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Shares of Rackspace Hosting (NYSE:RAX) have shot 14% higher today after the cloud-hosting pioneer reported better-than-expected earnings following Monday's closing bell and initiated a major share buyback program.
Why it's happening
Rackspace's revenue of $459.8 million narrowly bested Wall Street's consensus of $458.4 million, and its earnings of $0.18 per share -- a 64% year-over-year improvement -- also topped the analyst consensus of $0.16 in EPS. Rackspace also boosted its revenue per server to $1,405 (for 110,453 servers) from $1,375 per server in the second quarter. Rackspace also plans to implement a $500 million share buyback program, of which $200 million of that program is to be undertaken this year.
Looking ahead, Rackspace expects revenue in the range of $469 million-$476 million for the fourth quarter, with adjusted EBITDA margin in the 33%-35% range. Analysts had expected $476.5 million on the fourth quarter top line, so this projection is a bit underwhelming, but investors seem willing to overlook that in favor of the buyback, which will take approximately 8% of its shares off the market at current prices.