The Linux distribution veteran reported diluted non-GAAP earnings of $0.42 per share on $397 million in total sales. That's a 15% year-over-year sales increase and 45% higher earnings. Analysts were looking for EPS of $0.35 on $383 million in sales, so Red Hat beat those targets with ease.
CEO Jim Whitehurst pointed to largely organic growth behind these surprising numbers. "Strong demand in Q3 for our core Red Hat Enterprise Linux and JBoss Middleware technologies led to results that exceeded guidance across several key financial metrics," he said. "Red Hat's technologies address the high growth opportunities in the data center to modernize and move away from legacy proprietary software."
Moreover, CFO Charlie Peters explained that the reported revenue figures don't tell the whole story of Red Hat's sales growth. The company is moving into longer-term service contracts to replace shorter agreements and onetime license payments, which pushes most of the revenue from signed contracts into future quarters. The billings proxy, which accounts for this factor, rose 19% year over year to $453 million.
Fool contributor Anders Bylund has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.