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Rackspace Hosting Inc. reported Monday that profit climbed 26% in the second quarter, though the cloud-computing company released dour revenue guidance for the current quarter and lowered annual expectations.

The quarterly update follows a report last week by The Wall Street Journal that Rackspace is nearing a sale to a private-equity firm. The company didn't address the report in its earnings news release.

Shares of the San Antonio, company fell 1.1% to $28.31 in recent after-hours trading.

Rackspace is a provider of cloud services, which allow users to tap remote servers for storage and expanded computing power. Cloud services have exploded amid the surge in mobile usage. Rackspace has shifted its business model in recent years, amid stiff competition from larger technology companies such as Amazon.com Inc. and Microsoft Corp., and is now more of a services provider offering bundled computing and support.

For the current quarter, the company expects revenue between $510 million and $515 million, while analysts surveyed by Thomson Reuters had expected $530 million.

The company also lowered its annual estimate for revenue to a range of $2.06 billion to $2.08 billion from a previous range of $2.08 billion to $2.16 billon. The revenue projections included roughly $70 million of negative impact from currency movements and asset divestitures.

The Wall Street Journal reported last week that Rackspace was in advanced talks with one or more private-equity firms, citing people familiar with the matter. In 2014, Rackspace said it had hired bankers to help evaluate expressions of interest.

Technology has been the most active sector for deal making so far in this year. There have been over $404 billion of deals in the industry, representing about one-fifth of overall deal flow, according to Dealogic.

Over all, for the second quarter ended June 30, Rackspace reported a profit of $35.8 million, or 28 cents a share, up from $28.3 million, or 20 cents a share, a year earlier. Excluding certain items, adjusted per-share earnings rose to 38 cents from 29 cents. The per-share profit was boosted by a small number of shares outstanding during the latest quarter compared with a year earlier.

Revenue increased 7% to $523.6 million.

For the second quarter, Rackspace estimated revenue of $519 million to $524 million, while analysts polled by Thomson Reuters expected revenue of $521 million and per-share profit of 22 cents.

Write to Ezequiel Minaya at ezequiel.minaya@wsj.com

(END) Dow Jones Newswires

August 08, 2016 19:05 ET (23:05 GMT)

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