After reporting its earnings, including a profit meet and a small revenue miss, shares of Rackspace are down sharply in after-hours trading. The cloud-focused company’s guidance for its current quarter failed to match expectations, clouding investor sentiment about Rackspace’s future growth.
Rackspace reported profit of $0.20 per share, matching expectations, off of revenue of $480.2 million. The street had expected a higher top-line figure of $481.57 million.
More important, however, is guidance. Here’s Rackspace on its current quarter:
For the second quarter of 2015, Rackspace expects revenue to grow between 1.5 percent and 2.5 percent on a constant currency basis and adjusted EBITDA margins to be between 32 percent and 34 percent.
The street had expected a higher $502.1 million. Investors also expect the company to earn $0.22 per share or more in profit per unit of equity on a sequential-quarter basis. Given the implied slower revenue growth, if the company can meet the expectation appears to be less certain than before, using investor sentiment after-the-fact as barometer.
Rackspace generates cash, has $276 million in cash, and is growing — its first quarter revenue was up 14 percent from the year-ago period. However, the company’s lower than expected second quarter predicted growth is an anchor on the company’s share price.
Before the report, Rackspace was worth north of $7 billion. Tomorrow’s open could see that billion dollar ticker lose a single slot.
