Q2 2026 Rackspace Technology Inc Earnings Call Transcript
Key Points
- Rackspace Technology Inc (RXT) is strategically positioned in the growing enterprise AI inference market, with McKinsey projecting inferencing workloads to surpass training by end of 2026 and represent two-thirds of all AI workloads by 2030.
- The company has formed key partnerships with AMD, Palantir, and Unifor to build a managed compute and inference platform, enhancing its full-stack enterprise AI offerings.
- Rackspace Technology Inc (RXT) plans to deploy 30 megawatts of AMD-based compute by 2028, with expected revenue of $450-600 million annually and EBITDA margins exceeding 50%.
- The company secured significant customer wins in regulated industries, including a five-year agreement with AdventHealth and a multi-year cyber recovery cloud deal with a top UK banking firm.
- Rackspace Technology Inc (RXT) is expanding its public cloud portfolio with partner-funded entry point offerings, such as AWS-funded optimization assessments, which drive revenue and open doors to larger managed services relationships.
- The company is actively managing its capital structure, repurchasing $11.2 million in senior notes to reduce interest expense and strengthen its balance sheet.
- Rackspace Technology Inc (RXT) reported a non-GAAP loss per share of $0.08 in Q2 2026, worse than the $0.06 loss in the prior year quarter.
- The company's cash flow from operations was negative $32 million and free cash flow was negative $48 million in the quarter, reflecting seasonal cash uses and strategic investments.
- Public cloud revenue declined 2% year-over-year to $407 million, reflecting lower infrastructure and services revenue as the company pivots away from low-margin business.
- Non-GAAP gross margin decreased 120 basis points year-over-year to 18.6%, driven by higher costs and the timing impact in private cloud.
- The company's full-year revenue guidance implies a 7% decline at the midpoint, largely due to the strategic exit of low-margin public cloud revenue.
- Rackspace Technology Inc (RXT) faces execution risks in its AI infrastructure buildout, with the first deployment not expected until late 2026 and significant capital expenditures required.
Thank you. Thank you for standing by and welcome to Rackspace's second quarter 2026 earnings conference call. (Operator Instructions) I would now like to hand the call over to Sagar Hebbar, Investor Relations. Please, go ahead.
Thank you and welcome to Rackspace Technologies' second quarter 2026 earnings conference call. I'm Sagar Hebbar, Head of Investor Relations. Joining me today are Gajen Kandiah, our Chief Executive Officer, and Mark Marino, our Chief Financial Officer.
As a reminder, certain comments we make on this call will be forward-looking, including without limitation, statements regarding our financial guidance and outlook, our enterprise AI deployment plans, capacity targets, and timelines expected capital expenditures, revenue per megawatt, and margin assumptions, our financing plans, cash flow expectations, our business strategy, and product roadmap, as well as shifts in our business mix.
These statements involve risks and
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