After its Q1 ‘miss’ (see Rackspace misses earnings but hits strategy) US-based hosting giant Rackspace had a much better Q2. As a result, headline revenues for the 6 months to 30th June leapt by 30% yoy to $620m, and operating margins improved by 150bps to 12.5%.
Having said that, it’s interesting to compare Rackspace’s profitability with that of ‘our very own’ Telecity (see Telecity powers onwards and upwards), for whom operating margins expanded by almost 2 points to 31.6% on 22% revenue growth. And just for the avoidance of doubt, both these operating margins are after D&A (depreciation and amortisation). On an EBITDA basis (i.e. before D&A), Rackspace’s margin was 31.4% compared to Telecity’s 45.6%!
On the face of it, Telecity seems to be doing a much better job of ‘sweating the assets’! Investors apparently haven’t missed that point either – Telecity’s shares are some 35% up on a ytd basis, whereas Rackspace is broadly flat.