Rackspace Profit Rises 30%

Rackspace Hosting Inc. said its second-quarter earnings rose 30% as the cloud-computing company posted improved revenue and unveiled plans to increase its stock-buyback plan to $1 billion.

Shares rose 5.6% to $33.50 in recent after-hours trading.

The company said its board raised Rackspace's share buyback authorization to $1 billion, in addition to the $200 million of repurchases already completed. Rackspace expects to complete at least $500 million of the new buyback plan within six to nine months.

San Antonio-based Rackspace has benefited from increased interest in cloud computing services, which eliminate the need for companies to build, maintain and staff data centers. A pioneer in this market, Rackspace hasn't grown as quickly as its main competitor, Amazon Web Services, a division of the online retailer. Last year, Rackspace pivoted away from an Amazon-style business and stopped selling raw computing power in favor of bundled computing and support.

"During the second quarter, we made progress on several key fronts, including with our 50 largest enterprise customers, whose spending with us is growing at more than twice the rate of our overall business," Chief Executive Taylor Rhodes said in prepared remarks Monday.

Overall, Rackspace reported a profit of $29.2 million, or 20 cents a share, up from $22.5 million, or 16 cents a share, a year earlier. Revenue increased 11% to $489.4 million. Excluding currency impacts, revenue improved 14%.

Analysts polled by Thomson Reuters expected per-share profit of 20 cents and revenue of $491 million.

For the year, the company lowered it revenue view and now expects revenue growth of 12% to 14% excluding currency impacts, compared with its previous guidance for 14% to 18%.

Write to Tess Stynes at [e-mail]

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