Rackspace Technology Global Inc. (RXT)
Running toward a 2028 cliff
This cloud provider is caught between reducing crippling debt levels and investing in a high-capex AI strategy. Rackspace already needs to fork out over $2.4 bln in debt principal maturity repayments throughout 2028, and refinancing terms are unlikely to be favorable given the company’s poor debt credit rating. RXT is hurtling toward a cash cliff. Self-funding from operating cash flow is unlikely to come to the rescue. Interest expenses appear set to rise with the recent expiration of a highly beneficial interest-rate swap agreement that had been in place since February 2021.
The stock price rose well over 200% last May after RXT signed a Memorandum of Understanding with AMD to build a “governed Enterprise AI Cloud infrastructure.” But this MOU is just for new equipment to set up a business line with the hope of attracting revenue; there’s no contract for revenue, and the agreement sits on a foundation of weakening legacy revenue.
Even if the agreement were somehow to enable a turnaround, that would not come fast enough to rescue RXT: in 2026, RXT predicts continuing losses and debt payments that will eat up the operating cash flow. Projections of a high “adjusted EBITDA” omit significant expenses that move this metric’s value far away from the reality of US GAAP.
Falling revenue, customer numbers and remaining performance obligations in RXT’s legacy business, negative profit, recent guidance downgrades, ambitious capex plans, maturing debt and poor ability to cover interest payments suggest significant dilutive capital raises are inevitable. These factors can be material offsets against growth in the AMD Enterprise AI Cloud business, if achieved. Indeed, just two weeks ago, on July 9, 2026, RXT launched an At-The-Market equity offering program to issue up to $250 mln in common stock. The announcement, made alongside a downward revision of full-year 2026 revenue and EBITDA guidance, dropped the shares by about 25% in one day. A higher share price apparently led to the share issuance. We believe this recent ATM offering is just the beginning.