Rackspace Lowers Full-Year Guidance
Rackspace Technology (NASDAQ:RXT) revised its fiscal 2026 outlook lower, reducing its revenue forecast by $150 million and cutting its adjusted EBITDA guidance by $20 million, while outlining plans to accelerate its enterprise artificial intelligence business.
The company attributed the weaker outlook to ongoing supply constraints, geopolitical uncertainty and a strategic decision to exit lower-margin operations.
Rackspace now expects full-year revenue of between $2.45 billion and $2.55 billion, compared with its previous forecast of $2.6 billion to $2.7 billion.
Adjusted EBITDA is now projected at $285 million to $295 million, down from the prior range of $305 million to $315 million. Despite the lower guidance, the company expects its adjusted EBITDA margin to remain around 12%.
Strategic Business Changes Affect Revenue
Most of the revenue reduction comes from Rackspace’s public cloud business, which accounts for approximately $125 million of the revised outlook.
The company said it is reducing lower-margin cloud resale activity as hyperscale providers increasingly move customers to direct contracts.
The remaining $25 million reduction relates to the private cloud segment, where Rackspace is scaling back colocation and traditional hosting services to free up capacity for enterprise AI workloads.
For the second quarter of 2026, preliminary results indicate revenue of between $641 million and $649 million, a GAAP net loss ranging from $91 million to $62 million, and adjusted EBITDA of $58 million to $62 million.
Palantir Partnership Supports AI Expansion
Separately, Rackspace announced a definitive agreement with Palantir to deploy Palantir Foundry and Artificial Intelligence Platform (AIP) across mid-market, regulated and sovereign cloud environments.
Under the agreement, Rackspace has been designated as a preferred deployment partner and currently has approximately 400 Palantir-certified professionals across its workforce.
The companies also revealed they completed their first joint implementation for a U.S.-based solar tracking manufacturer in less than two months.
Rackspace shares rose 8% following the announcement.
AI Growth Targets Extended
The company also announced a capital raise, although financial details were not disclosed.
Looking ahead, Rackspace plans to increase its enterprise AI infrastructure to 15 megawatts by the end of 2027 and expand capacity to 30 megawatts by the end of 2028.
At full deployment, management expects the AI business to generate annual revenue of between $450 million and $600 million, with adjusted EBITDA margins exceeding 50%.