Rackspace (RXT) Q1 2026 earnings summary

Executive summary

• Revenue grew 2% year-over-year to $678 million in Q1 2026, driven by 7% growth in Public Cloud, while Private Cloud declined 6% due to deal timing and customer transitions off legacy platforms.

• Net income reached $8 million, reversing a net loss of $72 million in Q1 2025, primarily due to gains on debt extinguishment and lower SG&A expenses.

• Announced a memorandum of understanding with AMD to integrate advanced GPU and CPU technologies for governed enterprise AI infrastructure.

• Expanded partnerships with Palantir, VMware, Rubrik, Uniphore, and Broadcom, delivering integrated AI solutions and closing the first joint Palantir deal.

• Significant regulated and sovereign Private Cloud deals secured in healthcare, telecom, and financial services.

Financial highlights

• Q1 2026 total revenue was $678 million, up 2% year-over-year; Public Cloud revenue was $443 million (up 7%), Private Cloud revenue was $235 million (down 6%).

• Non-GAAP gross profit margin was 18.3%, down 160 basis points year-over-year; gross margin declined to 17.6% from 19.1%.

• Non-GAAP operating profit reached $31 million, up 20% year-over-year; adjusted EBITDA was $71 million, up from $61 million.

• Non-GAAP loss per share was $0.06, flat year-over-year; net earnings per diluted share improved to $0.03 from $(0.31).

• Cash flow from operations was $5 million; free cash flow was -$9 million; quarter-end liquidity was $295 million, including $94 million cash and $201 million undrawn revolver.

Outlook and guidance

• Full-year 2026 guidance reaffirmed: revenue $2.6B–$2.7B, non-GAAP operating profit $160M–$170M, adjusted EBITDA $305M–$315M.

• Free cash flow expected at $90M–$110M for the year; growth expected to accelerate.

• Private Cloud revenue expected at $1,025–$1,075 million; Public Cloud at $1,575–$1,625 million.

• No material impact from the AMD partnership factored into 2026 guidance due to supply chain and delivery timing.

• Liquidity projected to be sufficient for at least the next twelve months, but ongoing debt service requirements remain significant.