Rackspace Technology (RXT), an AI infrastructure solutions provider, saw its shares tumble roughly 25% on Thursday after the company significantly reduced its full-year financial guidance.
The company cut its 2026 revenue outlook by $150 million, citing supply constraints, challenging industry conditions, and shifting internal resource priorities as key factors weighing on near-term performance.
Rackspace now forecasts full-year 2026 revenue of $2.45 billion to $2.55 billion, down from its prior guidance range of $2.6 billion to $2.7 billion and below the Wall Street consensus estimate of $2.65 billion.
The company also trimmed its adjusted EBITDA forecast to between $285 million and $295 million, compared with its earlier projection of $305 million to $315 million, a reduction of $20 million at the midpoint.
Second-quarter preliminary revenue is projected at $641 million to $649 million, falling short of the analyst consensus estimate of $657.10 million, adding further pressure on investor sentiment.
Rackspace also guided for a non-GAAP loss of $0.08 to $0.11 per share in the second quarter, which is wider than the $0.05 per share loss analysts had expected heading into the period.
Despite the weaker near-term results, management maintained that enterprise AI represents a potentially attractive long-term growth opportunity, while stressing that capacity and supply limitations require disciplined expansion.
The company plans to grow its Enterprise AI business to 15 megawatts of cumulative capacity by the end of 2027 and reach 30 megawatts by the end of 2028, with each megawatt expected to generate $15 million to $20 million in annual revenue.
At the full 30-megawatt buildout using AMD (NASDAQ: AMD) technology, the Enterprise AI segment could generate between $450 million and $600 million in annual revenue, with adjusted EBITDA margins expected to exceed 50%.
To fund this expansion strategy, Rackspace announced an at-the-market share offering that may raise up to $250 million through the sale of common shares on the open market.
CEO Gajen Kandiah stated that the capital raise could accelerate the company’s Enterprise AI strategy and create a new revenue and EBITDA growth opportunity beginning in 2027.
Rackspace also revealed a definitive agreement with Palantir Technologies (NASDAQ: PLTR) designed to help regulated and sovereign enterprises own and operate AI systems in full production environments.
The partnership combines Palantir’s Foundry and Artificial Intelligence Platform with Rackspace’s private cloud, sovereign cloud, on-premises infrastructure, certified engineers, and managed operations capabilities.
Since announcing their strategic partnership in February, Rackspace has expanded to approximately 400 Palantir certifications and plans to deploy Palantir software across more than 70% of its own back-office operations.
Palantir shares fell roughly 4% on Thursday as investors weighed the longer-term potential of the partnership against Rackspace’s reduced outlook and the prospect of dilution from the proposed share offering.
