Key Stats for Rackspace Technology Stock
- Price change for Rackspace Technology stock: 22%
- $RXT Stock Price as of Jul. 10: $5
- 52-Week High: $9
- $RXT Stock Price Target: $5
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What Happened?
Rackspace Technology (RXT) stock jumped over 22% after the company announced a major strategic shift. The plan: walk away from lower-margin cloud business and instead pour resources into AI infrastructure.
The company cut its full-year 2026 revenue outlook by $150 million and its EBITDA outlook by $20 million. Most of that cut, $125 million, comes from public cloud, where Rackspace is deliberately dropping low-margin infrastructure resale work.
Another $25 million comes from private cloud, where the company is exiting basic colocation and hosting revenue to free up capacity for AI deployments.
Why give up revenue on purpose?
Management says these lower-margin businesses were dragging down profitability. Rackspace Technology investors got more detail on the trade-off: the company will spend roughly $75 million in capital expenditures on its first AI compute deployment under a definitive agreement with AMD.
That AMD partnership is central to the new strategy.
Rackspace plans to deploy nearly 2 megawatts of compute by the end of 2026, scaling up to 15 megawatts by 2027 and 30 megawatts by 2028.
Each megawatt is expected to generate $15 million to $20 million in revenue, with EBITDA margins above 50%.
That’s a much richer margin profile than the legacy business Rackspace is stepping away from.
To help fund this buildout, the company announced a $250 million at-the-market equity offering, aimed squarely at growth capital for its GPU initiatives.
Rackspace also gave preliminary numbers for Q2.
- Total revenue is expected between $641 million and $649 million, down 3.1% at the midpoint.
- Public cloud should range between $399 million and $403 million, while private cloud should range between $242 million and $246 million.
- EBITDA is expected between $58 million and $62 million.
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What the Market Is Telling Us About Rackspace Technology Stock
The market’s reaction suggests investors like the direction, even with lower near-term numbers.
Rackspace Technology stock’s rally of more than 22% shows that shedding low-margin revenue for a shot at 50%-plus EBITDA margins in AI infrastructure is being read as a smart long-term trade, not a step backward.
Management has made it clear that this year’s margin hit is temporary.
It comes from a gap in timing between exiting old revenue streams and turning on new AI-related income, which isn’t expected to show up meaningfully until 2027.
For now, Rackspace Technology stock investors seem willing to look past this year’s guidance cut and focus on the bigger opportunity building behind it, particularly the AMD partnership and the company’s push into governed, regulated AI infrastructure.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
