Rackspace Hosting (RAX) 10-Q 11 Aug 14 2014 Q2 Quarterly report Financial data

Document_and_Entity_Informatio

Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Aug. 07, 2014
Document and Entity Information [Abstract]	'	'
Entity Registrant Name	'RACKSPACE HOSTING, INC.	'
Entity Central Index Key	'0001107694	'
Current Fiscal Year End Date	'--12-31	'
Entity Filer Category	'Large Accelerated Filer	'
Document Type	'10-Q	'
Document Period End Date	30-Jun-14	'
Document Fiscal Year Focus	'2014	'
Document Fiscal Period Focus	'Q2	'
Amendment Flag	'false	'
Entity Common Stock, Shares Outstanding	'	143,015,946

Condensed_Consolidated_Balance

Condensed Consolidated Balance Sheets (USD $)	Jun. 30, 2014	Dec. 31, 2013
In Thousands, unless otherwise specified
Current assets:	'	'
Cash and cash equivalents	$340,344	$259,733
Accounts receivable, net of allowance for doubtful accounts and customer credits of $3,891 as of December 31, 2013 and $4,672 as of June 30, 2014	130,911	123,898
Deferred income taxes	11,769	12,637
Prepaid expenses	27,239	30,782
Other current assets	7,470	11,918
Total current assets	517,733	438,968
Property and equipment, net	972,830	890,776
Goodwill	81,084	81,084
Intangible assets, net	20,043	23,880
Other non-current assets	56,285	57,089
Total assets	1,647,975	1,491,797
Current liabilities:	'	'
Accounts payable and accrued expenses	147,285	122,047
Accrued compensation and benefits	65,700	62,459
Income and other taxes payable	18,578	11,388
Current portion of deferred revenue	20,742	22,868
Current portion of capital lease obligations	25,639	37,885
Current portion of debt	1,108	1,861
Total current liabilities	279,052	258,508
Non-current liabilities:	'	'
Deferred revenue	2,506	3,662
Capital lease obligations	14,982	25,048
Finance lease obligations for assets under construction	36,262	0
Debt	18	124
Deferred income taxes	54,645	69,729
Deferred rent	47,693	43,046
Other liabilities	41,620	36,268
Total liabilities	476,778	436,385
COMMITMENTS AND CONTINGENCIES	'	'
Stockholders' equity:	'	'
Common stock, $0.001 par value per share: 300,000,000 shares authorized; 141,123,904 shares issued and outstanding as of December 31, 2013; 143,009,409 shares issued and outstanding as of June 30, 2014	143	141
Additional paid-in capital	696,109	636,660
Accumulated other comprehensive income (loss)	3,901	-4,536
Retained earnings	471,044	423,147
Total stockholders’ equity	1,171,197	1,055,412
Total liabilities and stockholders' equity	$1,647,975	$1,491,797

Condensed_Consolidated_Balance1

Condensed Consolidated Balance Sheets (Parentheticals) (USD $)	Jun. 30, 2014	Dec. 31, 2013
In Thousands, except Share data, unless otherwise specified
Current assets:	'	'
Allowance for doubtful accounts and customer credits	$4,672	$3,891
Stockholders' equity:	'	'
Common stock, par value	$0.00	$0.00
Common stock, shares authorized	300,000,000	300,000,000
Common stock, shares issued	143,009,409	141,123,904
Common stock, shares outstanding	143,009,409	141,123,904

Condensed_Consolidated_Stateme

Condensed Consolidated Statements of Comprehensive Income (USD $)	3 Months Ended		6 Months Ended
In Thousands, except Per Share data, unless otherwise specified	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Net revenue	$441,112	$375,847	$862,159	$738,047
Costs and expenses:	'	'	'	'
Cost of revenue	145,051	117,658	285,468	231,268
Research and development	29,711	23,216	54,903	41,591
Sales and marketing	60,480	52,269	117,839	102,083
General and administrative	81,424	72,840	152,574	140,317
Depreciation and amortization	90,559	74,460	178,364	144,571
Total costs and expenses	407,225	340,443	789,148	659,830
Income from operations	33,887	35,404	73,011	78,217
Other income (expense):	'	'	'	'
Interest expense	-529	-833	-1,024	-1,773
Interest and other income (expense)	171	-303	436	-104
Total other income (expense)	-358	-1,136	-588	-1,877
Income before income taxes	33,529	34,268	72,423	76,340
Income taxes	11,078	11,901	24,526	26,712
Net income	22,451	22,367	47,897	49,628
Other comprehensive income, net of tax	'	'	'	'
Foreign currency translation adjustments	5,618	-1,860	8,437	-11,929
Other comprehensive income (loss)	5,618	-1,860	8,437	-11,929
Comprehensive income	$28,069	$20,507	$56,334	$37,699
Net income per share	'	'	'	'
Basic	$0.16	$0.16	$0.34	$0.36
Diluted	$0.16	$0.16	$0.33	$0.34
Weighted average number of shares outstanding	'	'	'	'
Basic	142,079	138,011	141,558	139,463
Diluted	144,093	142,178	143,910	144,180

Condensed_Consolidated_Stateme1

Condensed Consolidated Statements of Cash Flows (USD $)	6 Months Ended
In Thousands, unless otherwise specified	Jun. 30, 2014	Jun. 30, 2013
Cash Flows From Operating Activities	'	'
Net income	$47,897	$49,628
Adjustments to reconcile net income to net cash provided by operating activities:	'	'
Depreciation and amortization	178,364	144,571
Loss on disposal of equipment, net	159	225
Provision for bad debts and customer credits	3,267	2,361
Deferred income taxes	-19,094	-1,891
Deferred rent	4,369	5,484
Share-based compensation expense	29,997	25,498
Excess tax benefits from share-based compensation arrangements	-28,321	-16,197
Changes in certain assets and liabilities:	'	'
Accounts receivable	-9,120	-13,488
Prepaid expenses and other current assets	7,255	-556
Accounts payable and accrued expenses	51,996	15,535
Deferred revenue	-3,521	2,065
All other operating activities	2,948	6,757
Net cash provided by operating activities	266,196	219,992
Cash Flows From Investing Activities	'	'
Purchases of property and equipment	-198,997	-225,377
Acquisitions, net of cash acquired	0	-6,203
All other investing activities	1,628	-372
Net cash used in investing activities	-197,369	-231,952
Cash Flows From Financing Activities	'	'
Principal payments of capital leases	-23,545	-35,550
Principal payments of notes payable	-899	-897
Payments for deferred acquisition obligations	-113	-1,238
Receipt of Texas Enterprise Fund grant	5,500	0
Common shares withheld for employee withholding taxes	-13,620	0
Proceeds from employee stock plans	14,753	6,400
Excess tax benefits from share-based compensation arrangements	28,321	16,197
Net cash provided by (used in) financing activities	10,397	-15,088
Effect of exchange rate changes on cash and cash equivalents	1,387	-1,961
Increase (decrease) in cash and cash equivalents	80,611	-29,009
Cash and cash equivalents, beginning of period	259,733	292,061
Cash and cash equivalents, end of period	$340,344	$263,052

Supplemental_Cash_Flow_Informa

Supplemental Cash Flow Information (USD $)	6 Months Ended
In Thousands, unless otherwise specified	Jun. 30, 2014	Jun. 30, 2013
Non-Cash Additions of Property and Equipment	'	'
Non-cash purchases of property and equipment	$14,090	$6,547
Additional finance lease obligations for assets under construction	35,619	0
Total non-cash additions of property and equipment	49,709	6,547
Shares issued in business combinations	0	4,457
Cash payments for interest, net of amount capitalized	1,008	1,908
Cash payments for income taxes	5,787	10,035
Acquisition of property and equipment by capital leases	'	'
Non-Cash Additions of Property and Equipment	'	'
Non-cash purchases of property and equipment	929	415
Increase in property and equipment in accounts payable and accrued expenses	'	'
Non-Cash Additions of Property and Equipment	'	'
Non-cash purchases of property and equipment	$13,161	$6,132

Company_Overview_Basis_of_Pres

Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies	6 Months Ended
	Jun. 30, 2014
Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies [Abstract]	'
Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies	'
	Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies
	Nature of Operations
	As used in this report, the terms “Rackspace,” “Rackspace Hosting,” “we,” “our company,” “the company,” “us,” or “our” refer to Rackspace® Hosting, Inc. and its subsidiaries. Rackspace Hosting, Inc., through its operating subsidiaries, is a provider of cloud computing services, managing web-based IT systems for small and medium-sized businesses as well as large enterprises. We focus on providing a service experience for our customers, which we call Fanatical Support®.
	Our operations began in 1998 as a limited partnership, and Rackspace Hosting, Inc. was incorporated in Delaware in March 2000.
	Basis of Consolidation
	The accompanying consolidated financial statements include the accounts of Rackspace Hosting and our wholly-owned subsidiaries, which include, among others, Rackspace US, Inc., our domestic operating entity, and Rackspace Limited, our United Kingdom operating entity. Intercompany transactions and balances have been eliminated in consolidation.
	Foreign currency translation adjustments arising from differences in exchange rates from period to period are included in the foreign currency translation adjustment account in accumulated other comprehensive income (loss). There was no income tax expense allocated to foreign currency translation adjustments during the three or six months ended June 30, 2013 or 2014.
	Basis of Presentation
	The accompanying consolidated financial statements as of June 30, 2014, and for the three and six months ended June 30, 2013 and 2014, are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and Rule 10-01 of Regulation S-X. Accordingly, they do not include all financial information and disclosures required by GAAP for complete financial statements, and certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of December 31, 2013 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 3, 2014 (the "2013 Annual Consolidated Financial Statements"). The unaudited interim consolidated financial statements have been prepared on the same basis as the 2013 Annual Consolidated Financial Statements and, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of our financial position as of June 30, 2014, our results of operations for the three and six months ended June 30, 2013 and 2014, and our cash flows for the six months ended June 30, 2013 and 2014.
	The results of operations for the three and six months ended June 30, 2014 are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2014, or for any other interim period, or for any other future year.
	We revised the amounts previously reported as Research and Development and General and Administrative costs for the three and six months ended June 30, 2013. We determined that certain internal projects did not meet the accounting definition of Research and Development costs, and such amounts were reclassified to General and Administrative costs, as follows:
		Three Months Ended					Six Months Ended
		June 30, 2013					June 30, 2013
	(In thousands)	Reclassification Amount			As Adjusted		Reclassification Amount			As Adjusted
	Research and development	$	(3,560	)	$	23,216	$	(7,958	)	$	41,591
	General and administrative	$	3,560		$	72,840	$	7,958		$	140,317
	Use of Estimates
	The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to accounts receivable and customer credits, property and equipment, fair values of intangible assets and goodwill, useful lives of intangible assets, fair value of share-based compensation, contingencies, and income taxes, among others. Whenever possible, we base our estimates and assumptions on historical experience. However, certain estimates require us to make assumptions about expected future cash flow, events and usage patterns that we cannot influence or control. Our judgments, assumptions and estimates are based upon facts and circumstances known to us when we prepare the financial statements and that we believe to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities or recording revenue and expenses in our financial statements. Changes in facts and circumstances may cause us to change our assumptions and estimates in future periods, and it is possible that actual results could differ from our estimates. We have engaged third-party consultants to assist management in the valuation of acquired assets, including other intangibles, as well as share-based compensation.
	Significant Accounting Policies
	The accompanying financial statements reflect the application of certain significant accounting policies. There have been no material changes to our significant accounting policies that are disclosed in the 2013 Annual Consolidated Financial Statements.
	Recent Accounting Pronouncements Not Yet Adopted
	In May 2014, the Financial Accounting Standards Board issued guidance to clarify principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and is to be applied retrospectively using one of two methods. One method is to apply the guidance retrospectively to each prior period presented with practical expedients available. The second method is to apply the guidance retrospectively with the cumulative effect of initially applying the Update recognized at the date of initial application. Early application is not permitted. We will adopt this standard in the first quarter of 2017, and we are evaluating the impact on our consolidated financial statements of adopting this new accounting standard.

Earnings_Per_Share

Earnings Per Share	6 Months Ended
	Jun. 30, 2014
Earnings Per Share [Abstract]	'
Earnings Per Share	'
	Earnings Per Share
	The following table sets forth the computation of basic and diluted earnings per share:
		Three Months Ended June 30,				Six Months Ended June 30,
	(In thousands, except per share data)	2013		2014		2013		2014
	Basic net income per share:
	Net income	$	22,367	$	22,451	$	49,628	$	47,897
	Weighted average shares outstanding:
	Common stock	138,011		142,079		139,463		141,558
	Number of shares used in per share computations	138,011		142,079		139,463		141,558
	Earnings per share	$	0.16	$	0.16	$	0.36	$	0.34
	Diluted net income per share:
	Net income	$	22,367	$	22,451	$	49,628	$	47,897
	Weighted average shares outstanding:
	Common stock	138,011		142,079		139,463		141,558
	Stock options, awards and employee share purchase plans	4,167		2,014		4,717		2,352
	Number of shares used in per share computations	142,178		144,093		144,180		143,910
	Earnings per share	$	0.16	$	0.16	$	0.34	$	0.33
	We excluded 4.3 million and 7.2 million potential common shares from the computation of dilutive earnings per share for the three months ended June 30, 2013 and 2014, respectively, and 2.8 million and 7.1 million potential shares for the six months ended June 30, 2013 and 2014, respectively, because the effect would have been anti-dilutive.

Fair_Value_Measurements

Fair Value Measurements	6 Months Ended
	Jun. 30, 2014
Fair Value Disclosures [Abstract]	'
Fair Value Measurements	'
	Fair Value Measurements
	Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There is a three-tier fair value of hierarchy, which prioritizes the inputs used in measuring fair value as follows:
	Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities;
	Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
	Level 3 – Unobservable inputs that are supported by little or no market activity, which require management judgment or estimation.
	Assets and liabilities measured at fair value on a recurring basis are summarized by level below. As of December 31, 2013 and June 30, 2014, we did not hold any financial instruments categorized as Level 2 or Level 3. Our Level 1 assets and liabilities are valued using quoted market prices.
	(In thousands)		December 31, 2013		June 30, 2014
	Level 1:
	Assets:
	Money market funds (1)		$	102,380	$	110,544
	Rabbi trust (2)		835		1,037
	Total		$	103,215	$	111,581
	Liabilities:
	Deferred compensation (3)		$	540	$	742
	Total		$	540	$	742
	-1	Money market funds are classified in cash and cash equivalents.
	-2	Investments in marketable securities held in a Rabbi Trust associated with a non-qualified deferred compensation plan are classified in other non-current assets.
	-3	Obligations to pay benefits under a non-qualified deferred compensation plan are classified in other non-current liabilities.
	Our Rabbi Trust was established in 2009, and we elected the fair value option, which allows for the recognition of gains and losses to be recorded in the Consolidated Statement of Comprehensive Income in the same period as the gains and losses are incurred as part of the non-qualified deferred compensation plan. During the three and six months ended June 30, 2013 and June 30, 2014, we recognized minimal net gains as interest and other income.

Property_and_Equipment_net

Property and Equipment, net	6 Months Ended
	Jun. 30, 2014
Property, Plant and Equipment [Abstract]	'
Property and Equipment, net	'
	Property and Equipment, net
	Property and equipment consisted of:
	(Dollar amounts in thousands)	Estimated Useful Lives				December 31,			June 30,
						2013			2014
	Computers, software and equipment	1	-	5	years	$	1,488,106		$	1,652,351
	Furniture and fixtures	7	years			55,681			56,770
	Buildings and leasehold improvements	2	-	30	years	236,255			250,096
	Land					28,566			29,052
	Property and equipment, at cost					1,808,608			1,988,269
	Less accumulated depreciation and amortization					(983,618		)	(1,125,135		)
	Work in process					65,786			109,696
	Property and equipment, net					$	890,776		$	972,830
	At December 31, 2013, the work in process balance consisted of build outs of $32.6 million for office facilities, $2.4 million for data centers, and $30.7 million for capitalized software and other projects. At June 30, 2014, the work in process balance consisted of build outs of $46.3 million for office facilities, $24.5 million for data centers, and $38.9 million for capitalized software and other projects.

Leases

Leases	6 Months Ended
	Jun. 30, 2014
Leases [Abstract]	'
Leases	'
	Leases
	We have entered into multiple complex real estate development and lease arrangements with independent real estate developers to design, construct and lease certain real estate projects. While the independent developer legally owns the real estate projects and must finance the overall construction, we have funded certain structural improvements and/or retained obligations related to certain potential construction cost overruns which have triggered an accounting requirement to include construction costs in progress and a related long-term finance lease liability on our consolidated balance sheets as though we are the owner of the asset during the construction period. We do not depreciate the cost of the real estate projects or expect to fund this long-term finance lease liability during the construction period.
	Upon completion of construction, we perform a sale-leaseback analysis pursuant to ASC 840, Leases, to determine if we can remove the asset and liability from our consolidated balance sheet. If the asset and corresponding liability can be derecognized, then the lease will be accounted for as an operating lease, and we will recognize rent expense over the lease term. However, certain factors may be considered “continuing involvement” which precludes derecognizing the asset and liability from the consolidated balance sheet when construction is complete. If the sale-leaseback criteria are not met, the asset would be considered to be owned for accounting purposes during the lease term. At this time, the amount recorded as a finance lease obligation for assets under construction would be transferred to a capital lease obligation. Accordingly, it would be depreciated and rental payments under the lease would be recorded as a reduction of the capital lease liability and accrued interest expense.
	During the first quarter of 2014, construction of one of these real estate projects completed, and we performed a sale-leaseback analysis. As a result of our continuing involvement in the project, we were precluded from derecognizing the asset and liability, and we will account for the lease as a capital lease obligation throughout the lease term. At the end of the lease term, we will derecognize the remaining lease obligation and asset balance.

Contingencies

Contingencies	6 Months Ended
	Jun. 30, 2014
Commitments and Contingencies Disclosure [Abstract]	'
Contingencies	'
	Contingencies
	We have contingent liabilities resulting from various litigation, claims and commitments. We record accruals for loss contingencies when losses are considered probable and can be reasonably estimated. The amount that will ultimately be paid related to these matters may differ from the recorded accruals, and the timing of such payments is uncertain. We were involved in the following legal proceeding:
	On October 22, 2008, Benjamin E. Rodriguez D/B/A Management and Business Advisors vs. Rackspace Hosting, Inc. and Graham Weston was filed in the 37th District Court in Bexar County Texas by a former consultant to the company, Benjamin E. Rodriguez. The suit alleged breach of an oral agreement to issue Mr. Rodriguez a 1% interest in our stock in the form of options or warrants for compensation for services he was engaged to perform for us. This matter was settled as of February 19, 2014, and there was not a material difference between the settlement amount and the amount for which we had accrued for the matter in our consolidated financial statements.
	We are a party to various claims that certain of our products, services, and technologies infringe the intellectual property rights of others. Adverse results in these lawsuits may include awards of substantial monetary damages, costly royalty or licensing agreements, or orders preventing us from offering certain features, products, or services, and may also cause us to change our business practices and require development of non-infringing products or technologies, which could result in a loss of revenue for us and otherwise harm our business. We have disputed the allegations of wrongdoing in these proceedings and intend to vigorously defend ourselves in all such matters.
	We cannot predict the impact, if any, that any of the matters described above may have on our business, results of operations, financial position, or cash flows. Because of the inherent uncertainties of such matters, including the early stage and lack of specific damage claims in many of them, we cannot estimate the range of possible losses from them.

ShareBased_Compensation

Share-Based Compensation	6 Months Ended
	Jun. 30, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]	'
Share-Based Compensation	'
	Share-Based Compensation
	We have granted equity awards to our employees and directors in the form of stock options and restricted stock. The exercise price of all stock options granted is not less than 100% of the fair market value of a share of common stock as of the date of grant. The stock options granted vest ratably over a four-year period. All stock options expire seven to ten years following the grant date. The restricted stock generally vests ratably over a four-year period. Certain key executives have received restricted stock grants that cliff-vest over various terms from one to three years. Vesting of these grants are generally also based on predetermined market and/or performance conditions.
	The composition of the equity awards outstanding as of December 31, 2013 and June 30, 2014 was as follows:
		December 31,		June 30,
		2013		2014
	Restricted stock	3,538,271		3,191,667
	Stock options	9,487,570		7,968,466
	Total outstanding awards	13,025,841		11,160,133
	We also have an Employee Stock Purchase Plan (the "ESPP"). Under the ESPP, eligible employees may purchase a limited number of shares of our common stock at the lesser of 85% of the market value on the enrollment date or 85% of the market value on the purchase date. The ESPP is made up of a series of offering periods. Each offering period has a maximum term of 24 months and is divided into semi-annual purchase intervals. The current ESPP began on July 1, 2013 and will conclude on June 30, 2015. Eligible employees may enroll at the beginning of any semi-annual purchase interval.
	Share-Based Compensation Expense
	Share-based compensation expense was recognized as follows:
		Three Months Ended June 30,						Six Months Ended June 30,
	(in thousands)	2013			2014			2013			2014
	Cost of revenue	$	2,735		$	4,127		$	5,254		$	7,918
	Research and development	1,813			3,293			3,341			6,073
	Sales and marketing	1,744			2,062			3,402			4,153
	General and administrative	7,023			7,783			13,501			11,853
	Pre-tax share-based compensation	13,315			17,265			25,498			29,997
	Less: Income tax benefit	(4,633		)	(5,756		)	(8,922		)	(10,158		)
	Total share-based compensation expense, net of tax	$	8,682		$	11,509		$	16,576		$	19,839
	We have made certain reclassifications to the prior period amounts above in order to conform to the current period's presentation. Refer to Note 1, "Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies," for more information about these reclassifications.
	As of June 30, 2014, there was $171.6 million of total unrecognized compensation cost related to restricted stock, stock options and the ESPP, which will be amortized using the straight-line method over a weighted average period of 2.5 years.

Taxes

Taxes	6 Months Ended
	Jun. 30, 2014
Income Tax Disclosure [Abstract]	'
Taxes	'
	Taxes
	We are subject to U.S. federal income tax and various state, local, and international income taxes in numerous jurisdictions. Our domestic and international tax liabilities are subject to the allocation of revenue and expenses in different jurisdictions and the timing of recognizing revenue and expenses. As such, our effective tax rate is impacted by the geographical distribution of income and mix of profits in the various jurisdictions. Additionally, the amount of income taxes paid is subject to our interpretation of applicable tax laws in the jurisdictions in which we file.
	We expect a taxable profit in the U.S. and U.K. for the full year 2014 before consideration of excess tax benefits, and therefore we anticipate utilizing benefits of tax deductions related to stock compensation in 2014. As a result, we have recognized an excess tax benefit in the U.S. and U.K. during the current period.

Summary_of_Significant_Account

Summary of Significant Accounting Policies (Policies)	6 Months Ended
	Jun. 30, 2014
Accounting Policies [Abstract]	'
Basis of Consolidation	'
	The accompanying consolidated financial statements include the accounts of Rackspace Hosting and our wholly-owned subsidiaries, which include, among others, Rackspace US, Inc., our domestic operating entity, and Rackspace Limited, our United Kingdom operating entity. Intercompany transactions and balances have been eliminated in consolidation.
Foreign Currency	'
	Foreign currency translation adjustments arising from differences in exchange rates from period to period are included in the foreign currency translation adjustment account in accumulated other comprehensive income (loss).
Basis of Presentation	'
	The accompanying consolidated financial statements as of June 30, 2014, and for the three and six months ended June 30, 2013 and 2014, are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and Rule 10-01 of Regulation S-X. Accordingly, they do not include all financial information and disclosures required by GAAP for complete financial statements, and certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of December 31, 2013 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 3, 2014 (the "2013 Annual Consolidated Financial Statements"). The unaudited interim consolidated financial statements have been prepared on the same basis as the 2013 Annual Consolidated Financial Statements and, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of our financial position as of June 30, 2014, our results of operations for the three and six months ended June 30, 2013 and 2014, and our cash flows for the six months ended June 30, 2013 and 2014.
Use of Estimates	'
	The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to accounts receivable and customer credits, property and equipment, fair values of intangible assets and goodwill, useful lives of intangible assets, fair value of share-based compensation, contingencies, and income taxes, among others. Whenever possible, we base our estimates and assumptions on historical experience. However, certain estimates require us to make assumptions about expected future cash flow, events and usage patterns that we cannot influence or control. Our judgments, assumptions and estimates are based upon facts and circumstances known to us when we prepare the financial statements and that we believe to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities or recording revenue and expenses in our financial statements. Changes in facts and circumstances may cause us to change our assumptions and estimates in future periods, and it is possible that actual results could differ from our estimates. We have engaged third-party consultants to assist management in the valuation of acquired assets, including other intangibles, as well as share-based compensation.
Recent Accounting Pronouncements Not Yet Adopted	'
	In May 2014, the Financial Accounting Standards Board issued guidance to clarify principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and is to be applied retrospectively using one of two methods. One method is to apply the guidance retrospectively to each prior period presented with practical expedients available. The second method is to apply the guidance retrospectively with the cumulative effect of initially applying the Update recognized at the date of initial application. Early application is not permitted. We will adopt this standard in the first quarter of 2017, and we are evaluating the impact on our consolidated financial statements of adopting this new accounting standard.
Sale Leaseback Transactions	'
	We have entered into multiple complex real estate development and lease arrangements with independent real estate developers to design, construct and lease certain real estate projects. While the independent developer legally owns the real estate projects and must finance the overall construction, we have funded certain structural improvements and/or retained obligations related to certain potential construction cost overruns which have triggered an accounting requirement to include construction costs in progress and a related long-term finance lease liability on our consolidated balance sheets as though we are the owner of the asset during the construction period. We do not depreciate the cost of the real estate projects or expect to fund this long-term finance lease liability during the construction period.
	Upon completion of construction, we perform a sale-leaseback analysis pursuant to ASC 840, Leases, to determine if we can remove the asset and liability from our consolidated balance sheet. If the asset and corresponding liability can be derecognized, then the lease will be accounted for as an operating lease, and we will recognize rent expense over the lease term. However, certain factors may be considered “continuing involvement” which precludes derecognizing the asset and liability from the consolidated balance sheet when construction is complete. If the sale-leaseback criteria are not met, the asset would be considered to be owned for accounting purposes during the lease term. At this time, the amount recorded as a finance lease obligation for assets under construction would be transferred to a capital lease obligation. Accordingly, it would be depreciated and rental payments under the lease would be recorded as a reduction of the capital lease liability and accrued interest expense.
Commitments and Contingencies Policy	'
	We have contingent liabilities resulting from various litigation, claims and commitments. We record accruals for loss contingencies when losses are considered probable and can be reasonably estimated. The amount that will ultimately be paid related to these matters may differ from the recorded accruals, and the timing of such payments is uncertain.
Share-based Compensation, Stock Options and Restricted Stock Policy	'
	We have granted equity awards to our employees and directors in the form of stock options and restricted stock. The exercise price of all stock options granted is not less than 100% of the fair market value of a share of common stock as of the date of grant. The stock options granted vest ratably over a four-year period. All stock options expire seven to ten years following the grant date. The restricted stock generally vests ratably over a four-year period. Certain key executives have received restricted stock grants that cliff-vest over various terms from one to three years. Vesting of these grants are generally also based on predetermined market and/or performance conditions.

Company_Overview_Basis_of_Pres1

Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies (Tables)	6 Months Ended
	Jun. 30, 2014
Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies [Abstract]	'
Prior Period Reclassification Adjustments	'
	We revised the amounts previously reported as Research and Development and General and Administrative costs for the three and six months ended June 30, 2013. We determined that certain internal projects did not meet the accounting definition of Research and Development costs, and such amounts were reclassified to General and Administrative costs, as follows:
		Three Months Ended					Six Months Ended
		June 30, 2013					June 30, 2013
	(In thousands)	Reclassification Amount			As Adjusted		Reclassification Amount			As Adjusted
	Research and development	$	(3,560	)	$	23,216	$	(7,958	)	$	41,591
	General and administrative	$	3,560		$	72,840	$	7,958		$	140,317

Earnings_Per_Share_Tables

Earnings Per Share (Tables)	6 Months Ended
	Jun. 30, 2014
Earnings Per Share [Abstract]	'
Computation of Basic and Diluted Earnings Per Share	'
	The following table sets forth the computation of basic and diluted earnings per share:
		Three Months Ended June 30,				Six Months Ended June 30,
	(In thousands, except per share data)	2013		2014		2013		2014
	Basic net income per share:
	Net income	$	22,367	$	22,451	$	49,628	$	47,897
	Weighted average shares outstanding:
	Common stock	138,011		142,079		139,463		141,558
	Number of shares used in per share computations	138,011		142,079		139,463		141,558
	Earnings per share	$	0.16	$	0.16	$	0.36	$	0.34
	Diluted net income per share:
	Net income	$	22,367	$	22,451	$	49,628	$	47,897
	Weighted average shares outstanding:
	Common stock	138,011		142,079		139,463		141,558
	Stock options, awards and employee share purchase plans	4,167		2,014		4,717		2,352
	Number of shares used in per share computations	142,178		144,093		144,180		143,910
	Earnings per share	$	0.16	$	0.16	$	0.34	$	0.33

Fair_Value_Measurements_Tables

Fair Value Measurements (Tables)	6 Months Ended
	Jun. 30, 2014
Fair Value Disclosures [Abstract]	'
Assets and Liabilities Measured at Fair Value on a Recurring Basis	'
	Assets and liabilities measured at fair value on a recurring basis are summarized by level below. As of December 31, 2013 and June 30, 2014, we did not hold any financial instruments categorized as Level 2 or Level 3. Our Level 1 assets and liabilities are valued using quoted market prices.
	(In thousands)		December 31, 2013		June 30, 2014
	Level 1:
	Assets:
	Money market funds (1)		$	102,380	$	110,544
	Rabbi trust (2)		835		1,037
	Total		$	103,215	$	111,581
	Liabilities:
	Deferred compensation (3)		$	540	$	742
	Total		$	540	$	742
	-1	Money market funds are classified in cash and cash equivalents.
	-2	Investments in marketable securities held in a Rabbi Trust associated with a non-qualified deferred compensation plan are classified in other non-current assets.
	-3	Obligations to pay benefits under a non-qualified deferred compensation plan are classified in other non-current liabilities.

Property_and_Equipment_net_Tab

Property and Equipment, net (Tables)	6 Months Ended
	Jun. 30, 2014
Property, Plant and Equipment [Abstract]	'
Property and Equipment	'
	Property and equipment consisted of:
	(Dollar amounts in thousands)	Estimated Useful Lives				December 31,			June 30,
						2013			2014
	Computers, software and equipment	1	-	5	years	$	1,488,106		$	1,652,351
	Furniture and fixtures	7	years			55,681			56,770
	Buildings and leasehold improvements	2	-	30	years	236,255			250,096
	Land					28,566			29,052
	Property and equipment, at cost					1,808,608			1,988,269
	Less accumulated depreciation and amortization					(983,618		)	(1,125,135		)
	Work in process					65,786			109,696
	Property and equipment, net					$	890,776		$	972,830

ShareBased_Compensation_Tables

Share-Based Compensation (Tables)	6 Months Ended
	Jun. 30, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]	'
Composition of equity awards outstanding	'
	The composition of the equity awards outstanding as of December 31, 2013 and June 30, 2014 was as follows:
		December 31,		June 30,
		2013		2014
	Restricted stock	3,538,271		3,191,667
	Stock options	9,487,570		7,968,466
	Total outstanding awards	13,025,841		11,160,133
Allocation of share-based compensation expense to income statement line items	'
	Share-based compensation expense was recognized as follows:
		Three Months Ended June 30,						Six Months Ended June 30,
	(in thousands)	2013			2014			2013			2014
	Cost of revenue	$	2,735		$	4,127		$	5,254		$	7,918
	Research and development	1,813			3,293			3,341			6,073
	Sales and marketing	1,744			2,062			3,402			4,153
	General and administrative	7,023			7,783			13,501			11,853
	Pre-tax share-based compensation	13,315			17,265			25,498			29,997
	Less: Income tax benefit	(4,633		)	(5,756		)	(8,922		)	(10,158		)
	Total share-based compensation expense, net of tax	$	8,682		$	11,509		$	16,576		$	19,839
	We have made certain reclassifications to the prior period amounts above in order to conform to the current period's presentation. Refer to Note 1, "Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies," for more information about these reclassifications.

Company_Overview_Basis_of_Pres2

Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Foreign Currency	'	'	'	'
Income tax expense allocated to foreign currency translation adjustments	$0	$0	$0	$0
As Adjusted	'	'	'	'
Research and development	29,711,000	23,216,000	54,903,000	41,591,000
General and administrative	81,424,000	72,840,000	152,574,000	140,317,000
Research and development	'	'	'	'
Reclassification Adjustments to Prior Periods	'	'	'	'
Reclassification Amount	'	-3,560,000	'	-7,958,000
General and administrative	'	'	'	'
Reclassification Adjustments to Prior Periods	'	'	'	'
Reclassification Amount	'	$3,560,000	'	$7,958,000

Earnings_Per_Share_Details

Earnings Per Share (Details) (USD $)	3 Months Ended		6 Months Ended
In Thousands, except Share data, unless otherwise specified	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Basic net income per share:	'	'	'	'
Net income	$22,451	$22,367	$47,897	$49,628
Weighted average shares outstanding:	'	'	'	'
Common stock	142,079,000	138,011,000	141,558,000	139,463,000
Number of shares used in per share computations	142,079,000	138,011,000	141,558,000	139,463,000
Earnings per share	$0.16	$0.16	$0.34	$0.36
Diluted net income per share:	'	'	'	'
Net income	$22,451	$22,367	$47,897	$49,628
Weighted average shares outstanding:	'	'	'	'
Common stock	142,079,000	138,011,000	141,558,000	139,463,000
Stock options, awards and employee share purchase plans	2,014,000	4,167,000	2,352,000	4,717,000
Number of shares used in per share computations	144,093,000	142,178,000	143,910,000	144,180,000
Earnings per share	$0.16	$0.16	$0.33	$0.34
Number of potential common shares excluded from the computation of dilutive earnings per share because the effect would have been anti-dilutive	7,200,000	4,300,000	7,100,000	2,800,000

Fair_Value_Measurements_Detail

Fair Value Measurements (Details) (Recurring Basis, Level 1, USD $)	Jun. 30, 2014	Dec. 31, 2013
In Thousands, unless otherwise specified
Recurring Basis | Level 1	'	'
Assets:	'	'
Money market funds	$110,544	$102,380	[1]
Rabbi trust	1,037	835	[2]
Total	111,581	103,215
Liabilities:	'	'
Deferred compensation	742	540	[3]
Total	$742	$540
[1]	Money market funds are classified in cash and cash equivalents.
[2]	Investments in marketable securities held in a Rabbi Trust associated with a non-qualified deferred compensation plan are classified in other non-current assets.
[3]	Obligations to pay benefits under a non-qualified deferred compensation plan are classified in other non-current liabilities.

Property_and_Equipment_net_Det

Property and Equipment, net (Details) (USD $)	6 Months Ended
In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Property and equipment, net	'	'
Property and equipment, at cost	$1,988,269	$1,808,608
Less accumulated depreciation and amortization	-1,125,135	-983,618
Work in process	109,696	65,786
Property and equipment, net	972,830	890,776
Computers, software and equipment	'	'
Property and equipment, net	'	'
Property and equipment, at cost	1,652,351	1,488,106
Computers, software and equipment | Minimum	'	'
Property and equipment, net	'	'
Estimated useful lives	'1 year	'
Computers, software and equipment | Maximum	'	'
Property and equipment, net	'	'
Estimated useful lives	'5 years	'
Furniture and fixtures	'	'
Property and equipment, net	'	'
Estimated useful lives	'7 years	'
Property and equipment, at cost	56,770	55,681
Buildings and leasehold improvements	'	'
Property and equipment, net	'	'
Property and equipment, at cost	250,096	236,255
Buildings and leasehold improvements | Minimum	'	'
Property and equipment, net	'	'
Estimated useful lives	'2 years	'
Buildings and leasehold improvements | Maximum	'	'
Property and equipment, net	'	'
Estimated useful lives	'30 years	'
Land	'	'
Property and equipment, net	'	'
Property and equipment, at cost	29,052	28,566
Office facility build outs	'	'
Property and equipment, net	'	'
Work in process	46,300	32,600
Data center build outs	'	'
Property and equipment, net	'	'
Work in process	24,500	2,400
Capitalized software and other projects	'	'
Property and equipment, net	'	'
Work in process	$38,900	$30,700

Contingencies_Details

Contingencies (Details) (Plaintiff - Benjamin E. Rodriguez, Settled Litigation)	6 Months Ended
	Jun. 30, 2014
Plaintiff - Benjamin E. Rodriguez | Settled Litigation	'
Legal Proceedings	'
Lawsuit Filing Date	'October 22, 2008
Name of Plaintiff	'Benjamin E. Rodriguez D/B/A Management and Business Advisors
Name of Defendant	'Rackspace Hosting, Inc. and Graham Weston
Domicile of Litigation	'37th District Court in Bexar County Texas
Allegations	'breach of an oral agreement to issue Mr. Rodriguez a 1% interest in our stock in the form of options or warrants for compensation for services he was engaged to perform for us
Settlement Date	'February 19, 2014

ShareBased_Compensation_Detail

Share-Based Compensation (Details 1) - General

Jun. 30, 2014

Dec. 31, 2013

Jun. 30, 2014

Jun. 30, 2014

Jun. 30, 2014

Jun. 30, 2014

Jun. 30, 2014

Jun. 30, 2014

Jun. 30, 2014

Jun. 30, 2014

Jun. 30, 2014

Jun. 30, 2014

Stock Options

Stock Options

Stock Options

Stock Options

Restricted Stock

Restricted Stock

Restricted Stock

Employee Stock Purchase Plan

Employee Stock Purchase Plan

Employee Stock Purchase Plan

Minimum

Maximum

Grant Date

Certain key executives

Certain key executives

Maximum

Enrollment Date

Purchase Date

Minimum

Minimum

Maximum

Maximum

Maximum

Share-Based Compensation

'

'

'

'

'

'

'

'

'

'

'

'

Purchase price of common stock, as a percentage of market value

'

'

'

'

'

100.00%

'

'

'

'

85.00%

85.00%

Award vesting period

'

'

'4 years

'

'

'

'4 years

'1 year

'3 years

'

'

'

Award expiration period

'

'

'

'7 years

'10 years

'

'

'

'

'

'

'

Expected term of award

'

'

'

'

'

'

'

'

'

'24 months

'

'

Restricted stock

3,191,667

3,538,271

'

'

'

'

'

'

'

'

'

'

Stock options

7,968,466

9,487,570

'

'

'

'

'

'

'

'

'

'

Total outstanding awards

11,160,133

13,025,841

'

'

'

'

'

'

'

'

'

'

ShareBased_Compensation_Detail1

Share-Based Compensation (Details 2) - Share-Based Compensation Expense (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Allocation of share-based compensation expense to income statement line items	'	'	'	'
Pre-tax share-based compensation	$17,265,000	$13,315,000	$29,997,000	$25,498,000
Less: Income tax benefit	-5,756,000	-4,633,000	-10,158,000	-8,922,000
Total share-based compensation expense, net of tax	11,509,000	8,682,000	19,839,000	16,576,000
Share-Based Compensation Expense, Aggregate Disclosures	'	'	'	'
Total unrecognized compensation cost related to restricted stock, stock options and the ESPP ($)	171,600,000	'	171,600,000	'
Remaining weighted-average period over which the unrecognized compensation cost related to restricted stock, options and the ESPP will be amortized on a straight line basis	'	'	'2 years 6 months	'
Cost of revenue	'	'	'	'
Allocation of share-based compensation expense to income statement line items	'	'	'	'
Pre-tax share-based compensation	4,127,000	2,735,000	7,918,000	5,254,000
Research and development	'	'	'	'
Allocation of share-based compensation expense to income statement line items	'	'	'	'
Pre-tax share-based compensation	3,293,000	1,813,000	6,073,000	3,341,000
Sales and marketing	'	'	'	'
Allocation of share-based compensation expense to income statement line items	'	'	'	'
Pre-tax share-based compensation	2,062,000	1,744,000	4,153,000	3,402,000
General and administrative	'	'	'	'
Allocation of share-based compensation expense to income statement line items	'	'	'	'
Pre-tax share-based compensation	$7,783,000	$7,023,000	$11,853,000	$13,501,000