Rackspace Profit Surges But Revenue Misses Views
May 09 2016 - 6:40PM
Dow Jones News
Rackspace Hosting Inc. reported a 77% rise in first-quarter
earnings but provided a lackluster revenue outlook for the current
quarter as the cloud-computing company continues its shift to
becoming more of a services provider.
Shares of the San Antonio, Texas, company fell 5.3% to $21.35 in
recent after-hours trading as the company's first-quarter revenue
fell short of Wall Street estimates. Through Friday's close, the
stock has declined 58% in the past 12 months.
For the current quarter, Rackspace estimated revenue of $519
million to $524 million, while analysts polled by Thomson Reuters
expected revenue of $524 million. Rackspace, however, affirmed its
2016 revenue outlook.
Rackspace, a pioneer in the cloud market, has transitioned its
business model in recent years to become more of a services
provider offering bundled computing and support.
Last year, Rackspace and Amazon.com Inc., once fierce rivals,
unveiled a partnership in which Rackspace will make its easier for
for corporate customers to move computing operations from their own
facilities to Amazon Web Services, as well make its easier for
customers to use the cloud. Rackspace also has a partnership with
Microsoft Corp.
While Rackspace has previously said agreements reached last year
to provide managed-cloud services for Amazon Web Services and
expanded services for Microsoft's Azure platform likely will
represent a disproportionate percentage of its 2016 bookings, but
aren't expected to have a material effect on revenue until
2017.
"We've continued to build market power behind our managed cloud
strategy," Chief Executive Taylor Rhodes said in prepared remarks.
Demand for its Amazon Web Services, Microsoft Cloud and OpenStack
private cloud services are growing rapidly, Mr. Rhodes stated,
noting that collectively Rackspace now provides services for more
than 400 customers on those cloud platforms.
During the company's conference call, Rackspace gave an update
on its Amazon Web Services and Microsoft partnerships. Rackspace
said its support services for Amazon Web Services has signed on 187
customers from its launch last year through April, marking an
increase of 87 customers since the end of January. The company said
clients include a balanced mix of new and current customers and
that 60% of the clients selected the highest service level.
Rackspace said it has signed on 178 Microsoft Cloud customers
from launch through April, doubling since the end of January, with
the customer mix skewed towards large enterprises.
The company also added that its OpenStack private cloud saw
record bookings in the first quarter.
Over all, Rackspace reported a profit of $48.8 million, or 37
cents a share, up from $27.5 million, or 19 cents a share, a year
earlier. Excluding an asset sale gain, stock-based compensation and
other items, adjusted per-share earnings rose to 34 cents from 28
cents.
Revenue increased 7.9% to $518.1 million. Excluding currency
effects and the sale of its Jungle Disk business, revenue improved
by 9.9%.
Analysts expected per-share profit of 22 cents and revenue of
$519 million.
Write to Tess Stynes at tess.stynes@wsj.com
(END) Dow Jones Newswires
May 09, 2016 18:25 ET (22:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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