Over the past few years, cloud computing has become a hot topic. A variety of companies -- like NetSuite (N) -- have built applications that are based on Internet technologies. The result is improved productivity and lower costs.
Yet, in order to continue to propel the cloud-computing revolution, there needs to be a strong technology foundation, such as with servers, operating systems and application development tools. And one of the top players in the market is Red Hat (RHT).
Revenues increased by 25% to $244.8 million. The consensus estimate was for $235.9 million. Oh, and the company beat the earnings forecast by four cents, coming to a total of 26 cents per share (when making some exclusions for one-time items).
But investors were more impressed by the outlook. For the upcoming quarter, Red Hat expects earnings of 21 to 22 cents per share, with revenue of $252 million to $255 million. The annual forecast is for earnings of 94 to 96 cents per share and revenue of $1.05 billion to $1.07 billion.
All in all, corporate America is flush with cash and is ramping up investments in cloud-computing technologies (in the latest quarter, there were 30 deals in excess of $1 million for Red Hat). It's a trend that is likely to continue for many years.
However, investors should be cautious. The valuation of Red Hat is rich and there will probably be some volatility. So it is a good idea to wait awhile before taking a position in the stock.
Tom Taulli is the author of several books, including the Complete M&A Handbook and All About Short Selling.