Rackspace Technology Inc. (NASDAQ:RXT) stock plunged more than 29% on Thursday after the cloud services provider slashed its full-year revenue outlook, overshadowing new artificial intelligence initiatives and a partnership with Palantir Technologies Inc. (NASDAQ:PLTR).
Rackspace Cuts Revenue Outlook
Rackspace lowered its fiscal 2026 revenue forecast to a range of $2.45 billion to $2.55 billion, down from its previous outlook of $2.60 billion to $2.70 billion. The company also reduced its adjusted EBITDA guidance to $285 million to $295 million, down from $305 million to $315 million.
The company said the lower outlook reflects a planned exit from low-margin businesses, including public cloud resale and certain colocation and basic hosting services, as it redirects resources toward higher-margin enterprise AI opportunities. Rackspace also cited supply timing and geopolitical factors that are delaying near-term deployments.
The company expects second-quarter revenue of $641 million to $649 million and an adjusted loss of 8 cents to 11 cents per share. It projects Private Cloud revenue of $242 million to $246 million and Public Cloud revenue of $399 million to $403 million.
AI Expansion And Palantir Partnership
Despite the weaker near-term outlook, Rackspace unveiled an aggressive enterprise AI expansion strategy.
The company plans to increase Enterprise AI capacity to 15 megawatts by the end of 2027 and 30 megawatts by the end of 2028. At full deployment, Rackspace expects the business to generate $450 million-$600 million in annual revenue with adjusted EBITDA margins above 50%.
Rackspace also announced that Palantir Technologies has named the company a preferred partner for regulated and sovereign markets.
The companies signed a definitive operating framework to deploy Palantir Foundry and Artificial Intelligence Platform (AIP), building on a partnership announced earlier this year.
Rackspace said it has trained about 400 Palantir-certified professionals and has already completed its first joint customer deployment.
Chief Executive Officer Gajen Kandiah said recent partnerships with AMD, Palantir, Rubrik, Uniphore and VMware by Broadcom, together with the company’s planned capital raise, will help accelerate Rackspace’s enterprise AI strategy beginning in 2027. The specific financial terms of the raise were undisclosed.
Price Action
RXT Stock Price Activity: Rackspace Technology shares were down 29.03% at $4.665 at the time of publication on Thursday, according to Benzinga Pro data.
Image via Shutterstock
Recent Comments