NEW YORK, July 9, 2026, 14:03 EDT
- Rackspace Technology Inc NASDAQ:RXT dropped 29% to $4.67 on Thursday, pulling back from an earlier high of $7.45 in intraday trade.
- The company lowered its 2026 revenue midpoint by $150 million. About 83% of the cut is tied to Public Cloud.
- Rackspace Technology, Inc. Rackspace Technology, Inc. set up a new $250 million at-the-market share sale plan. The move could raise cash for AI hardware but also brings shareholder dilution back into focus.
Rackspace Technology Inc NASDAQ:RXT fell hard Thursday as the market shrugged off its push into enterprise AI, homing in on weaker 2026 guidance and a new equity plan. Shares slumped 29% to $4.67 and volume spiked to almost 40 million shares. Rackspace’s market cap was around $1.17 billion.
Timing is key. Rackspace turned into a small-cap name for enterprise AI plays after it struck deals with Advanced Micro Devices Inc NASDAQ:AMD and Palantir Technologies Inc NASDAQ:PLTR. But Thursday’s update pointed to most of the AI gains hitting in 2027 and 2028. The 2026 step-down is what’s happening now.
Rackspace cut its outlook, mainly in Public Cloud, where it resells and manages outside cloud services. Adjusted EBITDA, which Rackspace calculates before interest, taxes, depreciation, amortization, and some other items, also fell.
| 2026 outlook, midpoint | Prior | New | Change |
|---|---|---|---|
| Revenue | $2.65 bln | $2.50 bln | -$150 mln |
| Private Cloud revenue | $1.05 bln | $1.03 bln | -$25 mln |
| Public Cloud revenue | $1.60 bln | $1.48 bln | -$125 mln |
| Adjusted EBITDA | $310 mln | $290 mln | -$20 mln |
The picture is messier than a basic AI pullback. Most of the $150 million revenue cut—about $125 million, or 83%—came from Public Cloud, as Rackspace said it’s getting out of low-margin resale while big cloud vendors shift customers to direct deals. Rackspace put preliminary Q2 revenue between $641 million and $649 million, shy of the $657.1 million consensus from MarketBeat. The company also guided to a non-GAAP loss per share of 8 to 11 cents, compared to the Street’s 3-cent loss estimate.
The financing deal ramps up the pressure. Rackspace moved to sell as much as $250 million in common stock through Goldman Sachs & Co LLC, part of Goldman Sachs Group Inc NYSE:GS, in an at-the-market offering that lets the company sell shares at current prices over time. The filing says Rackspace could use the cash for working capital, capital spending and growth, with GPU-related costs among possible uses. GPUs are chips used in AI workloads.
This dilution isn’t minor. Using the $6.43 reference price from the prospectus, a full $250 million sale would mean about 38.9 million shares, or around 16% of the 249.1 million shares outstanding as of March 31. With Thursday’s intraday price at $4.67, that same $250 million equals about 53.5 million shares, or roughly 21% of the share count. The filing notes the real number of shares is still up in the air.
Rackspace is leaning on more capacity to offset management. The company said it’s targeting 15 megawatts of enterprise-AI capacity by end-2027 and 30 megawatts by 2028. Megawatt refers to data center power and serves as a proxy for computing size. If Rackspace gets to 30 megawatts, it sees $450 million to $600 million in annual revenue, or about 18% to 24% of its new 2026 revenue midpoint.
| Enterprise AI target | Low | High |
|---|---|---|
| Annual revenue per MW, est. | $15 mln | $20 mln |
| Annual revenue at 30 MW, est. | $450 mln | $600 mln |
| Exit 2026 target capacity | 2 MW | 2 MW |
| Exit 2027 target capacity | 15 MW | 15 MW |
| Exit 2028 target capacity | 30 MW | 30 MW |
Chief Executive Gajen Kandiah said the capital raise will “expedite our AI Enterprise strategy” and drive revenue and EBITDA growth from 2027 onward. Palantir CEO Alex Karp said, “Sovereign AI requires more than access to a model,” describing the Rackspace deal as an operating layer for customers needing strict data controls. GlobeNewswire
Competition is tough. Rackspace still operates near big cloud providers like Amazon.com Inc’s NASDAQ:AMZN AWS and Microsoft Corp’s NASDAQ:MSFT Azure, but more customers keep going straight to those platforms. The AI story is supposed to push Rackspace higher: AMD brings the chips, Palantir supplies the AI software, and Rackspace pitches itself as the go-to for regulated industries.
The bridge is still a risk. Rackspace said rolling out AI will depend on how much its customers want, hardware wait times and other stuff, and the AMD deal still needs sign-offs for each deployment and some terms aren’t set yet. If the stock stays low, every dollar from equity pays for fewer GPUs and the dilution goes up.
Investors right now are pricing Rackspace lower for its long-term AI upside than they are worried about its short-term cash issues. The company has more going on than it did a year ago. But after Thursday, it’s also pricing richer.
