SAN ANTONIO, Texas ( TheStreet) -- Hosting specialist Rackspace ( RAX) surpassed Wall Street's third-quarter sales estimate after market close on Monday, although the company's shares were down in extended trading.

Rackspace shares dipped 30 cents, or 1.14%, to $25.94 after market close, despite a strong quarter from the managed hosting firm.

One of TheStreet's top Web stocks, Rackspace brought in revenue of $199.7 million, up 23% from the same period last year, and comfortably above analysts' forecast of $197.56 million. Excluding items, Rackspace earned 9 cents a share, up from 6 cents a share in the prior year's quarter, and in line with Wall Street's estimate.

Managed hosting and cloud services helped boost Rackspace's numbers. The company's third-quarter managed hosting revenue was $172.9 million, up from $164.1 million in the year-ago quarter, while cloud revenue increased from $23.2 million to $26.8 million. The company's total server count also increased, from 61,874 at the end of the prior quarter, to 63,996.

Rackspace is also bolstering its customer list, which grew from 108,023 at the end of the second quarter to 118,732.

"Our efforts to improve the business model are working," explained Lanham Napier, the Rackspace CEO, in a statement released after market close. "We have been making investments to enhance the capital efficiency of our business, and we are beginning to see the early returns on those investments now."

--Written by James Rogers in New York.

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