Shares in the cloud hosting provider Rackspace Inc. took a battering on Monday as the company reported a dismal-looking forecast for its second quarter fiscal 2015.

Rackspace said it’s total revenue for the first three months of the year was $480.2 million, a 14.1 percent increase on the previous year’s first quarter. That’s not bad by any means, but the results were still lower than Wall Street’s expectations. However, the company did report earnings of $0.20 per diluted share, which was bang on with analyst’s estimates, while its net income of $28.4 million for the quarter displayed healthy growth of 11.8 percent year-on-year.

All well and good, but it was Rackspace’s projections for the coming quarter, rather than its past achievements, that has investors worried. Rackspace said it expects revenues to grow by around just 1.5 percent and 2.5 percent for the second quarter, which would place its revenue at somewhere between $487.4 million and $492 million.

If that seems like a lot, well, apparently it isn’t. At least not in the eyes of Wall Street analysts, who were expecting to see a much better performance from the company. Analysts had estimated revenues of $502.1 million, which caused investors to race to the trading floor to sell off stock, pusing Rackspace’s share price down by a whopping 13 percent.

Rackspace likes to differentiate itself from cloud giants like Amazon Web Services (AWS), Google and Microsoft, calling itself a “managed cloud” company. The services it offers are somewhat different to the managed infrastructure offerings of the big vendors, being somewhat closer to a traditional hosting provider.

As well as letting customers run workloads on virtual machines, Rackspace has recently begun letting customers run their own dedicated, single-tenant machines under its new OnMetal brand. Those servers run on CoreOS, the new distributed operating system that makes use of Docker containerization rather than VMs. CoreOS is said to be similar to the internal operating systems used by Amazon, Facebook and Google, except for the fact it’s open-source.

Rackspace reported first quarter earnings of $1,412 per server, a 5.7 percent increase from Q1 of 2014. It currently operates 114,105 servers scattered throughout its data centers, which means it’s increased the number of machines up-and-running by 7.4 percent from one year ago. But those new machines don’t come cheap – it reported expenditure of $13.4 million on kitting out data centers, a 21.8 percent increase from one year ago.

Unfortunately for Rackspace, many of its investors were hoping to see a better return on those investments than what the company is promising, and they’ve been quick to voice their displeasure by selling off its shares.

Photo Credit: Garrett Heath via Compfight cc