Key Highlights
- Rackspace (RXT) stock skyrocketed more than 60% during morning hours following first-quarter results and a strategic AMD partnership reveal
- First-quarter revenue reached $678M, surpassing analyst projections of approximately $667-675M, representing roughly 2% year-over-year growth
- Earnings per share came in at -$0.06 versus consensus of -$0.03, though net income flipped positive to $8.3M compared to a -$71.5M deficit in the prior year period
- The company and AMD executed a memorandum of understanding to develop a governed Enterprise AI Cloud targeting highly regulated sectors
- Management maintained full-year 2026 revenue outlook of $2.6–$2.7B; the AMD arrangement remains non-binding and in early stages
Shares of Rackspace Technology experienced a dramatic rally on May 7, 2026, climbing more than 60% during the morning session and reaching an intraday peak of $4.12, following the simultaneous release of first-quarter financial results and an unexpected collaboration announcement with AMD.
Rackspace Technology, Inc., RXT
Prior to this session, the equity had been languishing as a distressed turnaround candidate. Analyst consensus price targets before the earnings release averaged merely $1.93. It’s clear Wall Street was unprepared for this development.
First-quarter top-line results totaled $678.1 million, representing 1.9% annual growth and exceeding Street estimates ranging from $667 to $675 million. Operating income expanded 20% from the year-ago quarter to $31 million.
The company posted net income of $8.3 million, a dramatic reversal from the $71.5 million loss recorded in the comparable period twelve months earlier. This profitability shift was partially driven by a $55.8 million benefit from debt extinguishment. Adjusted EBITDA climbed to $71.2 million.
Earnings per share fell short of expectations, registering -$0.06 against the anticipated -$0.03. Gross margin also contracted to 18.3%, declining 160 basis points on a year-over-year basis.
Management also executed approximately $96 million in debt buybacks, lowering interest obligations and advancing its balance sheet improvement strategy.
AMD Collaboration Takes Center Stage
Concurrent with the earnings announcement, Rackspace and AMD unveiled a Memorandum of Understanding to create what they characterize as an entirely new segment: a governed Enterprise AI Cloud infrastructure designed specifically for regulated verticals and sovereign computing requirements.
The initiative encompasses AMD Instinct GPUs and EPYC CPUs embedded within a comprehensively managed technology stack, with Rackspace maintaining end-to-end ownership from hardware to business outcomes. This approach represents a significant departure from the prevailing hourly GPU rental paradigm.
Chief Executive Officer Gajen Kandiah noted that regulated enterprises are exercising intentional decision-making regarding AI deployment locations and accountability structures, positioning Rackspace as the frontrunner in this emerging category.
CEO Amar Maletira emphasized that the firm’s strategic pivot toward becoming an orchestrator of enterprise AI solutions for regulated sectors is “gaining traction.”
It’s important to note that this MOU does not constitute a binding commitment. Negotiations remain in preliminary phases, and no formal contracts have been executed.
Additional Developments From the Conference Call
The existing Palantir collaboration also received attention during the analyst discussion, with management disclosing that the inaugural joint transaction has been finalized and a robust opportunity pipeline has been established.
Full-year 2026 financial projections remained unchanged, with Rackspace anticipating total revenue between $2.6 and $2.7 billion and Non-GAAP Operating Profit in the $160–$170 million range.
Broader equity markets offered minimal support for the rally. The S&P 500 advanced just 0.08%, the Dow Jones Industrial Average rose 0.14%, and the Nasdaq Composite increased 0.26% during the session.
Wall Street sentiment entering the quarterly report was subdued — with four Hold recommendations and one Sell rating. Those price objectives now sit substantially below current trading levels.
RXT carries a beta coefficient of 2.24, indicating significant volatility is characteristic of this security.
Insider transaction activity during the preceding six-month period consisted of nine open-market executions, all representing stock sales.
