Seeking Alpha

Red Hat now -5.3% AH, billings growth slows

  • Though Red Hat's (RHT) FQ2 revenue rose 16% Y/Y and beat estimates, its billings rose only 8% Y/Y, a marked slowdown from FQ1's 14%. Likewise, the enterprise Linux leader's deferred revenue balance was flat Q/Q and up 12% Y/Y, after rising 16% Y/Y in FQ1.
  • Red Hat attributes the billings slowdown to "modest IT spending in Europe and the impact of large deal arrangements." The latter could be a reference to growth in long-term deals where a smaller portion of the contract can be recognized as deferred revenue (discussed in the FQ4 CC).
  • Subscription revenue (87% of total) +17% Y/Y. Training/services +9%.
  • Opex +17% Y/Y, nearly even with rev. growth. Sales/marketing spend +17% to $144.6M, R&D +23% to $78.3M, G&A +1% to $38.2M. Gross margin +100 bps Y/Y to 87%.
  • Only $20M was spent on buybacks, down from $179M in FQ1.
  • CC at 5PM ET, guidance should be provided. FQ2 results, PR.

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