Editors note: Information courtesy David Cahill – AL3

Summary. Rackspace Hosting (ticker: RAX) reported Q1 fiscal 2011 results after the close. Total revenue grew 29% over last year, driven by 93% growth in the cloud business. The strength in the cloud revenue (now ~16% of total) came from mix of new customer additions, increased installed base penetration, and initial traction from both the managed cloud service and UK-based cloud offering. Rackspace’s organic customer additions in the quarter were the strongest in company history, up 43% over the same period last year. Total customer count now stands at greater than 142,000. Employee headcount and server units increased 20% and 18% respectively over Q1 2010. Rackspace’s continued improvements in capital efficiency are depicted in the graphic below. The company’s revenue/server increased 9% over the March quarter last year to $3,264. Customers per server, an indication of hardware efficiency, increased 22% during the same period.

Rackspace Hosting: Hardware Efficiency Metrics

Looking to the future, management reiterated that they are on track to hit their previously stated revenue and gross margin goals for fiscal 2011. Other key metrics and takeaways from the call:

• Forrester Cloud survey…Management referenced a Forrester survey that cited 13% of North American enterprises are currently outsourcing their entire IT infrastructure. The total cloud market is estimated by Forrester to be $38b today, growing to $73b by 2013.
• Continued hiring…Investing in product development team to drive higher service level offerings, enterprise service capability, and a focus on customer acquisition as well
• Open Stack adoption…more than 20,000 downloads of software platform, >60 participating partners
• Whitebox server adoption…Across compute platform seeing shift into the more whitebox form factor, driven by cloud offering. Cloud architecture is fastest growing form factor in company.
• Managed cloud service…seeing strong demand for this higher service level with >1100 customers by the end of April
• UK Cloud… launched cloud service in Europe in January, >3000 customers adopted since launch