RXT Stock Forecast & Price Target

Rackspace Technology Inc. has demonstrated robust growth in its Private Cloud segment, with bookings increasing 24% quarter-over-quarter and 42% year-over-year, indicating strong demand across various industries including healthcare, BFSI, and telecom. Management anticipates improved free cash flow (FCF) in the second half of the year, supported by higher adjusted EBITDA and enhanced working capital performance despite the impact of one-time vendor prepayments in the first half. Furthermore, there is potential for additional revenue growth and margin expansion projected in the upside case for fiscal year 2026, enhancing the company's overall financial outlook.

Rackspace Technology Inc. is facing a concerning outlook as management has revised its revenue guidance, indicating a total revenue decline of approximately 1% year-over-year, an adjustment from a prior estimate of a 2.4% decline. The company's Public Cloud segment is projected to decline by about 0.3% year-over-year, while the Private Cloud segment is expected to experience a more significant drop of 3.0% year-over-year. Additionally, a scenario analysis suggests a potential reduction in revenue growth of 150 basis points and a decrease in operating margin by 50 basis points for fiscal year 2026, further compounding concerns about the company's financial trajectory.