Rackspace reports record revenue in Q2 but weak Q3 guidance

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Rackspace on Wednesday reported better-than-expected second quarter financial results. However, the cloud solutions company gave a weak outlook for Q3, and shares fell in after-hours trading. 

Rackspace’s non-GAAP earnings per share in Q2 came to 24 cents on revenue of $744 million, up 13% year-over-year. Revenue growth was strong thanks to new customer acquisitions and growing customer spend in the company’s Multicloud Services and Apps & Cross Platform segments.

Analysts were expecting earnings of 22 cents per share on revenue of $740.66 million.

“Our second quarter financial results were solid, with double-digit revenue growth and strong operating profit margins,” CEO Kevin Jones said in a statement. “In addition, our working capital and cash management transformation programs have driven excellent results with more than $100 million of operating cash flow for the second consecutive quarter.”

Revenue from Rackspace’s Core Segments, comprised of Multicloud Services and Apps & Cross Platform, increased 17 percent year-over-year in Q2 to $698 million.

Bookings in Q2 were $258 million, a decrease of 10 percent year-over-year. The company noted that bookings a year prior, in Q2 2020, included one large deal valued at approximately $38 million. Excluding this deal from the comparative period, bookings growth was 3 percent year-over-year.

For the third quarter, Rackspace expects revenue in the range of $750 million to $760 million.

Analysts are expecting revenue of $761.23 million.

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