What Drove Red Hat's Fiscal 2Q18 Earnings?

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What Drove Red Hat's Fiscal 2Q18 Earnings? PART 1 OF 18

Red Hat’s Fiscal 2Q18 Earnings Beat Analysts’ Expectations

Fiscal 2Q18 earnings

Red Hat, a leading Linux software and open source provider, released its fiscal 2Q18 earnings on September 25, 2017, after the markets closed. In fiscal 2Q18, Red Hat (RHT) posted revenues and non-GAAP EPS (earnings per share) of $723 million and $0.77, respectively. Its revenues and EPS beat analysts’ expectations by $23.6 million and $0.10, respectively.

On a YoY (year-over-year) basis, Red Hat’s fiscal 2Q18 revenues and EPS rose 21% and 65%, respectively. On a constant currency basis, Red Hat’s fiscal 2Q18 revenues grew 20%.
Red Hat&#8217;s Fiscal 2Q18 Earnings Beat Analysts&#8217; Expectations

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Consistent revenue growth

The above graph shows that in the last 12 quarters, Red Hat’s revenue has either met or beaten analysts’ expectations. On the earnings front, Red Hat’s EPS were always either in line or better than analysts’ expectations.

From $6 million in annual revenues in fiscal 1998, Red Hat has come a long way. In fiscal 2017, the company’s annual revenues were close to $2.4 billion. Red Hat’s consistent double-digit growth not only shows the success of the company but also the success of open source software, which the company pioneered.

Open-source software provides the foundation for Twitter (TWTR), Facebook (FB), and Google (GOOG) (GOOGL). Today, enterprise software players like Microsoft (MSFT), which was known for its Windows-centric strategy, are also eager to adopt Linux.

Later in the series, we’ll discuss Red Hat’s way of generating recurring revenue from open source software as well as its contribution to the increased adoption of open source software.


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