Rackspace Revenue Declines as Public Cloud Growth Fails to Offset Private Cloud Erosion
Event summary
- Rackspace Technology reported Q4 2025 revenue of $683 million, down 0.4% year-over-year, and full-year revenue of $2,686 million, down 2% year-over-year.
- Private Cloud revenue declined 10% year-over-year in Q4 2025 and 6% for the full year, while Public Cloud revenue increased 6% in Q4 and 1% for the full year.
- Rackspace projects Private Cloud revenue to grow year-over-year in 2026 for the first time in years.
- The company is forecasting revenue between $2.6 and $2.7 billion for FY 2026.
The big picture
Rackspace's results highlight a broader trend in the hybrid cloud market where legacy private cloud deployments are facing increasing pressure from public cloud alternatives and the need for AI integration. While the company's shift towards higher-value enterprise engagements is a positive signal, the continued decline in Private Cloud revenue raises concerns about its long-term sustainability and ability to compete in a rapidly evolving landscape. The company's guidance suggests a period of transition and potential volatility as it navigates this shift.
What we're watching
- Private Cloud Revival
- The projected return to growth for Private Cloud services in 2026 will be a key indicator of Rackspace’s strategic shift and its ability to retain legacy enterprise clients.
- AI Integration
- Rackspace’s success in integrating AI solutions and generating tangible growth from this vector will depend on its ability to differentiate its offerings and secure enterprise contracts.
- Margin Pressure
- The company's reliance on non-GAAP metrics to highlight profitability improvements suggests ongoing margin pressure that warrants close monitoring.
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