Rackspace Technology’s Earnings Call Highlights Growth Amid Challenges

Rackspace Technology, Inc. ((RXT)) has held its Q1 earnings call. Read on for the main highlights of the call.

Rackspace Technology’s recent earnings call exuded a positive sentiment, underscored by strong performance across key metrics and successful strategic partnerships. The company reported growth in sectors such as Public Cloud and regulated industries, although challenges like revenue declines in Private Cloud and macroeconomic uncertainties were acknowledged.

Exceeded Expectations Across All Key Metrics

Rackspace’s first quarter of 2025 results surpassed expectations for revenue, profit, and EPS, marking the 11th consecutive quarter of meeting or exceeding guidance. This consistent performance highlights the company’s robust operational strategies and market positioning.

Strategic Partnership with Rubrik

Rackspace announced a strategic partnership with Rubrik to launch the Cyber Recovery Cloud. This collaboration is anticipated to drive revenue starting in 2025, showcasing Rackspace’s commitment to innovation and enhancing its service offerings.

Public Cloud Bookings Growth

Public Cloud bookings experienced a 16% year-over-year growth, driven by a remarkable 26% increase in The Americas. This growth reflects Rackspace’s successful expansion efforts and its ability to capture market share in the competitive cloud sector.

Operational Turnaround and Efficiency Improvement

The company reported an 83% year-over-year growth in non-GAAP operating profit, alongside significant increases in cash flow from operations and free cash flow. These improvements indicate Rackspace’s effective cost management and operational efficiency.

Expansion in Regulated Industries

Rackspace secured significant wins in the healthcare and energy sectors, including deals with a healthcare provider and a European energy company. These successes highlight the company’s strategic focus on expanding its footprint in regulated industries.

Revenue Decline in Private Cloud

Private Cloud revenue for the first quarter was $250 million, reflecting a single-digit decline year-over-year. This decrease is attributed to customers transitioning away from older generation offerings, indicating a need for innovation in this segment.

Macroeconomic Uncertainty

The broader macroeconomic environment poses potential challenges, potentially affecting onboarding timelines for recently closed deals and customer decision cycles in the short term. Rackspace remains vigilant in navigating these uncertainties.

Decline in Total Company GAAP Revenue

Total company GAAP revenue stood at $665 million, down 4% year-over-year. Despite this decline, the revenue met the high-end of guidance, demonstrating Rackspace’s ability to manage expectations amidst challenging conditions.

Forward-Looking Guidance

Rackspace’s guidance for the second quarter projects GAAP revenue between $653 million and $665 million, with total non-GAAP operating profit expected to be between $25 million and $27 million. Despite forecasting a non-GAAP loss per share, the company remains optimistic about its strategic initiatives, particularly in Private Cloud and AI, which are expected to drive future growth.

In conclusion, Rackspace Technology’s earnings call reflected a positive sentiment, with strong performance across key metrics and strategic partnerships paving the way for future growth. Despite challenges such as revenue declines in Private Cloud and macroeconomic uncertainties, the company’s strategic focus and operational efficiency position it well for continued success.