Rackspace Hosting (RAX) 10-Q 10 Nov 14 2014 Q3 Quarterly report Financial data

Document_and_Entity_Informatio

Document and Entity Information	9 Months Ended
	Sep. 30, 2014	Nov. 06, 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-Sep-14	'
Document Fiscal Year Focus	'2014	'
Document Fiscal Period Focus	'Q3	'
Amendment Flag	'false	'
Entity Common Stock, Shares Outstanding	'	143,554,418

Condensed_Consolidated_Balance

Condensed Consolidated Balance Sheets (USD $)	Sep. 30, 2014	Dec. 31, 2013
In Thousands, unless otherwise specified
Current assets:	'	'
Cash and cash equivalents	$349,480	$259,733
Accounts receivable, net of allowance for doubtful accounts and customer credits of $3,891 as of December 31, 2013 and $4,650 as of September 30, 2014	134,555	123,898
Deferred income taxes	11,061	12,637
Prepaid expenses	42,349	30,782
Other current assets	16,509	11,918
Total current assets	553,954	438,968
Property and equipment, net	1,014,168	890,776
Goodwill	81,084	81,084
Intangible assets, net	18,241	23,880
Other non-current assets	57,095	57,089
Total assets	1,724,542	1,491,797
Current liabilities:	'	'
Accounts payable and accrued expenses	139,501	122,047
Accrued compensation and benefits	80,580	62,459
Income and other taxes payable	24,316	11,388
Current portion of deferred revenue	19,562	22,868
Current portion of capital lease obligations	20,144	37,885
Current portion of debt	160	1,861
Total current liabilities	284,263	258,508
Non-current liabilities:	'	'
Deferred revenue	1,875	3,662
Capital lease obligations	11,168	25,048
Finance lease obligations for assets under construction	67,046	0
Debt	0	124
Deferred income taxes	47,924	69,729
Deferred rent	49,233	43,046
Other liabilities	39,261	36,268
Total liabilities	500,770	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; 143,547,558 shares issued and outstanding as of September 30, 2014	144	141
Additional paid-in capital	736,208	636,660
Accumulated other comprehensive loss	-9,364	-4,536
Retained earnings	496,784	423,147
Total stockholders’ equity	1,223,772	1,055,412
Total liabilities and stockholders' equity	$1,724,542	$1,491,797

Condensed_Consolidated_Balance1

Condensed Consolidated Balance Sheets (Parentheticals) (USD $)	Sep. 30, 2014	Dec. 31, 2013
In Thousands, except Share data, unless otherwise specified
Current assets:	'	'
Allowance for doubtful accounts and customer credits	$4,650	$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	143,547,558	141,123,904
Common stock, shares outstanding	143,547,558	141,123,904

Condensed_Consolidated_Stateme

Condensed Consolidated Statements of Comprehensive Income (USD $)	3 Months Ended		9 Months Ended
In Thousands, except Per Share data, unless otherwise specified	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Net revenue	$459,776	$388,636	$1,321,935	$1,126,683
Costs and expenses:	'	'	'	'
Cost of revenue	142,954	127,404	428,422	358,672
Research and development	30,718	23,773	85,621	65,364
Sales and marketing	60,582	50,869	178,421	152,952
General and administrative	86,702	78,075	239,276	218,392
Depreciation and amortization	98,307	80,753	276,671	225,324
Total costs and expenses	419,263	360,874	1,208,411	1,020,704
Income from operations	40,513	27,762	113,524	105,979
Other income (expense):	'	'	'	'
Interest expense	-445	-689	-1,469	-2,462
Interest and other income (expense)	-2,191	440	-1,755	336
Total other income (expense)	-2,636	-249	-3,224	-2,126
Income before income taxes	37,877	27,513	110,300	103,853
Income taxes	12,137	11,202	36,663	37,914
Net income	25,740	16,311	73,637	65,939
Other comprehensive income, net of tax	'	'	'	'
Foreign currency translation adjustments	-13,265	11,893	-4,828	-36
Other comprehensive income (loss)	-13,265	11,893	-4,828	-36
Comprehensive income	$12,475	$28,204	$68,809	$65,903
Net income per share	'	'	'	'
Basic	$0.18	$0.12	$0.52	$0.48
Diluted	$0.18	$0.11	$0.51	$0.46
Weighted average number of shares outstanding	'	'	'	'
Basic	142,978	138,714	142,036	138,140
Diluted	144,895	143,543	144,310	142,699

Condensed_Consolidated_Stateme1

Condensed Consolidated Statements of Cash Flows (USD $)	9 Months Ended
In Thousands, unless otherwise specified	Sep. 30, 2014	Sep. 30, 2013
Cash Flows From Operating Activities	'	'
Net income	$73,637	$65,939
Adjustments to reconcile net income to net cash provided by operating activities:	'	'
Depreciation and amortization	276,671	225,324
Loss on disposal of equipment, net	159	892
Provision for bad debts and customer credits	4,323	3,843
Deferred income taxes	-30,140	10,305
Deferred rent	6,297	9,285
Share-based compensation expense	49,839	42,457
Excess tax benefits from share-based compensation arrangements	-45,311	-17,383
Changes in certain assets and liabilities:	'	'
Accounts receivable	-15,729	-24,129
Prepaid expenses and other current assets	-17,199	-18,560
Accounts payable and accrued expenses	93,882	26,948
Deferred revenue	-4,952	1,191
All other operating activities	147	8,430
Net cash provided by operating activities	391,624	334,542
Cash Flows From Investing Activities	'	'
Purchases of property and equipment	-323,126	-325,873
Acquisitions, net of cash acquired	0	-6,203
All other investing activities	1,945	-1,808
Net cash used in investing activities	-321,181	-333,884
Cash Flows From Financing Activities	'	'
Principal payments of capital leases	-32,502	-51,208
Principal payments of notes payable	-1,866	-1,863
Payments for deferred acquisition obligations	-168	-1,296
Receipt of Texas Enterprise Fund grant	5,500	0
Common shares withheld for employee withholding taxes	-13,620	0
Proceeds from employee stock plans	18,021	14,846
Excess tax benefits from share-based compensation arrangements	45,311	17,383
Net cash provided by (used in) financing activities	20,676	-22,138
Effect of exchange rate changes on cash and cash equivalents	-1,372	-586
Increase (decrease) in cash and cash equivalents	89,747	-22,066
Cash and cash equivalents, beginning of period	259,733	292,061
Cash and cash equivalents, end of period	$349,480	$269,995

Supplemental_Cash_Flow_Informa

Supplemental Cash Flow Information (USD $)	9 Months Ended
In Thousands, unless otherwise specified	Sep. 30, 2014	Sep. 30, 2013
Non-Cash Purchases of Property and Equipment	'	'
Non-cash purchases of property and equipment	$7,384	$23,609
Cash payments for interest, net of amount capitalized	1,399	2,599
Cash payments for income taxes	7,144	12,674
Shares issued in business combinations	0	4,457
Additional finance lease obligations for assets under construction and other	70,787	0
Acquisition of property and equipment by capital leases	'	'
Non-Cash Purchases 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 Purchases of Property and Equipment	'	'
Non-cash purchases of property and equipment	$6,455	$23,194

Company_Overview_Basis_of_Pres

Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies	9 Months Ended
	Sep. 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, Inc. 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 nine months ended September 30, 2013 or 2014.
	Basis of Presentation
	The accompanying consolidated financial statements as of September 30, 2014, and for the three and nine months ended September 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 September 30, 2014, our results of operations for the three and nine months ended September 30, 2013 and 2014, and our cash flows for the nine months ended September 30, 2013 and 2014.
	The results of operations for the three and nine months ended September 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.
	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 ("FASB") 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.
	In April 2014, the FASB issued guidance to revise the definition of discontinued operations by limiting discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on an entity's operations and financial results. This guidance also requires expanded disclosures for discontinued operations and adds new disclosures for individually significant dispositions that do not qualify as discontinued operations. This guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2014. The impact of the adoption of this guidance will be dependent on the nature of dispositions, if any, occurring after adoption.
	In August 2014, the FASB issued guidance that will require management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern and provide related footnote disclosures in certain circumstances. This guidance is effective for the annual period ending after December 15, 2016 and for annual and interim periods thereafter with early adoption permitted. We do not expect the adoption of this guidance to have an impact on our consolidated financial statements.

Net_Income_Per_Share

Net Income Per Share	9 Months Ended
	Sep. 30, 2014
Earnings Per Share [Abstract]	'
Net Income Per Share	'
	Net Income Per Share
	The following table sets forth the computation of basic and diluted net income per share:
		Three Months Ended September 30,				Nine Months Ended September 30,
	(In thousands, except per share data)	2013		2014		2013		2014
	Basic net income per share:
	Net income	$	16,311	$	25,740	$	65,939	$	73,637
	Weighted average shares outstanding:
	Common stock	138,714		142,978		138,140		142,036
	Number of shares used in per share computations	138,714		142,978		138,140		142,036
	Net income per share	$	0.12	$	0.18	$	0.48	$	0.52
	Diluted net income per share:
	Net income	$	16,311	$	25,740	$	65,939	$	73,637
	Weighted average shares outstanding:
	Common stock	138,714		142,978		138,140		142,036
	Stock options, awards and employee share purchase plans	4,829		1,917		4,559		2,274
	Number of shares used in per share computations	143,543		144,895		142,699		144,310
	Net income per share	$	0.11	$	0.18	$	0.46	$	0.51
	We excluded 3.9 million and 5.8 million potential common shares from the computation of dilutive net income per share for the three months ended September 30, 2013 and 2014, respectively, and 2.8 million and 5.6 million potential shares for the nine months ended September 30, 2013 and 2014, respectively, because the effect would have been anti-dilutive.

Fair_Value_Measurements

Fair Value Measurements	9 Months Ended
	Sep. 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 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 September 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		September 30, 2014
	Level 1:
	Assets:
	Money market funds (1)		$	102,380	$	90,553
	Rabbi trust (2)		835		1,123
	Total		$	103,215	$	91,676
	Liabilities:
	Deferred compensation (3)		$	540	$	829
	Total		$	540	$	829
	-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 nine months ended September 30, 2013 and September 30, 2014, we recognized minimal net gains and losses as interest and other income (expense).

Property_and_Equipment_net

Property and Equipment, net	9 Months Ended
	Sep. 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,			September 30,
						2013			2014
	Computers, software and equipment	1	-	5	years	$	1,488,106		$	1,743,301
	Furniture and fixtures	7	years			55,681			56,529
	Buildings and leasehold improvements	2	-	30	years	236,255			258,636
	Land					28,566			28,436
	Property and equipment, at cost					1,808,608			2,086,902
	Less accumulated depreciation and amortization					(983,618		)	(1,186,882		)
	Work in process					65,786			114,148
	Property and equipment, net					$	890,776		$	1,014,168
	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 September 30, 2014, the work in process balance consisted of build outs of $38.6 million for office facilities, $52.7 million for data centers, and $22.9 million for capitalized software and other projects.

Leases

Leases	9 Months Ended
	Sep. 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 developers legally own the real estate projects and must finance the overall construction, we agreed to fund certain structural improvements and/or retain 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 are considered “continuing involvement” which precludes derecognizing the asset and liability 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, the asset would be depreciated and rental payments under the lease would be recorded as a reduction of the capital lease liability and interest expense.
	During the first quarter of 2014, construction of one of these real estate projects was 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.
	As of December 31, 2013 and September 30, 2014 we had $0 and $67.0 million, respectively, of finance lease obligations for assets under construction recorded on our consolidated balance sheets related to real estate projects for which we are deemed the accounting owner during the construction period, with the corresponding construction costs in progress included in work in process within property and equipment, net.

Contingencies

Contingencies	9 Months Ended
	Sep. 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.
	We record to cost of revenue state sales taxes related to software licenses acquired to provide hosting services to customers. We also remit state sales taxes collected from our customers for hosting services invoiced to our customers, with such services including the use of the aforementioned software licenses. During the three months ended September 30, 2014, we recorded a $7 million benefit to cost of revenue for settlement of a dispute related to sales taxes paid on such software licenses for the period September 2007 through April 2014.

ShareBased_Compensation

Share-Based Compensation	9 Months Ended
	Sep. 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 based on predetermined market and/or performance conditions.
	The composition of the equity awards outstanding as of December 31, 2013 and September 30, 2014 was as follows:
		December 31,		September 30,
		2013		2014
	Restricted stock	3,538,271		4,252,132
	Stock options	9,487,570		7,499,819
	Total outstanding awards	13,025,841		11,751,951
	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 September 30,						Nine Months Ended September 30,
	(in thousands)	2013			2014			2013			2014
	Cost of revenue	$	3,453		$	4,175		$	8,707		$	12,093
	Research and development	2,306			3,399			5,647			9,472
	Sales and marketing	2,149			2,637			5,551			6,790
	General and administrative	9,051			9,631			22,552			21,484
	Pre-tax share-based compensation	16,959			19,842			42,457			49,839
	Less: Income tax benefit	(6,578		)	(6,408		)	(15,500		)	(16,566		)
	Total share-based compensation expense, net of tax	$	10,381		$	13,434		$	26,957		$	33,273
	As of September 30, 2014, there was $193.2 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	9 Months Ended
	Sep. 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.

Subsequent_Event

Subsequent Event	9 Months Ended
	Sep. 30, 2014
Subsequent Events [Abstract]	'
Subsequent Event	'
	Subsequent Event
	On November 6, 2014, the Company's Board of Directors authorized the repurchase of up to $500.0 million of our common stock over the next two years.

Summary_of_Significant_Account

Summary of Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 2014
Accounting Policies [Abstract]	'
Basis of Consolidation	'
	The accompanying consolidated financial statements include the accounts of Rackspace Hosting, Inc. 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	'
	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 September 30, 2014, and for the three and nine months ended September 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 September 30, 2014, our results of operations for the three and nine months ended September 30, 2013 and 2014, and our cash flows for the nine months ended September 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 ("FASB") 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.
	In April 2014, the FASB issued guidance to revise the definition of discontinued operations by limiting discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on an entity's operations and financial results. This guidance also requires expanded disclosures for discontinued operations and adds new disclosures for individually significant dispositions that do not qualify as discontinued operations. This guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2014. The impact of the adoption of this guidance will be dependent on the nature of dispositions, if any, occurring after adoption.
	In August 2014, the FASB issued guidance that will require management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern and provide related footnote disclosures in certain circumstances. This guidance is effective for the annual period ending after December 15, 2016 and for annual and interim periods thereafter with early adoption permitted. We do not expect the adoption of this guidance to have an impact on our consolidated financial statements.
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 developers legally own the real estate projects and must finance the overall construction, we agreed to fund certain structural improvements and/or retain 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 are considered “continuing involvement” which precludes derecognizing the asset and liability 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, the asset would be depreciated and rental payments under the lease would be recorded as a reduction of the capital lease liability and interest expense.
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.
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 based on predetermined market and/or performance conditions.

Net_Income_Per_Share_Tables

Net Income Per Share (Tables)	9 Months Ended
	Sep. 30, 2014
Earnings Per Share [Abstract]	'
Computation of Basic and Diluted Net Income Per Share	'
	The following table sets forth the computation of basic and diluted net income per share:
		Three Months Ended September 30,				Nine Months Ended September 30,
	(In thousands, except per share data)	2013		2014		2013		2014
	Basic net income per share:
	Net income	$	16,311	$	25,740	$	65,939	$	73,637
	Weighted average shares outstanding:
	Common stock	138,714		142,978		138,140		142,036
	Number of shares used in per share computations	138,714		142,978		138,140		142,036
	Net income per share	$	0.12	$	0.18	$	0.48	$	0.52
	Diluted net income per share:
	Net income	$	16,311	$	25,740	$	65,939	$	73,637
	Weighted average shares outstanding:
	Common stock	138,714		142,978		138,140		142,036
	Stock options, awards and employee share purchase plans	4,829		1,917		4,559		2,274
	Number of shares used in per share computations	143,543		144,895		142,699		144,310
	Net income per share	$	0.11	$	0.18	$	0.46	$	0.51

Fair_Value_Measurements_Tables

Fair Value Measurements (Tables)	9 Months Ended
	Sep. 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 September 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		September 30, 2014
	Level 1:
	Assets:
	Money market funds (1)		$	102,380	$	90,553
	Rabbi trust (2)		835		1,123
	Total		$	103,215	$	91,676
	Liabilities:
	Deferred compensation (3)		$	540	$	829
	Total		$	540	$	829
	-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)	9 Months Ended
	Sep. 30, 2014
Property, Plant and Equipment [Abstract]	'
Property and Equipment	'
	Property and equipment consisted of:
	(Dollar amounts in thousands)	Estimated Useful Lives				December 31,			September 30,
						2013			2014
	Computers, software and equipment	1	-	5	years	$	1,488,106		$	1,743,301
	Furniture and fixtures	7	years			55,681			56,529
	Buildings and leasehold improvements	2	-	30	years	236,255			258,636
	Land					28,566			28,436
	Property and equipment, at cost					1,808,608			2,086,902
	Less accumulated depreciation and amortization					(983,618		)	(1,186,882		)
	Work in process					65,786			114,148
	Property and equipment, net					$	890,776		$	1,014,168

ShareBased_Compensation_Tables

Share-Based Compensation (Tables)	9 Months Ended
	Sep. 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 September 30, 2014 was as follows:
		December 31,		September 30,
		2013		2014
	Restricted stock	3,538,271		4,252,132
	Stock options	9,487,570		7,499,819
	Total outstanding awards	13,025,841		11,751,951
Allocation of share-based compensation expense to income statement line items	'
	Share-based compensation expense was recognized as follows:
		Three Months Ended September 30,						Nine Months Ended September 30,
	(in thousands)	2013			2014			2013			2014
	Cost of revenue	$	3,453		$	4,175		$	8,707		$	12,093
	Research and development	2,306			3,399			5,647			9,472
	Sales and marketing	2,149			2,637			5,551			6,790
	General and administrative	9,051			9,631			22,552			21,484
	Pre-tax share-based compensation	16,959			19,842			42,457			49,839
	Less: Income tax benefit	(6,578		)	(6,408		)	(15,500		)	(16,566		)
	Total share-based compensation expense, net of tax	$	10,381		$	13,434		$	26,957		$	33,273

Company_Overview_Basis_of_Pres1

Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Foreign Currency	'	'	'	'
Income tax expense allocated to foreign currency translation adjustments	$0	$0	$0	$0

Net_Income_Per_Share_Details

Net Income Per Share (Details) (USD $)	3 Months Ended		9 Months Ended
In Thousands, except Share data, unless otherwise specified	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Basic net income per share:	'	'	'	'
Net income	$25,740	$16,311	$73,637	$65,939
Weighted average shares outstanding:	'	'	'	'
Common stock	142,978,000	138,714,000	142,036,000	138,140,000
Number of shares used in per share computations	142,978,000	138,714,000	142,036,000	138,140,000
Net income per share	$0.18	$0.12	$0.52	$0.48
Diluted net income per share:	'	'	'	'
Net income	$25,740	$16,311	$73,637	$65,939
Weighted average shares outstanding:	'	'	'	'
Common stock	142,978,000	138,714,000	142,036,000	138,140,000
Stock options, awards and employee share purchase plans	1,917,000	4,829,000	2,274,000	4,559,000
Number of shares used in per share computations	144,895,000	143,543,000	144,310,000	142,699,000
Net income per share	$0.18	$0.11	$0.51	$0.46
Number of potential common shares excluded from the computation of dilutive net income per share because the effect would have been anti-dilutive	5,800,000	3,900,000	5,600,000	2,800,000

Fair_Value_Measurements_Detail

Fair Value Measurements (Details) (Recurring Basis, Level 1, USD $)	Sep. 30, 2014	Dec. 31, 2013
In Thousands, unless otherwise specified
Recurring Basis | Level 1	'	'
Assets:	'	'
Money market funds	$90,553	$102,380	[1]
Rabbi trust	1,123	835	[2]
Total	91,676	103,215
Liabilities:	'	'
Deferred compensation	829	540	[3]
Total	$829	$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 $)	9 Months Ended
In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Property and equipment, net	'	'
Property and equipment, at cost	$2,086,902	$1,808,608
Less accumulated depreciation and amortization	-1,186,882	-983,618
Work in process	114,148	65,786
Property and equipment, net	1,014,168	890,776
Computers, software and equipment	'	'
Property and equipment, net	'	'
Property and equipment, at cost	1,743,301	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	56,529	55,681
Buildings and leasehold improvements	'	'
Property and equipment, net	'	'
Property and equipment, at cost	258,636	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	28,436	28,566
Office facility build outs	'	'
Property and equipment, net	'	'
Work in process	38,600	32,600
Data center build outs	'	'
Property and equipment, net	'	'
Work in process	52,700	2,400
Capitalized software and other projects	'	'
Property and equipment, net	'	'
Work in process	$22,900	$30,700

Leases_Details

Leases (Details) (USD $)	Sep. 30, 2014	Dec. 31, 2013
In Thousands, unless otherwise specified
Leases [Abstract]	'	'
Finance lease obligations for assets under construction	$67,046	$0

Contingencies_Details

Contingencies (Details) (USD $)	3 Months Ended	9 Months Ended
In Millions, unless otherwise specified	Sep. 30, 2014	Sep. 30, 2014
	Settlement of Dispute Related to Sales Taxes Paid	Plaintiff - Benjamin E. Rodriguez
	Cost of revenue	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
Gain (Loss) Related to Resolution of Loss Contingency	$7	'

ShareBased_Compensation_Detail

Share-Based Compensation (Details 1) - General

Sep. 30, 2014

Dec. 31, 2013

Sep. 30, 2014

Sep. 30, 2014

Sep. 30, 2014

Sep. 30, 2014

Sep. 30, 2014

Sep. 30, 2014

Sep. 30, 2014

Sep. 30, 2014

Sep. 30, 2014

Sep. 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

4,252,132

3,538,271

'

'

'

'

'

'

'

'

'

'

Stock options

7,499,819

9,487,570

'

'

'

'

'

'

'

'

'

'

Total outstanding awards

11,751,951

13,025,841

'

'

'

'

'

'

'

'

'

'

ShareBased_Compensation_Detail1

Share-Based Compensation (Details 2) - Share-Based Compensation Expense (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Allocation of share-based compensation expense to income statement line items	'	'	'	'
Pre-tax share-based compensation	$19,842,000	$16,959,000	$49,839,000	$42,457,000
Less: Income tax benefit	-6,408,000	-6,578,000	-16,566,000	-15,500,000
Total share-based compensation expense, net of tax	13,434,000	10,381,000	33,273,000	26,957,000
Share-Based Compensation Expense, Aggregate Disclosures	'	'	'	'
Total unrecognized compensation cost related to restricted stock, stock options and the ESPP ($)	193,200,000	'	193,200,000	'
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	4,175,000	3,453,000	12,093,000	8,707,000
Research and development	'	'	'	'
Allocation of share-based compensation expense to income statement line items	'	'	'	'
Pre-tax share-based compensation	3,399,000	2,306,000	9,472,000	5,647,000
Sales and marketing	'	'	'	'
Allocation of share-based compensation expense to income statement line items	'	'	'	'
Pre-tax share-based compensation	2,637,000	2,149,000	6,790,000	5,551,000
General and administrative	'	'	'	'
Allocation of share-based compensation expense to income statement line items	'	'	'	'
Pre-tax share-based compensation	$9,631,000	$9,051,000	$21,484,000	$22,552,000

Subsequent_Event_Details

Subsequent Event (Details) (Subsequent Event, Common Stock, USD $)	0 Months Ended
In Millions, unless otherwise specified	Nov. 06, 2014
Subsequent Event	'
Stock Repurchase Program, Period in Force	'2 years
Maximum	'
Subsequent Event	'
Stock Repurchase Program, Authorized Amount	500