Rackspace Shares Rally 12+% Following Q1 Earnings Beat, Solid Guidance

Rackspace Hosting

is one of the largest extended-hours gainers Monday on upbeat earnings. The stock last traded at $30.86, up a jaw-dropping 12 percent from Monday's after-hours session. First-quarter revenue came in at $421 million, beating the analyst estimate by 0.33 percent. This figure is up more than 15 percent from the same quarter for the previous year. $2.4 million of revenue can be attributed to favorable currency exchange. EPS for the quarter came in at $0.18, beating the $0.12 analyst estimate, but down $0.01 from the same quarter last year. The drop in profitability despite increased revenue can be attributed to the cost of goods sold rising from 31.4 percent to 33.3 percent, and depreciation & amortization jumping from 19.4 percent to 20.9 percent. Looking forward, Rackspace expects second-quarter revenue from $434 million to $440 million. The current analyst consensus sits at the bottom of that range at $435 million. CEO Graham Weston stated, “our first quarter revenue growth came in as expected and we expect growth to improve in the second quarter. We are encouraged by qualitative factors, including the thousands of new customers we added in the quarter, including one of the largest we've ever landed. We also added significant new workloads for existing customers including Alex and Ani, Appboy, Clarks shoes, Under Armour and SunPower. Each of these customers values our managed cloud approach and chose us over providers of less expensive unmanaged infrastructure.”