Rackspace Technology said it is lowering its revenue outlook it exits certain business lines and shifts resources to become an operator of full enterprise AI stack.
The company on Thursday cut its revenue guidance for the year to $2.45 billion to $2.55 billion, down from a previous forecast for $2.6 billion to $2.7 billion. With its new outlook, the company is on track for a 5% to 9% revenue decline from the prior year.
Shares slid 1.5% to $6.48 in premarket trading. They have surged more than six fold so far this year.
The downshift includes a $125 million drop in expected revenue from Rackspace's public cloud business due to its exit from low-margin resale as hyperscalers continue to move customers to direct contracts.
Rackspace is also exiting colocation and basic hosting revenue to reserve capacity for enterprise AI. The exits, along with supply timing and geopolitical factors affecting near-term delivery, will translate to a drop in $25 million of expected annual revenue, it said.
"Rackspace believes the correct strategic and tactical response in this environment is to prioritize our resources and focus on the activities that we believe provide the best returns to Rackspace's stakeholders," the company said.
The company also delivered preliminary financial results for the second quarter, saying it expects revenue to be $641 million to $649 million. Analysts polled by FactSet had been expecting $657 million.
Rackspace expects to post a second-quarter loss of between $62 million, or 25 cents a share, and $91 million, or 36 cents a share. Stripping out one-time items, the adjusted loss is set to hit 8 cents to 11 cents a share. Analysts had been projecting an adjusted loss of 5 cents a share.
Write to Dean Seal at dean.seal@wsj.com
(END) Dow Jones Newswires
July 09, 2026 08:30 ET (12:30 GMT)
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