RXT

Interested in Rackspace Technology, Inc.? Here are five stocks we like better. Rackspace reported Q2 revenue of $670 million, up 1% year over year, while maintaining 2026 guidance and forecasting positive full-year free cash flow of $50 million to $70 million. The company is expanding its enterprise AI infrastructure strategy, including an AMD-backed plan to deploy 30 megawatts of compute capacity by 2028. Rackspace expects the initiative to generate $450 million to $600 million in annual revenue at full capacity, with enterprise AI EBITDA margins above 50%. Private Cloud revenue rose 5% to $263 million, helped by contract-related revenue timing, while Public Cloud revenue fell 2% to $407 million. Despite the decline, Public Cloud margins improved as Rackspace shifted toward higher-value AI, data and managed-services work. Rackspace’s AI Land Grab: Plugging Into the Next Compute Boom Rackspace Technology (NASDAQ:RXT) reported second-quarter revenue of $670 million, up 1% from a year earlier, as the company outlined an expanded enterprise AI infrastructure strategy built around managed compute, inference and sovereign AI deployments. Chief Executive Officer Gajen Kandiah said the company aims to become an “accountable provider and operator of the full enterprise AI stack from core to cloud to edge,” emphasizing governance, security, sovereignty, resilience and operational accountability for enterprise customers. → SoundHound AI Sends a Loud Signal After Its Q2 Earnings Beat Palantir Just Opened a New DoD Door—What Changes Now? The company’s strategy includes a Managed Compute and Inference Platform supported by partners including AMD, Dell, Palantir and Uniphore. Rackspace said it sees demand for AI deployments that can place workloads across cloud and edge environments based on latency, cost, security and criticality requirements. Rackspace said it entered a definitive agreement with AMD to deploy an initial 30-megawatt footprint of AMD-based compute capacity across Rackspace data centers in phases from late 2026 through 2028. The planned architecture will use AMD Instinct GPUs and EPYC CPUs. → 3 Dividend Champion Utilities for a Market That Can't Sit Still The 10 Top-Rated Stocks by Wall Street Analysts in August 2021 The first deployment, expected to be nearly 2 MW, is targeted for completion by the end of 2026 and is expected to require about $75 million of capital expenditures. Rackspace’s goal is to reach cumulative capacity of 15 MW by the end of 2027 and 30 MW by the end of 2028. The company expects revenue to average $15 million to $20 million per megawatt deployed, with results varying based on CPU, GPU and customer mix. At 30 MW, that range would equate to $450 million to $600 million in annual revenue. Rackspace expects enterprise AI EBITDA margins to exceed 50%. → Take-Two’s Q1 Results Leave GTA 6 Bulls Stuck in the Fog of War Chief Financial Officer Mark Marino said Rackspace is evaluating a mix of OEM financing, equipment financing and other asset-backed credit facilities to fund a significant portion of the compute hardware investment. The anticipated financing would be collateralized by newly acquired hardware. Kandiah said early demand signals include inbound inquiries, interest from Rackspace’s enterprise customer base and sales activity from partners. He also said Rackspace has placed its initial order for AMD GPUs and CPUs and believes its existing infrastructure, power, cooling and talent provide an advantage amid long lead times for data-center projects. Rackspace also said it strengthened its relationship with Palantir, whose platforms connect AI applications with enterprise data and operational workflows while incorporating security permissions and governance. Kandiah said Rackspace’s forward-deployed engineers work in customer environments on use cases and remain accountable after implementation. During the question-and-answer session, Kandiah said the Palantir partnership has gained traction over the past four to five months. He said engagements typically begin with “bootcamp to agent camp” activities and an initial production use case, after which the company aims to scale deployments more quickly. He cited renewable energy, packaging, specialty chemicals and healthcare among industries represented in early wins. Kandiah added that customer discussions increasingly center on “institutional sovereignty,” including where models operate and how data is maintained across private and public environments. Rackspace completed the production release of RackAI, its inference and fine-tuning platform that allows customers to integrate AI into workloads and applications through an API. The company said it plans to add capabilities such as intelligent model routing and access to customized model harnesses. Private Cloud revenue totaled $263 million, up 5% year over year and above the company’s previously stated outlook of $242 million to $246 million. Marino said the result benefited from the timing of revenue recognition associated with an embedded lease in a long-term managed hosting contract, treated similarly to a hardware sale. Rackspace said the timing item pulls revenue forward from future periods, including the second half of 2026, and does not alter its full-year guidance. Private Cloud non-GAAP gross margin was 32.3%, down 460 basis points from a year earlier, reflecting the same revenue item as well as somewhat higher customer license and data-center costs. Segment non-GAAP operating margin was 21.8%, down about 280 basis points. The company highlighted several Private Cloud customer engagements, including a five-year agreement with AdventHealth to host and manage infrastructure supporting a reduced on-premises data-center footprint. The project includes the migration of roughly 366 applications, 2,300 virtual machines and 283 database servers, with disaster-recovery failover. Rackspace also signed a multiyear agreement with a U.K. banking firm to deploy and manage a cyber recovery cloud built on Rubrik, along with managed backup and managed Kubernetes services. Public Cloud revenue was $407 million, down 2% from the prior-year quarter, reflecting lower infrastructure and services revenue. The result was modestly above Rackspace’s outlook of $399 million to $403 million due to higher reported consumption from hyperscaler partners than anticipated. Public Cloud non-GAAP gross margin rose about 10 basis points to 9.7%, while segment non-GAAP operating margin increased 80 basis points to 4.7%, which Marino attributed to workforce-reduction savings and improved operating-expense efficiency. Rackspace said it is shifting Public Cloud toward higher-value, services-led work, including data and AI enterprise transformation, AI operations-driven managed services and forward-deployed engineering. New offerings launched during the quarter included partner-funded entry-point engagements focused on AWS optimization and modernization, Microsoft Copilot adoption, managed network security and data readiness. For 2026, Rackspace maintained its guidance for GAAP revenue of $2.45 billion to $2.55 billion, representing a 7% year-over-year decline at the midpoint. The company said most of the expected reduction reflects its decision to exit low-margin Public Cloud revenue over time. Private Cloud revenue is expected to be $1 billion to $1.05 billion, up 4% at the midpoint. Public Cloud revenue is expected to be $1.45 billion to $1.5 billion, down 13% at the midpoint. Non-GAAP operating profit is projected at $125 million to $135 million. Adjusted EBITDA is forecast at $285 million to $295 million. Full-year free cash flow is expected to be positive $50 million to $70 million. Second-quarter non-GAAP operating profit was $27 million, unchanged from a year earlier, while non-GAAP loss per share widened to $0.08 from $0.06. Cash flow from operations was negative $32 million and free cash flow was negative $48 million. Rackspace ended the quarter with $111 million in cash and $202 million in total liquidity. During the quarter, the company repurchased $11.2 million in aggregate principal amount of senior notes under a previously established plan. Marino said Rackspace expects free-cash-flow generation to accelerate in the second half as seasonal cash uses subside. Rackspace Technology (NASDAQ: RXT) is a leading provider of managed multi-cloud solutions and services, specializing in the deployment, management and optimization of public and private cloud environments. The company helps organizations design and operate applications across platforms such as Amazon Web Services (AWS), Microsoft Azure, Google Cloud and its own private cloud infrastructure. Rackspace's core offerings include cloud migration, application modernization, data protection, security services and 24x7x365 operational support. Beyond cloud hosting, Rackspace offers a range of professional services designed to accelerate digital transformation initiatives. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Rackspace Technology Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

This article first appeared on GuruFocus. Total Revenue: GAAP revenue was $670 million, up 1% year-over-year. Private Cloud Revenue: $263 million, up 5% year-over-year, ahead of guidance due to a timing item from a long-term customer contract. Public Cloud Revenue: $407 million, down 2% year-over-year, modestly ahead of guidance due to higher reported consumption from hyperscaler partners. Non-GAAP Gross Margin: 18.6% of GAAP revenue, down 120 basis points year-over-year. Non-GAAP Operating Profit: $27 million, flat year-over-year. Non-GAAP Loss Per Share: $0.08, compared to $0.06 in the prior year quarter. Cash Flow from Operations: Negative $32 million. Free Cash Flow: Negative $48 million. Cash and Liquidity: Ended the quarter with $111 million in cash and $202 million in total liquidity. Private Cloud Gross Margin: GAAP gross margin was 32.3%, down 460 basis points year-over-year. Private Cloud Segment Operating Margin: Non-GAAP segment operating margin was 21.8%, down approximately 280 basis points year-over-year. Public Cloud Gross Margin: Non-GAAP gross margin was 9.7%, up approximately 10 basis points year-over-year. Public Cloud Segment Operating Margin: GAAP segment operating margin was 4.7%, up 80 basis points year-over-year. Full-Year Revenue Guidance: Expected to be $2.45 billion to $2.55 billion, a decline of 7% year-over-year at the midpoint. Full-Year Private Cloud Revenue Guidance: Expected to be $1.0 billion to $1.05 billion, up 4% year-over-year at the midpoint. Full-Year Public Cloud Revenue Guidance: Expected to be $1.45 billion to $1.5 billion, down 13% year-over-year at the midpoint. Full-Year Non-GAAP Operating Profit Guidance: Expected to be $125 million to $135 million, up 3% at the midpoint. Full-Year Adjusted EBITDA Guidance: Expected to be $285 million to $295 million, up 5% at the midpoint. Full-Year Non-GAAP Loss Per Share Guidance: Expected to be $0.25 to $0.30. Full-Year Free Cash Flow Guidance: Expected to be $50 million to $70 million in positive free cash flow. Warning! GuruFocus has detected 5 Warning Signs with RXT. Is RXT fairly valued? Test your thesis with our free DCF calculator. Release Date: August 11, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Rackspace Technology Inc (NASDAQ:RXT) is strategically positioned in the growing enterprise AI inference market, with McKinsey projecting inferencing workloads to surpass training by end of 2026 and represent two-thirds of all AI workloads by 2030. The company has formed key partnerships with AMD, Palantir, and Unifor to build a managed compute and inference platform, enhancing its full-stack enterprise AI offerings. Rackspace Technology Inc (NASDAQ:RXT) plans to deploy 30 megawatts of AMD-based compute by 2028, with expected revenue of $450-600 million annually and EBITDA margins exceeding 50%. The company secured significant customer wins in regulated industries, including a five-year agreement with AdventHealth and a multi-year cyber recovery cloud deal with a top UK banking firm. Rackspace Technology Inc (NASDAQ:RXT) is expanding its public cloud portfolio with partner-funded entry point offerings, such as AWS-funded optimization assessments, which drive revenue and open doors to larger managed services relationships. The company is actively managing its capital structure, repurchasing $11.2 million in senior notes to reduce interest expense and strengthen its balance sheet. Rackspace Technology Inc (NASDAQ:RXT) reported a non-GAAP loss per share of $0.08 in Q2 2026, worse than the $0.06 loss in the prior year quarter. The company's cash flow from operations was negative $32 million and free cash flow was negative $48 million in the quarter, reflecting seasonal cash uses and strategic investments. Public cloud revenue declined 2% year-over-year to $407 million, reflecting lower infrastructure and services revenue as the company pivots away from low-margin business. Non-GAAP gross margin decreased 120 basis points year-over-year to 18.6%, driven by higher costs and the timing impact in private cloud. The company's full-year revenue guidance implies a 7% decline at the midpoint, largely due to the strategic exit of low-margin public cloud revenue. Rackspace Technology Inc (NASDAQ:RXT) faces execution risks in its AI infrastructure buildout, with the first deployment not expected until late 2026 and significant capital expenditures required. Q: Can you comment on your vision of how the Palantir partnership will evolve over time and where it will specifically add to Rackspace's growth profile over the next several years? A: Gajen Kandiah (CEO): The Palantir partnership has gained significant traction over the last four to five months, driven by enterprise customers' focus on "institutional sovereignty"where models run and where data must remain sovereign. We follow a process from boot camp to agent camp to the first production use case, allowing us to "land small and scale fast." The opportunities span industries like renewable energy, packaging, special chemicals, and healthcare. The success of this motion has led both companies to structure it as a strict, fast go-to-market strategy, which is already yielding early revenue and a strong pipeline. Q: Could you flush out some of the demand you're seeing from existing and new customers in 2027, and describe the current demand and competitive environment for regulated AI production environments? A: Gajen Kandiah (CEO): The strategy is expanding beyond our core regulated enterprise base, with partners like AMD, Palantir, and Unifor adding to our opportunities. A key emerging trend is "sovereign AI," which now extends beyond country boundaries to enterprise boundaries, requiring modularity in models, compute, and orchestration. We are seeing demand for context-aware inference that moves between models without losing context. This needs to land in a safe, secure, and governed environment. While we started in regulated industries, we believe almost all enterprises will seek a "regulated approach" for data residency and processing confidence, positioning Rackspace strongly. Q: How do you see the balance between growth investing and debt repayment evolving over the next 12 to 18 months? A: Mark Marino (CFO): This is a top priority. The GPU investment with AMD is expected to be largely financed via hardware-backed or asset-backed facilities, preserving our cash for operations. We are being judicious by optimizing and restructuring other parts of the business to free up funds for high-ROI investments, including the GPU deployment and the Palantir initiative. We will continue to drive liquidity to fund these strategic growth areas over the next few quarters. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Revenue of $670 million in the Second Quarter, up 1% Year-over-Year Private Cloud Revenue was $263 million, up 5% Year-over-Year Public Cloud Revenue was $407 million, down 2% Year-over-Year Second Quarter 2026 Cash Flow Used in Operating Activities was $32 million; Cash Flow From Operating Activities was $104 million on a Trailing-Twelve-Month Basis SAN ANTONIO, Aug. 10, 2026 (GLOBE NEWSWIRE) -- Rackspace Technology, Inc. (Nasdaq: RXT), a global enterprise AI infrastructure and solutions provider, today announced results for its second quarter ended June 30, 2026. Gajen Kandiah, Chief Executive Officer, stated, “Enterprises in regulated industries are moving AI from experimentation into production, and they are choosing partners who can be accountable for it.” Mr. Kandiah added, “This quarter, we continued to expand work across our installed base and launched our Managed Compute and Inference Platform, backed by partners including AMD and Palantir. We remain focused on disciplined execution as we build the full enterprise AI stack our customers can trust.” Second Quarter 2026 Results Revenue was $670 million in the second quarter of 2026, an increase of 0.6% on a reported basis and 0.4% on a constant currency (1) basis compared to revenue of $666 million in the second quarter of 2025. Private Cloud revenue was $263 million in the second quarter of 2026, an increase of 5.5% on a reported basis and 5.2% on a constant currency basis compared to revenue of $250 million in the second quarter of 2025. Public Cloud revenue was $407 million in the second quarter of 2026, a decrease of 2.3% on a reported basis and 2.5% on a constant currency basis compared to revenue of $417 million in the second quarter of 2025. Loss from operations was $(33) million in the second quarter of 2026, compared to loss from operations of $(25) million in the second quarter of 2025. Net loss was $(68) million in the second quarter of 2026, compared to net loss of $(55) million in the second quarter of 2025. Net loss per diluted share was $(0.27) in the second quarter of 2026, compared to net loss per diluted share of $(0.23) in the second quarter of 2025. Non-GAAP Operating Profit was $27 million in both the second quarter of 2026 and 2025. Non-GAAP Loss Per Share was $(0.08) in the second quarter of 2026, a decline of 33% compared to Non-GAAP Loss Per Share of $(0.06) in the second quarter of 2025. Capital expenditures were $28 million in the second quarter of 2026, compared to $31 million in the second quarter of 2025. As of June 30, 2026, we had cash and cash equivalents of $111 million and total liquidity of $202 million, including our Revolving Credit Facility. Financial Outlook Rackspace Technology is providing guidance as follows: Information about Rackspace Technology’s use of non-GAAP financial measures is provided below under “Non-GAAP Financial Measures”. Definitions of non-GAAP financial measures and the reconciliations to the most directly comparable measures in accordance with generally accepted accounting principles in the United States (“GAAP”) are provided in subsequent sections of this press release narrative and supplemental schedules. Rackspace Technology has not reconciled Non-GAAP Operating Profit, Adjusted EBITDA, Non-GAAP Loss Per Share, Non-GAAP Other Income (Expense) or Non-GAAP Tax Expense Rate guidance to the most directly comparable GAAP measure because it does not provide guidance on GAAP net income (loss) or the reconciling items between these Non-GAAP measures and GAAP net income (loss) as a result of the uncertainty regarding, and the potential variability of, certain of these items, such as share-based compensation expense. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measure is not available without unreasonable effort. With respect to Non-GAAP Operating Profit, Adjusted EBITDA, Non-GAAP Loss Per Share, Non-GAAP Other Income (Expense) and Non-GAAP Tax Expense Rate guidance, adjustments in future periods are generally expected to be similar to the kinds of charges and costs excluded from these Non-GAAP measures in prior periods, but the impact of such adjustments could be significant. Conference Call and Webcast Rackspace Technology will hold a conference call August 11, 2026, at 7:30am CT / 8:30am ET to discuss its second quarter 2026 results. Interested parties may access the conference call as follows: To listen to the live webcast or access the replay following the webcast, please visit our IR website at the following link: https://ir.rackspace.com/news-and-events/events-and-presentations. To obtain a dial-in number, please pre-register at the following link: https://register-conf.media-server.com/register/BIc05fae8f41a64ec2b985a0ae9e064237 Registrants will receive dial-in information and a PIN allowing them to access the live call. About Rackspace Technology Rackspace Technology is the operator of the full enterprise AI stack from governed private cloud to AI inference and agents in production. With an Outcomes-as-a-Service model built on secure infrastructure, data foundations, and forward-deployed engineering, Rackspace delivers business results for regulated and mission-critical industries where governance, sovereignty, and uptime are non-negotiable. Forward-looking Statements Rackspace Technology has made statements in this press release and other reports, filings, and other public written and verbal announcements that are forward-looking and therefore subject to risks and uncertainties. All statements, other than statements of historical fact, included in this press release are, or could be, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are made in reliance on the safe harbor protections provided thereunder. These forward-looking statements relate to anticipated financial performance, management’s plans and objectives for future operations, business prospects, outcome of regulatory proceedings, market conditions, and other matters. Any forward-looking statement made in this press release speaks only as of the date on which it is made. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. Forward-looking statements can be identified by various words such as “expects,” “intends,” “will,” “anticipates,” “believes,” “confident,” “continue,” “propose,” “seeks,” “could,” “may,” “should,” “estimates,” “forecasts,” “might,” “goals,” “objectives,” “targets,” “planned,” “projects,” and similar expressions. These forward-looking statements are based on management’s current beliefs and assumptions and on information currently available to management. Rackspace Technology cautions that these statements are subject to risks and uncertainties, many of which are outside of our control, and could cause future events or results to be materially different from those stated or implied in this press release, including among others, risk factors that are described in Rackspace Technology, Inc.’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings with the Securities and Exchange Commission, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained therein. Non-GAAP Financial Measures This press release includes several non-GAAP financial measures such as constant currency revenue, Non-GAAP Gross Profit, Non-GAAP Net Income (Loss), Non-GAAP Operating Profit, Adjusted EBITDA and Non-GAAP Earnings (Loss) Per Share. These non-GAAP financial measures exclude the impact of certain costs, losses and gains that are required to be included in our profit and loss measures under GAAP. Although we believe these measures are useful to investors and analysts for the same reasons they are useful to management, as described in the accompanying pages, these measures are not a substitute for, or superior to, GAAP financial measures or disclosures. Other companies may calculate similarly-titled non-GAAP measures differently, limiting their usefulness as comparative measures. We have reconciled each of these non-GAAP measures to the applicable most comparable GAAP measure in the accompanying pages. IR ContactSagar HebbarRackspace Technology Investor [email protected] Media ContactWill LinkRackspace Technology Media Relations [email protected] SEGMENT DATA NON-GAAP FINANCIAL MEASURES Constant Currency Revenue We use constant currency revenue as an additional metric for understanding and assessing our growth excluding the effect of foreign currency rate fluctuations on our international business operations. Constant currency information compares results between periods as if exchange rates had remained constant period over period and is calculated by translating the non-U.S. dollar income statement balances for the most current period to U.S. dollars using the average exchange rate from the comparative period rather than the actual exchange rates in effect during the respective period. We also believe this is an important metric to help investors evaluate our performance in comparison to prior periods. Non-GAAP Gross Profit We present Non-GAAP Gross Profit because we believe the measure is useful in analyzing trends in our underlying, recurring gross margins. We define Non-GAAP Gross Profit as gross profit, adjusted to exclude the impact of share-based compensation expense, purchase accounting-related effects, and certain business transformation-related costs. Non-GAAP Net Income (Loss), Non-GAAP Operating Profit and Adjusted EBITDA We present Non-GAAP Net Income (Loss), Non-GAAP Operating Profit and Adjusted EBITDA because they are a basis upon which management assesses our performance and we believe they are useful to evaluating our financial performance. We believe that excluding items from net income that may not be indicative of, or are unrelated to, our core operating results, and that may vary in frequency or magnitude, enhances the comparability of our results and provides a better baseline for analyzing trends in our business. We define Non-GAAP Net Income (Loss) as net income (loss) adjusted to exclude the impact of non-cash charges for share-based compensation, transaction-related costs and adjustments, restructuring and transformation charges, the amortization of acquired intangible assets, goodwill and asset impairment charges, the interest expense impact from the refinancing transactions announced in March 2024 (the "March 2024 Refinancing Transactions"), and certain other non-operating, non-recurring or non-core gains and losses, as well as the tax effects of these non-GAAP adjustments. We define Non-GAAP Operating Profit as income (loss) from operations adjusted to exclude the impact of non-cash charges for share-based compensation, transaction-related costs and adjustments, restructuring and transformation charges, the amortization of acquired intangible assets, goodwill and asset impairment charges, and certain other non-operating, non-recurring or non-core gains and losses. We define Adjusted EBITDA as net income (loss) adjusted to exclude the impact of non-cash charges for share-based compensation, transaction-related costs and adjustments, restructuring and transformation charges, certain other non-operating, non-recurring or non-core gains and losses, interest expense, expenses for our Receivables Purchase Agreement, income taxes, depreciation and amortization, and goodwill and asset impairment charges. Non-GAAP Operating Profit and Adjusted EBITDA are management's principal metrics for measuring our underlying financial performance. Non-GAAP Operating Profit and Adjusted EBITDA, along with other quantitative and qualitative information, are also the principal financial measures used by management and our Board of Directors in determining performance-based compensation for our management and key employees. These non-GAAP measures are not intended to imply that we would have generated higher income or avoided net losses if the November 2016 merger and the subsequent transactions and initiatives had not occurred. In the future we may incur expenses or charges such as those added back to calculate Non-GAAP Net Income (Loss), Non-GAAP Operating Profit or Adjusted EBITDA. Our presentation of Non-GAAP Net Income (Loss), Non-GAAP Operating Profit and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these items. Other companies, including our peer companies, may calculate similarly-titled measures in a different manner from us, and therefore, our non-GAAP measures may not be comparable to similarly-titled measures of other companies. Investors are cautioned against using these measures to the exclusion of our results in accordance with GAAP. Net loss reconciliation to Non-GAAP Net Loss Loss from operations reconciliation to Non-GAAP Operating Profit Net loss reconciliation to Adjusted EBITDA Non-GAAP Earnings (Loss) Per Share We define Non-GAAP Earnings (Loss) Per Share as Non-GAAP Net Income (Loss) divided by our GAAP weighted average number of shares outstanding for the period on a diluted basis and further adjusted for the weighted average number of shares associated with securities which are anti-dilutive to GAAP loss per share. Management uses Non-GAAP Earnings (Loss) Per Share to evaluate the performance of our business on a comparable basis from period to period, including by adjusting for the impact of the issuance of shares.

This article first appeared on GuruFocus. Revenue Outlook: Updated total revenue expectation for FY26 is $2.45 billion to $2.55 billion, a decline of 7% at the midpoint compared with prior guidance. Public Cloud Revenue: New outlook for the year is $1.45 billion to $1.50 billion, $125 million lower than prior expectations. Private Cloud Revenue: New outlook is $1.0 billion to $1.05 billion, $25 million lower than prior expectations. EBITDA Outlook: Updated targets are $285 million to $295 million, compared with prior outlook of $305 million to $315 million. 2Q '26 Preliminary Revenue: Expected to be between $641 million and $649 million, down 3.1% at the midpoint. 2Q '26 Public Cloud Revenue: Expected between $399 million and $403 million. 2Q '26 Private Cloud Revenue: Expected between $242 million and $246 million. 2Q '26 EBITDA: Expected to be $58 million to $62 million. Capital Expenditures: First deployment under AMD agreement expected to be approximately $75 million. AI Compute Capacity Revenue: Expected $15 million to $20 million per megawatt deployed, with a committed floor of $10 million per megawatt for initial deployment. AI Compute Capacity EBITDA Margins: Expected to be in the 50% plus range. ATM Equity Offering: Announced a $250 million at-the-market equity offering for growth capital related to GPU initiatives. Warning! GuruFocus has detected 5 Warning Signs with RXT. Is RXT fairly valued? Test your thesis with our free DCF calculator. Release Date: July 09, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Rackspace Technology Inc (NASDAQ:RXT) is strategically positioning itself as a leader in the enterprise AI market, particularly in regulated industries and sovereign markets. The company has established a strong partnership with Palantir, becoming a preferred deployment and operations partner for regulated and sovereign environments. Rackspace has curated a robust ecosystem of best-of-breed partners, including Uniphore, VMware, and Rubrik, to enhance its AI capabilities and offerings. The company is focusing on higher-margin opportunities by transitioning away from low-margin public cloud infrastructure resale revenue. Rackspace is launching a $250 million at-the-market equity offering to support growth capital related to its GPU initiatives, indicating a proactive approach to financing its strategic goals. Rackspace Technology Inc (NASDAQ:RXT) is reducing its FY26 revenue outlook by $150 million and its EBITDA outlook by $20 million due to its strategic pivot away from low-margin engagements. The company is facing a timing mismatch between exiting lower-margin revenue streams and realizing benefits from new AI revenues, impacting near-term EBITDA margins. Rackspace's updated total revenue expectation for FY26 reflects a decline of 7% at the midpoint compared to prior guidance, primarily due to strategic choices to exit low-margin revenue. The transition to higher-margin revenue is expected to lower this year's margins due to a lag between exiting old colocation revenues and rolling out new AI deployments. The new growth vector in AI compute capacity is incremental and not yet realized, meaning the financial benefits will not be immediate and are expected to materialize in 2027. Q: Can you give more color on the deployment of megawatts in 2027 and 2028? Is this going to the existing customer base, or do you expect new demand or new customers? A: Mark Marino, Chief Financial Officer, explained that a large portion of the demand for GPUs is expected to come from new customers, with an estimated two-thirds being new and one-third existing. Gajen Kandiah, Chief Executive Officer, added that the focus will eventually shift towards Infrastructure as a Service for enterprise customers in regulated environments. Q: What is the expected revenue per megawatt deployed, and what are the anticipated margins? A: Mark Marino stated that Rackspace expects $15 million to $20 million of revenue per megawatt of deployed GPU capacity, with a committed floor of $10 million per megawatt for the initial deployment. The revenue stream should yield above 50% EBITDA margins. Q: How does the strategic choice to walk away from low-margin revenue impact the financial outlook? A: Mark Marino noted that Rackspace's updated total revenue expectation for FY26 is $2.45 billion to $2.55 billion, a decline of 7% at the midpoint compared with prior guidance. The EBITDA targets are $285 million to $295 million, reflecting a timing mismatch between exiting lower-margin revenue streams and investing in AI-related growth. Q: Can you elaborate on the capital raise and its intended use? A: Rackspace announced a $250 million at-the-market equity offering, primarily for growth capital related to GPU initiatives. The proceeds will be directed towards growth capacity and demand, with financing collateralized by the assets themselves. Q: What are the preliminary expectations for 2Q '26 results? A: Rackspace expects total revenues between $641 million and $649 million, with Public Cloud revenues of $399 million to $403 million and private cloud revenues of $242 million to $246 million. The EBITDA expectation is $58 million to $62 million. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Investments and Partnerships to Fuel AI Growth in 2027 and Beyond Palantir names Rackspace Technology as a Preferred Partner in Regulated and Sovereign Markets SAN ANTONIO, July 09, 2026 (GLOBE NEWSWIRE) -- Rackspace Technology® (NASDAQ: RXT), a global enterprise AI infrastructure and solutions provider, today announced a strategic and financial update on its transition to becoming the operator of the full enterprise AI stack. Strategy Update Rackspace is becoming the operator of the full enterprise AI stack, serving a demand now visible across the market. Enterprises, particularly in regulated industries, are seeking control over their compute, their models, and their data, and assurance that the proprietary knowledge embedded in that data is not transferred outside their environments. Rackspace is model-agnostic by design and operates the governed layer that allows enterprises to use the best available models, whether open, closed, or their own, on private cloud where control matters and public cloud where elasticity matters, while policy, identity, and data boundaries remain under the enterprise’s control. “The best-of-breed partnerships we have signed during 2026 – with AMD, Palantir, Rubrik, Uniphore and VMware by Broadcom – combined with the data center capacity and 25+ years of expertise that Rackspace brings to the table, represent a unique positional advantage for Rackspace. Today’s capital raise announcement is meaningful because it will enable us to expedite our AI Enterprise strategy and unlock a meaningful revenue and EBITDA growth vector for Rackspace, starting in 2027,” said Gajen Kandiah, Chief Executive Officer of Rackspace Technology. “Apollo remains highly supportive of Rackspace’s strategy and believes the Company is taking the right steps to fund its next phase of growth. We are excited about the opportunity ahead and remain aligned with Rackspace as it builds a differentiated platform for Enterprise AI,” said Aaron Sobel, Partner at Apollo Global Management and a member of Rackspace Technology's Board of Directors. Palantir Partnership Update In a separate release today, Palantir and Rackspace announced a definitive agreement establishing an operating framework to deploy Palantir Foundry and AIP in mid-market, regulated and sovereign environments, naming Rackspace a preferred partner. Since the companies’ initial February 2026 announcement, the partnership has built measurable momentum. Rackspace has scaled to approximately 400 Palantir certifications across sales, engineering, delivery, and operations, including a large global cohort of Palantir-certified forward deployed engineers (FDEs) to serve demand across healthcare, financial services, energy, and mid-market. The first joint deployment closed in less than 2 months with Rackspace FDEs deploying AI-enabled workflows on Palantir Foundry inside a U.S.-based solar tracking manufacturer to deliver a 94% reduction in their quote cycle time. Both parties have considerable traction on this partnership and Rackspace views today’s announcement as a marker of the partnership’s early success. Financial and Business Update The enterprise AI deployment end market has attractive demand characteristics. However, enterprise AI growth and deployments require discipline because of the resource-constrained nature of the capacity- and supply-side. Rackspace believes the correct strategic and tactical response in this environment is to prioritize our resources and focus on the activities that we believe provide the best returns to Rackspace’s stakeholders. The combination of our prioritization efforts, industry trends and current supply constraints results in a reduction of $150 million in our revenue expectations and $20 million in EBITDA. The details are illustrated in the table below. Rackspace Technology anticipates the following preliminary financial results for the second quarter of 2026: Revenue is expected to be in the range of $641 to $649 million, including Private Cloud revenue between $242 to $246 million and Public Cloud revenue between $399 to $403 million. GAAP Net Loss is expected to be in the range of $(91) to $(62) million, and GAAP net loss per diluted share is expected to be in the range of $(0.36) to $(0.25) GAAP Loss from Operations is expected to be in the range of $(53) to $(33) million. Non-GAAP Operating Profit is expected to be in the range of $19 to $23 million. Non-GAAP Loss Per Share is expected to be $(0.11) to $(0.08). Non-GAAP Adjusted EBITDA is expected to be between $58 to $62 million. As we look beyond 2026, our current plan is to ramp the Enterprise AI business up to cumulative capacity of 15 MW by the end of 2027 and a total of 30 MW of capacity by the end of 2028. We expect to average $15-20 million of annual revenue per MW deployed as GPU and customer mix evolves. This translates to $450-$600 million of annual revenue at the full 30 MW of AMD deployments and we expect Adjusted EBITDA margins for Enterprise AI to be in the 50%+ range, as summarized in the following table: The strategic intent of our recent partnerships and today’s announced capital raise is to add a new growth vector – Enterprise AI capacity, which is incremental to our core business, not a cannibalization of existing revenues. Although Public Cloud infrastructure resale will continue to decline, we look for core Private Cloud to grow low single digits, driven by the mix shift out of lower-growth, lower-margin revenue and into higher-growth, higher-margin revenue. Enterprise AI capacity is a new growth vector that sits on top of our established Private Cloud base, which we expect to enable sustainable growth in Private Cloud. Rackspace Investor Call: An investor call has been scheduled for July 9, 2026 at 8:30 am ET to provide further remarks by Rackspace Technology's CEO and CFO and to take questions. Date: 07/09/2026Start time: 8:30 am EDT To listen to the live webcast or access the replay following the webcast, please visit: https://edge.media-server.com/mmc/p/y3bgu4wg To obtain a dial-in number, please pre-register at the following link: https://register-conf.media-server.com/register/BI11a7b0c1c4794392831509be203ec832 Registrants will receive dial-in information and a PIN allowing them to access the live call. About Rackspace Technology Rackspace Technology® (NASDAQ: RXT) is the operator of the full enterprise AI stack from governed private cloud to AI inference and agents in production. With an Outcomes-as-a-Service model built on secure infrastructure, data foundations, and forward deployed engineering, Rackspace delivers business results for regulated and mission-critical industries where governance, sovereignty, and uptime are non-negotiable. Learn more at www.rackspace.com. Forward-Looking Statements Rackspace Technology has made statements in this press release and other reports, filings, and other public written and verbal announcements that are forward-looking and therefore subject to risks and uncertainties. All statements, other than statements of historical fact, included in this press release are, or could be, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are made in reliance on the safe harbor protections provided thereunder. These forward-looking statements relate to anticipated financial performance, management’s plans and objectives for future operations, business prospects, outcome of regulatory proceedings, market conditions, our expectations regarding our AI strategy and strategic changes we are making at Rackspace, strategic partnerships, GPU infrastructure deployment costs, timing and economics, financing arrangements and capital expenditures, the at-the-market equity offering and expected use of proceeds, anticipated customer demand, our recent workforce realignment and expected cost savings, portfolio optimization initiatives, expected Public Cloud and Private Cloud performance, and our expectations regarding future operating and financial performance, and other matters. These forward-looking statements may not be achieved in full or at all, or may be achieved on a materially different timeline. Any forward-looking statement made in this press release speaks only as of the date on which it is made. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. Forward-looking statements can be identified by various words such as “expects,” “intends,” “will,” “anticipates,” “believes,” “confident,” “continue,” “propose,” “seeks,” “could,” “may,” “should,” “estimates,” “forecasts,” “might,” “goals,” “objectives,” “targets,” “planned,” “projects,” and similar expressions. In addition, this press release includes preliminary financial results for the second quarter ended June 30, 2026. These preliminary results are based on information available to management as of the date of this press release and are subject to the completion of the Company's financial closing procedures, quarter-end review processes and other developments that may arise between now and the time our financial results for the quarter are finalized. These preliminary results are not a comprehensive statement of the Company’s financial results for the second quarter and should not be viewed as a substitute for full financial statements prepared in accordance with GAAP. These preliminary results are inherently uncertain, have not been audited or reviewed by our independent registered public accounting firm, and may differ, including materially, from the financial results that will be reported in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2026. All forward-looking statements are based on management’s current beliefs and assumptions and on information currently available. Rackspace Technology cautions that these statements are subject to risks and uncertainties, many of which are outside of our control, and could cause future events or results to be materially different from those stated or implied in this press release, including among others, risk factors that are described in Rackspace Technology, Inc.’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, registration statements and other filings with the Securities and Exchange Commission, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained therein. Contacts Investor Relations Contact: Sagar Hebbar, [email protected] Media Contact: Will Link, [email protected] Non-GAAP Net Income (Loss), Non-GAAP Operating Profit and Adjusted EBITDA This press release includes several non-GAAP financial measures such as Non-GAAP Net Income (Loss), Non-GAAP Operating Profit, Adjusted EBITDA and Non-GAAP Earnings (Loss) Per Share. These non-GAAP financial measures exclude the impact of certain costs, losses and gains that are required to be included in our profit and loss measures under GAAP. Although we believe these measures are useful to investors and analysts for the same reasons they are useful to management, as described in the accompanying pages, these measures are not a substitute for, or superior to, GAAP financial measures or disclosures. Other companies may calculate similarly-titled non-GAAP measures differently, limiting their usefulness as comparative measures. We have reconciled each of these non-GAAP measures to the applicable most comparable GAAP measure in the accompanying pages. We present Non-GAAP Net Income (Loss), Non-GAAP Operating Profit and Adjusted EBITDA because they are a basis upon which management assesses our performance and we believe they are useful to evaluating our financial performance. We believe that excluding items from net income that may not be indicative of, or are unrelated to, our core operating results, and that may vary in frequency or magnitude, enhances the comparability of our results and provides a better baseline for analyzing trends in our business. Non-GAAP Operating Profit and Adjusted EBITDA are management's principal metrics for measuring our underlying financial performance. In the future we may incur expenses or charges such as those added back to calculate Non-GAAP Net Income (Loss), Non-GAAP Operating Profit or Adjusted EBITDA. Our presentation of Non-GAAP Net Income (Loss), Non-GAAP Operating Profit and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these items. Other companies, including our peer companies, may calculate similarly-titled measures in a different manner from us, and therefore, our non-GAAP measures may not be comparable to similarly-titled measures of other companies. Investors are cautioned against using these measures to the exclusion of our results in accordance with GAAP. Net loss reconciliation to Non-GAAP Net Loss Loss from operations reconciliation to Non-GAAP Operating Profit Net loss reconciliation to Adjusted EBITDA Non-GAAP Earnings (Loss) Per Share We define Non-GAAP Earnings (Loss) Per Share as Non-GAAP Net Income (Loss) divided by our GAAP weighted average number of shares outstanding for the period on a diluted basis and further adjusted for the weighted average number of shares associated with securities which are anti-dilutive to GAAP loss per share. Management uses Non-GAAP Earnings (Loss) Per Share to evaluate the performance of our business on a comparable basis from period to period, including by adjusting for the impact of the issuance of shares.

RIYADH, Saudi Arabia, June 08, 2026 (GLOBE NEWSWIRE) -- Rackspace Technology® (NASDAQ: RXT), a global enterprise AI infrastructure and solutions provider, today announced the establishment of its regional headquarters in Riyadh, Saudi Arabia, reinforcing the company’s long-term commitment to the Kingdom of Saudi Arabia and the broader Middle East region. The new regional headquarters will serve as a strategic hub for Rackspace Technology’s operations and customer engagement efforts, supporting organizations across enterprise, government, and regulated industries as they accelerate digital transformation initiatives aligned with Saudi Arabia’s Vision 2030 agenda. The Riyadh office will be led by Shakeel Mohammed and will focus on: Accelerating enterprise cloud adoption across the GCC Expanding sovereign and regulated cloud capabilities Supporting AI-driven transformation initiatives aligned with national development agendas "Saudi Arabia has always been at the heart of our regional strategy, and establishing our headquarters here is a natural and proud milestone, one that deepens our commitment to the Kingdom's digital future and the bold ambitions of Vision 2030,” said Shakeel Mohammed, Vice President, Middle East, Rackspace Technology. “The Kingdom of Saudi Arabia is one of the most important technology and innovation markets globally,” said Marco Tesini, Senior Vice President International, Rackspace Technology. “Establishing our Regional Headquarters in Riyadh reflects our commitment to helping customers modernize securely and at scale. By strengthening our local presence, we are better positioned to deliver the cloud, AI, and data solutions organizations need to drive innovation, resilience, and economic growth across the region.” Saudi Arabia continues to emerge as one of the world’s fastest-growing digital economies, with significant investments in cloud computing, artificial intelligence, and next-generation digital infrastructure. Rackspace Technology’s expanded presence in Riyadh positions the company closer to customers and partners, enabling more localized delivery, enhanced responsiveness, and deeper collaboration across the Gulf Cooperation Council (GCC). It also underscores the company’s continued investment in regional talent, customer success, and strategic partnerships. For more information about Rackspace Technology, visit www.rackspace.com. About Rackspace Technology Rackspace Technology® (NASDAQ: RXT) is the operator of the full enterprise AI stack from governed private cloud to AI inference and agents in production. With an Outcomes-as-a-Service model built on secure infrastructure, data foundations, and forward-deployed engineering, Rackspace delivers business results for regulated and mission-critical industries where governance, sovereignty, and uptime are non-negotiable. Learn more at www.rackspace.com. Forward-Looking Statements This press release contains forward-looking statements within the meaning of applicable securities laws, including statements regarding the establishment and anticipated capabilities of Rackspace Technology's regional headquarters in Riyadh and its expected contributions to customers' digital transformation initiatives. These statements involve known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Factors that could cause such differences include, but are not limited to, changes in customer requirements, competitive developments, regulatory changes, and general market conditions. Rackspace Technology undertakes no obligation to update or revise any forward-looking statements as a result of new information, future events, or otherwise, except as required by law. Media Contact Cheryl Amerine: [email protected]

Image source: The Motley Fool. Thursday, February 26, 2026 at 8:30 a.m. ET Chief Executive Officer — Gajen Kandiah Chief Financial Officer — Mark Marino Senior Vice President, Investor Relations — Sagar Hebbar Gajen Kandiah: Thank you, Sagar. I want to start by framing clearly where we are going as a company and why. Since I joined 5 months ago, we have sharpened our strategy in response to a clear shift in the market. Organizations now expect AI to deliver returns on their investment. As a result, they are moving beyond isolated AI experiments to operating AI at scale inside core enterprise systems. AI is infusing every workload and as it becomes embedded in customer data, financial systems and regulated processes, where it runs starts to matter. Whether across edge, core, private cloud, public cloud or sovereign environments, those choices directly impact performance, cost and compliance. Managing those environments as one coordinated system is critical, especially in regulated industries where lapses can cause service disruption, regulatory exposure and escalating costs. The market is also entering what many are calling a private cloud renaissance. As AI moves into data-sensitive and regulated workloads, enterprises are recognizing that not all of it belongs in a pure public cloud model. Demand for governed, private and hybrid architectures with greater control over performance, cost and data residency is accelerating. Put simply, Rackspace is the infrastructure and operations backbone for enterprise AI, the layer that makes AI governable, scalable and real inside the environments that matter most. These are the environments Rackspace knows inside out. For 25 years, we have operated the compute, security and operations layer across private cloud, public cloud and edge in regulated industries where governance, sovereignty and uptime are nonnegotiable. Executing on this requires the right leadership. Since joining, I have made changes to our executive team, bringing in leaders with deep operational and delivery expertise. This was intentional. The opportunity in front of us is not primarily a strategy challenge. It is an execution challenge. I'm confident we now have the team to deliver it. But as AI increasingly operates inside live workflows, the opportunity extends beyond infrastructure. Enterprises do not want to stitch together hyperscalers, global system integrators, AI vendors and platform providers. That model is fragmented and complex with responsibility spread across too many parties. What they want is a platform engineering partner, one that deploys engineers directly into the environment, works on the platforms where AI actually runs and stays accountable from the initial use case definition all the way through to production operations on governed infrastructure, not just uptime and outcomes. Our partnerships are central to this model, and they reflect a deliberate shift in how we think about delivery. Rather than building a traditional services organization, we are building a platform engineering capability. In practice, that means we put our engineers directly inside the customer environment, getting AI into production alongside them, and then we run it for them day-to-day. Our forward-deployed engineers work directly inside customer environments on platforms like Palantir's Foundry and AIP, helping enterprises shape their AI road map, prioritize highest value use cases and then deploy and run those workloads on governed infrastructure. As a strategic partner to Palantir, that includes data readiness, hosting and ongoing managed operations. We have 30 Palantir-trained platform engineers today and plan to scale to over 250 in the next 12 months. The early pipeline activity reinforces the model. We have a strong and rapidly growing joint pipeline of Palantir-related opportunities, initial AIP boot camps in progress and a growing number of data migration opportunities in flight. And we are excited about what that means for our partnership and for the customers we serve together. Looking ahead to 2026, we see AI emerging as an important growth vector, not as a stand-alone product and not as a traditional services practice. As mentioned earlier, we are building a platform engineering model, forward-deployed engineers fluent in the platforms where enterprise AI actually runs, helping customers move from complexity to outcomes. At the center of that model is our private cloud infrastructure, the governed sovereign foundation purpose-built for regulated data-sensitive workloads. Our public cloud capabilities extend that reach across hybrid and multi-cloud environments, giving customers a consistent operating model wherever their workloads run. Together, they form the platform on which our ecosystem is built. The ecosystem is constructed through a curated set of anchor partnerships. VMware powers the control plane, unifying compute, storage, networking and security with native AI workload support and sovereign data residency controls built in. Rubrik anchors the cyber resilience layer, enabling rapid threat detection, data protection and workload recovery through Rackspace Cyber Recovery Cloud, nonnegotiable in the regulated environments we serve. Palantir brings the data and AI platform layer where use cases are defined, prioritized and deployed in production by our forward-deployed engineers. These are our anchor partners today, and we will add to this ecosystem deliberately as the modern AI stack continues to evolve. We meet our customers where they are. Through a modular approach, customers can leverage their existing investments and adopt what they need without ripping and replacing what is already working. This creates a self-reinforcing model. A stronger ecosystem drives deeper engagement, deeper engagement drives incremental infrastructure demand across both private and public cloud, and reliable operations build the trust that extends relationships over time. Rackspace is the infrastructure and operations backbone for enterprise AI, and we are building the ecosystem around that foundation so our customers can focus on what matters most, outcomes. The foundation is already shaping our financial trajectory. Our 2026 outlook reflects the inflection point taking hold. We expect private cloud revenue to grow 6% at the midpoint year-over-year, the first sustained growth in many years, anchored by large multiyear enterprise engagements. For public cloud, we expect revenue decline to approximately 6% year-over-year at the midpoint, primarily due to the planned transition of a large government contract as we exit lower-margin work. Excluding the contract, public cloud services revenue will grow in the mid- to high teens. This growth reflects continued expansion in high-margin managed offerings even as we proactively reduce exposure to lower-margin infrastructure resale engagements. As we pivot towards larger multiyear enterprise engagements and layer in scaling AI services, quarterly revenue timing will increasingly be influenced by migration milestones and deployment schedules. As a result, beginning in 2026, we will move to an annual guidance framework. We believe emphasizing full year growth, margin expansion and execution provides a clear measure of progress than quarter-to-quarter variability driven by implementation timing. We will continue to provide quarterly color on key drivers, including segment trends, margin trajectory and major ramps such as health care deployment moving into Q2 to ensure investors maintain full visibility into the underlying momentum. Now turning over to our fourth quarter and full year results. We exceeded guidance across most metrics for the quarter. At a segment level, however, private cloud revenue was below our guided range due to a recently signed health care contract ramping more slowly than initially expected. Note, this was offset by outperformance in public cloud across both infrastructure and services. Operating profit for the company remained strong at $41 million and adjusted EBITDA came in at $81 million. For the full year, we delivered stable performance, improved bookings quality and continued progress towards a more platform-led durable growth profile. I'm pleased with our overall execution in fiscal 2025, highlighted by continued revenue stabilization in private cloud and growth in public cloud services. With that, let me turn to segment performance, beginning with private cloud. Private cloud continues to serve as a foundational profit engine for Rackspace. In the fourth quarter, revenue came in at $241 million, below our guided range due to a newly closed health care deal ramping more slowly than initially expected. The deal is fully executed and is expected to begin ramping in the second quarter of 2026, reflecting additional client governance and oversight given its size and complexity. For the full year, private cloud revenue totaled $990 million, down 6% year-over-year compared to prior years of double-digit decline. Early pipeline activity remains encouraging with double-digit opportunities currently in flight and initial use cases typically representing 7-figure engagements. Importantly, each use case serves as a tip of the spear. Our platform engineers work with customers to define the right starting point, scoped, high value and achievable, and from there, each deployment drives incremental infrastructure consumption across private, public or hybrid environments. The engineering relationship and the infrastructure relationship grow together. During the quarter, we closed several high-quality private cloud deals that reinforce our strength in regulated data-intensive environments such as financial services and health care. One notable engagement in Q4 was a multiyear agreement with a top European retail and commercial bank. Rackspace is managing transformational migration, software-defined data center capabilities and managed services with a clear path to expand into cyber recovery, public cloud, AI and digital banking opportunities over time. In addition, we secured multiple transformation-focused wins across infrastructure and platform modernization. These included winning a mission-critical workload for a global online trading and financial services platform by modernizing hundreds of bare-metal servers into a virtualized software-defined infrastructure environment, improving resilience, scalability and operational efficiency while mitigating churn risk. We also entered into a new agreement with a fast-growing AI-enabled digital platform to host and manage its next-generation human-in-the-loop architecture designed to scale intelligent real-time engagement across a large user base. These wins share a common theme. Customers are choosing Rackspace to modernize and operate mission-critical workloads where reliability, security and compliance are nonnegotiable and where application-led services drive long-term strategic value. From a product perspective, private cloud continued to expand its platform capabilities. We introduced support for the latest release of Oracle PeopleTools, enhancing usability, embedded analytics and life cycle management for enterprise ERP environments. These improvements help customers drive higher productivity, stronger system governance and better decision-making in complex business systems. We also launched RackConnect Global Internet on Partner Fabric, extending Rackspace's network edge to partner ecosystems. This offering provides high-performance, resilient Internet connectivity with predictable costs and enterprise-grade routing, enabling customers to deploy and manage modern, hybrid and sovereign cloud architectures with confidence. Private cloud remained central to our strategy in 2025 with sustained customer engagement and steady execution across key programs. While these engagements typically carry longer deployment cycles, they provide greater revenue visibility, higher lifetime value and more durable recurring revenue streams. As we move through 2026, our focus is on accelerating our growth vectors as customers migrate into their future state environments. As these programs mature, we expect improved revenue predictability and expanding operating leverage over time. Now turning to public cloud. In the fourth quarter, revenue totaled $442 million, exceeding our guided range. This performance was driven by strength across both services and infrastructure resale. Services revenue grew 28% year-over-year, reflecting continued momentum in higher-value engagements. For the full year, public cloud revenue reached $1.7 billion, with services revenue growing 6%. These results reflect continued progress in executing our services-led strategy centered on operating, securing and modernizing complex cloud environments. Our increasing focus on enterprise customers reduces exposure to long-tail churn and positions us with larger enterprise-grade transformation engagements where we see stronger retention, deeper wallet share and more durable revenue streams. During the quarter, we secured a broad set of public cloud wins that reinforce Rackspace's role as a trusted partner for running large-scale customer-facing platforms. In the Americas, we helped a major digital media and advertising consumer-facing company transform its AI-powered services, serving hundreds of millions of users by building production-grade framework that speeds deployment of machine learning models and ensures reliability and governance. We also advanced AI solutions for a global aviation services provider, enabling real-time access to operational data, improving response times and driving measurable efficiency gains across regulated environments. In EMEA, we were selected as a strategic cloud managed services partner for a leading European bank, providing round-the-clock monitoring, security and optimization for core banking systems. For one of the largest diversified businesses in the Middle East across multiple industries, we are partnering on a comprehensive enterprise data platform modernization program that provides visibility across their diverse investment portfolio, enabling faster time to insight for better investment decisions. These wins highlight Rackspace's unique strength in regulated and data-intensive industries and our ability to deploy AI solutions at scale while ensuring reliability, compliance and operational excellence. We also continue to expand our public cloud product portfolio in Q4 with offerings designed to simplify adoption and accelerate time to value. We launched Rackspace Managed Cloud Database Operations, providing fully managed, secure and compliant database services across hyperscale environments. We also introduced streamlined deployment options for enterprise software and AI-enabled managed services. Together, these enhancements help customers adopt, scale and manage cloud and AI services more effectively as their environments grow. Across public cloud, AI is moving from experimentation to production. Customers increasingly rely on Rackspace to operationalize AI with governance, security and managed services, areas where execution, trust and reliability matter most. Our partnership with Palantir is a proof point of the platform engineering model in action. Forward-deployed engineers embedded with customers working on foundry and AIP shaping use cases building towards production. This is how enterprises deploy AI into live workflows in weeks rather than months, with governance built in from day 1. It is not managed services in the traditional sense. It is a new delivery architecture. That means engineers embedded in the customer environment, AI in production in weeks and Rackspace running it reliably from day 1. In summary, 2025 marked a year of meaningful structural improvement for our public cloud business. We drove stronger customer retention, executed targeted operational initiatives that supported margin expansion and delivered solid performance across the portfolio. As we enter 2026, we see AI evolving into a tangible growth driver with encouraging pipeline conversion trends and measurable delivery efficiency gains. Our focus remains on higher-value managed services, including AIOps, site reliability engineering, governance, modernization and cost optimization. As AI workloads expand, customers increasingly need support orchestrating across edge, core and cloud environments while balancing accelerated compute demand with governance and cost discipline. Rackspace enters 2026 with a clear identity and the team to execute on it. The work of the last 5 months has not just been about strategy. It has been about building the right leadership, sharpening our focus and making deliberate choices about where we compete and how we win. Those choices are now made and the team to deliver them is in place. The market is moving in our direction. Enterprises are realizing that operationalizing AI at scale inside regulated data-sensitive environments requires more than technology. It requires a partner with deep infrastructure expertise, governance discipline and operational accountability, a partner who can help them shape the journey, not just run the infrastructure underneath it. That is Rackspace. We are building a platform-engineering model, forward-deployed engineers embedded in the customer environments, working on the platforms where enterprise AI actually runs, helping customers define where to start, how to scale and how to operate with confidence. That capability sits on a foundation that took 25 years to build, governed private cloud infrastructure operating across regulated industries where uptime and sovereignty are nonnegotiable. Platform engineering, forward-deployed execution and governed infrastructure in one accountable relationship. We don't advise on the journey, we build it and run it. That is what makes Rackspace different. That is the layer that makes enterprise AI governable, scalable and real. We will execute with precision, earn trust at every step and deliver durable growth. I'm confident in this team, this model and this moment for our company. With that, I will turn it over to Mark for our financial results and outlook. Mark Marino: Thanks, Gajen. Three things stand out in the quarter. First, we beat revenue guidance, driven by public cloud outperformance. Second, non-GAAP operating profit came in at $41 million, above the high end of our range with margins up 120 basis points sequentially. Third, we ended the year with $397 million in total liquidity and $60 million in cash flow from operations for the quarter, a strong foundation heading into 2026. In the fourth quarter, total company GAAP revenue was $683 million, non-GAAP gross profit margin was 18.1% of GAAP revenue, down 180 basis points sequentially, driven by lower revenue in private cloud and higher mix of public cloud infrastructure. For the full year 2025, non-GAAP gross profit margin was 19.4%, down 120 basis points year-over-year. This was, again, a result of a year-over-year decline in private cloud revenue. Non-GAAP operating profit was $41 million, while non-GAAP operating profit margin was 6% of GAAP revenue, an increase of 120 basis points sequentially. For the full year 2025, non-GAAP operating profit margin was 4.7%, up 80 basis points versus prior year, driven by lower OpEx as we continue to optimize costs across the company. Non-GAAP loss per share was $0.01, beating our guided range of a $0.03 to $0.05 loss per share. Cash flow from operations was $60 million and free cash flow was $56 million in the fourth quarter. For the full year, cash flow from operations was $151 million and free cash flow was $91 million. We ended the year with $106 million in cash on hand and $397 million in total liquidity. Turning to our segment results. For the private cloud segment, GAAP revenue for the fourth quarter was $241 million, below our guided range due to a recently signed health care contract ramping more slowly than initially expected. Private cloud non-GAAP gross margin was 35.7%, down 240 basis points sequentially due to lower revenue and less fixed cost absorption. Non-GAAP segment operating margin at 26.1% was down 80 basis points sequentially. In our public cloud segment, GAAP revenue was $442 million, above our guided range, primarily driven by both cloud infrastructure volumes and services revenue. Non-GAAP gross margin was 8.5%, down 70 basis points sequentially, driven by a higher mix of infrastructure revenue. Non-GAAP segment operating margin was 4.5%, up 120 basis points sequentially due to improved operational efficiencies. Turning to guidance. As Gajen mentioned, beginning in 2026, we are shifting to an annual guidance framework. Quarter-to-quarter results are increasingly influenced by the timing of large deals, making short-term forecast less predictive of our long-term trajectory. Focusing on annual guidance aligns our external communication with how we run the business, prioritizing full year growth, margin expansion and operational execution over short-term variability. While we are moving to an annual guidance framework, we are committed to providing regular substantive updates on the drivers behind the numbers each quarter. We expect full year GAAP revenue to be $2.6 billion to $2.7 billion, down 1% year-over-year at the midpoint. From a segment perspective, we expect private cloud revenue of $1.025 billion to $1.075 billion, up 6% year-over-year at the midpoint and public cloud revenue of $1.575 billion to $1.625 billion, down 6% year-over-year at the midpoint. In private cloud, we expect growth to be balanced across the year as large health care and other regulated deployments move into production. The revenue cadence reflects migration complexity and implementation timing, not demand softness. In public cloud, we expect services revenue to grow mid- to high teens year-over-year, excluding the planned transition of a low-margin large-government contract, reflecting continued momentum in higher-margin managed offerings. Total non-GAAP operating profit is expected to be $160 million to $170 million, representing growth of 31% at the midpoint, driven by higher revenue and strong cost management. Adjusted EBITDA is expected to be $305 million to $315 million, up 12% at the midpoint, and non-GAAP loss is expected to be from $0.15 to $0.20 per share. Our non-GAAP tax rate is expected to be 26%, while non-GAAP other expenses will be in the $220 million to $230 million range. Non-GAAP share count is expected to be between 250 million and 260 million shares. Free cash flow is expected to be between $90 million to $110 million. With that, I will now turn it back over to Gajen for final remarks. Gajen Kandiah: Before I wrap up, thank you to our customers, partners and all Rackers. In my first full quarter here, I have seen a company built on trust with our people, customers and partners. Our strengths are clear, a culture focused on customer outcomes, a portfolio designed for regulated environments and significant growth potential in health care, sovereign and AI. As AI and complex workloads move into production, our role is to help clients orchestrate critical systems across private, public, edge and sovereign clouds, turning data into outcomes with reliability, security and precision. That is how we earn and keep trust. With that, I will turn the call back over to Sagar. Sagar Hebbar: Thank you, everyone, for joining us. If you have any questions, please e-mail us at [email protected]. We look forward to engaging with the sell-side and investor community in the coming weeks as we continue to articulate our strategic road map and financial priorities. Have a great rest of your day. Operator: This concludes today's conference. Thank you for your participation. You may now disconnect. 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This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Rackspace (RXT) Q4 2025 Earnings Transcript was originally published by The Motley Fool

Image source: The Motley Fool. Thursday, May 7, 2026 at 8:30 a.m. ET Chief Executive Officer — Gajen Kandiah Chief Financial Officer — Mark Marino Head of Investor Relations — Sagar Hebbar Sagar Hebbar: Thank you, and welcome to Rackspace Technologies First Quarter 2026 Earnings Conference Call. I'm Sagar Hebbar, Head of Investor Relations. Joining me today are Gajen Kandiah, our Chief Executive Officer; and Mark Marino, our Chief Financial Officer. As a reminder, certain comments we make on this call will be forward-looking. These statements involve risks and uncertainties, which could cause actual results to differ. A discussion of these risks and uncertainties is included in our SEC filings. Rackspace Technology assumes no obligation to update the information presented on the call, except as required by law. In particular, our discussion today will include forward-looking statements regarding our recently announced memorandum of understanding with AMD, including statements regarding the anticipated scope, benefits, commercial potential of the collaboration, deployment timelines or financial projections, the expected execution of definitive agreements and the anticipated impact of the partnership on our business, financial results and capital structure. The MOU represents a nonbinding framework only and does not constitute a binding commitment by either party to complete any specific transaction, financing or other commercial arrangement. No definitive agreements with AMD have been reached. Discussions remain preliminary, and there can be no assurance that any such arrangements will be entered into, that the parties will reach agreement on terms or that the anticipated benefits of the collaboration will be realized. Any third-party financing required to implement the transactions contemplated by the MOU is subject to the availability of financing on acceptable terms. There can be no assurance that any such financing will be obtained. Our presentation includes certain non-GAAP financial measures and adjustments to these measures, which we believe provide useful information to our investors. In accordance with SEC rules, we have provided a reconciliation of these measures to their most directly comparable GAAP measures in the earnings press release and presentation, both of which are available on our Investor Relations website. I will now turn the call over to Gajen for an update on the business. Gajen Kandiah: Thank you, Sagar. Last quarter, I said Rackspace was moving beyond being an infrastructure provider to becoming the orchestrator and operator of enterprise AI in regulated environments. We laid out 3 specifics: a partnership with Palantir anchored by a core build-out of forward deployed engineers, a technology stack with VMware as the control plane, Rubrik for cyber resilience, and Palantir as the data and AI platform layer, spanning infrastructure, resilience and AI and accelerating demand for Private Cloud in regulated environments. The results this quarter reinforce the strategy we've been executing against what we call where enterprise AI goes to production, governed infrastructure as the foundation, an integrated technology stack of curated partners on top of it and one accountable operator running it end-to-end. Every win this quarter sits inside that frame. We secured regulated and sovereign Private Cloud deals across health care, telecoms and financial services. We also closed our first joint Palantir deal in 41 days, a U.S.-based solar tracking manufacturer where the problem was costly and quantifiable, 16.5 days to move from a customer inquiry to a signed quote, burdened by manual intake and fragmented handoffs. Our FDEs deployed AI-enabled workflows on Palantir Foundry directly inside the customer's environment, reducing the quoting cycle by 94% and earning an expanded engagement to extend the FDE model into EMEA. We are also deploying Palantir inside Rackspace, running end-to-end business workflows on foundry natively. We are not just recommending Palantir to customers, we are operating our own business on it. We continue to expand our partner ecosystem. Today, I'm pleased to announce the signing of a memorandum of understanding with AMD that establishes a new category of governed enterprise AI infrastructure. We are integrating AMD Instinct GPU accelerators, AMD EPYC CPUs and the ROCm software ecosystem into a fully managed governed technology stack, purpose-built for enterprise, including health care, financial services and sovereign environments where security, compliance and accountability are nonnegotiable. The MOU establishes AMD as the launch silicon across our 4 integrated capabilities. Enterprise AI Cloud, our fully managed private, public and sovereign AI environment with one operator accountable across the stack, Enterprise Inference Engine, a context-aware inference runtime that retains domain knowledge, session history and enterprise-specific data context across queries with Rackspace owning the SLA; Inference as a Service, dedicated accelerated compute as a governed alternative to commodity GPU rental, launching with AMD Instinct; and Bare Metal Accelerated Compute launching with AMD Instinct for training and inference workloads requiring deterministic performance. Production inference is heterogeneous. Frontier models run on GPU, small language models, classical ML embeddings and many domain-specific workloads run more efficiently on CPU. AMD is the partner that brings both Instinct GPUs and EPYC CPUs inside one integrated architecture, which lets us route each workload to the right compute. That is what production economics requires. This puts Rackspace in a unique category. The market today is dominated by commodity GPU rental, where capacity is sold by the hour and the customer carries the burden of integration, security and accountability. We are building the opposite. AMD's leadership in open high-performance AI acceleration, combined with our operator-grade Outcomes-as-a-Service model delivers governed AI infrastructure that is accountable from silicon to outcomes. We expect the definitive agreement with AMD to be executed in the near term. Governed infrastructure is where enterprise AI either succeeds or stalls. When AI works with patient records, financial data or sovereign information, where that data sits and how access is governed determines compliance or exposure. That is why Rackspace's over 25-year history managing data centers and infrastructure is more important than ever. And this is why one of the largest EPYC environments runs on Rackspace. The second reason enterprises choose us is how we handle technical complexity. Enterprise AI cloud is not a single component problem. It takes data, compute, models, small language models, inference and governance working together in real time. If even one element in the technology stack is off, cost per token skyrocket and operational risk increases. We solve this by integrating each vendor's IT, making technologies fit together and operate as one. The third reason is accountability. In a fragmented enterprise AI cloud vendor ecosystem, nobody owns the outcome or takes responsibility when something breaks down. We solve that by being one accountable partner in the eyes of the customer, responsible for how the system performs and the outcome it delivers. That is why we are seeing momentum across the business. At our core, Rackspace is a data center and infrastructure company. We own and operate the physical infrastructure that enterprise AI runs on. That foundation, combined with our ability to take end-to-end accountability for AI in production from governed Private Cloud to AI inference and agents in production is exactly what our enterprise customers are looking for. And with that, let me get into our business performance, starting with Private Cloud. First quarter Private Cloud revenue was $235 million, with first half revenue on track with the timing of a large deal onboarding within our health care vertical, consistent with the dynamics we outlined last quarter. Segment operating margin came in at 24.7%, up 30 basis points year-over-year, driven by continued cost discipline. Our customer wins this quarter tell a consistent story. Enterprises in regulated industries are choosing Rackspace to modernize and operate environments where governance, reliability and compliance are nonnegotiable and where those environments increasingly serve as the foundation for AI adoption. For example, in financial services, we secured a long-term recommitment from a leading global online trading platform, modernizing core infrastructure through software-defined Private Cloud, improving resilience and user experience in a latency-sensitive, highly regulated environment. In health care, we signed a multiyear agreement with a major U.K. NHS Foundation Trust to migrate and operate workloads in a sovereign health care cloud with full outcome as a Service and security embedded from the outset. And this quarter, we expanded our relationship with AdventHealth, a long-standing customer. We already host and manage the infrastructure of their Epic EHR, one of the top 5 Epic systems in the world. And this quarter, we expanded our relationship to host and manage over 400 additional workloads on Rackspace Private Cloud. Health care is one of our most important verticals and one of the clearest expressions of our strategy. Epic Managed Services is proprietary Rackspace IP, purpose-built for governance, performance and uptime that clinical environments demand. As regulated health care organizations move from AI experimentation to AI in production, where data sits and how it's governed becomes the defining question. That is exactly the environment we are built to operate. This extends into sovereign markets. In Saudi Arabia, our partnership with SDAIA places us inside one of the world's most advanced national AI programs, built on in-country infrastructure, jurisdictional accountability and managed operations. In the U.K., BT recently selected Rackspace as the infrastructure foundation for BT Sovereign Cloud, positioned as U.K.'s first full suite of sovereign services hosted and operated entirely within the U.K. with security-cleared operations teams and managed services covering migration, operations and ongoing compliance. That is the kind of public anchor that validates our sovereign thesis. These are environments where AI cannot be deployed without full control over data and infrastructure, and they are increasingly central to how sovereign and enterprise AI is deployed. What makes these environments possible at scale is VMware Cloud Foundation 9, the control plane at the center of our governed AI strategy. It unifies compute, storage, networking and security into one operating substrate with native AI workload support, data residency controls and policy enforcement that meets regulated and sovereign requirements out of the box. Our deepening partnership with Broadcom around VCF 9 is one of the most strategic commitments we are making this year because it gives our customers a single control plane that travels with the workload with elasticity to Public Cloud where it makes sense. Running on top of that foundation is where our AI platform partnerships come to life. This quarter, we expanded our relationship with Uniphore, adding agent-based workflows to our governed AI technology stack. Together, we are building context-aware inference, a capability that retains domain knowledge, session history and enterprise-specific data context across queries. So AI agents and large language models perform with the consistency and institutional memory that production environments require. Like Palantir, our engineers are trained on the Uniphore platform and embedded directly inside customer environment. We are not just orchestrating infrastructure. We are orchestrating outcomes. VCF 9 as the control plane, Dell for core infrastructure, Palantir and Uniphore for governed AI and agent workflows, Rubrik for data resilience, AMD for enterprise-ready compute. Each partner is best-in-class, but the value Rackspace delivers is making them operate as one integrated system with full accountability for how the system performs and the outcomes it delivers. Looking ahead, the next phase is already emerging. As enterprise AI evolves towards agentic workflows where machines interact with machines and processes run end-to-end without human intervention, the demands of governed infrastructure become even more acute. Training will largely sit with specialized providers, but inference, particularly context-aware inference on regulated data is where production enterprise AI lives. That is the workload we have built to operate. And as customers develop a clearer picture of their data residency requirements, more of those workloads will move into governed Private Cloud, deployed across our global data center footprint in the jurisdictions and sovereignty zones our customers require. That is why we are doubling down on VCF 9 and Broadcom this year. Our full year Private Cloud growth outlook remains on track. We have signed engagements with AdventHealth, Seattle Children's and a strategic Database-as-a-Service partner onboarding through the rest of the year. We are also seeing encouraging pipeline momentum on our Palantir and Uniphore partnerships where context-aware inference and government agent workflows are gaining traction at deal sizes that we have not historically seen. The AMD partnership announced today adds a further layer of future optionality as governed AI compute becomes more central to how regulated enterprises operate. Together, these give us confidence in the full year Private Cloud growth profile we are reaffirming today. Now for our Public Cloud update. First quarter Public Cloud revenue was $443 million. Services revenue grew 10%, reflecting our continued shift towards higher-value engagements. Our customer wins this quarter highlight the breadth of our platform capabilities and our deepening presence in the AI space. First, we are powering a large-scale enterprise-wide multi-cloud transformation for a leading health care technology organization. Through a governance model, we are delivering program managed migrations, modern architecture, intelligent automation and measurable cost optimization, ensuring each workload is placed on the right platform for the right reasons. Second, Rackspace is serving as the implementation and managed services delivery engine for a high-growth AI-native database as a service partner operating across both Public and Private Cloud environments. Our execution capabilities are a direct accelerant to our partners' client acquisition and market expansion, reflecting a high-value compounding partnership driving differentiated multi-cloud Database-as-a-Service outcomes. Our service portfolio is built for where enterprise AI is headed, production, not experimentation. We are embedding engineers directly into customer environments moving from strategy to live deployment in weeks with governance and accountability built in from day 1. New partnerships expand our ability to deploy context-aware inference, governed agent workflows and forward deployed engineers inside customer environments, giving enterprises a governed path from strategy to inference workloads in production. We are complementing this with purpose-built capabilities in AIOps, identity security and data resilience, addressing the operational and security demands that become nonnegotiable once AI moves into production environments. In summary, Public Cloud is executing. As inference workloads move into production, we are increasingly positioned as the partner enterprises rely on to operate, secure and optimize their cloud environments with full accountability to match. The results this quarter confirm the thesis: governed AI infrastructure as the foundation, an integrated technology stack of curated partners running on top of it, one accountable operator responsible for the outcomes. That is what today's Rackspace delivers. With that, I will turn it over to Mark for our financial results. Mark Marino: Thank you, Gajen. In the first quarter, total company GAAP revenue was $678 million, up 2% year-over-year, driven by solid Public Cloud performance. Non-GAAP gross profit margin was 18.3% of GAAP revenue, down 160 basis points year-over-year, reflecting the Private Cloud revenue timing dynamics we discussed. Non-GAAP operating profit was $31 million, up 20% year-over-year, driven by continued operating expense discipline. Non-GAAP loss per share was $0.06, flat year-over-year. Cash flow from operations was $5 million and free cash flow was negative $9 million. We ended the quarter with $94 million in cash and $295 million in total liquidity, inclusive of the undrawn portion of our revolving credit facility. During the quarter, we repurchased approximately $96 million of debt, reflecting our continued commitment to disciplined capital allocation and active deleveraging. This reduces our interest burden and strengthens our overall capital structure. We are making deliberate progress on leverage reduction while continuing to invest in strategic growth. Turning to our segment results. Private Cloud GAAP revenue for the first quarter was $235 million, down 6% year-over-year, reflecting the timing of large deal onboarding within our health care vertical, consistent with the dynamics we outlined last quarter. Non-GAAP gross margin was 36%, down 110 basis points year-over-year, driven by lower fixed cost absorption on reduced revenue. Non-GAAP segment operating margin was 24.7%, an improvement of 30 basis points year-over-year, reflecting continued operating expense discipline. In our Public Cloud segment, GAAP revenue was $443 million, up 7% year-over-year with services revenue growing 10% year-over-year. Non-GAAP gross margin was 8.9%, down 60 basis points year-over-year, reflecting higher infrastructure costs. Non-GAAP segment operating margin was 4.7%, up 50 basis points year-over-year, driven by improved operating expense efficiency. Now on to our guidance. We are reaffirming our full year 2026 guidance in its entirety. Revenue, EBITDA and cash flow outlook all remain unchanged. The Q1 Private Cloud timing we described is fully reflected in our annual plan and our confidence in the full year outlook is unchanged. We continue to win larger complex engagements that carry longer deployment cycles but deliver greater revenue visibility, higher lifetime value and more durable recurring revenue streams. As they come online throughout the year, we expect Private Cloud to reflect the growth profile we committed to for 2026. With that, I'll turn it back over to Gajen. Gajen Kandiah: The market is trending in line with our expectations. And this quarter, we delivered proof across every layer of that thesis. Regulated enterprises are making a deliberate decision about where their AI was, who operates it and who is accountable for outcomes. Health care is now a pillar. One of the top 5 Epic workloads in the world runs on Rackspace governed AI infrastructure. Epic Managed Services is proprietary Rackspace IP, decades in the making and increasingly the foundation our health care customers are choosing as AI moves into production. Sovereign is validated. BT Sovereign Cloud runs on Rackspace governed AI infrastructure. SDAIA in Saudi Arabia places us inside one of the world's most advanced national AI programs. These are anchor commitments, not pilots. The technology stack is complete. And this quarter, we extended it further. VMware Cloud Foundation 9 as the control plane running across private, public, edge and sovereign environments, Palantir for governed data and AI operations with our first joint deal closing and a growing pipeline. Uniphore, enabling agent-based workflows with context-aware inference, Rubrik for data resilience and AMD, where we are establishing a new category of governed enterprise AI infrastructure, delivering 4 integrated capabilities from silicon to outcomes, Enterprise AI cloud, Enterprise Inference Engine, inference as a Service and Bare Metal AMD Instinct, one integrated system with an investment-grade counterparty co-invested in our success and Rackspace accountable for how it performs end-to-end. We are the operator of the full enterprise AI technology stack, one accountable partner where enterprise AI goes to production. That is Rackspace. Thank you to our customers, partners and every Racker. And with that, back to Sagar. Sagar Hebbar: Thank you, Gajen. Let us begin the question-and-answer session. Please go ahead. Operator: [Operator Instructions] Our first question comes from Kevin McVeigh with UBS. Kevin McVeigh: Let me start just congratulating you folks because obviously, there's been a lot of work to be done to get you folks to this level and a lot of patience and just that needs to be recognized. And I think I just wanted to kind of highlight that because there's a lot that's going into the results that are here today. I guess -- and there was an incredible amount of detail again, but maybe talk to how AMD dovetails into Palantir? And what else -- it sounds like the MOU is pretty far along. What else needs to be done to get it across the goal line? It sounds like it is, but is there anything in terms of what we should look for just as that officially gets signed? Or is it officially signed? Just again, it seems like it's pretty far along, but just if you could help us with that a little bit. Gajen Kandiah: Kevin, thank you, and I appreciate your comments. Now look, I think when we look at this, I would sort of think about Palantir and AMD somewhat distinct from each other, just so that the -- starting with the Palantir relationship, that's really all about deploying and running customer workflows for the customer with forward deployed engineers, somewhat independent of what compute platform it runs on, right? Really think about compute more as what's the most efficient place to run that work any given workload. And then having -- and then the AMD piece really fits into how -- first and foremost, it gives us CPU and GPU, which I think as we move further into inference and production workloads, being able to deliver that in an efficient manner allows us to now do it across sort of the CPU, GPU stack. And then in terms of the partnership itself, I think we are certainly well along the way there. I think we still need to get the financing locked down and sort of tightened up, but we feel pretty confident that we are on our way to getting that done and hopefully get it announced here in the near future. We feel pretty good about it. Kevin McVeigh: That's super helpful. And then just again, if you could remind us the capacity in the Private Cloud versus the Public. And as these initiatives kind of scale, particularly AMD and Palantir, is that primarily across the Private Cloud as opposed to the public? Or just maybe help us understand that a little bit because obviously, there's a lot to digest and just a really, really nice outcome. Gajen Kandiah: No. Great question, Kevin. This is sort of this market confusion. -- at least I think of it that way, right, because customer workloads are going to run across private and public depending on where that workload needs to land, right? And that's why sort of our VCF 9 partnership, the Broadcom VMware partnership gives us sort of think of it as a control plane across which we could somewhat elastically drive the workload, whether it be in Private or Public Cloud. So capacity-wise, we have the partnerships on the public side, and now we have the partnership and hopefully here soon, the compute side up and running from a GPU perspective as well, which allows us then to really be somewhat agnostic with the customer really focus on what specific outcome they want and then how do we deliver that in the most efficient way for them across either a CPU or a GPU landscape, and that could be private or public, right? So like you said at the beginning, Kevin, that's like a ton of work that goes into sort of figuring all this stuff out. And part of the challenge our customers have, right, is to think all of that stuff through, right, in terms of we're building a small language model or you're running on a large language model where do you run the inference, where do you -- how do you orchestrate that? How do you ensure that it's running as efficiently as possible, secure as possible, data residency is thought through, right? All of those. And our ambition is how do you take that complexity off the table for them and with our forward deployed engineers, really enable, support and accelerate their journey to become more AI-enabled or operate on a fully AI stack, right? So that's the opportunity we saw, and that's what we are truly -- and our customers are really guiding us through this. So pretty excited about it. Kevin McVeigh: No, it's amazing. And then just one more. I don't want to be -- I want to be respectful for your time, but it sounds like any sense of how this starts to kind of fan in, it sounds like maybe in the back half of '26. And then is there any way to think about kind of just what type of margin this work would be coming in? I know it's probably relatively -- maybe a tougher question, but just any way to think about that? And then what potential capital needs you could have as you're standing some of this stuff up? Gajen Kandiah: I think we are -- think of it this way, Kevin. We think of -- there are very -- there are 4 distinct capability sets, if you will, right, for that better way that we are bringing to market, right? It's governed Private Cloud on AMD silicon, right? Think of that as we own the entire outcome for our customer in partnership with our customer. So they don't think about anything that sits in between, right? So yes, that would be -- if you think of it through the lens of margin, probably our most profitable business. Then there's context aware inference, which is really the next level of business where you're driving domain-specific data through inference and maintaining that domain data throughout the entire process. That's probably your next tier when you think about margin coming down, if you will, right? Then there is the inference layer, just purely, we are providing the tokens or the intelligence customers are using it through an API. And then lastly, sort of a lot of what the neoclouds do, which is the bare metal, right, which is probably a lower spend on the margin, right? So yes, I think that as we ramp up, we will see our business sort of fluctuate across these 4 areas. Obviously, our intent is to end up with fully managed governed outcomes, but there's a journey to get there. And I think that's something we need to work our way through before we can give clear guidance around how that plays out. Mark Marino: Kevin, this is Mark. I would agree with that. I also think that it's going to be largely on par, if not accretive to existing gross margin rates across our Private Cloud business. And just in terms of timing, this is not something that we've got materially factored into our '26 guidance, right, just in terms of supply chain and delivery timing. Operator: Our next question comes from David Paige with RBC Capital Markets. David Paige Papadogonas: Congrats on the great results here. I guess just at a higher level, it seems like Rackspace is moving in the right direction not only internally as a company, but where the industry is going in terms of CPU, GPU, running SLMs, LLMs, et cetera. So I'm just curious, you seem like you're the first -- you're the leader, but I guess, how is the competitive environment looking? And I guess as a follow-up, you mentioned the pipeline is strong. So should we expect more deals in the future? Or maybe just flush that out a little bit. Gajen Kandiah: Sure. Good to meet you, David, and thank you for your comments as well. So yes, I think when I think about where we are, the -- how would I -- the orientation of the business right now is very much along the lines of helping customers really understand how they want to run AI workloads, right? Because if you think about where we sit today in our Private Cloud business, especially, a lot of the customer workloads that are regulated run on our environment. And so the ability for us to sort of guide them from there on to running AI-based workloads is sort of where we are seeing the most opportunity. And when you look at the partnerships, right, either on the application stack, the Palantir Uniphore or on the compute stack, they just give us a much more integrated view of trying to tie all of this together or not trying but tying all of this together and delivering it. So when you think of kind of your first question in terms of competitive environment, I haven't seen anyone yet that is able to put all of this together in one place and then own the outcome, right? I think that sort of makes a distinct difference, especially in a regulated or sovereign environment because I think that it becomes significantly unique. To give you an example, just when I say governed in health care, it means HIPAA compliance, PHI security, clinical SLAs, that all of that has to be put onto the same platform and integrated and then delivered, right? So I don't -- I'm not -- I'm sure there will be competitors that show up, but having the consulting, the forward deployed engineers, the infrastructure, the compute and the partnership all stitch together, I hope it gives us a little bit of a lead and an edge in terms of where we sit. Sorry for the long answer, but I hope that makes sense. David Paige Papadogonas: No, that was very helpful. And I would agree. It does seem like you have that leadership position, which is great. So I guess -- yes, that's helpful. Yes. Maybe one more. There were some comments about the capital structure. It looks like it's getting into a better place. Just how should we think about the capital structure over the next like 12 to 24 months just evolving? Mark Marino: David, this is Mark. Look, our motivation or our intent is deleveraging, right? That's our top priority, right? So as we think about some of the deals we've announced, some of our capital requirements for this year, right, the intent is ultimately we've got our eye on 2028, the maturity, the debt stack that's going to be due in the middle of 2028 and getting deleveraged through increase in operating leverage, EBITDA as well as additional cash flow. So as we structure some of these deals, right, the intent isn't to go take on more expensive add to our existing debt maturities, but to structure things in a way that don't create further leverage, right? We have decreased our operating leverage I think from 8.6 to 8.3 quarter-over-quarter, right? We continue to stay focused on the out quarters and finding ways to delever, right? You'll notice in the quarter, we actually repurchased some of our debt, roughly $96 million notional at a pretty significant discount, right? So we're looking for ways to deploy capital such that we can reduce that -- get ourselves to refinanceability over the next 12, 18 months. Operator: That concludes today's question-and-answer session. I'd like to turn the call back to Sagar Hebbar for closing remarks. Sagar Hebbar: Thank you, everyone, for joining us. If you have any questions, please e-mail us at [email protected]. Have a great rest of your day. Thanks, Liz. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Before you buy stock in Rackspace Technology, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Rackspace Technology wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $463,900!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,294,401!* Now, it’s worth noting Stock Advisor’s total average return is 978% — a market-crushing outperformance compared to 211% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of June 1, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Rackspace (RXT) Q1 2026 Earnings Transcript was originally published by The Motley Fool