Rackspace CEO: Q1 2016 Growth Driven by Managed Cloud Services Demand

Rackspace is the latest hosting company to post quarterly earnings, reporting adjusted earnings of 34 cents per share on Monday, far above the 22 cents predicted by Wall Street analysts. For the first quarter of 2016 Rackspace posted a net income of $49 million, up 77.5 percent from Q1 2015.

Net revenue was up 7.9 percent from a year ago to $518 million, roughly meeting analysts expectations, but adjusted for currency factors and the sale of cloud storage provider Jungle Disk, it grew by 9.9 percent, driving GAAP EPS of 37 cents. The company’s adjusted EBITDA grew 11.7 percent over Q1 2015 to $179 million, and its adjusted free cash flow and return on capital were up from a year ago.

“We’ve continued to build market power behind our managed cloud strategy,” said Taylor Rhodes, president and CEO of Rackspace. “Demand for Rackspace’s managed services for AWS, the Microsoft cloud, and our OpenStack private cloud is scaling rapidly. Collectively, we now deliver expertise and support for more than 400 customers on these cloud platforms, including some of the world’s largest companies and leading brands such as Digitas. While we are experiencing hyper-growth in these new offers, we also continued to reduce our capital intensity and boost our free cash flow.”