Rackspace Revenue Falls After Public Cloud Drop

The Tip Desk · November 12, 2026 · 3 min read

Third-quarter revenue fell 9.3% to $609 million as Public Cloud declined 17.2%, while the company lifted its 2026 revenue outlook midpoint by $35 million.

Rackspace Technology (RXT), a global enterprise AI infrastructure and solutions provider, reported third-quarter revenue of $609 million, down 9.3% from $671 million a year earlier, reversing a 0.6% year-over-year increase in the second quarter.

Public Cloud, the larger of the two reportable segments, was the source of the turn. Revenue there was $349 million, down 17.2% from $422 million a year earlier, after a 2.3% year-over-year decline in the second quarter. Private Cloud revenue was $260 million, up 4.2% from $250 million a year earlier.

Chief Executive Officer Gajen Kandiah said the company continued to execute on its business and financial plan and reaffirmed its profit outlook for the full year while modestly increasing its revenue outlook. He said that as he enters his second year as CEO, the company has moved from establishing a strategy to operate the full enterprise AI stack to translating go-to-market efforts and existing capacity into commitments, deployments and high-margin operations.

GAAP loss from operations narrowed to $13 million from $34 million a year earlier. Selling, general and administrative expenses were $125.6 million, down 23.3% and 20.6% of revenue versus 24.4% a year earlier. Gross profit was $113.1 million, with gross margin at 18.6% of revenue versus 19.4% a year earlier.

Non-GAAP Operating Profit was $36 million, up 12% from $32 million a year earlier, after remaining unchanged year-over-year at $27 million in the second quarter. Net loss was $54 million, or $0.21 a share, compared with a $67 million loss, or $0.28 a share, a year earlier. Non-GAAP loss was $0.06 a share. Interest expense was $35.5 million.

Segment operating profit moved in opposite directions. Public Cloud segment operating profit was $27.2 million, with margin at 7.8% of segment revenue versus 3.3% a year earlier. Private Cloud segment operating profit was $53.4 million, with margin at 20.5% of segment revenue versus 26.9% a year earlier. Corporate functions recorded a $44.7 million loss.

Cash flow from operating activities was $36 million in the third quarter, after cash flow used in operating activities of $32 million in the second quarter. Trailing-twelve-month operating cash flow was $69 million. Capital expenditures were $104 million, compared with $28 million in the second quarter. Cash and cash equivalents were $108 million as of September 30, with total liquidity of $170 million including the revolving credit facility, versus $111 million cash and $202 million liquidity as of June 30.

The company raised its full-year 2026 revenue outlook by $35 million at the midpoint to $2,510 million to $2,560 million, from $2,450 million to $2,550 million. It maintained full-year Non-GAAP Operating Profit of $125 million to $135 million and Adjusted EBITDA of $285 million to $295 million. Full-year Private Cloud revenue is guided at $995 million to $1,015 million and Public Cloud at $1,515 million to $1,545 million. Non-GAAP loss is guided at $0.25 to $0.30 a share.

Kandiah’s comments on translating capacity into deployments sit against a quarter in which Public Cloud revenue fell 17.2% and Private Cloud held a 4.2% gain, while the company lifted its 2026 revenue midpoint by $35 million and left profit guidance unchanged.