Science & Technology

Rackspace racks up solid Q3 results and its stock rises

Rackspace Technology Inc. beat expectations as it delivered its third quarter financial results today and offered guidance for the next period that was in-line with forecasts.

Third quarter bookings were down year-over-year, though executives said the cloud services firm had landed a large, competitive deal early in the fourth quarter that promises to make up for it. Investors seem to be giving Rackspace the benefit of the doubt, as its stock gained more than 11% in extended trading.

The company reported earnings before certain costs such as stock compensation of 25 cents per share on sales of $763 million, up 12% from a year ago. That was better than expected, with analysts modeling slightly lower earnings of 24 cents per share on revenue of $756 million.

Rackspace helps enterprises design, build and operate cloud computing environments across major technology platforms, including Amazon Web Services, Microsoft Azure and Google Cloud. The firm was actually an early rival to those companies in the cloud infrastructure market. But a comparative lack of funding left it unable to compete with them in the long term, prompting Rackspace to shift its focus onto managing cloud services for customers instead.

Rackspace Chief Executive Kevin Jones (pictured) said the revenue growth was fueled by new customer acquisitions and growing customer spend in the company’s Multicloud Services and Apps & Cross Platform segments.

“The Cloud market continues to grow and momentum continues to accelerate. Companies of all sizes need help with their move to the cloud,” he said. “Our new Elastic Engineering model is gaining fast adoption and was expanded to several new areas. And we are very excited about the launch of Rackspace Data Freedom, a new storage service based on robust Rackspace-developed technology that helps customers manage their costs across multiple cloud platforms.”

The company said revenue from its Core Segments, which includes the Multicloud Services and Apps & Cross Platform businesses, rose 15% to $718 million. Within that segment, Multicloud generated $625.1 million in sales, and Apps & Cross Platform chipped in with $92.8 million.

Investors may have been disappointed to learn Rackspace’s bookings, which are a customer’s commitment to spend money, were just $200 million, down 36% from a year ago. However, Rackspace executives said on the call the large deal signed early in the current quarter would help the company reach its $1 billion fiscal 2021 bookings target.

Looking to the fourth quarter, Rackspace offered a forecast of revenue in a range of $766 million to $776 million, which is more or less square with Wall Street’s consensus estimate of $771.4 million in Q4 sales.

Photo: Rackspace

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