Release Date: May 08, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rackspace Technology Inc (RXT, Financial) exceeded expectations across all key metrics for the first quarter of 2025, with revenue at the high end of guidance and profit and EPS surpassing guidance range.
- The company achieved an 11th consecutive quarter of meeting or exceeding guidance, indicating strong operational performance.
- Bookings measured by annual contract value grew 9% year-over-year, with a notable 13% increase in the Americas.
- Rackspace Technology Inc (RXT) announced a strategic partnership with Rubrik to launch the Cyber Recovery Cloud, enhancing cyber resiliency for customers.
- Public cloud bookings grew 16% year-over-year, driven by strong execution in the Americas, reflecting successful land and expand strategies.
Negative Points
- Total company GAAP revenue of $665 million was down 4% year-over-year, indicating a decline in overall revenue.
- Non-GAAP gross profit margin decreased by 1.5 percentage points year-over-year, primarily due to declines in private cloud.
- Private cloud revenue decreased by 7% year-over-year due to customers rolling off older generation offerings.
- The macroeconomic environment remains uncertain, potentially impacting onboarding timelines for recently closed deals and customer decision cycles.
- Infrastructure resale in public cloud is expected to continue declining by low-to-mid single digits, which could affect revenue growth.
Q & A Highlights
Q: What are you seeing from a macro perspective regarding customer behavior and decision cycles?
A: Amar Maletira, CEO, noted that while bookings were in line with expectations, there is caution regarding the conversion of bookings to revenue due to potential delays in onboarding contracts. The macro environment remains uncertain, but the company has not seen immediate delays in customer decisions.
Q: How has the sales pipeline evolved, and what are the trends in win rates?
A: Amar Maletira, CEO, stated that the sales pipeline remains strong, with consistent performance over the past quarters. The company has refreshed its sales organization and improved sales enablement, leading to higher win rates and a shift towards higher value, long-term contracts.
Q: What are the trends in public cloud services and infrastructure resale?
A: Amar Maletira, CEO, explained that the company is focusing on a services-led motion, with increased win rates in platform and data services. Infrastructure resale is expected to decline purposefully, focusing on profitable growth and attaching more services to infrastructure deals.
Q: Are larger customers still willing to pay upfront CapEx for lower OpEx over the deal's life?
A: Amar Maletira, CEO, confirmed that this trend continues, benefiting both customers and Rackspace. The company is also focused on driving CapEx efficiency through technology and operational discipline.
Q: How are regulated industries impacting the private cloud business?
A: Amar Maletira, CEO, highlighted strong traction in regulated industries like healthcare, BFSI, sovereign, and energy. The company is seeing good progress, particularly in energy, with significant deals and a growing pipeline in these sectors.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
