Rackspace Has Nearly Quadrupled in 2026 but a New Deal with AMD Could Keep the Gains Coming for RXT Stock

The cloud services space has been on fire in 2026. Investors are hungry for any company that can credibly slap “AI infrastructure” onto its story. We have seen legacy hosting names re‑rate almost overnight when they prove they are more than just rent‑a‑server shops.

Rackspace Technology (RXT) has become one of the market’s most unexpected AI winners in 2026. Just a few months ago, the stock was trading like a forgotten penny stock. Now, investors are suddenly treating the company as a serious artificial intelligence infrastructure play, and RXT is rocketing up almost 52% in morning trading today.

The reason is simple: Wall Street is aggressively rewarding any cloud company that can carve out a credible niche in enterprise AI. Rackspace may have just found one.

RXT Stock Has Turned Into an AI Momentum Rocket

Rackspace Technology shares surged more than 60% on May 7 after the company delivered a double catalyst: better-than-expected quarterly results and a major AI infrastructure partnership with Advanced Micro Devices (AMD).

The stock had already been on a historic run before the announcement. RXT traded below $1 earlier this year and has climbed above $5 after the news. That represents a gain of more than 433% year-to-date (YTD).

Rackspace is no longer just another struggling hosting company. Instead, the company is repositioning itself as a managed AI cloud provider focused on highly regulated industries like healthcare, finance, and government.

Even after the massive rally, Rackspace’s valuation still looks relatively low compared to most cloud and AI infrastructure peers.

The company currently trades at roughly 0.3 times sales, far below broader IT sector averages that sit closer to 2 times revenue or higher. That discount reflects years of weak growth, heavy debt, and profitability concerns.

At the same time, the low valuation is not accidental. Rackspace still carries more than $2.75 billion in debt, generates negative free cash flow, and continues to post adjusted losses. Investors are essentially betting on a turnaround rather than buying a proven growth machine.

The AMD Partnership Could Change Rackspace’s Story

Rackspace announced a memorandum of understanding with AMD (AMD) to help build a private enterprise AI platform governed by Rackspace.

The aim is to tie together EPYC CPUs and AMD Instinct GPUs with Rackspace's managed cloud offering and security capabilities. Unlike conventional GPU renting ventures, Rackspace is devoted to offering a completely managed AI environment that permits organizations to transfer their activities, administration, and adherence.

This opportunity is well articulated by CEO Gajen Kandiah in his claim that the infrastructure for AI must embed accountability and governance from the outset and not be retrofitted.

Investors knew of the potential right off the bat. The arrangement provides Rackspace with access to a booming segment of the artificial intelligence market without seriously threatening its hyperscalable rivals, such as Amazon (AMZN) S3 and Microsoft (MSFT) Azure.

As yet, the deal remains non-binding, meaning there is a risk of non-execution. Even the potential of being a specialized AI infrastructure player can remake the growth story for a firm whose combined enterprise value was at, or just shy of, distressed levels even a few months ago.

Rackspace’s Quarterly Results Showed Real Improvement

Underneath the AMD headlines, Rackspace’s first-quarter earnings report showed signs that the business may finally be stabilizing.

Revenue rose 2% year-over-year (YoY) to $678 million, slightly above Wall Street expectations. Public Cloud revenue climbed 7%, helping offset weakness in the Private Cloud segment.

More importantly, the company reported net income of $8 million, compared to a $72 million loss in the same quarter last year. That marks a meaningful improvement for a company that has spent years struggling with declining growth and persistent losses.

However, the report was not perfect. Free cash flow also remained deeply negative due to elevated capital spending.

Management reaffirmed its full-year outlook, guiding for revenue between $2.6 billion and $2.7 billion alongside non-GAAP operating profit of $160 million to $170 million.

Rackspace is also expanding beyond AMD. Earlier this year, the company partnered with Palantir Technologies (PLTR) to host and manage enterprise deployments of Foundry and Palantir’s AI platform. The company says the pipeline for those offerings is already growing internationally.

Analysts Remain Cautious Despite the Rally

Wall Street analysts are still skeptical even after RXT stock’s explosive run.

Several firms continue to focus on Rackspace’s debt burden, inconsistent profitability, and execution risks. RBC Capital previously maintained a "Sector Perform" rating, while other firms have stayed neutral or bearish on the shares.

The bigger issue is that the stock has now surged far beyond most published analyst price targets. The consensus target of $2.17 sits well below current trading levels, meaning analysts will likely need to revise estimates higher if the AI momentum continues.

That leaves Rackspace in a fascinating position. The company finally has an AI narrative investors believe in, and the business itself is showing early signs of stabilization. But the balance sheet is still heavily leveraged, profitability remains fragile, and the AMD agreement has not yet turned into binding revenue contracts.

If Rackspace successfully executes on its enterprise AI strategy, the rally may have further room to run. If the AI excitement fades before real revenue materializes, the stock could cool off just as quickly as it exploded higher.