Red Had, the world's biggest distributor of the open-source Linux operating system, beat analyst forecasts by a penny after it announced stronger-than-expected results for the first quarter.
The company announced Wednesday that total revenue for the first quarter rose to $423.8 million, up by 17% from the same period in the previous fiscal year. The earnings boosted largely by the double-digit growth in sales in every region and an 18% growth in subscriptions, which earned $372 million of the company's revenue. Red Had also reported a 16% year-over-year increase in operating cash flow to $165 million. This boosted adjusted earnings to $0.34 per share, ahead of analyst expectations of $0.33.
Red Hat raised its full-year adjusted revenue forecast from $1.73 - $1.755 billion to $1.76 billion - $1.785 billion and its adjusted earnings forecast from $1.54 - $1.56 per share to $1.59 - $1.61 per share. According to Thomson Reuters I/B/E/S, analysts were expecting a lower full-year adjusted revenue somewhere around $1.55 - $1.75 billion.
However, Red Hat's net income fell 6.6% from $40.4 million or $0.21 per share from last year's first quarter to $37.7 million or $0.20 per share this quarter due to increasing operating costs. Still, Red Hat's stocks rose abruptly in after-hours trading Wednesday by 4.5% to $55.55.
"...We are benefiting from an improved IT spending environment for open source and cloud enabling technologies," Red Hat chief executive Jim Whitehurst remarked during the company's quarterly conference call.
Red Hat, whose majority of clients comprises Fortune 500 companies such as Dell, Amazon and Alcatel-Lucent, said the company was able to renew its 25 most profitable contracts and closed a number of additional deals worth around a million dollars.
The figures came after Red Hat announced its acquisition of Paris-based eNovance, a privately-owned company specializing in building and deploying cloud storage, software and services for large-scale providers. The $95 million deal, which is expected to close this month, will help Red Hat expand its open source OpenStack cloud computing platform, which competes with similar products from Microsoft and VMWare.
Earlier this year, Red Hat also purchased Inktank, a data-center storage provider, for $175 million.
Analysts predict Red Hat's spectacular first quarter is a sign of good things to come in the fiscal year ahead.
"Red Hat delivered solid first-quarter results as subscription revenue, and more importantly, billings outperformed expectations," says Kirk Materne, analyst at Evercore Partners. "Given that Red Hat's business can tend to be a little slow in their first fiscal quarter, this would appear to be a really solid start to fiscal year 2015."
