Rackspace hits Q3 revenue, earnings targets

UPDATED: Rackspace executives put the spotlight on open source advancements.
Written by Rachel King, Contributor

Rackspace's barely skirted past the revenue forecast and earnings projections for the third quarter.

The open cloud company reported a third quarter net income of $27 million, or 19 cents a share (statement). Non-GAAP earnings were 20 cents a share on a revenue of $336 million, up by 27 percent on an annual basis.

But Wall Street expected Rackspace to report third quarter earnings of 19 cents a share on revenue of $335.9 million.

Much of the focus from the Q3 earnings statement was on the expansion of the company's product portfolio rather than financials.

For example, chief financial officer Karl Pichler tried to emphasize the bigger picture here by asserting Rackspace has "successfully enhanced our product and services portfolio while managing a rapidly growing business and building a better economic model."

He added that this ground work "so far in 2012 increases our competitiveness in this massive cloud opportunity."

CEO Lanham Napier also commented in prepared remarks about Rackspace's commitment to open source in the cloud:

We're excited to report that the rollout of our new Open Cloud platform, built on OpenStack, is finally complete. With the new products now in production, Rackspace offers a better, faster and more valuable cloud experience, built on an open platform that gives our customers true choice and control without the fear of being locked-in to one vendor’s technology. Rackspace customers can choose how, where, and with whom they deploy applications, as well as the deployment option that best fits their needs – whether that’s public, private or a hybrid cloud infrastructure, all backed by our unmatched culture of customer service, known throughout the industry as Fanatical Support.

Rackspace didn't provide an outlook in the report, but for the fourth quarter, Wall Street is looking for earnings of 22 cents a share on revenue of $358.1 million.

Key points from Q3 2012:

  • Acquired Mailgun for its APIs to integrate cloud-based email services into applications and websites
  • Total customers increased to 197,635 -- up from 190,958 at the end of Q2 2012.
  • Total server count increased to 89,051 -- up from 84,978 servers at the end of Q2 2012.
  • Rackspace had 4,596 employees as of September 30 -- up from 4,528 in the previous quarter.

CORRECTION: This post previously listed that Rackspace posted non-GAAP earnings of 15 cents per share for Q3 2012. That was actually the figure for the third quarter of 2011.

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