Rackspace Sees 2016 Revenue Below Wall Street Views

Cloud-computing company Rackspace Hosting Inc. said Tuesday that it made "significant progress" on strategic and financial goals in the fourth quarter, but it issued 2016 revenue guidance below Wall Street estimates.

Revenue rose 11% to $508.9 million, as profit fell 13% amid higher expenses.

Shares fell 8% to $16.70 in after-hours trading.

Rackspace expects first-quarter revenue of $517 million to $521 million, while analysts polled by Thomson Reuters project $530 million, on average. The company's full-year view is $2.08 billion to $2.16 billion, while analysts project $2.21 billion.

The company said it has become less capital-intensive, resulting in higher free cash flow.

Rackspace, a pioneer in the cloud market, has transitioned its business model in recent years to become more of a services provider offering bundled computing and support.

Rackspace and Amazon.com Inc.'s Amazon Web Services unit were once fierce rivals, but Rackspace's new focus made it less of a direct competitor. Last year, Rackspace and Amazon announced a partnership that makes it easier for corporate customers to move computing operations from their own facilities to Amazon Web Services. Rackspace also has partnerships with Microsoft Corp. and Intel Corp.

For the quarter ended Dec. 31., Rackspace earned of $32.1 million, or 24 cents a share, compared with $37 million, or 26 cents a share, a year earlier. Earnings excluding items were 31 cents a share.

Analysts polled by Thomson Reuters had expected earnings of 23 cents a share.

Revenue rose to $522.8 million from $472.5 million. The sequential revenue increase was 2.7%, compared with guidance of 2% to 3%.

Write to Josh Beckerman at [e-mail]

(END) Dow Jones Newswires

February 16, 2016 18:25 ET (23:25 GMT)

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