Key Takeaways
- Rackspace Technology (RXT) stock surged roughly 68% on Thursday following better-than-expected fourth quarter financial results, with shares climbing another 11% in Friday’s premarket trading.
- The company posted Q4 earnings per share of -$0.010, beating analyst estimates calling for -$0.040; revenue came in at $683M versus the $674.91M consensus forecast.
- The quarter generated $60M in operating cash flow, and Rackspace ended the fiscal year with roughly $397M in total liquidity available.
- Management’s 2026 outlook calls for revenue of $2.6B to $2.7B and operating profit of $160M to $170M, though the projected EPS of -$0.150 missed the -$0.030 analyst consensus.
- A recently announced strategic partnership with Palantir targeting enterprise AI solutions helped fuel positive investor sentiment ahead of the earnings announcement.
Rackspace Technology posted fourth quarter numbers that beat diminished analyst forecasts, sparking one of the most significant stock movements of the trading week.
The stock soared roughly 68% during Thursday’s trading hours. Momentum carried into Friday’s pre-market session with shares climbing an additional 11%, making RXT one of the standout performers of the week.
Rackspace Technology, Inc., RXT
What fueled this remarkable rally?
The company reported fourth quarter revenue of $683 million, topping Wall Street’s $674.91 million estimate. The quarterly loss of -$0.010 per share significantly outperformed analyst projections of -$0.040, representing a three-cent beat.
Despite remaining in negative territory, the better-than-expected loss figure was enough to spark considerable investor optimism.
The cloud infrastructure company also produced $60 million in operating cash flow for the quarter. Non-GAAP operating profit hit $41 million, exceeding the high end of the company’s own guidance range.
Rackspace finished 2025 with roughly $397 million in total available liquidity. This figure holds particular importance considering ongoing investor concerns surrounding the company’s balance sheet health.
Fiscal 2026 Outlook: A Tale of Two Narratives
For the full fiscal year 2026, Rackspace anticipates revenue between $2.6 billion and $2.7 billion. The Street consensus previously stood at $2.72 billion, placing management’s guidance slightly beneath the high end of expectations.
The company’s operating profit forecast of $160 million to $170 million indicates its restructuring efforts are beginning to yield results through improved margins.
The earnings per share guidance, however, tells a more complicated story. Rackspace expects FY2026 EPS of -$0.150, considerably worse than the analyst consensus of -$0.030. This significant gap between company projections and Street expectations will likely draw continued scrutiny.
In the three months before this earnings report, analyst activity showed zero upward EPS estimate revisions and one downgrade — hardly the kind of setup that typically precedes massive rallies.
Strategic Palantir Alliance Amplifies Positive Sentiment
Some of the stock’s dramatic price action stems from news that emerged earlier this month.
Rackspace announced a strategic alliance with Palantir Technologies. Under this agreement, Rackspace will help enterprise customers deploy and manage Palantir’s Foundry platform and Artificial Intelligence Platform (AIP).
This partnership places Rackspace in a more advantageous position within the enterprise AI infrastructure market, an area attracting substantial investor capital.
The combination of the Palantir announcement and quarterly results that exceeded pessimistic expectations appears to have triggered significant short covering activity along with fresh buying interest.
Before the post-earnings jump, shares changed hands at $1.35. The stock has gained 27.36% over the past three months but still sits 43.98% lower compared to the same period last year.
The current Wall Street consensus rating is Hold, based on one analyst assessment published in the last three months. The average price target of $1.30 implies potential downside even after the recent surge.
During the 90-day window prior to this earnings release, Rackspace saw no upward EPS estimate revisions and one downward revision from the analyst community.
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