Rackspace Technology (RXT) shares plunged roughly 25% Thursday after the company slashed its full-year 2026 revenue outlook and unveiled a $250 million stock offering that rattled investors.
The dramatic sell-off came despite Rackspace announcing an expanded AI partnership with Palantir (PLTR), a deal that failed to offset concern over the company’s weakened financial outlook.
Rackspace now expects fiscal year 2026 revenue of $2.45 billion to $2.55 billion, a meaningful step down from its prior guidance range of $2.6 billion to $2.7 billion.
The revised outlook also fell short of the Wall Street consensus estimate of $2.65 billion, adding further pressure to a stock already under scrutiny from investors.
Adjusted EBITDA guidance was similarly trimmed, falling to a range of $285 million to $295 million from the previously guided $305 million to $315 million.
Management cited supply constraints, broader industry trends, and tighter resource prioritization as the primary factors driving the downward revision in profitability expectations.
Despite the negative near-term news, Rackspace continued to position artificial intelligence as a central pillar of its long-term growth strategy going forward.
The company is targeting 15 megawatts of enterprise AI capacity by 2027 and 30 megawatts by 2028, a buildout it estimates could generate between $450 million and $600 million in annual revenue.
Those AI infrastructure targets come with an attractive financial profile, as Rackspace projects adjusted EBITDA margins above 50% once that capacity is fully operational.
The expanded partnership with Palantir is designed to serve regulated industries that require tighter control over both data management and AI deployments.
Investors appeared unwilling to look past the immediate financial headwinds, with the $250 million stock offering raising concerns about dilution at a time when the company’s revenue trajectory is under pressure.
The combination of a lowered outlook, a large equity raise, and a stock already sensitive to sentiment proved too much for the market to absorb in a single session.
