Rackspace Technology announced a strategic pivot toward becoming a full enterprise artificial intelligence stack operator on July 9, 2026, leading to a downward revision of its fiscal year 2026 revenue outlook by $150 million due to capacity constraints and strategic exits from legacy services.
The San Antonio-based company adjusted its total fiscal year 2026 revenue projections to a midpoint of $2.5 billion, while lowering its adjusted EBITDA expectations by $20 million to a new midpoint of $290 million.
Private cloud revenue projections dropped by $25 million as the firm exits colocation and basic hosting to reserve capacity for enterprise AI.
Public cloud revenue projections fell by $125 million due to an exit from low-margin resale contracts.
Workforce Reduction and Restructuring
To fuel this transition, the company is reducing its global workforce by approximately 15 percent, incurring up to $19 million in restructuring charges to generate up to $85 million in annual savings for AI reinvestment.
For the second quarter of 2026, preliminary figures show expected revenue between $641 million and $649 million, alongside an expected GAAP net loss ranging from $91 million to $62 million.
As part of its structural shift, Rackspace finalized a definitive agreement with Palantir to deploy Palantir Foundry and AIP in mid-market, regulated, and sovereign environments, establishing Rackspace as a preferred partner.
The company has already achieved roughly 400 Palantir certifications across its technical and sales teams.
“The best-of-breed partnerships we have signed during 2026 – with AMD, Palantir, Rubrik, Uniphore and VMware by Broadcom – combined with the data center capacity and 25+ years of expertise that Rackspace brings to the table, represent a unique positional advantage for Rackspace.
Today’s capital raise announcement is meaningful because it will enable us to expedite our AI Enterprise strategy and unlock a meaningful revenue and EBITDA growth vector for Rackspace, starting in 2027,” said Gajen Kandiah, Chief Executive Officer of Rackspace Technology.
The company also secured a definitive agreement with AMD to deploy 30 megawatts of GPU and CPU capacity through 2028, aiming directly at regulated healthcare and corporate AI workloads.
Apollo Global Management expressed continued alignment with the structural shift toward secure private cloud environments.
“Apollo remains highly supportive of Rackspace’s strategy and believes the Company is taking the right steps to fund its next phase of growth.
We are excited about the opportunity ahead and remain aligned with Rackspace as it builds a differentiated platform for Enterprise AI,” said Aaron Sobel, Partner at Apollo Global Management and a member of Rackspace Technology's Board of Directors.
Wall Street firms reacted to the multi-year transformation, with UBS raising its price target for the company to $5.50 following the AMD deal and the opening of a new regional headquarters in Riyadh.
Meanwhile, RBC Capital lifted its price target to $4 while maintaining a neutral sector perform rating.
The firm plans to expand its total enterprise AI capacity to 15 megawatts by the end of 2027, eventually reaching 30 megawatts by 2028.
According to official corporate projections, the company expects to average $15 million to $20 million in annual revenue per megawatt once these installations are operational.
Rackspace Technology stock closed up 7.94 percent at $6.93 on Tuesday, July 7, 2026, ahead of the formal updated full-year forecast release.
