Rackspace (RXT) Q4 2025 earnings summary

Executive summary

• Sharpened strategy to focus on enterprise AI and platform engineering, emphasizing regulated, data-sensitive workloads and structural changes to support this pivot.

• Embedded engineers and curated partnerships, including Palantir, VMware, and Rubrik, are driving deeper customer engagement and incremental infrastructure demand.

• Q4 2025 results exceeded guidance on most metrics due to disciplined cost management, improved execution, and stabilization in Private Cloud.

• Strategic exit from low-margin government contracts and focus on higher-margin services improved revenue quality.

• 2026 guidance targets durable revenue growth, margin expansion, and sustained free cash flow, with AI as a key growth vector.

Financial highlights

• Q4 2025 GAAP revenue was $683 million, flat year-over-year; non-GAAP operating profit was $41 million, up 5% year-over-year and above guidance.

• Non-GAAP gross profit margin for Q4 was 18.1%, down 180 bps sequentially; full-year margin was 19.4%, down 120 bps year-over-year.

• Q4 2025 cash flow from operations was $60 million; free cash flow was $56 million.

• Ended 2025 with $106 million in cash and $397 million in total liquidity.

• FY 2025 non-GAAP operating profit was $126 million, up 19% year-over-year; adjusted EBITDA was $276 million, up 13%.

Outlook and guidance

• FY 2026 revenue guidance: $2,600–$2,700 million, down 1% year-over-year at midpoint.

• Private Cloud revenue expected to grow 6% to $1,025–$1,075 million; Public Cloud revenue to decline 6% to $1,575–$1,625 million.

• Public Cloud services revenue (excluding contract) to grow mid to high teens year-over-year.

• Non-GAAP operating profit expected at $160–$170 million (up 31% at midpoint); adjusted EBITDA at $305–$315 million (up 12%).

• Free cash flow guidance: $90–$110 million, up 10% year-over-year.