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November 11, 2014

Rackspace reports strong Q3 alongside £500m stock repurchase

$460 million net revenue up 4.2% on Q2 and 18.3% from Q3 in 2013.

By Ellie Burns

Rackspace has reported a Q3 net revenue of $460 million, up 4.2% on Q2 and 18.3% from the third quarter in 2013. On a constant currency basis, net revenue grew 4.4% from Q2 and 16.1% from the third quarter of 2013.

The company is forecasting total net revenue to range between $469 and $476 million in the fourth quarter of 2014. This range includes an expected negative foreign currency impact of approximately $5 million in the quarter or 110 basis points of sequential growth.

The projected range of net revenue assumes sequential growth of 3.0% to 4.5% on a constant currency basis, or growth of 2.0% to 3.5% on a GAAP basis.

"We are pleased with our operating performance this quarter and encouraged by the momentum we are seeing in the business," said Taylor Rhodes, president and CEO of Rackspace.

"We are poised to capitalize on the massive opportunity ahead in the managed cloud market, where we see increasing demand for our managed services and expertise. And while we made strong progress this year, we’re determined to continually improve our execution and seize our future."

Total server count in the Q3 of 2014 increased to 110,453, up from 107,657 servers at the end of the previous quarter. Revenue per server grew to $1,405 per month up from $1,375 in the previous quarter.

Following the company’s report of a strong third quarter, Rackspace have announced their intention to invest in the future of the company with a repurchase of up to $500 million of the company’s stock over the next two years. Rackspace intends to execute a $200 million accelerated share repurchase as its first initiative under this program.

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Rackspace intends to fund these share repurchases through a combination of its available cash balance and existing line of credit. The remaining $300 million will be available for purchases in future period.

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