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Rackspace Technology (RXT)
NASDAQ:RXT
US Market

Rackspace Technology (RXT) AI Stock Analysis

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Rackspace Technology

(NASDAQ:RXT)

Rating:47Neutral
Price Target:
$1.50
▲(12.78%Upside)
Rackspace Technology's overall stock score is primarily impacted by weak financial performance, with declining revenues and negative profitability. Valuation concerns further weigh down the score due to a negative P/E ratio. However, the earnings call provided some optimism with strong performance in key metrics and strategic partnerships, which partially offsets the negatives.
Positive Factors
Capital Funding
Rackspace does not need to raise additional capital to fund its business plan for the next 12-24 months.
Guidance
Rackspace reported strong bookings and issued positive guidance for the second quarter.
Negative Factors
Contract Adjustments
The shift to larger contracts will take more time for Rackspace to adjust to, affecting its performance rating.
Perception of Turnaround
Rackspace's recent bookings success is taking longer to build into revenue, impacting the perception of its turnaround.
Performance Rating
Analyst downgrades Rackspace shares to Market Perform from Outperform due to longer-than-expected path to improved growth and free cash flow.

Rackspace Technology (RXT) vs. SPDR S&P 500 ETF (SPY)

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 Technology makes money primarily through its suite of cloud management and professional services. The company generates revenue by offering subscription-based managed services, wherein clients pay for continuous support and management of their cloud environments. Additional revenue streams include consulting services for cloud strategy and implementation, as well as project-based engagements for cloud migrations and optimizations. Rackspace's partnerships with leading cloud providers like Amazon Web Services, Microsoft Azure, and Google Cloud also enhance its service offerings, allowing it to leverage these platforms to provide tailored solutions to its clients. Furthermore, Rackspace may earn revenue from reselling cloud infrastructure services and through its proprietary tools that help automate and optimize cloud operations.

Rackspace Technology Earnings Call Summary

Earnings Call Date:May 08, 2025
(Q1-2025)
|
% Change Since: -7.64%|
Next Earnings Date:Aug 12, 2025
Earnings Call Sentiment Positive
Rackspace's earnings call reflected a positive sentiment with strong performance across key metrics, successful strategic partnerships, and growth in important sectors like Public Cloud and regulated industries. However, challenges such as revenue declines in Private Cloud and macroeconomic uncertainties were noted.
Q1-2025 Updates
Positive Updates
Exceeded Expectations Across All Key Metrics
Rackspace's first quarter 2025 results exceeded expectations for revenue, profit, and EPS, marking the 11th consecutive quarter of meeting or exceeding guidance.
Strategic Partnership with Rubrik
Rackspace announced a strategic partnership with Rubrik to launch the Cyber Recovery Cloud, expected to drive revenue starting in 2025.
Public Cloud Bookings Growth
Public Cloud bookings grew 16% year-over-year, driven by a 26% increase in The Americas.
Operational Turnaround and Efficiency Improvement
Non-GAAP operating profit grew 83% year-over-year, with significant growth in cash flow from operations and free cash flow.
Expansion in Regulated Industries
Rackspace secured wins in the healthcare and energy sectors, including a new deal with a healthcare provider and a European energy company.
Negative Updates
Revenue Decline in Private Cloud
Private Cloud revenue for the first quarter was $250 million, down single-digits year-over-year due to customers rolling off older generation offerings.
Macroeconomic Uncertainty
The broader macroeconomic environment may impact onboarding timelines for recently closed deals and customer decision cycles in the short term.
Decline in Total Company GAAP Revenue
Total company GAAP revenue was $665 million, down 4% year-over-year, meeting the high-end of guidance despite the decline.
Company Guidance
In the first quarter of 2025, Rackspace Technology exceeded expectations across all key metrics, with revenue at the high-end of guidance and profit and EPS surpassing the guidance range. The company reported a 9% year-over-year growth in bookings, measured by annual contract value, notably achieving a 13% increase in The Americas. Non-GAAP operating profit saw an impressive 83% year-over-year growth, accompanied by significant growth in cash flow from operations and free cash flow. The company also highlighted its strategic partnership with Rubrik to launch Cyber Recovery Cloud, which is expected to drive revenue starting in 2025. Despite macroeconomic uncertainties, Rackspace remains poised to capitalize on secular trends with its strategic focus on Private Cloud and AI, evidenced by a 20% hypothetical growth in Private Cloud bookings if certain deals closed earlier, and a 16% year-over-year increase in Public Cloud bookings. 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, and a non-GAAP loss per share forecasted at $0.04 to $0.06.

Rackspace Technology Financial Statement Overview

Summary
Rackspace Technology faces significant financial challenges with declining revenues, negative profitability, and a heavily leveraged balance sheet. However, there are some positive cash flow trends, indicating better cash generation relative to accounting losses.
Income Statement
45
Neutral
Rackspace Technology's income statement shows declining revenue and profitability. The TTM revenue growth rate is negative, reflecting a decrease from the previous year. The gross profit margin has also decreased over time, indicating a squeeze on profitability. EBIT and net profit margins are negative, highlighting ongoing operational challenges and losses.
Balance Sheet
30
Negative
The balance sheet reveals significant weaknesses, with negative stockholders' equity indicating financial distress. The debt-to-equity ratio is not applicable due to negative equity, but high total debt poses a risk. The equity ratio is negative, emphasizing financial instability and high leverage.
Cash Flow
50
Neutral
Despite negative net income, Rackspace Technology shows some positive cash flow trends. The operating cash flow to net income ratio is positive, indicating better cash generation relative to accounting losses. Free cash flow has improved in the TTM period, although past trends show volatility.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue2.71B2.74B2.96B3.12B3.01B2.71B
Gross Profit527.50M533.40M648.60M856.90M936.80M984.40M
EBITDA79.90M-362.90M-149.90M-248.20M421.40M479.10M
Net Income-289.10M-858.20M-837.80M-804.80M-218.30M-245.80M
Balance Sheet
Total Assets2.97B3.05B4.10B5.47B6.33B6.38B
Cash, Cash Equivalents and Short-Term Investments128.00M144.00M196.80M241.00M272.80M104.70M
Total Debt492.20M3.28B3.38B3.90B4.03B4.02B
Total Liabilities4.04B4.06B4.25B4.84B5.00B4.99B
Stockholders Equity-1.07B-1.00B-154.50M629.50M1.33B1.38B
Cash Flow
Free Cash Flow51.50M-71.20M278.00M178.90M262.40M200.00K
Operating Cash Flow142.80M39.90M374.90M259.30M370.80M116.70M
Investing Cash Flow-84.30M-86.60M-96.00M-97.90M-69.00M-128.40M
Financing Cash Flow-211.80M-3.00M-312.80M-187.00M-132.20M29.90M

Rackspace Technology Technical Analysis

Technical Analysis Sentiment
Neutral
Last Price1.33
Price Trends
50DMA
1.27
Positive
100DMA
1.67
Negative
200DMA
2.09
Negative
Market Momentum
MACD
<0.01
Negative
RSI
55.53
Neutral
STOCH
63.57
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RXT, the sentiment is Neutral. The current price of 1.33 is above the 20-day moving average (MA) of 1.27, above the 50-day MA of 1.27, and below the 200-day MA of 2.09, indicating a neutral trend. The MACD of <0.01 indicates Negative momentum. The RSI at 55.53 is Neutral, neither overbought nor oversold. The STOCH value of 63.57 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral 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

Overall Rating
UnderperformOutperform
Sector (56)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
71
Outperform
$1.02B-15.69%8.38%-278.88%
70
Neutral
$4.10B-12.09%11.79%35.35%
SWSWI
68
Neutral
$3.20B28.867.87%5.03%
67
Neutral
$479.48M-0.32%18.51%97.57%
60
Neutral
$462.34M5.47-94.58%-2.75%-4.13%
56
Neutral
$3.18B5.02-5.68%5.66%8.05%-41.83%
RXRXT
47
Neutral
$303.86M81.52%-6.14%67.53%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
RXT
Rackspace Technology
1.33
-1.46
-52.33%
YEXT
Yext
8.22
3.14
61.81%
BAND
Bandwidth
16.11
-0.74
-4.39%
TENB
Tenable Holdings
33.64
-10.14
-23.16%
SWI
SolarWinds
18.49
6.49
54.08%
CCSI
Consensus Cloud Solutions
23.66
6.92
41.34%

Rackspace Technology Corporate Events

Executive/Board ChangesShareholder Meetings
Rackspace Technology Holds Annual Stockholder Meeting
Neutral
Jun 20, 2025

On June 20, 2025, Rackspace Technology held its annual meeting of stockholders, where 85.72% of shares were represented. During the meeting, stockholders elected four directors to the board, ratified KPMG LLP as the independent accounting firm for 2025, and approved executive compensation in an advisory vote.

The most recent analyst rating on (RXT) stock is a Hold with a $2.50 price target. To see the full list of analyst forecasts on Rackspace Technology stock, see the RXT Stock Forecast page.

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.Date of analysis: Jun 28, 2025