Rackspace Profit Rises In Line - Update

(RTTNews) - Cloud service provider Rackspace Hosting Inc (RAX). Monday reported a marginal rise in second-quarter profit, helped by double-digit revenue growth, largely offset by higher operating expenses. Quarterly earnings came in line with Wall Street estimates, while revenue surpassed expectations.

Rackspace provided a strong revenue guidance for the third quarter.

CEO Graham Weston said, "We added thousands of new customers, including one of our largest ever, and we saw solid growth from existing customers."

Rackspace, based in San Antonio, Texas, posted second-quarter net earnings of $22.5 million or $0.16 per share, compared with $22.4 million last year.

On average, 20 analysts polled by Thomson Reuters expected earnings of $0.16 per share for the quarter. Analysts' estimates typically exclude special items.

Revenue for the second quarter climbed 17 percent to $441 million from $375.9 million in the prior year. Analysts had a consensus revenue estimate of $436.9 million.

Foreign currency rates favorably impacted revenue by about $10 million.

Expenses for the quarter rose to $407 million from $340 million a year ago, due to higher research, selling and depreciation costs.

For the third quarter, Rackspace expects revenue of $454 million to $461 million, while analysts currently expect $454.2 million.

In July, Rackspace was said to be in talks with an investment firm to go private. The company earlier hired Morgan Stanley to explore options and was approached by parties for partnership and acquisitions.

Rackspace has been able to generate revenue growth on the back of customer additions, but grapples with higher costs due to strong competition.

RAX closed Monday at $31.29, up $0.92 or 3.03%, on a volume of 4.6 million shares on the NYSE. In after hours, the stock dropped $0.11 or 0.35%.