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Rackspace Technology
(NASDAQ:RXT)
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Rating:48Neutral
Price Target:
$4.50
▲(14.21% Upside)
Action:Reiterated
Date:08/11/26
The score is held down primarily by weak financial fundamentals—ongoing losses and a highly stressed balance sheet with negative equity and substantial debt—despite positive (but recently weaker) cash generation. The earnings call adds modest support due to an AI-driven strategic pivot and expected full-year positive free cash flow, but near-term revenue decline guidance, margin pressure, and execution/financing risk temper confidence. Technicals are mixed and valuation is not supportive given the company is still unprofitable and offers no dividend yield in the provided data.
Positive Factors
Recurring managed services revenue
A large, recurring managed-services base provides durable revenue predictability and customer lock‑in through long‑term operations, supporting steady cash flow and higher lifetime value. This model favors cross‑sell of higher‑margin services and cushions the business versus project cyclicality.
Negative Factors
Highly stressed balance sheet and leverage
Negative equity and multi‑billion dollar debt create refinancing and solvency sensitivity, limiting strategic flexibility. Elevated leverage increases interest and covenant risk, constrains capacity to fund capex organically, and magnifies execution risk for multi‑year AI investments.
Read all positive and negative factors
Positive Factors
Negative Factors
Recurring managed services revenue
A large, recurring managed-services base provides durable revenue predictability and customer lock‑in through long‑term operations, supporting steady cash flow and higher lifetime value. This model favors cross‑sell of higher‑margin services and cushions the business versus project cyclicality.
Read all positive factors
Rackspace Technology (RXT) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$1.07B
Dividend YieldN/A
Average Volume (3M)20.01M
Price to Earnings (P/E)―
Beta (1Y)3.72
Revenue Growth0.34%
EPS Growth60.08%
CountryUS
Employees5,000
SectorTechnology
Sector Strength88
IndustrySoftware - Infrastructure
Share Statistics
EPS (TTM)-0.65
Shares Outstanding254,872,850
10 Day Avg. Volume11,704,590
30 Day Avg. Volume20,007,882
Financial Highlights & Ratios
PEG Ratio0.01
Price to Book (P/B)-0.19
Price to Sales (P/S)0.09
P/FCF Ratio2.56
Enterprise Value/Market Cap<0.01
Enterprise Value/Revenue<0.01
Enterprise Value/Gross Profit<0.01
Enterprise Value/Ebitda<0.01
Forecast
1Y Price Target
$4.77Price Target Upside20.98% Upside
Rating ConsensusHold
Number of Analyst Covering3
EPS Forecast (FY)-0.25
Revenue Forecast (FY)$2.50B
Rackspace Technology Business Overview & Revenue Model
Company Description
Rackspace Technology, Inc. is a global provider specializing in multi-cloud technology services. The company organizes its business into two primary divisions: Multicloud Services and Apps & Cross Platform. Through its Multicloud Services division...
How the Company Makes Money
Rackspace Technology makes money primarily by selling services that help customers adopt, run, and optimize cloud and IT environments.
1) Managed services (recurring revenue)
- A major portion of revenue is generated from ongoing managed services...
Rackspace Technology Earnings Call Summary
Earnings Call Date:Aug 11, 2026
(Q2-2026)
| % Change Since: |
Next Earnings Date:Nov 11, 2026
Earnings Call Sentiment Neutral
The call balanced tangible near-term challenges with a clear strategic pivot toward high‑margin enterprise AI and several promising milestones. Near-term metrics include modest revenue growth in Q2 (+1% YoY) but compressed gross margins (down 120 bps), negative H1 free cash flow, and a full‑year revenue decline guide (‑7% midpoint) driven by an intentional exit of low‑margin Public Cloud business (Public Cloud guide down ~13% midpoint). Offsetting these headwinds are substantive strategic positives: production launch of RackAI, a definitive AMD partnership targeting a 30 MW AI footprint with projected $450M–$600M annual revenue at scale and 50%+ AI EBITDA margins, accelerating Palantir traction, notable customer wins in regulated industries, improved adjusted EBITDA guidance (+5% at midpoint), and an expectation of positive full‑year free cash flow ($50M–$70M). Given the meaningful strategic upside but material near‑term financial headwinds and execution/financing risks, the call reflects a balanced, transitional outlook.Positive Updates
Q2 Revenue Beat and Year-over-Year Growth
Total company GAAP revenue of $670 million, up 1% year-over-year, with the beat versus expectations driven by timing in Private Cloud revenue recognition.
Negative Updates
Full-Year Revenue Decline Guidance
Full-year GAAP revenue guidance of $2.45B–$2.55B implies a midpoint decline of ~7% year-over-year, largely reflecting a strategic exit of low-margin Public Cloud revenue.
Read all updates
Q2-2026 Updates
Positive
Negative
Q2 Revenue Beat and Year-over-Year Growth
Total company GAAP revenue of $670 million, up 1% year-over-year, with the beat versus expectations driven by timing in Private Cloud revenue recognition.
Read all positive updates
Company Guidance
Rackspace reiterated full‑year 2026 guidance for GAAP revenue of $2.45B–$2.55B (≈7% decline at the midpoint), with Private Cloud revenue of $1.00B–$1.05B (+≈4% at midpoint) and Public Cloud $1.45B–$1.50B (−≈13% at midpoint); they forecast total non‑GAAP operating profit of $125M–$135M (+≈3% at midpoint), adjusted EBITDA $285M–$295M (+≈5% at midpoint), non‑GAAP loss per share $(0.25)–$(0.30), a non‑GAAP tax rate of 26%, non‑GAAP other expenses of $220M–$230M, and a non‑GAAP share count of 250M–260M (ex‑ATM). They expect full‑year free cash flow of $50M–$70M (stronger in H2); Q2 reported revenue was $670M, cash $111M, total liquidity $202M, operating cash flow −$32M and FCF −$48M. Separately, their AI infrastructure plan targets ~2 MW by end‑2026 (~$75M CapEx), 15 MW by end‑2027 and 30 MW by end‑2028, at $15M–$20M revenue/MW ($450M–$600M annual at 30 MW) and 50%+ EBITDA margins, with equipment financing expected to be asset‑backed.Rackspace Technology Financial Statement Overview
Summary
Income Statement
28
Negative
Balance Sheet
15
Very Negative
Cash Flow
47
Neutral
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 2.70B | 2.69B | 2.74B | 2.96B | 3.12B | 3.01B |
| Gross Profit | 374.10M | 359.50M | 533.40M | 648.60M | 856.90M | 936.80M |
| EBITDA | 293.10M | 288.30M | -420.50M | -149.90M | -241.70M | 446.70M |
| Net Income | -159.00M | -225.80M | -858.20M | -837.80M | -804.80M | -218.30M |
Balance Sheet | ||||||
| Total Assets | 2.75B | 2.80B | 3.05B | 4.10B | 5.46B | 6.33B |
| Cash, Cash Equivalents and Short-Term Investments | 110.60M | 105.80M | 144.00M | 196.80M | 228.40M | 272.80M |
| Total Debt | 3.30B | 3.28B | 3.28B | 3.38B | 3.85B | 3.97B |
| Total Liabilities | 4.03B | 4.02B | 4.06B | 4.25B | 4.83B | 5.00B |
| Stockholders Equity | -1.28B | -1.22B | -1.00B | -154.50M | 629.50M | 1.33B |
Cash Flow | ||||||
| Free Cash Flow | 41.00M | 90.60M | -71.20M | 278.00M | 178.90M | 262.40M |
| Operating Cash Flow | 104.00M | 151.40M | 39.90M | 374.90M | 259.30M | 370.80M |
| Investing Cash Flow | -59.70M | -58.40M | -86.60M | -96.00M | -97.90M | -69.00M |
| Financing Cash Flow | -34.70M | -134.60M | -3.00M | -312.80M | -187.00M | -132.20M |
Rackspace Technology Technical Analysis
Negative
3.94
Price Trends
5.17
Negative
4.02
Negative
2.61
Positive
Market Momentum
-0.17
Positive
41.34
Neutral
7.70
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RXT, the sentiment is Negative. The current price of 3.94 is below the 20-day moving average (MA) of 4.34, below the 50-day MA of 5.17, and above the 200-day MA of 2.61, indicating a neutral trend. The MACD of -0.17 indicates Positive momentum. The RSI at 41.34 is Neutral, neither overbought nor oversold. The STOCH value of 7.70 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for RXT.
Rackspace Technology Risk Analysis
Rackspace Technology disclosed 61 risk factors in its most recent earnings report. Rackspace Technology reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 3 New Risks
1.
The debt we have incurred or may incur to deploy AI infrastructure could adversely affect our financial condition and results of operations. Q2, 2026
2.
We depend on AMD as well as other Key Partners for our Enterprise AI business. Q2, 2026
3.
Our Enterprise AI business is capital-intensive and depends on recovering large investments in rapidly evolving GPU infrastructure, and if GPU utilization, customer demand, hardware residual values or other assumptions fall short of our expectations, our results of operations could be materially and adversely affected. Q2, 2026
Rackspace Technology Peers Comparison
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Rackspace Technology
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246.49%
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BLZE
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Rackspace Technology Corporate Events
Business Operations and StrategyFinancial DisclosuresPrivate Placements and Financing
Rackspace Launches $250M ATM to Support AI Shift
Negative
Jul 9, 2026
On July 9, 2026, Rackspace Technology entered an at-the-market equity distribution agreement with Goldman Sachs that allows the company to sell up to $250 million of common stock, while on July 2, 2026 it amended and extended its accounts receivab...
Executive/Board ChangesShareholder Meetings
Rackspace Stockholders Approve Directors, Auditor and Equity Plan
Positive
Jun 18, 2026
At its annual meeting of stockholders held on June 18, 2026, Rackspace Technology, Inc. reported that 81.89% of its outstanding common shares were represented in person or by proxy, establishing a quorum for voting. Stockholders elected Gajen Kand...
Business Operations and Strategy
Rackspace Announces Workforce Cuts to Accelerate AI Transformation
Negative
Jun 16, 2026
On June 10, 2026, Rackspace Technology’s executive committee approved a workforce realignment plan aimed at accelerating its strategic transformation into an operator for governed enterprise AI, deemphasizing legacy public cloud services and...
Business Operations and StrategyProduct-Related Announcements
Rackspace Partners with AMD to Expand AI Infrastructure
Positive
Jun 16, 2026
On June 16, 2026, Rackspace Technology and AMD announced a definitive agreement for the phased deployment of an initial 30 MW of AMD-based AI compute capacity across Rackspace’s global data centers from late 2026 through 2028, formalizing a ...
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.