Rackspace Technology (RXT), an AI infrastructure solutions provider, saw its shares tumble approximately 4% in premarket trading Thursday following a significant downward revision to its full-year 2026 financial outlook.
The company cited supply constraints and resource prioritization as factors likely to weigh on near-term growth, rattling investor confidence ahead of the market open.
Rackspace now expects 2026 revenue of $2.45 billion to $2.55 billion, down from its previous guidance range of $2.6 billion to $2.7 billion, representing a cut of roughly $150 million at the midpoint.
Adjusted EBITDA guidance was also reduced, with the company now projecting $285 million to $295 million, compared with the prior outlook of $305 million to $315 million.
The revised revenue midpoint of $2.5 billion falls meaningfully short of the $2.65 billion consensus estimate that analysts had been tracking ahead of the announcement.
For the second quarter, Rackspace expects preliminary revenue of $641 million to $649 million, also below the Wall Street consensus estimate of $657.10 million.
Within that second-quarter outlook, Private Cloud revenue is projected at $242 million to $246 million, while Public Cloud revenue is expected to land between $399 million and $403 million.
The company also guided for a non-GAAP loss per share of $0.11 to $0.08 for the period, worse than the consensus estimate calling for a $0.05 loss.
Despite the near-term pressures, Rackspace is framing enterprise AI as a significant longer-term growth opportunity with ambitious infrastructure build-out targets on the horizon.
The company plans to scale its Enterprise AI business to 15 MW of cumulative capacity by the end of 2027, with a target of 30 MW by the end of 2028.
Management estimates $15 million to $20 million of annual revenue per megawatt deployed, implying $450 million to $600 million in annual revenue once the full 30 MW capacity is reached.
Rackspace also announced plans for an at-the-market stock offering of up to $250 million, a move that could provide additional capital to fund its infrastructure expansion ambitions.
The company is expanding its agreement with Palantir Technologies (PLTR), combining Palantir’s Foundry and Artificial Intelligence Platform with Rackspace’s cloud and managed operations framework for regulated and sovereign enterprises.
Palantir shares dipped approximately 2% in premarket trading following the announcement, reflecting broader market sensitivity to the updated partnership details.
Advanced Micro Devices (AMD) was also referenced in Rackspace’s deployment plan, underscoring the chipmaker’s role in the company’s AI capacity build-out strategy going forward.
