Rackspace Technology (RXT), an AI infrastructure solutions provider, has cut its 2026 outlook as supply constraints, industry conditions, and internal resource priorities weigh on its near-term performance. Shares fell about 25% on Thursday after the company reduced its full-year revenue expectations by $150 million and adjusted EBITDA expectations by $20 million. Rackspace now expects 2026 revenue of $2.45 billion to $2.55 billion, compared with its previous forecast of $2.6 billion to $2.7 billion and the consensus estimate of $2.65 billion. The company also lowered its adjusted EBITDA forecast to between $285 million and $295 million from the earlier range of $305 million to $315 million. For the second quarter, Rackspace expects preliminary revenue of $641 million to $649 million, below the $657.10 million consensus estimate, while its projected non-GAAP loss of $0.08 to $0.11 per share is wider than the expected loss of $0.05 per share.
Despite the weaker outlook, Rackspace continues to view enterprise AI as a potentially attractive long-term growth opportunity, although management emphasized that expansion must remain disciplined because of capacity and supply limitations. The company plans to increase its Enterprise AI business to 15 megawatts of cumulative capacity by the end of 2027 and 30 megawatts by the end of 2028. Rackspace expects each deployed megawatt to generate an average of $15 million to $20 million in annual revenue as its GPU and customer mix develops. At the full 30 megawatts of AMD NASDAQ:AMD, a semiconductor company whose technology is being used in Rackspace's planned deployments, the business could generate $450 million to $600 million in annual revenue. Rackspace also expects Enterprise AI adjusted EBITDA margins to be above 50%, which could make the segment an important earnings contributor if the company executes its expansion plan.
Rackspace plans to support this strategy through an at-the-market offering that may raise up to $250 million from the sale of common shares. CEO Gajen Kandiah said the capital raise could accelerate the company's Enterprise AI strategy and create a new revenue and EBITDA growth opportunity beginning in 2027. Rackspace also announced a definitive agreement with Palantir Technologies NASDAQ:PLTR, a provider of analytical and AI-driven software, to help regulated and sovereign enterprises own and operate AI systems in production. The framework combines Palantir's Foundry and Artificial Intelligence Platform with Rackspace's private cloud, sovereign cloud, on-premises infrastructure, certified engineers, and managed operations. Since the companies announced their strategic partnership in February, Rackspace has expanded to about 400 Palantir certifications and plans to deploy Palantir software across more than 70% of its own back-office operations. Palantir shares fell about 4% on Thursday, while investors may weigh the partnership's longer-term potential against Rackspace's reduced outlook and the possible dilution from the proposed share offering.