Rackspace Profit Tops Estimate; Stock Up - Update

(RTTNews) - Cloud computing service provider Rackspace Hosting Inc (RAX), Monday reported a lower first-quarter profit, hurt by weak margins that offset double-digit growth in revenues. However, results for the quarter topped Wall Street estimates.

Rackspace provided strong outlook for the second quarter, sending its shares up about 8 percent in after-hours trading on the New York Stock Exchange.

Rackspace has been posting revenue growth on the back of customer additions, but also has had to grapple with higher costs.

For the first quarter, San Antonio, Texas-based Rackspace posted net income of $25.4 million or $0.18 per share, compared with $27.3 million or $0.19 per share last year.

On average, 22 analysts polled by Thomson Reuters expected earnings of $0.12 per share for the quarter. Analysts' estimates typically exclude special items.

Revenues for the first quarter jumped 16 percent to $421 million from $362 million a year ago, topping analysts' expectations of $419.53 million.

Results for the quarter were hurt by expenses that climbed to $381.9 million from $319.4 million a year ago. This was due mainly to higher research, sales, general and depreciation costs.

Operating margin slid to 9.3 percent from 11.8 percent last year.

The company deployed 106,229 servers for the quarter, up from 94,122 a year ago. Average monthly revenue per server grew to $1,336 from $1,308 in the prior year.

For the second quarter, Rackspace expects revenue of $434 million to $440 million, while analysts currently estimate $435.5 million.

Rackspace stock closed Monday at $27.69, up $1.41 or 5.37%, on a volume of 5.8 million shares.