Rackspace Hosting (NYSE:RAX) Information Technology - Internet Software & Services | Reports August 8, After Market ClosesKey Takeaways
- The Estimize consensus is looking for earnings per share of 25 cents on $522.90 million in revenue, 3 cents higher than Wall Street on the bottom line and right in line on the top
- Rackspace is in advanced talks to sell its business to one or more private equity firms
- Fanatical support is gaining traction in the industry announcing increasing certifications for AWS and MS Azure
Rackspace is scheduled to report second-quarter results today, after the market closes. Ahead of its report, the company announced it was close to selling to one or more private equity firms. This comes two years after management said it would explore a deal in light of increasing competition in the fast-growing market. Monday's conference call should shed some light on the likelihood of the deal and its impact on future quarters. Quarterly earnings will still need to hit its numbers despite ongoing takeover talks.
The Estimize consensus is looking for earnings per share of 25 cents up 20% compared to the same period last year. That estimate has jumped 14% since Rackspace’s last report in May. Revenue is anticipated to 7% to $522.90 million, marking the second consecutive quarter of single-digit growth. Shares are up 15% year to date, with a majority of that attributed to the pop from takeover talks.
Cloud services have become more consolidated in recent years with big names like Google, Amazon and MSFT garnering the most market share. This has forced Rackspace to shift its business to more managed cloud services. The ongoing transition hasn’t had a material impact on the company’s growth prospects.
New services such as Fanatical Support have started to gain traction among tech giants. In July the company announced that it surpassed 300 AWS certifications. The company also launched its support for Microsoft’s Azure in 2015. Considering that Amazon rules the cloud space, it’s encouraging that Rackspace is seeing increased customer usage. These moves open up a huge opportunity for the company to stay relevant in a saturating market.
The company has also teamed up with Google to co-design an IBM powered machine to develop new data centers. With all the efforts put forward to promote growth, investors will be looking to see what guidance Rackspace gives for Q3 on Monday.
Do you think RAX can beat estimates?