Rackspace Slashed Revenue Guidance, Sending RXT Stock Plummeting. What Comes Next.

Rackspace Technology (RXT) shares came under pressure yesterday following an 8-K filing in which management scaled back expectations for full fiscal 2026. RXT now sees its revenue falling between $2.45 billion and $2.55 billion this year, down roughly $150 million from the prior guidance. 

And internal estimates for adjusted EBITDA now sit in the range of $285 million to $295 million, also down from $305 million to $315 million previously. 

Including today's slight rebound, Rackspace stock is down more than 40% versus its year-to-date high. 

Should You Buy the Dip in Rackspace Stock?

While a topline cut often signals structural decay, Rackspace’s trimmed outlook has more to do with a tactical retreat from a struggling business to clear the deck for higher returns. 

In its press release, management said its decision to wind down public cloud resale operations — a business line suffering from structural squeeze as hyperscalers push mid-market clients into direct contracts — will result in a $125 million hit to the top line. 

And the remaining $25 million decline in guidance reflects a deliberate pullback from traditional colocation and basic hosting services. 

Simply put, rather than losing core clients, Rackspace is intentionally evicting low-margin rent business to reclaim high-value data center real estate. 

RXT stock is worth buying on the dip, particularly because management expects adjusted EBITDA margin to hold firm at 12%, reinforcing that this is an efficiency pivot, not an unprofitable spiral. 

Why Else Are RXT Shares an Attractive Pick?

Rackspace shares are also attractive because the company has secured a definitive framework to deploy Palantir’s (PLTR) Foundry and Artificial Intelligence Platform (AIP) across sovereign and heavily regulated clouds, which instantly positions its 400 certified experts at the center of enterprise AI deployment.

The infrastructure runway is clear: RXT is expanding its AI computing footprint to 15 megawatts by late 2027 and doubling it to 30 megawatts by 2028. 

Management estimates that these specialized enterprise artificial intelligence workloads will yield an impressive $15 million to $20 million in annualized revenue per megawatt. 

Crucially, this business targets adjusted EBITDA margins of over 50%, transforming Rackspace’s margin profile from a legacy IT recycler to a premium, high-cash-flow AI enabler. 

How Wall Street Recommends Playing Rackspace

Investors should also note that Wall Street analysts remain constructive on RXT shares for the next 12 months. 

While the consensus rating on Rackspace Technology is “Hold," price targets as high as $5.70 indicate potential upside of more than 30% from current levels.