Rackspace confirms Hosted Exchange outage caused by ransomware attack

As it recovers from a ransomware attack, Rackspace tops fourth quarter earnings

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Shares in Rackspace Technology Inc. rose by nearly 10% in late trading after the cloud services provider topped estimates in its latest earnings report.

For the quarter that ended Dec. 31, Rackspace reported non-generally accepted accounting principles earnings of $74 million or six cents per share, down from $122 million or 25 cents per share in the same quarter of last year. Revenue came in at $787 million, up 1% year-over-year. Analysts had expected earnings per share of five cents on revenue of $776.31 million.

Revenue from Rackspace’s core Core Segments, comprised of Multcloud Services and Apps & Cross Platform, were up 2% year-over-year in the quarter, driven by new customer acquisitions and growing customer spending. On a constant currency basis, the figure was up 3% year-over-year.

The fourth quarter also saw Rackspace record $217 million in non-cash impairment charges driven by $129 million of goodwill and a $75 million asset impairment. The goodwill impairment was due to a decline in market capitalization following a ransomware attack on Rackspace’s Hosted Exchange email business. The asset impairment was due to Rackspace moving officers from one part of San Antonio to another later this year.

The ransomware attack hit Rackspace in early December, forcing the company to shut down its Hosted Exchange Environment. In early January, Rackspace said that an investigation into the attack had found that cybercriminals had only stolen data from 27 of its 30,000 customers. The company added that it had decided not to rebuild the Hosted Exchange email environment and would instead migrate to Microsoft 365.

For the full year 2022, Rackspace reported a non-GAAP profit of $364 million or 54 cents per share, down from $484 million or 97 cents per share in 2021. Revenue came in at $3.122 billion, up 4% year-over-year or 5% on a constant currency basis.

“We delivered fourth-quarter revenue and profit above our guidance and reported solid cash flow,” Amar Maletira, chief executive officer of Rackspace, said in a statement. “My focus is on changing the trajectory of the business and positioning Rackspace for sustained, long-term growth.”

For the first quarter of 2023, Rackspace expects a non-GAAP loss per share of one cent to five cents on revenue of $752 million to $762 million. Analysts were expecting figures of break-even and $762.14 million.

Despite the slight miss in outlook, investors liked the earnings beat, with Rackspace shares up 9.47% as of 7 p.m. EST. .

Photo: Scott Beale / Laughing Squid

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