Red Hat tops Q3 targets on strong subscription revenue growth
Red Hat reported better-than-expected third quarter earnings on Tuesday, as strong subscription revenue growth continues to bolster the company's bottom line.
The open-source software company said third quarter revenue from application development-related and other emerging technology subscriptions was $162 million, up 44 percent above last year. Subscription revenue overall was $657 million, up 21 percent annually, including $495 million from infrastructure-related products.
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As for the rest of the numbers, Red Hat reported a net income of $101.3 million, or 54 cents per share, up from $68 million, or 37 cents per share, in the year-ago quarter.
Non-GAAP earnings were 73 cents per share on revenue of $748 million, up 22 percent year over year.
Wall Street was looking for earnings of 71 cents per share with $739 million in revenue. Red Hat's shares dropped nearly four percent after hours despite the overall beat.
In a statement, Red Hat chief executive Jim Whitehurst said the company has seen strong consumer demand for hybrid cloud technologies including Red Hat's container platforms.
"Our growing strategic position within enterprise IT organizations is evidenced by the strong cross selling of our broad portfolio of technologies, which led to 30 percent year-over-year growth in deals over $1 million and over 40 percent growth in application development-related and other emerging technology subscription revenue."
In terms of guidance, analysts are looking for Q4 revenue of $748.9 million with earnings of 75 cents a share. Red Hat responded with a Q4 revenue projection between $758 million to $763 million, with earnings around 81 cents a share.
For the year, Red Hat expects revenue of approximately $2.906 billion to $2.911 billion with earnings of $2.02 per share. Analysts are looking for revenue of $2.89 billion with earnings of $2.78 per share.