Rackspace growing but its cloud is still tiny next to AWS

Rackspace posted strong financial results, with its cloud segment growing faster than overall business

Hosting provider Rackspace exceeded analyst predictions Friday when it posted strong financial results, but it continues to be dwarfed in the infrastructure as a service (IaaS) market by the juggernaut that is Amazon Web Services (AWS).

Rackspace reported overall second quarter earnings of $22 million, and revenues of $376 million, up 18 percent on the previous year and beyond the Wall Street predictions of $372 million.

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The Texan-headquartered hosting company is increasingly turning its focus to the public cloud and grew the revenue of this part of the business by 36 percent in the second quarter to $99 million, up from $72 million the previous year.

However, it's still not growing at nearly the rate as its main rival, AWS, which posted second quarter revenues a couple of weeks ago of $844 million for its "other" business (widely believed to represent the earnings of Amazon's mysterious cloud segment). This is a 64 percent year-on-year increase.

The public cloud requires more initial capital investments than hosting to be made on infrastructure because companies want to buy capacity on a cloud immediately. However, in the last quarter Rackspace spent just under $120 million on infrastructure and added only 4,762 servers, while Google and Microsoft spent a combined $3.4 billion on infrastructure over their last quarter, according to GigaOM.

Many companies offering cloud services, such as AWS, Google and Microsoft, attempt to drive down their costs by employing a bullish economies of scale approach, but Rackspace claims that it doesn't wish to compete in this way.

While Rackspace isn't in the same league as AWS, neither are Microsoft and Google. Microsoft said in April that its Windows Azure platform has exceeded a billion dollars, while Google's Compute Engine has only been active since May.

This story, "Rackspace growing but its cloud is still tiny next to AWS" was originally published by Techworld.com.