped us in any significant way that really, I think next year and year after it's when if kicked in. But nonetheless, we're seeing very solid early momentum with record orders for our ACX product line, which is predominantly used in that metro opportunity. And the last thing I'll say about automated WAN which is very encouraging, is our 400-gig win rate. So, while we don't necessarily see a tone of revenue yet, with 400 gig deployments, we are looking at very solid wins and also growing orders at this point, which is reflected in the automated WAN order growth.

Okay. And thanks for that, Rami. And can I just -- just following that up, could you comment on the backlog, as I know you said it's a billion-dollar increase, I think year-to-date, is most of that backlog increase in this quarter in the automated WAN area where -- you're just seeing that across-the board. I'm just curious about the composition of the backlog?

Yes. So, we've been building backlog throughout the year and it did grow quite healthy in Q3 as well as you noted, Rod. It is really across the board. I mean, backlog is up across all customer solutions. I would say that the automotive WAN is up a little bit more than the others, but it really is an across-the-board backlog build with a little bit more slanted towards automated WAN. So, we are entering the fourth quarter, and I believe next year with a very healthy backlog across all products, but automated when it is, I would say, the healthiest, if you will.

Great. Okay, guys. Thank you very much.

Sure. Thank you.

Our next question is from Q - Samik Chatterjee with JPMorgan. Please proceed with your question.

Thanks for taking the question. I guess I just wanted to start off by asking on pricing. What kind of actions have you taken on that front? If you can just break that down in some different verticals. Where are you finding it easier to take pricing, where it's been more difficult and in relation to the supply chain driven headwinds on gross margin when do we get to a point where you can be more net neutral with the price -- the pricing actions that you take? Another follow-up, please.

Yeah. So, I'll take that. Thanks for the question to me. So, we are expecting the supply-chain costs to remain elevated throughout next year. I still believe there transitory and I could be positively surprised where we might see some of that reduction, maybe late next year. But at this point, we're presuming that it's going to remain elevated on the cost side. On the pricing side, we are absolutely taking pricing actions to try to protect our Gross Margin. At this point, I feel that we are going to be able to protect much of our Gross Margins a little too early to call exactly how that's going to play out. The other thing I would also add is the timing. I do expect that the cost to hit us a little earlier as you can see from the results. Costs have already started to hit us and the pricing actions will take some time to feather in, particularly because we have such a large backlog at the old prices. So, we need to burn through the backlog at kind of legacy pricing if you will. And as we make pricing actually going forward, but we will realize that benefit in 2022, but it might not be evenly throughout the year.

Got it. As far as a follow-up, you are guiding the 5-plus in revenue growth and mid-single-digit as you call it, revenue growth in 2022. In the past, you've given some color about growth expectations by the vertical, just wanted to -- I can see different drivers, you have Cloud, you have the benefit of 400 gigs is Momentum and service provider as lenders. If you can help us think about directionally which vertical is probably going to be your strongest growth vertical and rank order them in terms of growth for next expectations for next year?

Let me take that and maybe Ken would add some more to it. First, I would say we're not really guiding to mid-single-digit or a 5% growth, as you mentioned. We're guided -- we're providing an outlook of at least mid-single-digit growth. And just keep in mind that we are supply chain limited right now. So that outlook that we provided assumes no meaningful improvement to the supply chain situation. If the supply chain situation does start to materially improve next year, then I think there is upside to that number. So, I would just start with that. In terms of where that growth comes in. Every vertical is performing extremely well, and every solution area is performing extremely well. In enterprise, I'd say it's going to be a significant growth driver for us. So, assuming against supply chain goes our way, I think the differentiation that we have in the market, the win rate, the net new wins we're getting sets us up to perform extremely well. A service provider, I think could actually do exceptionally well and even compete with an enterprise standpoint -- with the enterprise vertical just from the standpoint of the significant backlog that we built thus far. So, it's going to be very difficult to predict exact stack ordering of contributors to that growth, primarily because it's going to be very much determined by the supply chain situation.

The only thing I'll add, we'll provide more color on our next call as we typically do in the beginning of 2022. So, our Q4 call, we'll provide more color on FY '22 at that time.

Thank you for these clarifying remarks, Rami, and thank you, Ken. Thank you.

Okay.

And our next question is from James Fish with Piper Sandler. Please proceed with your question.

Hey guys, this is Q - Clinton for [Indiscernible] Thanks for taking our question. Maybe touching base again on the Enterprise side, we've seen some really strong quarters, especially within the [Indiscernible] business. How should we think about the puts and takes of the Enterprise strength? Is it driven more by kind of delayed projects returning or are we seeing Juniper gaining more share? Are winning more against the incumbents? Thank you.

Yes, thanks for the good question. So, I'm very confident that we're taking share in the enterprise space. You saw our enterprise routing performance, 7% year-over-year. But I think the big difference between our revenue, and I think I said enterprise routing performance, I mean enterprise revenue performance 7% Year-over-year. Order performance is actually significantly more than that and the difference is driven primarily by the fact that we had some weakness in enterprise routing due entirely to the federal space where there's still uncertainty of our budget. So, if you remove that, our strength in the enterprise is phenomenal. We're seeing significant wins of net new opportunities and there are two things that are driving that today. One is our AI driven enterprise solution, campus and branch that includes the Mist for wireless, wired, and WAN that's achieving new records every single quarter. Triple-digit revenue growth for Mist, the first triple-digit bookings quarter for Mist wireless, significant EX wired switching pull-through of the Mist portfolio, all of these are contributing to that portion of the Enterprise business. The second vector of growth within the Enterprise is a datacenter, there as well, over 50% year-over-year order growth. Significant differentiation with Apstra as the management solution for the datacenter, very solid win rate. So, I just think that we're taking share because of the strength of our portfolio which has never been this differentiated I mean, at least in my time at Juniper.

And I just want to add on to that a little bit. So as Rami mentioned, Enterprise from a revenue perspective was up 7%. We already talked about automated WAN and service provider being a little bit stunted because of supply. And I just want to make sure everyone is aware that all cuts, whether it's Enterprise Cloud or SP, or Automated [Indiscernible] Cloud Ready Datacenter [Indiscernible] than Price. All numbers are actually lower from a revenue perspective than we would otherwise expect if it were not for supply constraints. We're not going to give you an absolute number, but it could have been, but in one way to look at it is the difference between our adjusted bookings on a product perspective, which is 15% or mid-teens in Q3 year-over-year as compared to our revenue growth on a product perspective of 5%. So, it's easily to imply that there's an extra 10% of revenue growth that did not happen due to supply constraints. and that would have really lifted all boats, Enterprise, Cloud, NSP.

Super helpful. Thank you.

Our next question is from Simon Leopold with Raymond James, please proceed with your question.

Thanks for taking the question. I wanted to see if you could talk about the general trend in your input costs and specifically what I'm pondering is the components, particularly chips that you're ordering now or ordered during the quarter, are likely to show up in 40, 50 weeks at higher price points. So, want to get a better understanding how to think about the impact of that particular headwind in 22 gross margins. Is that something you could help us with?

Yes. So, as you can see from -- we provided the actual reported gross margin of 60.1 this quarter, which was above midpoint due to product mix being favorable. But we also talked about what it would have been if it weren't for the elevated costs which would have been close to 61.5%. So, these elevated costs are hitting us now. And one thing I would say, Simon, yes, we have purchase orders throughout all of next year. In some cases, out 50 weeks, in other cases, out 80 weeks, in an attempt to secure supply. And these are non - cancelable committed purchase orders with pricing. That said, this pricing environment is taking that and throwing it out the window. We are seeing costs going up despite the fact that we have orders in place. So, we are expecting -- the orders we have in place are not necessarily the price we are going to pay. Whether it's disguised in the form of an expedite fee or purchase price variance, etc., we're seeing costs going up in advance of those orders being fulfilled if that makes sense.

I think it does. Just to clarify, all else being equal your mix the same, customers the same, gross margins for products would be lower in 2022 than they are right now. Is that fair?

Not providing 2022 specific gross margin guidance at this point, there's just too much uncertainty. You could count on us giving you a better understanding 90 days from now on our next call. I will say this, we're not dependent on gross margin improvement next year for us to hit our commitment of at least 100 basis points improvement in operating margin. So, we're very committed to expanding profitability next year and we're not dependent on gross margin to do that, but we are very committed to expanding profits.

Okay, thank you. That's helpful.

Yes.

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

Hi, guys. Thanks very much. I guess, as I listened to the call, you guys have turned out a lot of numbers. Certainly, some eye-popping stats, I think, in terms of the additional billion-dollars in backlog, triple-digit order rates across a number of your business lines and customer areas, and yet we're talking about mid-single-digit growth for next year. Certainly, I think you caveated that at least mid-single, but I guess I'm trying to understand sort of the delta between all these numbers. I mean, it seems like at some level you expect that some of your customers have double and triple ordered with you. And I guess I'm wondering like how you see that dynamic and how does that play out going forward?

Hi George. I'll start. So, I mean, you said it. We're really not guiding or we're not providing an outlook of mid-single digits. We're providing an outlook of at least that number, and we're doing it with the major assumption that supply situation does not in fact get better. If the supply situation, in fact does start to improve, and it could by the second half of next year. Then I think you will see an upside to this outlook that we provided. That's really the net of it. At this point in time based on visibility, we felt that it would be prudent for us to provide you with an outlook based on the supply situation not improving. However, that could be a false assumption. Things could actually be better next year.

Absolutely. I mean, there's no doubt that the limiting factor or the primary input into our guidance or outlook for next year is supply. This really has to do with how much supply we think we're going to have access to next year. And that's where we came up with at least mid-single digits. If it were purely a demand equation, the number would be much greater than that. And that that holds true to nominate next year. But also, this year.

Okay. Thank you very much.

Our next question is from Meta Marshall (ph.) with Morgan Stanley. Please proceed with your question.

Great thanks. I'm trying to see where you were seeing the most traction with the App Store business and was its enterprise or just -- or were you seeing kind of any attraction on the hyperscale side or on the cloud side. And then maybe just a second question if you could just remind us how much of the Q3 year-on-year growth would be inorganic? Thanks

Yeah. Let me start with your question about Astra. So first, I'll just say very quickly that we never anticipated that Astra would be a significant opportunity in the hyperscale space. Primarily because the top 5 hyperscale customers tend to develop their own automation software. That being said, everything outside of hyperscale: Enterprise, service provider, even Cloud major, is an opportunity. Where we have thus far seeing the quickest win rates, the biggest pipeline build is in the enterprise, large to mid-size enterprise companies. and as I mentioned earlier, it's extremely encouraging the rate at which we are taking down new opportunities. There is absolutely a demand for this kind of automation technology for the datacenter space. And there are some very unique aspects to our Astra software offering. First and foremost, it's the only open solution in the market today. None of our peer automation solutions work on anything but their own switching infrastructure. Astra works on our own switching as well as sonic as well as our competitor switches. that turns out to be a highly desirable feature of the technology. Apstra is designed ground-up to scale to the largest datacenters. That's very meaningful for large enterprises especially in financial services, and manufacturing, and other similar verticals. And Apstra invented -- pioneered the concept of intent-based networking so from an operational experience standpoint, there really is nothing as good as it in the market. So, I'm very, very pleased with the performance thus far, and I think this is going to be a great growth driver for us in the future.

Yes, and your second question on organic versus inorganic. When we started the year, we called out that we believe the inorganic acquisitions in aggregate, all 3 of them would add about 1% of revenue growth to Juniper. We know it's about $50 million and that's holding exactly as we expected. So, you can take that 50 million. I am not going to give you the exact number in Q3, but if you start with a $50 million for the year and quarterize that, that gives you some indication of the inorganic revenue in Q3.

Great, thanks, guys.

Sure.

Our next question is from Amit Daryanani with Evercore ISI. Please proceed with your question.

Hey, guys. Q - Michael Fisher on for Amit. I was curious on one of the comments on the AI driven enterprise revenue growth. You mentioned both Mist and EX product families grew year-over-year. I was curious, if you can give some more color on the trajectory there and whether growth rates are accelerating, decelerating, not moving around too much for each of those products, families?

Yeah, I sorry, you glitched there for a second. I think you're asking about Mist Wi - Fi, and then also the.

Yes.

Got it. Thank you. So first, I think by any measure, Mist has been an incredible acquisition for Juniper Networks, and it really has put our enterprise business on a significant growth and take share of trajectory. Q3 was no difference in terms of the quarter-over-quarter record we continue to make. This was a record AI - driven enterprise orders quarter and record AI - driven revenue quarter for us. Order growth is well into double-digits and Growth in all customers verticals, SP Enterprise and Cloud providers that are all bracing the technology. And I think I did mention that it's not just about WIFI, although Wi-Fi___33 in and of itself was a record and it hit triple-digit bookings for the first time in the Q3 timeframe. We saw a record number of EX pull-through, both in units, but also in revenue as well. So that has always been the strategy for Mist, not just about Wi-Fi___33, it's that entire client to Cloud connection that includes Wi-Fi___33, wired, and WAN. We're seeing the full benefit in wireless and wired, as we integrate 128 technology into the LAN, which is really going to happen by the end of this year. And the first part of next year, I think we'll see a similar pull-through effect happening on that side as well. So, the momentum has just been really strong. I expect that to continue for sure.

Great. Thanks for taking my question.

Our next question is from David Vod with UBS. Please proceed with your questions.

Great. Hey guys. Thanks for the question. So, can I just go back to the commentary about product order growth versus actual product revenue. Are you suggesting that in 3Q there was roughly 70 million of deferred product revenue that shows up in your product backlog that you're going to recognize next year? And if I do that same math in the June quarter, it's probably about 60 million or maybe 55 million. So, is that revenue that you think it will be recognized next year? Is that the right way to think about it? And then I have a quick follow-up.

Yes. So, I think those numbers you're referring to are in the ballpark from an adjusted bookings perspective, our actual backlog is growing much faster than that. We've talked about greater than a billion. So much bigger numbers. But if you just go to our adjusted bookings number, which is that mid-teen number, that delta the revenue or the numbers you just quoted and those are the revenue that we could have or arguably should have recognized already, right, in Q3. That plus 10%, that $70 million you were referring to. That if there were not supply constraints, we would have recognized approximately that much more revenue is really the math I want you to understand. From a backlog build is much greater than that because customers are placing orders at a faster rate.

So then maybe just as a quick follow-up. So that's 70 million given your backlog, I guess would be recognized in calendar 2022. So, when I think about your commentary about at least mid-single-digit revenue growth, that sounds like about a 0.5 of that growth comes from the backlog pushed from, let's say 3Q into 4Q. What I would imagine, you're expecting something similar in Q4. Is that the right way to think about your '22 revenue outlook? There's some push-out from 3Q and 4Q that's going to benefit in 2022?

I do think that the backlog build, whether it's the adjusted bookings backlog build or even the unadjusted, for that matter, is going to ship essentially. So, I think that gives us confidence in our revenue outlook of at least mid-single-digit revenue growth. The reason why we're not guiding more than at least single-digits is supply constrained. So, we are supply constrained today and we're expecting to be supply constrained next year as well. So how much of that backlog and how quickly we are able to ship it is still uncertain at this point, but we feel very good about at least mid-single-digit growth due to the strength of our backlog, due to the strength of the momentum we're seeing on the bookings side, quite honestly, the execution we have in the field and depart differentiation we enjoy. So, there's a lot of reasons to be more bullish, the one reason to be somewhat prudent is supply and that's something that's keeping us kind of at the at least mid-single digit level at this point.

Great, thanks for the color.

Sure.

And our next question is from Bajaj Najam with MGM Partners, please proceed with your question.

Thank you for squeezing me in. I apologize I missed much of the call so if I'm repeating, I apologize. but I just want to get a better sense on your gross margin trend. In terms of -- can you give us some color on pricing environment, and how much of a percentage does that offset to a degree the component and freight costs that are impacting your near-term gross margin and how do you think the pricing environment plays out next year? I suspect it's probably favorable when -- and if anything, if I look at some of your peers like Cisco who highlight is significantly benefit in the fourth quarter for the pricing environment, I suspect you are also likely to benefit from that. So, can you give us a color on how that plays out versus component costs?

So, we already are seeing some of the elevated cost rates are component shortages, freight, etc. and we expect those costs to remain elevated throughout next year. In some cases, bringing up perhaps get a little worse application is actually a little better, but we expect elevated costs throughout all of next year and we're already experiencing those. Now we've given you a Nano -meter Gross Margin reported by the Adjusted Gross Margin, just to account for that, those extra costs which we do believe are transitory. However, at this point, we're assuming it's not going to go away in 2022 it'll be beyond that. On the pricing side, we are taking actions. I think many of our competitors are taking similar actions, but will take some time for us to -- for those actions to really hit our P&L. I do expect them to be beneficial to 2022, but the timing will be a little more back-end loaded because we are carrying such a large backlog. We have nearly $1.5 billion of backlog. We talked about growing it over a billion, we started the year with $420 million, so we're nearly at $1.5 billion. That takes some time to burn through and that's not going to be impacted by the pricing actions as much as the future of orders will be, so you'll start to see some benefit. How that all plays out is something we're -- it's just too early for us to quantify and provide outlook on. But what I am confident on is our profitability overall next year and op margin will expand by at least 100 basis points.

Can you share how the customer feedback has been on the price hikes, especially like are you getting a lot of pushback? Can you give us some color on the discounting environment, is it more discipline across the market? And should that all else being equal, if you have a favorable discounting environment, wouldn't that a good degree significantly offset the component headwinds that you've highlighted?

Yes. So, we are taking the pricing actions with that goal in mind to protect our gross margin, and I think to a degree at will. How much degree as what we're still working through and not willing to provide an outlook at this point? But absolutely, it should help offset and protect our gross margin, and that's why we're taking the actions. From a customer acceptance perspective, I think overall, I would summarize it is they're not surprised. They're seeing it across the board, across most of their suppliers. We're seeing it across our suppliers. This is something that's upstream and not surprising. Obviously, I don't think that they are necessarily jumping up for joy when we talk about price increases, but I think their understanding of it. And we feel that we'll be able to capture much of that price increase and be able to protect margins to the best of our ability.

Appreciate the answer. Thank you.

Yeah.

And our next question is from Jim Suva with Citigroup. Please proceed with your question.

Thank you very much. My question is your outlook for next year is very encouraging. I think you said at least mid-single digit. Can you just recap this year and next year the amount of organic versus inorganic, I think sometimes the timing layers in a little bit organic versus inorganic and I just assume, but maybe you can answer next year's outlook is not including anything not announced or pending or things like that for acquisitions. Thank you.

Yeah. Next year's outlook does not assume any new acquisitions. The acquisitions we made approximately 12 months ago are now baked in to our run rate and baked in to next year's outlook. Those businesses are growing. And so, you would see a year-on-year improvement if we were to break that out, which we're not. But we have back that into our at least mid-single-digit Growth. But this is an organic Juniper as today, outlook for next year does not require any additional M&A.

Thank you so much.

Sure.

Our next question is from Paul Silverstein with Cowen. Please proceed with your question.

I appreciate you squeezing me in all I do apologize if this has been asked and answered. First off, with respect to web-scale customers, I know 60 of your top 10 customers were Cloud and I know there has been pretty typical with presiding quarters but are all 4 of the Web Skill Johnson among those 6.

Are all 4 of the hyperscale’s. What scale giant amongst those 6? We don't break out that love detail as you know, Paul, I mean, I think it's a fair assumption that where the Capex is where you're going to see our biggest customers. So, where the spend is likely going to be where our top 10 customers are. But I'm not going to get into any more detail and say, 6 of our top 10 are Cloud customers.

I do want to add just Paul, that our Cloud provider businesses is performing incredibly well. second quarter of triple-digit order growth. And I love the broad-based strength that we're seeing. So, we're seeing an expansion within Hyperscale of opportunities and diversity across the four or five big hyperscale customers. So, it's not just our traditionally largest Cloud provider customer that's driving that growth, is also other hyperscale customers and add to that, that Cloud major Tier 2, Tier 3 Cloud providers that are also performing very well. There's an additional element of strength and broad-based diversity and net is in the technology space. So, routing, switching, and security are all performing really well within the cloud provider segment.

So, Raleigh, to that statement, I assume -- I recognize, as you just pointed out, you've got more than just routing, but I assume routing is a big portion of those large -- of your business with this large Cloud operators. Where I'm really trying to go with this and I'm trying to be too clever by half clearly is in light of Facebook's massive, was the $10 billion to $15 billion increase in calendar '22 CapEx. I was trying to discern to what extent, if any, you were leveraged. I assume you do have leverage, but I suspect you're not going to be willing to answer that. If you are, great. If not, I would like to ask you -- Let me pause and let you respond, and then I have a quick follow-up.

Well, I am not going to answer a question that specific to a customer. However, I will say, I'm looking at the hot off the press earnings results from our -- the Hyperscale Cloud providers looking at their capex rates and feeling very good about that because as long as their business is performing well, they will need to invest in their infrastructure to maintain that strength, to keep up with the demand that they're seeing and we will benefit from that. The simplest that our footprint in routing within Hyperscale is phenomenal. We've maintained that footprint despite many attempts by competitors to take slices of it away from us. And then as you get into the top 10 and Cloud major, it's not just about routing, it's about routing and switching for us.

And just a quick follow-up. I assume -- assuming that increasing number of customers are, in fact, providing longer-term forecasts, as I believe is [Indiscernible] for you and most others. I assume your forecast, your outlook for '22 is relatively more solid. There's more knowledge underlying, and let's hope relative to last year and proceeding years. Is that simply given?

Yeah, I think given the strength of our backlog and that's the most tangible way to look at it. I mean, we have a hard order in place for a much greater percentage of next year's revenue than we normally would entering the year. So, I think that absolutely gives us better visibility than we are accustomed to as we enter in future periods.

I appreciate the responses [Indiscernible]. Thanks, guys.

Thanks, Paul.

In our last question would be from Alex Henderson with Needham 40, whichever question.

I was hoping you could talk a little bit about the broader pricing environment. Not necessarily in context of what you're doing, but rather what you're seeing from your competitors and to what extent your actions are under an umbrella or are ahead of the umbrella and just can you talk about your price in your categories relative to what they're doing. Thanks.

Yes. I don't want to get super specific on what others are doing individually, but I can tell you pricing actions, whether they'd be list Price actions, discount controls, or other types of actions or absolutely something that many Companies, I assume not just Juniper group, but even in other industries where they're getting input costs are rising pretty dramatically. Many companies are exploring and implementing it. And I can tell you that so far, we have taken some actions, we'll continue to look at opportunities going forward. All in an effort to protect our gross margin. The [inaudible 00:55:41] costs are absolutely rising. I think that's not a secret. It starts upstream with the wafers, and the fast, and then moves into our component suppliers, and they're seeing higher cost, and are looking to pass those on to us, and we're looking to pass those onto our customers. And so far, we feel that -- feel confident we are going to benefit from the actions we're taking, but it's just too early to commit to gross margin input -- gross margin outputs for next year.

Certainly, I understand the mechanics of that. And I think everybody on the call does. There shouldn't be any surprises there. But the real question is, are you more aggressive and trying to push price or are you less aggressive versus your competition? And I don't -- I'm not asking for you to describe it on a per specific person or company. But rather in general, are you more aggressive or less aggressive on pricing than your competition in the categories that you are competing? And particularly, can you focus a little bit on the campus market, which is particular important here, Growth steam.

Yeah, Alex, let me take a stab at it. It's very difficult to answer that quantitatively because we don't know in a lot of detail what everybody else is doing. But to the extent that our peers are attempting to do what we're doing, which is essentially to offset cost increases, then I think first order of magnitude is going to be all roughly in line with each other. And that's sort of how I would answer that question. And then in the campus and branch in particular, yes. There are going to be cost pressures there just like anywhere else. But the thing about campus and [inaudible 00:57:23] that makes me feel very good is, the level of differentiation. And this is software-led differentiation has never been stronger and it allows us to win -- to compete and win on value. So, there are opportunities that we are winning now fairly routinely, where we're not price leaders, and yet we are able to garner a greater price dip because of the differentiation that we have with that solution.

With all due respect, I think there are large differences between the locations where Price actions are being taken by your competitors, and necessarily your exposure to them so that there could be meaningfully differentials between categories. And my guess is that campus is an area, that prices have gone up more rapidly, but the interest is if you have any thoughts on that point?

No additional thoughts at this time. Thanks for that input, Alex. I appreciate it.

Thank you.

Thank you. We have reached the end of the question-and-answer session. I will now turn the call back over to Rami Rahim for a closing remark.

Briefly, I just wanted to thank everybody for participating in the call today and for the great questions. I will just leave you with a couple of thoughts. First, I remain very encouraged by the momentum that we're seeing in the business especially the diversity of the strength that we're seeing across market segments and technologies and solution areas. I think the team is executing extremely well and I'm very proud of our Juniper team for doing that. And last but not least, I think the demand strength we're seeing coupled with the backlog that we built right now sets us up for a great next year, both from the standpoint of achieving revenue growth, but then also our commitment to expanding profits as well. So, I'll leave you with that thought. Thanks again.

And this concludes today's conference, and you may disconnect your line at this time. Thank you for your participation.