TLDR
- Shares of Rackspace (RXT) exploded approximately 68% higher Thursday, with an additional 11% gain in Friday’s premarket session following stronger-than-anticipated Q4 performance.
- Fourth quarter earnings per share registered at -$0.010, surpassing Wall Street’s -$0.040 projection by $0.03; quarterly revenue reached $683M compared to analyst expectations of $674.91M.
- Operating cash flow for the period totaled $60M, while the company closed the year with approximately $397M in total available liquidity.
- Management provided FY2026 guidance calling for revenue between $2.6B and $2.7B with operating profit of $160M–$170M, although the EPS outlook of -$0.150 fell short of the -$0.030 consensus.
- Recent news of a strategic collaboration with Palantir focused on enterprise AI deployment contributed to bullish momentum leading into the earnings release.
Rackspace Technology delivered fourth quarter financial results that exceeded lowered expectations, triggering one of the week’s most dramatic stock movements.
Shares catapulted approximately 68% during Thursday’s session. The momentum continued into Friday morning, adding another 11% in premarket activity, positioning RXT among the week’s most significant single-session gainers.
Rackspace Technology, Inc., RXT
What sparked this explosive move?
Fourth quarter revenue totaled $683 million, exceeding Wall Street’s consensus forecast of $674.91 million. Loss per share came in at -$0.010, significantly better than the anticipated -$0.040 loss.
While still unprofitable, the narrower-than-feared loss proved sufficient to ignite buyer enthusiasm.
The company also generated $60 million in operating cash flow during the quarter. Non-GAAP operating profit reached $41 million, surpassing the upper bound of management’s previous guidance range.
Rackspace closed out 2025 with roughly $397 million in total liquidity. This metric carries particular significance given ongoing investor concerns about the company’s balance sheet health.
FY2026 Guidance: Mixed Picture
Looking ahead to fiscal 2026, Rackspace projected revenue in the range of $2.6 billion to $2.7 billion. The Street had been anticipating $2.72 billion, positioning the guidance slightly below the high end of expectations.
Operating profit guidance of $160 million to $170 million suggests continuing margin expansion as the company’s operational transformation advances.
The earnings per share outlook presents a more challenging narrative. Management’s FY2026 EPS guidance of -$0.150 sits considerably below the consensus projection of -$0.030. This substantial variance represents a potential red flag requiring closer examination.
In the three months preceding this report, analyst sentiment showed zero upward EPS revisions alongside one downward adjustment — hardly an encouraging backdrop.
Palantir Partnership Adds to the Momentum
A portion of the stock’s rally can be attributed to developments earlier this month.
Rackspace unveiled a strategic partnership with Palantir Technologies. The collaboration positions Rackspace to assist enterprise clients in implementing and managing Palantir’s Foundry platform and AI Platform (AIP).
This arrangement strengthens Rackspace’s connection to the rapidly growing enterprise AI market, an area commanding significant investor attention.
The convergence of the Palantir announcement and better-than-feared quarterly results appears to have catalyzed substantial short covering alongside new long positions.
Prior to the post-earnings surge, RXT traded at $1.35. The stock has climbed 27.36% during the past three months while remaining down 43.98% on a twelve-month basis.
Current Wall Street consensus on RXT stands at Hold, derived from one analyst rating issued within the previous three months. The average price target of $1.30 — even accounting for the recent advance — suggests potential downside from present trading levels.
Analyst revisions in the 90-day period before this earnings report showed zero positive EPS adjustments and one negative change.
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