Rackspace Technology NASDAQ: RXT reported first-quarter 2026 revenue growth and reaffirmed its full-year outlook, while management emphasized the company’s shift toward managed, governed enterprise artificial intelligence infrastructure for regulated and sovereign environments.
Chief Executive Officer Gajen Kandiah said the quarter reinforced Rackspace’s strategy of providing “governed infrastructure as the foundation,” an integrated partner technology stack and “one accountable operator” running customer environments end to end. The company highlighted momentum in private cloud deals across healthcare, telecom and financial services, as well as new and expanded partnerships tied to AI workloads.
Revenue rises as public cloud offsets private cloud timing
Chief Financial Officer Mark Marino said total company GAAP revenue for the first quarter was $678 million, up 2% year over year, driven by public cloud performance. Non-GAAP gross profit margin was 18.3% of GAAP revenue, down 160 basis points from a year earlier, which Marino attributed to private cloud revenue timing dynamics.
Non-GAAP operating profit was $31 million, up 20% year over year, reflecting continued operating expense discipline. Non-GAAP loss per share was $0.06, flat compared with the prior-year period. Cash flow from operations was $5 million, while free cash flow was negative $9 million.
Rackspace ended the quarter with $94 million in cash and $295 million in total liquidity, including the undrawn portion of its revolving credit facility. Marino said the company repurchased approximately $96 million of debt during the quarter, which he said reduces interest burden and supports its deleveraging efforts.
Private cloud revenue declines, but margin improves
Private cloud GAAP revenue was $235 million in the quarter, down 6% year over year. Marino said the decline reflected the timing of a large deal onboarding within the healthcare vertical, consistent with comments the company made in the prior quarter. Non-GAAP gross margin in private cloud was 36%, down 110 basis points year over year, due to lower fixed cost absorption on reduced revenue. Segment operating margin was 24.7%, up 30 basis points from a year earlier.
Kandiah said private cloud demand remains strongest in regulated industries where governance, reliability and compliance are critical. He pointed to a long-term recommitment from a global online trading platform, a multi-year agreement with a U.K. NHS Foundation Trust, and an expanded relationship with AdventHealth. Rackspace already hosts and manages AdventHealth’s Epic electronic health record infrastructure and will now host and manage more than 400 additional workloads on Rackspace Private Cloud, according to Kandiah.
Rackspace also cited sovereign cloud work, including its partnership with SDAIA in Saudi Arabia and BT’s selection of Rackspace as the infrastructure foundation for BT Sovereign Cloud in the U.K.
Public cloud grows on services revenue
Public cloud GAAP revenue was $443 million, up 7% year over year. Services revenue grew 10% year over year, which management said reflected the company’s continued move toward higher-value engagements. Non-GAAP gross margin in public cloud was 8.9%, down 60 basis points year over year due to higher infrastructure costs. Segment operating margin was 4.7%, up 50 basis points, helped by operating expense efficiency.
Kandiah said public cloud wins included a large enterprise-wide multi-cloud transformation for a healthcare technology organization, as well as work as the implementation and managed services delivery engine for an AI-native database-as-a-service partner operating across public and private cloud environments.
AMD memorandum adds to AI infrastructure push
Rackspace announced a memorandum of understanding with AMD during the call, which Kandiah described as establishing “a new category of governed enterprise AI infrastructure.” He said the planned collaboration would integrate AMD Instinct GPU accelerators, AMD EPYC CPUs and AMD’s ROCm software ecosystem into a fully managed stack designed for enterprise, healthcare, financial services and sovereign use cases.
Management said AMD would be the launch silicon across four integrated capabilities: Enterprise AI Cloud, Enterprise Inference Engine, inference as a service and bare metal accelerated compute. Kandiah said production inference requires both GPUs and CPUs, depending on the workload, and that AMD’s CPU and GPU portfolio would allow Rackspace to route workloads to the appropriate compute architecture.
The company cautioned that the AMD memorandum is non-binding and that no definitive agreement has been reached. Sagar Hebbar, head of investor relations, said discussions remain preliminary and there is no assurance that definitive agreements, financing or the expected benefits will materialize. Kandiah later told analysts that Rackspace is “well along the way” but still needs to finalize financing.
Rackspace also highlighted partnerships with Palantir, Uniphore, Broadcom’s VMware Cloud Foundation 9, Dell and Rubrik. Kandiah said Rackspace closed its first joint Palantir deal in 41 days with a U.S.-based solar tracking manufacturer, deploying AI-enabled workflows on Palantir Foundry to reduce the customer’s quoting cycle by 94%. Rackspace also expanded its relationship with Uniphore to add agent-based workflows and context-aware inference to its governed AI stack.
Full-year guidance reaffirmed
Marino said Rackspace is reaffirming its full-year 2026 guidance in its entirety, including revenue, EBITDA and cash flow outlook. He said the first-quarter private cloud timing was already reflected in the company’s annual plan.
During the question-and-answer session, Marino said the AMD-related opportunity is not materially factored into 2026 guidance because of supply chain and delivery timing. He also said the work is expected to be “largely on par, if not accretive” to existing private cloud gross margin rates.
Asked about capital structure, Marino said deleveraging remains the company’s top priority. He said Rackspace is focused on debt maturities due in mid-2028 and aims to reduce leverage through operating leverage, EBITDA growth and cash flow. Marino said the company does not intend to add expensive debt as it structures new deals and is looking for ways to reduce leverage and improve refinanceability over the next roughly 18 months.
About Rackspace Technology NASDAQ: RXT
Rackspace Technology NASDAQ: RXT is a leading provider of managed multi-cloud solutions and services, specializing in the deployment, management and optimization of public and private cloud environments. The company helps organizations design and operate applications across platforms such as Amazon Web Services (AWS), Microsoft Azure, Google Cloud and its own private cloud infrastructure. Rackspace's core offerings include cloud migration, application modernization, data protection, security services and 24x7x365 operational support.
Beyond cloud hosting, Rackspace offers a range of professional services designed to accelerate digital transformation initiatives.
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