Rackspace Technology stock plunges 29% despite Palantir AI partnership as guidance cuts spark sell-off

Why Is Rackspace Technology Stock Sinking Thursday? - Rackspace Technology (NASDAQ:RXT)

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 Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.

Why is Rackspace Technology stock plunging today? By Investing.com

Investing.com -- Shares of Rackspace Technology fell 23.6% in morning trading to reach $5.03 after the company issued a sweeping downward revision to its fiscal 2026 financial outlook, erasing an early pre-market rally that had been fueled by a strategic AI partnership announcement. Management trimmed full-year revenue guidance to a range of $2.45 billion to $2.55 billion -- a $150 million reduction from the prior forecast of $2.6 billion to $2.7 billion -- while also cutting adjusted EBITDA expectations to $285 million to $295 million, down from the previous $305 million to $315 million range. The company attributed the cuts to supply constraints, geopolitical headwinds, and a deliberate retreat from lower-margin business lines. The guidance disappointment was compounded by a weaker-than-expected second-quarter revenue outlook of $641 million to $649 million, which fell short of the $657 million analyst consensus estimate. Adding further pressure, Rackspace simultaneously filed a Form S-3ASR automatic shelf registration and launched a $250 million at-the-market equity offering through Goldman Sachs -- a move that raised immediate dilution concerns among investors already rattled by the earnings outlook. These developments overshadowed what would otherwise have been a positive catalyst: a definitive agreement with Palantir Technologies to deploy Palantir Foundry and AIP in mid-market, regulated, and sovereign environments, naming Rackspace a preferred partner in healthcare, financial services, and energy verticals. The broader market offered no shelter, as the S&P 500 and Nasdaq both edged modestly higher on the day, underscoring that the sell-off was entirely driven by company-specific news rather than any macro or sector-wide headwinds. Cloud and AI infrastructure peers did not experience comparable pressure, further isolating the RXT decline as a reaction to its own guidance revision and capital raise. Taken together, the triple blow of a steep revenue guidance cut, a below-consensus near-term revenue outlook, and a dilutive equity offering proved too much for the stock to absorb -- even with a marquee AI partnership in hand. The session's intraday range, from a high of $6.42 to a low of $4.52, illustrates just how violently sentiment reversed once the full scope of the financial update was digested by the market. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.