Rackspace (RXT) Q1 2025 earnings summary

Executive summary

• Q1 2025 revenue was $665 million, down 4% year-over-year but at the high end of guidance; profit and EPS exceeded guidance.

• Eleventh consecutive quarter meeting or exceeding guidance, reflecting operational turnaround and improved efficiency.

• Net loss narrowed to $72 million from $641 million in Q1 2024, driven by the absence of prior year impairment charges and lower interest expense.

• Non-GAAP operating profit reached $26 million, up 83% year-over-year.

• Adjusted EBITDA increased to $61 million from $50 million year-over-year, reflecting improved cost management.

Financial highlights

• Q1 2025 revenue: $665 million, down 4% year-over-year; private cloud: $250 million, down 7%; public cloud: $416 million, down 2%.

• Gross profit was $127 million (19.1% margin), down from $133 million (19.2%) year-over-year.

• Non-GAAP operating profit: $26 million, up 83% from $14 million year-over-year; non-GAAP loss per share: $(0.06), improved from $(0.11).

• Cash flow from operations was $13 million; free cash flow was $4 million.

• Capital expenditures: $27 million, down from $46 million year-over-year; cash and equivalents: $128 million; total liquidity: $473 million.

Outlook and guidance

• Q2 2025 revenue guidance: $653–$665 million; private cloud: $247–$253 million; public cloud: $406–$412 million.

• Q2 2025 non-GAAP operating profit: $25–$27 million; non-GAAP loss per share: $(0.04)–$(0.06); non-GAAP tax rate: 26%.

• Management expects continued focus on cost optimization and margin improvement, with sufficient liquidity for at least the next twelve months.

• Ongoing business mix shift toward higher-margin services in Public Cloud and new solutions in Private Cloud.