US-based hosting provider Rackspace has reported another quarter of excellent growth. Total Q3 revenue was $265m, up 31% in constant currency year-on-year and 7% sequentially. Managed hosting grew by 24% year-on-year, while cloud growth was 89%, meaning public cloud now accounts for almost a fifth of Rackspace’s total business. The overall EBIT margin improved from 10.8% in Q3 2010 to 11.7%. Following the results release, shares in the company were up 7% on Wall Street yesterday, giving it a market cap of just under $6bn.
Clearly Rackspace is prospering from demand for managed hosting and cloud services among its target customer base of small to medium sized businesses. In a fragmented market, it has emerged as a player able to offer these services on an industrialised scale, and is continuing to build capacity and offerings on both sides of the Atlantic.
In its non-US operations, the vast majority of which are in the UK, Rackspace earned revenues of $66m in the quarter. So we’d estimate the company will deliver around £150m of UK business in 2011. That makes it one of the biggest players in the UK managed hosting and cloud market among smaller businesses, and certainly helps to distinguish it from the myriad smaller firms operating in that attractive space. On a headline basis, Rackspace’s UK revenues in Q3 grew in line with the total business, i.e. at low 30s% year on year. But given currency fluctuations, actual growth in the UK market would have been closer to the 40% mark.