Rackspace Technology, Inc. Common Stock 2026 Q2 Earnings Call
Review the key takeaways and the transcript of this earnings call.
- Rackspace Technologies reported second quarter 2026 GAAP revenue of $670 million, up 1% year over year, driven by timing impacts in private cloud revenue recognition.
- Private cloud revenue was $263 million, up 5% year over year, ahead of guidance due to timing of revenue recognition from a long-term customer contract.
- Public cloud revenue was $407 million, down 2% year over year but modestly ahead of guidance due to higher consumption from hyperscaler partners.
- Non-GAAP gross margin was 18.6%, down 120 basis points year over year.
- Non-GAAP operating profit was $27 million, flat year over year.
- Non-GAAP loss per share was $0.08 compared to $0.06 in the prior year quarter.
- Cash flow from operations was negative $32 million and free cash flow was negative $48 million, reflecting seasonal uses and strategic vendor prepayments.
- Rackspace repurchased $11.2 million in principal of senior notes, reducing interest expense.
- Private cloud non-GAAP gross margin was 32.3%, down 460 basis points year over year, and segment operating margin was 21.8%, down 280 basis points.
- Public cloud non-GAAP gross margin was 9.7%, up 10 basis points year over year, with segment operating margin of 4.7%, up 80 basis points.
- Rackspace signed multi-year agreements with AdventHealth and a top UK banking firm, expanding managed services in regulated industries.
- The company launched rack AI, an inference and fine tuning platform with a simple API, and continues to build enterprise AI capabilities.
- Rackspace entered partnerships with AMD and Palantir to build enterprise AI infrastructure, planning to deploy 30MW of AMD-based compute from late 2026 through 2028.
- The first deployment of nearly 2MW is targeted for completion by end of 2026 with capital expenditures of approximately $75 million.
- Rackspace expects to ramp to 15MW capacity by end of 2027 and 30MW by end of 2028, with revenue per megawatt of $15 to $20 million and EBITDA margins above 50% in enterprise AI.
- Full year 2026 GAAP revenue guidance is $2.45 billion to $2.55 billion, down 7% year over year due to strategic exit of low margin public cloud revenue.
- Private cloud revenue is expected to be $1.0 billion to $1.05 billion, up 4%, and public cloud revenue $1.45 billion to $1.5 billion, down 13%.
- Total non-GAAP operating profit is expected to be $125 million to $135 million, up 3%, and adjusted EBITDA $285 million to $295 million, up 5%.
- Non-GAAP loss per share is expected to be $0.25 to $0.30, with a non-GAAP tax rate of 26%.
- Free cash flow is expected to be positive $50 million to $70 million for the full year 2026.
STOCKNOW INSIGHTS
Continue with outlook and guidance.
Log in to unlock executive comments and Q&A highlights.
Log in for the full summaryStockNow uses AI to translate and summarize earnings calls. Accuracy and completeness are not guaranteed.
Transcript
Preview the first five paragraphs, organized by speaker.
Thank you for standing by, and welcome to Rackspace's second quarter 2026 earnings conference call. Currently, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. To remove yourself from the queue, please press star one one again. I would now like to hand the call over to Sagar Hebbar, investor relations.
Please go ahead. Thank you, and welcome to Rackspace Technology's second quarter 2026 earnings conference call.
I'm Sagar Hebbar, head of investor relations. Joining me today are Gajen Kandiah, our Chief Executive Officer, and Mark Marino, our Chief Financial Officer. As a reminder, certain comments we make on this call will be forward-looking, including, without limitation, statements regarding our financial guidance and outlook, our enterprise AI deployment plans, capacity targets and timelines, expected capital expenditures, revenue per megawatt, and margin assumptions, our financing plans, cash flow expectations, our business strategy and product roadmap, as well as shifts in our business mix. These statements involve risks and uncertainties which could cause actual results to differ materially. A discussion of these risks and uncertainties is included in the Risk Factors and Forward-Looking Statements sections of our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q filed with the SEC.
Rackspace Technology assumes no obligation to update the information presented on the call except as required by law. Our presentation includes certain non-GAAP financial measures and adjustments to these measures which we believe provide useful information to our investors. In accordance with SEC rules, we have provided a reconciliation of these measures with their most directly comparable GAAP measures in the earnings press release and presentation, both of which are available on our investor relations website. I will now turn the call over to Gajen for an update on the business.
Thank you, Sagar. Good morning, everyone, and thank you for joining us. I want to start by reviewing our progress toward a clear strategic goal: becoming the accountable provider and operator of the full enterprise AI stack from core to cloud to edge. For more than 25 years, enterprises have trusted Rackspace to operate complex mission-critical infrastructure across Private Cloud, Public Cloud, and data centers worldwide. As enterprise AI becomes operational infrastructure, the things that have always mattered most to our customers, governance, security, sovereignty, resilience, and accountability matter even more. McKinsey & Company estimates that global inferencing workloads will surpass training by the end of 2026 and represent two-thirds of all AI workloads by 2030. Rackspace has tens of thousands of customers across its install base, and many are starting to harness inference to run their businesses more effectively.
FULL TRANSCRIPT
Continue the full translated transcript in StockNow.
Log in to unlock every statement, the English original, and speaker-by-speaker history.
Log in for the full transcriptCall participants
6 people spoke on this call — only 2 are shown here.
PARTICIPANT LIST
View participant details in StockNow.
Log in to see executives and analysts, their roles, and complete speaking history.
Log in to view all participantsKeep exploring