Rackspace Technology (RXT) shares exploded on May 7–8, 2026, surging over 80% in premarket trading after the company reported better-than-expected Q1 revenue and announced a surprise partnership with Advanced Micro Devices (AMD). The stock closed up 62% at $3.68 on Thursday, with trading volume exceeding 44 million shares—over 40 times the daily average of roughly 1 million.
Rackspace posted first-quarter revenue of $678.1 million, rising 1.9% year-over-year and beating analyst estimates of $667–$675 million. Operating profit grew 20% to $31 million, and net income swung to a positive $8.3 million from a loss of $71.5 million in the same period a year ago, aided by a $55.8 million gain on debt extinguishment. While adjusted EBITDA climbed to $71.2 million, EPS missed expectations at -$0.06 versus -$0.03 forecast, and gross margin dipped to 18.3%. The company also repurchased around $96 million of debt, underscoring its deleveraging push.
The biggest catalyst, however, was the Memorandum of Understanding (MOU) with AMD. The two companies plan to build a new category of enterprise AI infrastructure: a governed, fully managed stack designed for regulated industries and sovereign workloads. Unlike the standard model where clients rent GPUs and manage operations, Rackspace will own and operate the entire platform—from silicon to outcomes—integrating AMD Instinct GPUs and EPYC CPUs. CEO Gajen Kandiah emphasized that governance and accountability must be built in from the start, a requirement for regulated enterprises. AMD’s Dan McNamara added that the collaboration aims to bring AMD compute into managed, private environments.
On the earnings call, Rackspace also highlighted a joint deal with Palantir that closed, with a strong pipeline ahead. Full-year 2026 guidance was reaffirmed: $2.6–$2.7 billion in total revenue and non-GAAP operating profit of $160–$170 million. Despite the massive rally, Wall Street remains cautious. The average analyst price target is $2.17, a potential downside from current levels, and the consensus rating is Hold. The MOU is not a binding agreement, and no financial terms or commercial timeline have been disclosed.
