US-based (SPY) technology (QQQ) company Juniper Networks’ (JNPR) Network Services segment provides maintenance and support to companies in the hardware networking space. In fiscal 2016, the segment’s revenue rose to about $1.5 billion, from $1.3 billion in fiscal 2015, a rise of 13.0% YoY (year-over-year). In 4Q16, revenue from this segment rose 16.0% YoY to $400.0 million.
Juniper’s revenue in this segment has risen at a CAGR (compound annual growth rate) of 7.0%, from $1.0 billion in fiscal 2011 to $1.3 billion in fiscal 2015. It improved significantly in fiscal 2016 as well. Juniper’s subscription model ensures repeat customers and recurring revenue in a difficult global market.
Network Services sales accounted for 24.0% of the company’s total sales in fiscal 2011. At the end of fiscal 2015, the segment accounted for approximately 26.7% of total revenue, and at the end of fiscal 2016, it accounted for 29.3%.
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Juniper’s CFO (chief financial officer) Ken Miller said, “Our services business remains strong with solid year-over-year and sequential growth. This growth was partially due to the recognition of approximately $15 million from a professional services project associated with a telecom cloud deployment of Contrail.”
Market research firm Gartner expects global IT (information technology) spending to fall 0.50% to $3.5 trillion in 2016. It expects software spending to rise 4.0% YoY to $320.0 billion, services spending to rise 2.0% YoY to $930.0 billion, and hardware spending to fall 4.0% YoY to $630.0 billion in 2016.
Juniper’s performance in 2016 reflected the broader market since its product revenue was stagnant compared to a rise in services revenue.