AI data center infrastructure by FOTOGRIN via Shutterstock
Rackspace Technology (RXT) is a company that’s really come onto the scene in recent months. This is thanks to a high-profile partnership with Palantir (PLTR) to roll out Rackspace’s proprietary operating model framework. It will govern private cloud, sovereign cloud, on-premises infrastructure, and other key platforms that require data, governance, security, and outcome control.
The ability for Rackspace to essentially integrate its core technology into Palantir’s Foundry and Artificial Intelligence Platform (AIP) technologies makes Rackspace’s offerings immediately more valuable. Therefore, this stock’s movement during recent months makes sense.
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Nevertheless, after hitting a high of $8.60 per share in mid-June, RXT stock is back below the $5 level. Investors are now wondering whether this level is worth jumping on, or if this decline is likely to continue.
These questions have come to the fore even more of late, considering Rackspace’s management team just announced it expects the framework provider’s revenue to be $154 million light in 2026, with EBITDA likely to come in around $20 million lower than previously expected.
Why This Downgrade Matters
If this AI hype train (or bubble) was as powerful as many prognosticators have indicated, such revenue and earnings downgrades wouldn’t be taking place. Indeed, for a company that’s partnered with one of the most important companies in the AI race in Palantir, this earnings revision is one that does appear to have caught some investors offsides.
We’ll have to see if Rackspace’s management team is trying to sandbag its recent results, in order to set the table for a rock solid 2027.
Even so, given the pace at which companies like Rackspace have been able to grow, a slowing of growth in this specific early-stage AI company doesn’t portend well for the industry as a whole. At least, that’s my take on the…
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