Why Rackspace Shares Soared

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of cloud-computing specialist Rackspace Hosting (NYSE: RAX  ) jumped 12% on Wednesday after its quarterly results topped Wall Street expectations.

So what: The stock has been under pressure over the past few months on concerns over the launch of its cloud-server software, OpenStack, but a strong second quarter -- revenue spiked 29% to $319 million versus the consensus of $317.7 million -- naturally eases some of those worries. Rackspace even increased its customer count to 190,958 from 180,866 in the year-ago period, suggesting that small and mid-sized businesses continue to demand cloud-computing solutions even amid the weak economy.

Now what: Don't let today's rally keep you from looking into Rackspace. "At the halfway point in the year, we have made a lot of progress on our plans to broaden our product and services portfolio while simultaneously managing a rapidly growing business," CFO Karl Pichler said in a statement. "Keep your eyes open for more product announcements in the coming weeks and we look forward to updating you on our progress in November." When you couple the strong demand tailwinds working in Rackspace's favor with the promising early feedback from customers regarding OpenStack, I'd expect that update to be a good one.   

Interested in more info on Rackspace? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Rackspace. Try any of our Foolish newsletter services free for 30 days.

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