Network gear maker Riverbed Technology Inc RVBD.O reported a better-than-expected third-quarter profit and forecast strong results for the current quarter as demand grew for its products that boost data speeds over wide-area networks (WAN).
The company's shares jumped 11 percent on the results after the bell.
"We entered the fourth quarter with a very solid funnel across the business, across all the verticals," Chief Executive Jerry Kennelly said on a conference call with analysts.
"I think judging by the performance in the third quarter, which happened to be pretty good for enterprise, we're encouraged for the end of the year."
Riverbed's results are closely watched by investors as it sets the tone for its peers F5 Networks Inc (FFIV.O) and Juniper Networks Inc (JNPR.N).
A faltering U.S. recovery and weakness in Europe has hit network equipment makers as telecom service providers -- their biggest customers -- cut spending. But demand for WAN optimization products have held up better than that of other network gears in the industry.
"They're holding up really well in the tough IT spending environment," Morningstar Inc analyst Grady Burkett said.
He added that Riverbed's deal with Juniper Networks was helping boost revenue.
Riverbed had signed a $75 million license agreement with Juniper in the second quarter for its data traffic management equipment, Stingray. Riverbed had said it will recognize the payment over four years beginning in the third quarter this year.
Riverbed expects a fourth-quarter profit of about 29 cents per share, excluding items, on revenue of between $230 million and $236 million.
Analysts were expecting a profit of 28 cents per share and revenue of $232.6 million, according to Thomson Reuters I/B/E/S.
"We are still concerned that the WAN optimization market is maturing and that the product refresh will only provide a short-term benefit," BMO Capital Markets analyst Tim Long said in a pre-earnings research note.
The prospects of Riverbed products like Cascade, which monitors network performance, and traffic manager Stingray are promising, but may be foiled by a weak economy, he added.
Net income for the third quarter rose to $24.7 million, or 15 cents per share, compared with $19.3 million, or 12 cents per share, a year earlier.
Excluding items, the company, which also competes with Cisco Systems Inc (CSCO.O) and Citrix Systems Inc (CTXS.O), earned 28 cents per share.
Adjusted revenue for Riverbed, which counts Verizon (VZ.N) among its customers, rose 10 percent to $218.6 million.
Analysts on average expected a third-quarter profit of 25 cents per share, on revenue of $216.8 million, according to Thomson Reuters I/B/E/S.
Riverbed's shares rose to $23.05 after the bell. They closed down 3 percent at $20.69 on the Nasdaq on Thursday.
Shares of the company, which has a market value of about $3.28 billion, have risen 42 percent since it reported strong second-quarter results in July.
(Additional reporting by Chandni Doulatramani; Editing by Supriya Kurane)