Strong growth in subscriptions, including to the company’s OpenShift – a container application platform built on Docker – drove positive results for open source giant Red Hat in Q1, the company reported late Thursday.
The Raleigh, North Carolina-headquartered company reported revenues of $814 million (up 20 percent) for the quarter, with subscription revenue from application development-related and other emerging technology offerings up 37 percent.
“We also drove 48 percent year-over-year growth in the number of deals over one million dollars in the quarter which is evidence of our ability to expand our technology footprint with customers,” stated Eric Shander, Executive Vice President and Chief Financial Officer of Red Hat. “As in March when we gave our annual guidance, we continue to expect strong demand for our hybrid cloud enabling technologies.
Net income was $113 million for the quarter.
“[We are seeing] a broader transition in middleware to deployments as a service on top of containers…. customers are deploying hybrid cloud technologies to enable them to compete in this world of digital transformation,”CEO Jim Whitehurst said.
Stock Repurchase Plan
The company, which now has 95 offices globally, also announced a $1 billion (£750 million) stock repurchase programme.
The Raleigh, North Carolina-headquartered company has bought some 8.2 million shares of its common stock for $751 million since July 2016.
“Red Hat’s Board of Directors and management team firmly believe in our long-term growth prospects and our ability to generate operating cash flow through our subscription business model,” Eric Shander, Red Hat’s CFO said.
… but Analysts are Hard to Please
Despite the strong results, Red Hat (which has a market capitalisation of some $30 billion) closed down, with analysts disappointed about the reduced guidance for the rest of the year.
Annual revenue guidance was forecast at $3.375- $3.41 billion, down from $3.425 billion to $3.46 billion. CFO Eric Shander Red Hat blamed FX volatility.
He said: “Many of the foreign exchange rates we conduct business in have weakened against the dollar since we gave guidance in March.”
The results came after the company reported new partnerships with Microsoft Azure and IBM in May at its annual Red Hat Summit, which had record attendance 7,500
developers, IT decision makers and partners.
The partnership with Azure First, intended to help enterprise developers run container-based applications across both Microsoft Azure and on premise environments, represents the first jointly managed OpenShift offering in the public cloud.