Rackspace revenue forecasts below expectations

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Rackspace Hosting Inc, a web hosting company, has forecast revenue for the current quarter below estimates, while also noting that the strong dollar hurt growth in the first quarter.

Shares of the company, which is in competition with Amazon, Google and Microsoft, fell 13% in extended trading on Monday.

Rackspace revenue below street estimates

Expected revenue from a contract with a large financial service company will only make an impact in Q3, hurting revenue growth in Q2, according to Rackspace Chief Executive Taylor Rhodes, in a post-earnings call statement.

Rackspace will also take a one-time charger as one customer moved some of its production elements away from one of the company’s data centres in the UK.

The firm say it expects revenue growth between 1.5% and 2.5% in the current quarter. That translates to revenue of $487.4 million to $492.2 million.

Analysts however expected an average revenue of $502.1 million.

Rackspace leases online storage to companies and provides management and support services for their cloud-based operations, and gets a third of its revenue from outside the United States. The company said foreign currency exchange rates hurt its revenue growth. Revenue increased 14.1% to $480.2 million in the first quarter, while revenue grew 16.6%.

Net income rose to $28.4 million, or 20 cents per share, from $25.4 million, or 18 cents per share, a year earlier. Rackspace shares closed at $53.13 on the New York Stock Exchange on Monday. They have risen 89% in the past 12 months.

SOURCE: Reuters

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