Analysts polled by Thomson Reuters expect Rackspace to earn 19 cents per share in the third quarter, up 36% from a year earlier. Revenue rose 27% to $264.6 million, according to Rackspace. As a result, San Antonio-based Rackspace watched its stock jump 54% this year. In Q2, Rackspace’s cloud revenue rose 69% to $73 million from last year’s numbers.
This growth is in line with others who lead the emerging cloud computing space, including the Amazon Web Services (AWS) unit of Amazon. Bernstein Research estimates AWS’ third-quarter sales rose 88% to $474 million, but some estimates put AWS sales up past a billion dollars per year.
According to Rackspace, they get about 23% of their sales from cloud services with the remainder coming from traditional website hosting. The growth of cloud services is the clear driver in their stock price. Count on Rackspace to investment heavily in their cloud computing offerings, including the use of technology based on OpenStack, as well as focus on private clouds.
A few things Rackspace should consider at this point:
- Continue to focus on private cloud deployments as a way to capture the emerging market. AWS largely ignores on-premise deployments, and most enterprises or government agencies are moving to private clouds first, and then to public.
- While OpenStack is hot right now, don’t bet the baby on that technology just yet. Those adopting technology are fickle, and the focus should continue to be on reliable and solid public and private cloud infrastructure. The best clouds win the game, not the best standard.