Red Hat sees further shift to hybrid cloud

Red Hat shares are up 4% after reporting Q2 results with better than expected revenue and earnings plus good Q3 and FY18 outlooks.

The Q3 outlook is for revenue, $730m to $737m (consensus: $710.92m) with a non-GAAP operating margin of 23.7%.  The FY18 outlook is for revenue in the range $2.88bn to $2.895bn (consensus: $2.81B); with strong operating cash flow of up to $900m.

Subscription revenue in Q2 from Infrastructure-related offerings was $487m (+14% yr/yr); subscription revenue from Application Development-related and other emerging technology offerings, $150m (+43%).

Deferred revenue: Red Hat ended the quarter with a deferred revenue balance of $2.05bn, up 22% on the year.


“Strong demand for our technologies that enable hybrid cloud computing has contributed to accelerated revenue growth in the first half of the fiscal year. In the second quarter, we delivered total revenue growth of 21%, fuelled by over 40% growth in our Application Development-related and other emerging technology revenue," says Jim Whitehurst (above), President and Chief Executive Officer of Red Hat. "IT organisations continued to turn to Red Hat as a strategic technology partner to help them transform and modernise their applications and infrastructure for the hybrid cloud."

"Strong execution and global demand for Red Hat technologies continued to drive financial results which exceeded expectations for the second quarter and the first half of fiscal year 2018," stated Eric Shander, Executive Vice President and Chief Financial Officer of Red Hat. "For the first half of fiscal 2018, Red Hat delivered a powerful combination of 20% total revenue growth, 41% GAAP operating income growth, 26% non-GAAP operating income growth, and 22% operating cash flow growth. Given our first half results and ongoing momentum, we are increasing our outlook for the full year."