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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:
$1.50
▲(257.14% Upside)
Action:ReiteratedDate:02/26/26
The score is held back primarily by weak financial fundamentals (declining revenue, ongoing losses, low margins, and negative equity) despite improved cash generation. Technicals are a key positive, with the stock trading above major moving averages and positive momentum indicators. Earnings-call messaging supports cautious optimism (guidance performance and public cloud strength), but margin pressure and soft private cloud trends limit upside, and valuation offers little support due to negative earnings.
Positive Factors
Recurring managed-services revenue
Rackspace's core business mixes time-bound projects with a substantial recurring managed-services base. Multi-year, subscription-like contracts increase revenue visibility, support customer stickiness and upsell, and create a durable cash flow foundation that sustains operations through cyclical IT spend.
Public cloud revenue growth and execution
Consistent growth and outperformance in public cloud revenue reflects effective partnership execution with hyperscalers and growing demand for multicloud managed services. This trend supports higher-scale engagements, repeatable delivery models and cross-sell into adjacent cloud, security and data/AI services over the medium term.
Improving free cash flow generation
Material FCF growth despite reported losses shows the firm's ability to convert operations into cash. Stronger cash generation improves flexibility for reinvestment, de-leveraging or funding platform upgrades, and reduces reliance on external financing, which is a durable support for operational continuity.
Negative Factors
Declining revenue and negative profitability
Sustained top-line contraction and negative net margins undermine scale economics and pressure operating leverage. Continued revenue declines make it harder to cover fixed delivery costs, compress gross and operating margins, and limit funds available for strategic investment or margin-restoring initiatives.
Stressed balance sheet and negative equity
Negative equity and elevated leverage heighten refinancing and solvency risks, reduce financial flexibility and can increase borrowing costs. This structural imbalance constrains the company's ability to pursue investments or withstand prolonged downturns without dilutive or costly recapitalization.
Sustained margin pressure from private cloud and mix
Worsening gross and segment margins driven by lower cost absorption in private cloud and higher resale costs indicate structural margin headwinds. If product mix and legacy transitions persist, margin recovery will be difficult without deeper automation, pricing power or cost restructuring.
Rackspace Technology (RXT) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$355.64M
Dividend YieldN/A
Average Volume (3M)1.02M
Price to Earnings (P/E)―
Beta (1Y)2.39
Revenue Growth-2.98%
EPS Growth69.09%
CountryUS
Employees5,100
SectorTechnology
Sector Strength88
IndustrySoftware - Infrastructure
Share Statistics
EPS (TTM)-0.01
Shares Outstanding243,592,120
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 Cap9.86
Enterprise Value/Revenue1.31
Enterprise Value/Gross Profit6.92
Enterprise Value/Ebitda31.76
Forecast
1Y Price Target
$2.17Price Target Upside415.87% 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
Operational stabilization is evident (TTM positive operating cash flow and positive free cash flow), but overall fundamentals remain pressured by ~10% TTM revenue decline, continued net losses/negative operating profit, low gross margin (~19%), and a balance sheet with deeply negative equity despite reduced debt.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 | -100.70M | -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 | 484.60M | 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
0.42
Price Trends
0.89
Positive
1.10
Positive
1.20
Positive
Market Momentum
0.16
Negative
63.75
Neutral
61.67
Neutral
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 0.42 is below the 20-day moving average (MA) of 0.77, below the 50-day MA of 0.89, and below the 200-day MA of 1.20, indicating a bullish trend. The MACD of 0.16 indicates Negative momentum. The RSI at 63.75 is Neutral, neither overbought nor oversold. The STOCH value of 61.67 is Neutral, 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 | $1.39B | 31.97 | 4.87% | 4.71% | 13.36% | ― | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
56 Neutral | $355.64M | -1.25 | ― | ― | -2.98% | 69.09% | |
56 Neutral | $216.95M | -8.55 | -31.85% | ― | 15.73% | 40.14% | |
48 Neutral | $43.63M | -0.72 | -14.38% | ― | 9.16% | 20.13% |
* Technology Sector Average
RXT
Rackspace Technology
2.28
-0.13
-5.39%
TUYA
Tuya
2.42
-1.13
-31.75%
ZENV
Zenvia
0.33
-1.62
-83.25%
CISO
Cerberus Cyber Sentinel Corp
0.38
-0.66
-63.08%
BLZE
Backblaze
3.84
-2.62
-40.56%
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.