Rackspace Technology (RXT) plunged about 25% Thursday after cutting its FY26 outlook and announcing plans for a $250 million stock offering, overshadowing an expanded AI partnership with Palantir NASDAQ:PLTR.
Rackspace now expects FY26 revenue of $2.45 billion to $2.55 billion, down from $2.6 billion to $2.7 billion previously and below the $2.65 billion consensus estimate. Adjusted EBITDA guidance fell to $285 million to $295 million from $305 million to $315 million, reflecting supply constraints, industry trends and tighter resource prioritization.
The company still sees AI as a major growth engine. Rackspace targets 15 MW of enterprise AI capacity by 2027 and 30 MW by 2028, which it estimates could generate $450 million to $600 million in annual revenue with adjusted EBITDA margins above 50%. Its expanded Palantir framework targets regulated industries requiring tighter control over data and AI deployments.