(Reuters) - Red Hat Inc (RHT.N), the world’s largest distributor of Linux operating software, reported a lower-than-expected adjusted profit as costs rose, and lowered the top end of its full-year revenue outlook on slow growth in its services business.
The company, which sells subscriptions to upgrades, bug fixes and helpdesk support for its business software and the widely used Linux operating system, expects full-year revenue of $1.32 billion to $1.33 billion. It had previously forecast revenue of up to $$1.34 billion.
Its adjusted earnings forecast remained unchanged at $1.16 to $1.20 per share.
Analysts were expecting full-year revenue of $1.33 billion and earnings of $1.19 per share, according to Thomson Reuters I/B/E/S.
“While our business momentum in the underlying demand trend for our subscriptions remain strong, we do expect our services business to continue with single-digit growth for a while longer,” Chief Executive Jim Whitehurst said on a conference call.
The company got 14 percent of its revenue from training and services last year.
Net income fell to $35 million, or 18 cents per share, in the second quarter, from $40 million, or 20 cents per share, a year earlier.
Excluding items, the company earned 28 cents per share.
Revenue rose 15 percent to $322.6 million.
Analysts on average had expected earnings of 29 cents per share on revenue of $322.1 million.
Red Hat’s subscription revenue rose 17 percent to $278.8 million.
The company reported billings, which is revenue and change in deferred revenue, of $349 million.
It generates about $1 billion annually from subscriptions to the Linux operating system, which competes with Microsoft Corp’s (MSFT.O) Windows.
Operating expenses rose 23 percent to $224.7 million, including investment into the company’s nascent storage business.
Raleigh, North Carolina-based Red Hat’s shares were down 2 percent after closing at $57.54 on the New York Stock Exchange on Monday.
Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Don Sebastian