10-Q · May 8, 2026
Rackspace Technology reported a Q1 2026 revenue of $678.1 million, surpassing expectations of $660.8 million, along with a net income of $8.3 million, reflecting a significant recovery from a loss of $71.5 million in…
Earnings analysis · 10-Q
RXT earnings analysis
Filed August 10, 2026 · Our reading of the company's report
The latest report
Rackspace delivered modest revenue growth to $670.1 million, but profitability weakened materially as gross margin declined to 17.1%, operating margin reached negative 4.9%, and GAAP diluted EPS fell to negative $0.27.…
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Rackspace delivered modest revenue growth to $670.1 million, but profitability weakened materially as gross margin declined to 17.1%, operating margin reached negative 4.9%, and GAAP diluted EPS fell to negative $0.27. Public Cloud revenue declined but profitability improved, while Private Cloud revenue grew 5.5% yet segment operating profit fell 6.5%, indicating margin pressure in the higher-margin business. Liquidity is supported by $110.6 million of cash and $91.5 million of remaining Revolver availability, but operating cash flow was negative $26.4 million for the first six months against $2,311.3 million of debt principal. The Enterprise AI strategy offers growth potential but requires significant capital, including approximately $75.0 million for the initial AMD GPU deployment, alongside execution, partner, utilization and financing risks.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
Where revenue came from
The business segments reported by the company.
Shares of the segments disclosed in this filing, largest first.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
Reported figures
- Earnings per share
- $-0.27
What stood out
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Revenue grew modestly year over year
Revenue increased to $670.1 million from $666.3 million, up $3.8 million or 0.6% year over year. Six-month revenue was $1,348.2 million, up 1.2% from $1,331.7 million.
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Public Cloud profitability improved
Public Cloud revenue declined 2.3% to $406.8 million, but segment operating profit increased 17.3% to $19.0 million and margin expanded to 4.7% from 3.9%.
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Six-month operating loss narrowed
Six-month loss from operations improved to $51.0 million from $63.5 million, while six-month Non-GAAP Operating Profit increased to $58.1 million from $52.9 million.
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Cash and receivables increased
Cash and cash equivalents increased to $110.6 million from $105.8 million at December 31, 2025, while accounts receivable increased to $278.7 million from $266.5 million.
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Debt repurchases reduced principal
The company repurchased $108.0 million of debt principal during the first six months and recorded a $62.5 million gain on debt extinguishment.
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Receivables facility was extended
The Receivables Purchase Agreement was amended to extend its termination date to July 2, 2029 or six months before Revolving Credit Facility maturity, and to increase the receivables-sale limit from $300.0 million to $350.0 million.
What to watch
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Margin compression worsened
Gross margin fell to 17.1% from 19.4% year over year, while operating margin deteriorated to negative 4.9% from negative 3.8%. Gross profit declined $14.4 million to $114.8 million.
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Losses and interest expense increased
GAAP diluted EPS declined to negative $0.27 from negative $0.23, and net loss increased to $67.5 million from $54.5 million. Interest expense rose 60.6% to $34.2 million after the interest-rate swap matured and Revolver borrowings increased.
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Operating cash flow turned negative
Net cash used in operating activities was $26.4 million in the first six months versus $21.0 million provided in the prior-year period. Capital expenditures increased to $62.9 million from $57.6 million, implying approximately negative $89.3 million of operating cash flow less total capital expenditures when using reported total capex.
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Leverage and liquidity remain significant
As of June 30, 2026, aggregate debt principal was $2,311.3 million, including $260.0 million drawn on a $375.0 million Revolving Credit Facility, leaving $91.5 million of available commitments.
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AI rollout depends on partners and capital
The company added a risk that its Enterprise AI business depends on AMD and other key partners; it has committed to dedicate an aggregate 30 megawatts of data-center capacity for AMD products, with the initial deployment targeted at nearly 2 megawatts and approximately $75.0 million of associated capital expenditures.
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Restructuring and litigation uncertainty
The company added risks from a planned workforce realignment expected to terminate approximately 15% of its global workforce, with estimated one-time 2026 expenses of $14.0 million to $19.0 million. It also disclosed a securities class action filed on July 29, 2026 covering purchasers from May 7, 2026 through July 8, 2026, with no loss estimate recorded.
Management's outlook
The 10-Q does not provide company-wide revenue or EPS guidance. It does disclose quantitative forward plans, including approximately 15% workforce reductions, estimated 2026 workforce-realignment expenses of $14.0 million to $19.0 million, and an initial AMD GPU deployment targeted at nearly 2 megawatts with approximately $75.0 million of associated capital expenditures.
Earlier filings 4
10-K · March 6, 2026
Rackspace positions itself as a "leading end-to-end hybrid cloud and AI solutions company," focused on governed private cloud and production AI deployments for regulated and mission-critical customers. The company…
10-Q · May 12, 2025
Rackspace reported quarter revenue of $665.4 million and a net loss of $71.5 million (EPS $(0.31)) for the three months ended March 31, 2025. Results show a meaningful improvement versus the prior-year quarter driven by…
10-K · March 21, 2025
Rackspace positions itself as a pure‑play hybrid cloud and AI solutions provider with differentiated automation (Rackspace Fabric) and deep partnerships with hyperscalers. Financials show stable revenue run‑rate…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.