In its third-quarter results, cloud provider Rackspace reported 10.7 percent revenue growth and 42 percent net income growth compared to the same quarter last year. The company attributes to a strong core business of managed cloud hosting, as well as being a support provider to the top public cloud platforms rather than competing with them.
“This was a strong quarter driven by two major factors,” Rackspace president and CEOTaylor Rhodes said in the Q3 earnings call. “The first one involves several large enterprise deals that we discussed with you earlier in the year. Delays in closing those deals adversely affected our Q2 results, but I’m pleased to report that we began recognizing revenue from them in Q3 which boosted our results for the quarter. The second factor driving our Q3 results was slightly higher growth in our public cloud. Our customer base there remains stable and loyal with low churn.”
Rhodes explained that Rackspace has also been expanding and differentiating its product portfolio, and pursuing a multi-cloud strategy where it provides private and hybrid cloud solutions, and then helps other customers manage their public cloud infrastructure on Amazon Web Services or Azure.
In July, for instance, Rackspace launched its signature “Fanatical Support” for customers using Microsoft Azure, the Microsoft private cloud, and Office 365, and more recently added Fanatical Support for AWS customers.
Rhodes said that many customers move to a public cloud service like AWS without necessarily having the capabilities to manage these services. “Many of these customers need a managed services partner to help them understand how to migrate, which applications to migrate, how to architect, how to secure them, how to operate them in an ongoing basis,” he said. “Some of the customers we’re seeing are those types who have been developing a cloud strategy but have been lacking the right partner to help them actually go execute on it.” One of the key elements of Rackspace’s strategy is to be that “right partner”.
Rackspace is also supporting large private and hybrid cloud environments usingOpenStack, which . “No other vendor is as focused as we are here, and no one else has the experience in OpenStack engineering and operations that we have,” Rhodes said. “The demand for OpenStack private and hybrid clouds is heating up and we will lead this market.”
On the topic of competing with other cloud providers, Rhodes said Rackspace is a specialist in managed cloud solutions, making it competitive against telcos and tech conglomerates like CenturyLink, Verizon, and AT&T. And instead of competing with the top public cloud platforms, it is providing complementary services.
While Rackspace’s revenue growth was high in Q3, meeting the high end of its expected range of revenue, the company is expecting only around two to three percent revenue growth in Q4. But long-term expectations are high.
“We have focused this year on expanding our portfolio with offerings that make us more competitive,” Rhodes said. “These new offers position us to lead in large high-growth markets, and they will drive our growth in 2017 and beyond.”