Benefitting from a further strong growth in customer growth and stable demand for its hybrid cloud technology solutions, Red Hat (RHT) reported better than expected earnings for the first quarter. However, the company’s stock dropped after its revenues missed estimates.
During the November quarter, revenues of the open source software solutions provider climbed 13% annually to $847 million, helped by a 13% growth in subscription revenues. Analysts had forecast a faster top line growth. Deferred revenue balance at the end of the quarter was $2.5 billion, up 20% compared to last year.
Benefitting from the higher revenues, adjusted earnings moved up 32% to $0.96 per share and came in above analysts’ forecast. Reported profit was $94 million or $0.51 per share, compared to $102 million or $0.55 per share in the third quarter of 2017.
“Adoption of Red Hat’s technologies that enable customers to build and deploy applications more securely and consistently across hybrid and multi-cloud environments continued to drive our growth in Q3,” said CEO Jim Whitehurst.
Last week, Red Hat acquired Boston-based tech firm NooBaa as part of its efforts to boost the high-demand hybrid cloud offerings. The company has been focusing on hybrid cloud architecture and cloud-enabling technologies to remain relevant in the fast-growing sector.
In October, Red Hat agreed to be acquired by International Business Machines (IBM) for $34 billion, in one of the biggest deals in the tech sector in recent times. Shareholders of Red Hat will be voting on the acquisition at a special meeting to be held next month. Owing to the pending buyout deal, the management did not provide its guidance for fiscal 2019.
Red Hat’s competitor Oracle reported earnings of $0.80 per share for the second quarter on revenues of $9.6 billion. The bottom line also exceeded estimates.
Shares of Red Hat maintained a steady uptrend in recent years. After losing momentum mid-year, they surged and hit a record high last month. The stock traded lower during Monday’s regular session and lost further after the earnings report.
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