Rackspace beats Q2 expectations

The cloud computing company is reportedly nearing a sale, but in the meantime, demand for its managed services is scaling rapidly

Rackspace on Monday reported second quarter financial results, besting market expectations.

The managed cloud company reported non-GAAP earnings on 38 cents per share on revenues of $523.6 million.

Wall Street was looking for earnings of 22 cents per share with $521.2 million in revenue.

Rackspace CEO Taylor Rhodes noted in a statement that demand for the company's managed services is "scaling rapidly".

"We now serve almost 600 customers on these platforms, including some of the world's largest companies," he said. "During the second quarter, we demonstrated continued revenue growth, along with higher profitability, higher capital efficiency, strong operating cash flow and record free cash flow."

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Roughly two years ago, Rackspace said it would pursue strategic alternatives, including going private, and the company now appears to be nearing a sale.

While Rackspace started the OpenStack cloud movement, it has struggled to keep up with the market for Infrastructure-as-a-Service (IaaS). Consequently, it's focused on offering cloud-computing support and securing deals with its biggest competitors, Amazon Web Services and Miscrosoft Azure.

Roughly two years ago, Rackspace said it would pursue strategic alternatives, including going private, and the company now appears to be nearing a sale. Going private should give Rackspace more leeway to invest in its support services. Rhodes on Monday declined to comment on speculation about a sale.

Rhodes said the company is planning a "bold" marketing campaign for the fall to reinforce its efforts in the managed cloud business.

"Businesses today are being told the cloud is simple," he said, when in fact "the cloud is complex and fast-changing."

While focusing on its managed cloud services, Rackspace is also divesting services not core to its strategy. In July, the company agreed to sell its Cloud Sites business to Liquid Web.

For Q3, Rackspace expects to see revenue of $510 million to $515 million. Wall Street, however, had an outlook of $531 million. The company's full year outlook comes in at $2.06 billion to $2.08 billion, compared with expectations of $2.11 billion.