TLDR
- Rackspace Technology (RXT) stock surged roughly 68% on Thursday, followed by another 11% jump in premarket trading Friday after the company reported fourth quarter financial results that topped analyst forecasts.
- The company posted Q4 earnings per share of -$0.010, beating the Street’s expectation of -$0.040 by three cents; revenue came in at $683M versus the $674.91M consensus.
- Rackspace generated $60M in operating cash flow during the quarter and ended the year with roughly $397M in total liquidity.
- For fiscal 2026, management expects revenue of $2.6B to $2.7B with operating profit between $160M and $170M, though the projected EPS of -$0.150 missed the -$0.030 analyst consensus.
- A recently announced strategic partnership with Palantir aimed at deploying enterprise AI solutions helped fuel positive momentum heading into the earnings report.
Rackspace Technology posted fourth quarter results that beat diminished expectations, sparking one of the most explosive stock moves of the week.
The stock skyrocketed roughly 68% during Thursday trading. The momentum continued into Friday’s premarket with an additional 11% gain, making RXT one of the week’s standout performers.
Rackspace Technology, Inc., RXT
What’s behind this massive surge?
The cloud infrastructure company reported Q4 revenue of $683 million, topping Wall Street’s $674.91 million estimate. The company’s loss per share of -$0.010 significantly beat expectations of -$0.040.
Despite remaining in negative territory, the better-than-expected loss was enough to spark considerable investor excitement.
The company also produced $60 million in operating cash flow for the quarter. Non-GAAP operating profit hit $41 million, exceeding even the high end of management’s guidance range.
Rackspace finished 2025 with roughly $397 million in total liquidity. This figure is particularly important given ongoing investor worries about the company’s balance sheet health.
FY2026 Outlook: A Tale of Two Narratives
For fiscal year 2026, Rackspace anticipates revenue between $2.6 billion and $2.7 billion. The Street consensus stood at $2.72 billion, meaning the guidance came in slightly below the high end of expectations.
The company’s operating profit forecast of $160 million to $170 million indicates improving margins and progress on its transformation efforts.
The earnings per share guidance, however, tells a different story. Rackspace expects FY2026 EPS of -$0.150, significantly worse than the consensus estimate of -$0.030. This substantial gap will likely remain under scrutiny from investors.
In the three months before this earnings release, the stock saw zero upward EPS revisions from analysts and one downgrade — hardly encouraging signs.
Strategic Palantir Deal Boosts Investor Sentiment
Part of the stock’s dramatic rally can be traced to news announced earlier this month.
Rackspace revealed a strategic collaboration with Palantir Technologies. Under this agreement, Rackspace will help enterprise customers deploy and manage Palantir’s Foundry platform and AI Platform (AIP).
This partnership strengthens Rackspace’s positioning in the high-growth enterprise AI infrastructure market, a space that has captured significant investor interest.
The combination of the Palantir deal and quarterly results that exceeded low expectations seems to have triggered heavy short covering and fresh buying interest.
Before the post-earnings explosion, shares were changing hands at $1.35. The stock has climbed 27.36% during the past three months but still sits 43.98% lower on a year-over-year basis.
The current Wall Street consensus rating is Hold, based on one analyst assessment from the past three months. The average price target of $1.30 implies potential downside even after the recent surge.
During the 90-day period before this earnings report, Rackspace received no upward EPS revisions while seeing one downward adjustment.
