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 fourth quarter that ended Dec. 31, Rackspace reported earnings before costs such as stock compensation 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 rose just 1%, to $787 million. Analysts had expected earnings per share of five cents on revenue of $776.31 million.

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

The fourth quarter also saw Rackspace record $217 million in noncash impairment charges driven by $129 million of goodwill and a $75 million asset impairment. The goodwill impairment was the result of a decline in market capitalization following a ransomware attack on Rackspace’s Hosted Exchange email business. The asset impairment came from Rackspace plan to move 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 2022, Rackspace reported an adjusted profit of $364 million, or 54 cents per share, down from $484 million, or 97 cents per share, in 2021. Revenue rose 4%, or 5% in constant currency, to $3.122 billion.

“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 an adjusted loss per share of one to five cents on revenue of $752 million to $762 million. Analysts were expecting breakeven on $762.14 million in revenue.

Despite the slight miss in outlook, investors liked the earnings beat, with Rackspace shares up more than 9% after-hours.

Photo: Scott Beale/Laughing Squid