UPDATED 21:23 EDT / MARCH 26 2018

CLOUD

Red Hat delights investors as cloud products gain traction

Open-source software leader Red Hat Inc. had a smile on its face today after posting solid fiscal fourth-quarter financial results that pushed up its share price more than 5 percent in after-hours trading.

The company reported a net loss of $12.5 million for the quarter, or 7 cents per share. Like other tech firms that also posted a loss in the quarter just gone, Red Hat blamed this deficit on the onetime impact of recent tax reforms introduced by President Donald Trump over the new year.

Still, Red Hat managed to deliver earnings after certain costs such as stock compensation of 91 cents per share on revenue of $772 million, up 23 percent from a year ago. That was well ahead of Wall Street’s forecast of 81 cents per share earnings on revenue of $761.1 million.

Much of Red Hat’s success in the quarter can be put down to subscription revenue, which hit $683 million for the quarter, representing growth of 22 percent year-over-year. Red Hat said the majority of its subscription revenue came from its infrastructure products. But the company was just as eager to point out the growth of its application development technologies, which saw a 39 percent revenue increase from a year ago.

These application development technologies are rapidly becoming a big driver of business for Red Hat, especially its software container products. Red Hat has bet heavily on container technologies, first with its OpenShift platform-as-a-service offering that integrates the Kubernetes container orchestration platform with Docker containers. More recently, the company signaled its intent to press further in this direction when it made one of the most notable acquisitions so far this year, snapping up container-focused startup CoreOS Inc. for $250 million in January.

Software container technology, which allows applications to run unchanged on a variety of computers and operating system, is likely to be a big part of Red Hat’s future, Chief Executive Jim Whitehurst noted in a blog post marking the company’s 25th anniversary since its founding.

“I am really proud that we have established a leadership position around Kubernetes and with our contributions to OpenShift,” Whitehurst wrote. “But it’s more than just the technology. It’s the fact that we are now seen as leaders in containers, which are the next wave of computing and application architecture. Our recent acquisition of CoreOS is just Red Hat’s latest move on this front.”

The company’s OpenStack and Network Functions Virtualization infrastructure offerings also played a strong part in the company’s performance this quarter, with support for OpenStack going beyond its traditional customer base of telecommunications firms, Whitehurst said in an earnings call with analysts. Nine of Red Hat’s ten largest new OpenStack customers in the quarter were not telcos, with most being involved in the financial services sector instead.

“Red Hat continues to rock the data center,” said longtime analyst Dave Vellante, co-chief executive of SiliconANGLE Media Inc.

Red Hat also posted encouraging guidance for the current quarter, saying it expects a profit of 68 cents a share on revenue of between $800 million and $810 million. Wall Street has forecast earnings of 72 cents on revenue of $795 million.

“The after-hours surge in Red Hat’s shares highlight the value of good news in today’s market, especially when it’s coupled with an optimistic outlook for the quarters ahead,” said Charles King, president and principal analyst of Pund-IT Inc. “What little weakness the company noted in Q4 was buoyed by a bright earnings outlook for full year 2019.”

For the full year, Red Hat said it’s expecting earnings per share of $2.25 to $2.28 on revenue of $3.425 billion to $3.46 billion.

Image: Jared Smith/Flickr

A message from John Furrier, co-founder of SiliconANGLE:

Your vote of support is important to us and it helps us keep the content FREE.

One click below supports our mission to provide free, deep, and relevant content.  

Join our community on YouTube

Join the community that includes more than 15,000 #CubeAlumni experts, including Amazon.com CEO Andy Jassy, Dell Technologies founder and CEO Michael Dell, Intel CEO Pat Gelsinger, and many more luminaries and experts.

“TheCUBE is an important partner to the industry. You guys really are a part of our events and we really appreciate you coming and I know people appreciate the content you create as well” – Andy Jassy

THANK YOU