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Juniper Networks shares are losing ground after the infrastructure hardware provider provided disappointing financial guidance, with weaker-than-expected demand from cloud computing customers.

While Juniper thinks it is a long-term beneficiary of the artificial intelligence software trend, it will take some time for that opportunity to develop. The shift appears to be hurting the company in the short run.

For the second quarter, Juniper (ticker: JNPR) posted revenue of $1.43 billion, up 13% from a year ago and slightly above the Wall Street consensus of $1.42 billion. Adjusted profits of 58 cents a share likewise were three cents above the Street consensus view of 55 cents.

We delivered better than expected results during the June quarter as our teams continued to execute well and we benefited from improved supply, CEO Rami Rahim said in a statement. We were particularly encouraged by the momentum we experienced in our enterprise business, which not only had a record quarter, but also represented both our largest and fastest growing vertical for a third consecutive quarter.

But managements financial forecasts proved disappointing. For the third quarter, Juniper sees revenue of $1.385 billion, which would be down about 2% from the year earlier period, falling short of the Street consensus of $1.48 billion. The company projects non-GAAP profits for the quarter of 54 cents, while the consensus call was for 62 cents.

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Analysts at Needham, Citi, Raymond James, and others all trimmed their financial forecasts and stock-price targets following the Thursday report.

In prepared remarks, CFO Kenneth Miller said orders were weaker than expected in the second quarter. He said he expects continued weakness in bookings in the third quarter, mostly from cloud customers, but to a lesser extent from telecom service providers.

We believe the softness in bookings is largely attributable to customer digestion of previously placed orders and certain projects being pushed to future periods, Miller said. We expect the macroeconomic environment to remain challenged, which may continue to impact customer spending. These factors are negatively impacting our revenue expectations.

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The company reduced its forecast of full-year revenue growth to between 5% and 6%, from 9%.

On a conference call with analysts, Rahim said that the focus by cloud providers right now is on building their AI offerings, which he says might be a bit of a negative for Juniper for now, although he adds that it will help in the longer term.

To the extent that AI is a new killer app thats going to be offered by cloud providersits going to result in an increase of trafficin areaswhere we have a significant footprint, he says.

Junipers disappointing results are weighing on shares of other network equipment providers with significant cloud exposure. Particularly hard hit is Arista Networks (ANET), which gets almost half of its business from Microsoft (MSFT) and Meta Platforms (META).

Arista shares, which had already been under pressure this week from concerns that Microsoft and Meta spent less than expected on capital equipment in the June quarter, are down 6% on Friday. That increased the stocks four-day loss to 13%.

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Write to Eric J. Savitz at eric.savitz@barrons.com

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Juniper Stock Slides on Cut to Outlook as Cloud Business Slows - Barron's