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Rackspace Technology (RXT)
NASDAQ:RXT
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Rackspace Technology
(NASDAQ:RXT)
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Rating:56Neutral
Price Target:
$2.50
▲(28.21% Upside)
Action:ReiteratedDate:02/28/26
The score is driven primarily by weak fundamentals—declining revenue, ongoing losses, and a stressed balance sheet with negative equity—partly offset by improving cash generation. Technicals are strong with clear upward momentum, but valuation remains difficult to justify due to negative earnings, and earnings-call commentary was mixed with guidance implying modest year-over-year pressure.
Positive Factors
Improving cash generation
Sustained positive operating and free cash flow provides durable internal funding for operations, product development, and working capital. This reduces reliance on external financing, supports deleveraging, and gives management flexibility to invest in automation and margin improvement over the next several quarters.
Recurring managed-services / bookings growth
ACV growth signals healthy demand for recurring managed services and contract renewals. A rising bookings base implies predictable revenue tails, higher customer stickiness, and better revenue visibility that can sustain margins and cash conversion as the company scales multicloud operations.
Product innovation and strategic client wins
New industry-focused offerings (EHR, AI LaunchPack) and high-profile client wins strengthen differentiated service capabilities and market credibility. These structural product investments expand addressable markets in regulated and sovereign segments and increase long-term deal pipeline quality.
Negative Factors
Top-line decline
A sustained revenue decline erodes scale benefits and makes fixed-cost absorption harder, pressuring margins and cash conversion. Unless revenue stabilizes or new higher-margin offerings gain traction, continued top-line contraction limits sustainable profitability and reinvestment capacity.
Deeply negative shareholders' equity
Negative equity constrains balance-sheet strength, raising solvency concerns and reducing capacity to raise capital on favorable terms. It limits strategic optionality for M&A or heavy upfront investments, and makes the firm more sensitive to cash-flow volatility over the medium term.
Low and compressing gross margins
Sub-20% gross margins and year-over-year compression reflect unfavorable mix and higher infrastructure resale costs. Persistently low gross margins limit operating leverage, cap the ability to fund R&D and sales, and make profitability highly dependent on cost saves or product mix shifts.
Rackspace Technology (RXT) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$481.48M
Dividend YieldN/A
Average Volume (3M)1.02M
Price to Earnings (P/E)―
Beta (1Y)2.33
Revenue Growth-2.98%
EPS Growth69.09%
CountryUS
Employees5,100
SectorTechnology
Sector Strength88
IndustrySoftware - Infrastructure
Share Statistics
EPS (TTM)-0.01
Shares Outstanding246,914,400
10 Day Avg. Volume1,190,569
30 Day Avg. Volume1,022,900
Financial Highlights & Ratios
PEG Ratio0.01
Price to Book (P/B)-0.19
Price to Sales (P/S)0.09
P/FCF Ratio2.56
Enterprise Value/Market Cap7.60
Enterprise Value/Revenue1.36
Enterprise Value/Gross Profit7.23
Enterprise Value/Ebitda18.55
Forecast
1Y Price Target
$2.17Price Target Upside11.28% Upside
Rating ConsensusHold
Number of Analyst Covering3
EPS Forecast (FY)-0.03
Revenue Forecast (FY)$2.72B
Rackspace Technology Business Overview & Revenue Model
Company DescriptionRackspace Technology, Inc. operates as a multi cloud technology services company worldwide. It operates through Multicloud Services and Apps & Cross Platform segments. The company's Multicloud Services segment provides public and private cloud managed services, which allow customers to determine, manage, and optimize the right infrastructure, platforms, and services; and professional services related to designing and building multi cloud solutions and cloud-native applications. Its Apps & Cross Platform segment includes managed applications; managed security services in the areas of security threat assessment and prevention, threat detection and response, rapid remediation, governance, and risk and compliance assistance across multiple cloud platforms, as well as privacy and data protection services, including detailed access restrictions and reporting; data services; and professional services related to designing and implementing application, security, and data services. Rackspace Technology, Inc. was founded in 1998 and is headquartered in San Antonio, Texas.
How the Company Makes MoneyRackspace generates revenue primarily through its subscription-based model, charging customers for managed cloud services and solutions. Key revenue streams include fees for cloud infrastructure, managed services, consulting, and support services. The company has established strategic partnerships with major cloud providers like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud, which enhance its service offerings and enable cross-selling opportunities. Additionally, Rackspace benefits from long-term contracts with its clients, providing a stable revenue base, and it focuses on upselling value-added services to existing customers to drive growth.
Rackspace Technology Earnings Call Summary
Earnings Call Date:Nov 06, 2025
(Q3-2025)
| % Change Since: |
Next Earnings Date:May 12, 2026
Earnings Call Sentiment Neutral
The earnings call presented a balanced overview with notable achievements in sales momentum, revenue growth, and innovative product launches. However, these positives were offset by revenue declines in the private cloud sector and decreased profit margins.Q3-2025 Updates
Positive Updates
Strong Sales Momentum
Bookings, as measured by annual contract value, grew 5% year over year, driven primarily by private cloud, which secured several key wins.
Exceeding Revenue Expectations
Total company GAAP revenue of $671 million was up 1% sequentially, surpassing the midpoint of guidance.
Innovative Product Launches
Introduced eight new releases in private cloud, including the electronic health record Cloud Enterprise and AI LaunchPack, showcasing innovation in cloud, AI, and security.
Successful Major Client Engagements
Signed significant deals with a leading global telecommunications provider and a sovereign government customer, enhancing Rackspace Technology's market reputation.
Public Cloud Revenue Growth
Public cloud revenues totaled $422 million, exceeding guided range, with a 1% increase year over year and sequentially.
Negative Updates
Private Cloud Revenue Decline
Private cloud revenue came in at $250 million, meeting guidance but down 3% year over year due to customer transitions off legacy platforms.
Decreased Gross Profit Margin
Non-GAAP gross profit margin was 19.9%, down 120 basis points year over year, driven by lower cost absorption in private cloud and higher infrastructure resale costs in public cloud.
Lower Non-GAAP Operating Margins
Private Cloud non-GAAP segment operating margin was down 180 basis points year over year, and Public Cloud non-GAAP operating margin was down 40 basis points year over year due to unfavorable product mix.
Company Guidance
During the Rackspace Technology, Inc. Q3 2025 earnings call, the company reported that their revenue, operating profit, and EPS met or exceeded the midpoint of their guided range. Private cloud revenue was $250 million, meeting the guidance midpoint but down 3% year over year. Public cloud revenue totaled $422 million, surpassing the high end of the guidance and increasing 1% both year over year and sequentially. The company's non-GAAP operating profit was $32 million, at the high end of the guided range, with a non-GAAP loss per share at $0.05. Looking ahead, Rackspace provided a Q4 revenue guidance range of $664 to $678 million, which is flat sequentially and down 2% year over year at the midpoint. Overall, the company is focusing on expanding AI offerings, modernizing critical workloads, and strengthening strategic partnerships, particularly in regulated and sovereign markets.Rackspace Technology Financial Statement Overview
Summary
Operations are stabilizing with positive TTM operating cash flow (~$151M) and free cash flow (~$91M), but revenue is down ~10%, profitability remains weak (negative operating profit and net margin), and the balance sheet is strained by deeply negative equity despite debt reduction.Income Statement
TTM (Trailing-Twelve-Months) revenue is down ~10% and profitability remains weak, with negative operating profit and a negative net margin. The company did improve meaningfully versus 2024 (EBITDA turned positive and losses narrowed sharply), but gross margin is still low (~19%) and the business has not yet returned to sustainable earnings.28
Negative
Balance Sheet
The balance sheet is the main pressure point: stockholders’ equity is deeply negative in TTM (Trailing-Twelve-Months), which limits financial flexibility and makes leverage risk harder to assess through equity-based measures. Debt has come down substantially versus 2024, but the combination of negative equity and ongoing losses keeps solvency risk elevated despite the smaller debt load.18
Very Negative
Cash Flow
Cash generation is a relative bright spot. TTM (Trailing-Twelve-Months) operating cash flow is solidly positive (~$151M) and free cash flow is positive (~$91M) with strong growth versus 2024, reflecting better cash discipline. However, cash flow is not consistently strong year-to-year (2024 free cash flow was negative), and cash conversion versus revenue remains modest.55
Neutral
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 2.69B | 2.74B | 2.96B | 3.12B | 3.01B |
| Gross Profit | 506.40M | 533.40M | 648.60M | 856.90M | 936.80M |
| EBITDA | 216.90M | -420.50M | -149.90M | -241.70M | 446.70M |
| Net Income | -225.80M | -858.20M | -837.80M | -804.80M | -218.30M |
Balance Sheet | |||||
| Total Assets | 2.80B | 3.05B | 4.10B | 5.46B | 6.33B |
| Cash, Cash Equivalents and Short-Term Investments | 105.80M | 144.00M | 196.80M | 228.40M | 272.80M |
| Total Debt | 3.28B | 3.28B | 3.38B | 3.85B | 3.97B |
| Total Liabilities | 4.02B | 4.06B | 4.25B | 4.83B | 5.00B |
| Stockholders Equity | -1.22B | -1.00B | -154.50M | 629.50M | 1.33B |
Cash Flow | |||||
| Free Cash Flow | 90.60M | -71.20M | 278.00M | 178.90M | 262.40M |
| Operating Cash Flow | 151.40M | 39.90M | 374.90M | 259.30M | 370.80M |
| Investing Cash Flow | -58.40M | -86.60M | -96.00M | -97.90M | -69.00M |
| Financing Cash Flow | -134.60M | -3.00M | -312.80M | -187.00M | -132.20M |
Rackspace Technology Technical Analysis
Positive
1.95
Price Trends
1.17
Positive
1.19
Positive
1.26
Positive
Market Momentum
0.26
Positive
58.26
Neutral
15.09
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RXT, the sentiment is Positive. The current price of 1.95 is above the 20-day moving average (MA) of 1.81, above the 50-day MA of 1.17, and above the 200-day MA of 1.26, indicating a bullish trend. The MACD of 0.26 indicates Positive momentum. The RSI at 58.26 is Neutral, neither overbought nor oversold. The STOCH value of 15.09 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for RXT.
Rackspace Technology Risk Analysis
Rackspace Technology disclosed 57 risk factors in its most recent earnings report. Rackspace Technology reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Rackspace Technology Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
67 Neutral | $1.54B | 22.24 | 5.77% | 4.71% | 13.36% | ― | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
56 Neutral | $481.48M | -1.03 | ― | ― | -2.98% | 69.09% | |
56 Neutral | $218.76M | -10.23 | -31.67% | ― | 15.73% | 40.14% | |
48 Neutral | $33.60M | -2.54 | -15.16% | ― | 9.16% | 20.13% |
* Technology Sector Average
RXT
Rackspace Technology
1.95
0.10
5.41%
TUYA
Tuya
2.44
-1.19
-32.78%
ZENV
Zenvia
0.64
-0.87
-57.68%
CISO
Cerberus Cyber Sentinel Corp
0.39
-0.41
-51.25%
BLZE
Backblaze
3.64
-1.76
-32.59%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.