Rackspace Stock Plummets Over 10% on Slashed Full-Year Guidance

Rackspace Technology (NASDAQ: RXT) shares plummeted more than 10% in Thursday trading after the cloud services provider drastically cut its full-year financial guidance, overshadowing the simultaneous announcement of a high-profile artificial intelligence partnership with Palantir Technologies (NASDAQ: PLTR).

Guidance Slashed on Strategic Shifts

The company significantly lowered its fiscal 2026 revenue forecast to a range of $2.45 billion to $2.55 billion, a substantial reduction from its prior estimate of $2.6 billion to $2.7 billion. The outlook for adjusted EBITDA was also trimmed to between $285 million and $295 million, down from a previous range of $305 million to $315 million.

Management attributed the $150 million reduction in its top-line forecast to a deliberate strategy of exiting low-margin business lines, along with broader industry pressures. Key factors include:

• Public Cloud: A $125 million guidance cut as Rackspace moves away from low-margin resale operations and as major cloud providers increasingly work directly with customers.
• Private Cloud: A $25 million reduction driven by the company's exit from certain colocation and basic hosting services.
• Macroeconomic Headwinds: The company also cited supply chain timing and geopolitical friction as near-term pressures on delivery schedules.

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Q2 Outlook Falls Short

Adding to investor concerns, Rackspace's outlook for the second quarter of fiscal 2026 also missed analyst expectations. The company projects revenue to be between $641 million and $649 million, below the consensus estimate of $657 million. It anticipates an adjusted loss per share in the range of $0.08 to $0.11, compared to the Wall Street estimate of a $0.11 loss per share.

Palantir AI Partnership Overlooked

The bleak financial update completely overshadowed what would have otherwise been positive news. On the same day, Rackspace announced a definitive agreement to deploy Palantir’s Foundry and AIP platforms for clients in mid-market, regulated, and sovereign environments. According to the announcement, the integration is progressing rapidly, with Rackspace securing approximately 400 Palantir certifications and closing its first joint deployment in less than two months. However, the market's focus remained squarely on the company's deteriorating financial outlook.