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Rackspace Technology, Inc. (RXT)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered revenue of $0.665B (down 3.7% YoY) at the high end of guidance, with non-GAAP EPS of $(0.06) and non-GAAP operating profit of $26M, both above guidance; GAAP diluted EPS was $(0.31) amid ongoing amortization and interest expense .
  • Public Cloud revenue of $0.416B fell 1.6% YoY but exceeded guidance; Private Cloud revenue of $0.250B fell 6.9% YoY and was in line; segment operating margins improved in Public Cloud (4.2%) and moderated in Private Cloud (24.4%) .
  • Bookings momentum continued: total bookings up 9% YoY; Public Cloud bookings +16% YoY (Americas +26% YoY), with services-led pivot and higher-margin mix; management flagged macro-driven onboarding timing risk (bookings-to-bill caution) .
  • Q2 2025 guidance: revenue $0.653–$0.665B, non-GAAP EPS $(0.04)–$(0.06), non-GAAP operating profit $25–$27M; guidance is essentially in line with S&P Global consensus (Revenue $0.659B*, EPS $(0.054)), suggesting limited estimate risk near term .

What Went Well and What Went Wrong

What Went Well

  • “Results in the first quarter of 2025 exceeded our expectations across all key metrics. Revenue was at the high end of our guidance while profit and EPS exceeded our guidance range.” — CEO Amar Maletira .
  • Bookings strength: overall ACV bookings +9% YoY; Public Cloud bookings +16% YoY (Americas +26% YoY), driven by services-led motion and deeper enterprise penetration .
  • Margin progress: Public Cloud non-GAAP segment operating margin rose to 4.2% (+230 bps YoY) on improved mix and OpEx efficiency; non-GAAP operating profit +83% YoY to $26M .

What Went Wrong

  • Top line still declining: total revenue down 3.7% YoY; Private Cloud down 6.9% YoY and Public Cloud down 1.6% YoY despite bookings momentum .
  • GAAP loss persists: net loss $(71.5)M and GAAP diluted EPS $(0.31); gross margin compresses slightly to 19.1% from 19.2% YoY .
  • Management caution on bookings-to-bill conversion amid macro uncertainty and a purposeful headwind from lower-margin infrastructure resale (expected low-to-mid single-digit decline for the year) .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$0.676 $0.686 $0.665
GAAP Diluted EPS ($)$(0.82) $(0.26) $(0.31)
Non-GAAP EPS ($)$(0.04) $(0.02) $(0.06)
Gross Profit Margin (%)20.4% 19.2% 19.1%
Non-GAAP Operating Profit ($USD Millions)$34.3 $39.1 $25.6
Adjusted EBITDA ($USD Millions)$67.9 $73.7 $61.3

Segment breakdown

Segment MetricQ1 2024Q4 2024Q1 2025
Public Cloud Revenue ($USD Millions)$422.4 $417.0 $415.6
Public Cloud Segment Operating Profit ($USD Millions)$8.2 $9.9 $17.3
Public Cloud Segment Operating Margin (%)1.9% 2.4% 4.2%
Private Cloud Revenue ($USD Millions)$268.4 $268.6 $249.8
Private Cloud Segment Operating Profit ($USD Millions)$71.1 $80.6 $61.0
Private Cloud Segment Operating Margin (%)26.5% 30.0% 24.4%

KPIs and cash metrics

KPIQ3 2024Q4 2024Q1 2025
Bookings YoY (company/segment)Public Cloud: record bookings; high double-digit YoY Company bookings +14% FY; record quarterly bookings Company bookings +9% YoY; Public Cloud +16% YoY; Americas +26% YoY
Cash from Operations ($USD Millions)$52 $54 $12.6 (press: $13)
Capital Expenditures ($USD Millions)$31 $27 $27
Liquidity ($USD Millions)$532 total liquidity $519 total liquidity; $144 cash $473 total liquidity; $128 cash

Note: Q1 2025 cash from operations shows $12.6M in the cash flow statement, rounded to $13M in the press release .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($USD Millions)Q1 2025$653–$665 Actual: $665 Beat vs high end
Non-GAAP Operating Profit ($USD Millions)Q1 2025$19–$21 Actual: $25.6 Beat
Non-GAAP EPS ($)Q1 2025$(0.07)–$(0.09) Actual: $(0.06) Beat
Total Revenue ($USD Millions)Q2 2025—$653–$665 New
Private Cloud Revenue ($USD Millions)Q2 2025—$247–$253 New
Public Cloud Revenue ($USD Millions)Q2 2025—$406–$412 New
Non-GAAP Operating Profit ($USD Millions)Q2 2025—$25–$27 New
Non-GAAP EPS ($)Q2 2025—$(0.04)–$(0.06) New
Non-GAAP Other Income (Expense) ($USD Millions)Q2 2025—$(42)–$(46) New
Non-GAAP Tax Rate (%)Q2 2025—26% New
Non-GAAP Diluted Shares (M)Q2 2025—244–248 New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Services-led Public Cloud pivotRecord bookings; services attach rising; AWS collaboration; Amazon Q Incubate Public Cloud bookings +22% FY; services/data standout; services attach rate up Public Cloud bookings +16% YoY; services-led motion; infrastructure resale discipline Strengthening
Private Cloud stabilization in regulated verticalsHealthcare and sovereign momentum; epic migration success; large European energy POC Healthcare revenue +34% FY; sovereign +59% FY; flattish revenue by 2H25 expected Healthcare/Energy wins; revenue decline moderating; long-term contracts Stabilizing
AI initiatives (FAIR; AI platforms)~50 customers; hybrid AI infra; GPU-as-a-Service (NVIDIA H100) >50 customers; AI bookings contribute to data; AI <2% of revenue; path to >5% ~60 wins; >200 pipeline opps; launched Rackspace AI Business and Modern Ops for Data/AI Expanding
Cyber resiliency partnerships——Rubrik partnership; Cyber Recovery Cloud launch New catalyst
Macro, tariffs/supply chain—Improved visibility; cautious on infra resale renewals Caution on bookings-to-bill conversion amid macro uncertainty Cautious
Capital structure and liquidityTotal liquidity $532M Total liquidity $519M; positive FCF expected in 2025 Total liquidity $473M; CFO $13M; TTM CFO $143M Improving FCF trajectory

Management Commentary

  • “Our operational turnaround is gaining steady momentum, with strength in sales pipeline across both business units, increased sales bookings, and improved efficiency.” — CEO Amar Maletira .
  • “Public Cloud revenue… exceeding our guidance range… while macroeconomic uncertainty adds complexity to forecasting, we anticipate services revenue to perform well in 2025.” — CEO Amar Maletira .
  • “Non-GAAP operating profit was $26 million, exceeding the high end of our guidance and up 83% year-over-year, largely due to OpEx efficiencies.” — CFO Mark Marino .
  • “Rackspace Cyber Recovery Cloud powered by Rubrik… recover critical business systems within hours… following a cybersecurity breach.” — CEO Amar Maletira (press) .

Q&A Highlights

  • Macro and book-to-bill: Customers are not delaying decisions, but management is cautious that onboarding timelines could slip; funnel remains strong .
  • Services vs infrastructure resale: Win rates rising in services; infra resale expected low-to-mid single-digit decline by design to protect margins, with services attach as renewal lever .
  • CapEx approach: Customers willing to pay upfront CapEx for lower OpEx; internal initiatives to reduce CapEx intensity (Under Cloud; multi-tenant Flex environments) .
  • Regulated industries: Strong traction in Healthcare, BFSI, Sovereign, Energy, including major energy deal and expanding UK Sovereign Secure offering .

Estimates Context

MetricQ1 2025 ActualQ1 2025 ConsensusBeat/MissQ2 2025 GuidanceQ2 2025 ConsensusBeat/Miss (Implied)
Revenue ($USD Millions)665.4 658.0*Beat653–665 658.9*In line (midpoint ≈ 659)
Primary EPS ($)(0.06) (0.0813)*Beat(0.04)–(0.06) (0.0542)*In line to slightly better

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Q1 was a clean beat on non-GAAP EPS and operating profit with revenue at the high end; momentum is driven by services mix and OpEx discipline .
  • Public Cloud is executing on a services-led pivot, improving margins and bookings; infrastructure resale will be pruned to protect profitability, limiting near-term top-line but supporting margin expansion .
  • Private Cloud declines are moderating with healthcare/sovereign/energy wins and long-term contracts; management targets stabilization and a path back to growth as retention improves .
  • Strategic catalysts: AI Business platform, OpenStack Flex launch, and Rubrik cyber recovery partnership expand TAM in AI and cyber resiliency, potentially accelerating services revenue and enterprise penetration .
  • Watch bookings-to-bill conversion: macro uncertainty could elongate onboarding timelines; near-term revenue is guided roughly flat sequentially with estimate alignment limiting surprise risk *.
  • Balance sheet/FCF: Liquidity $473M and improving operating cash flow support ongoing transformation; continued focus on CapEx efficiency and capital structure optimization .
  • Near-term trade: With beats and in-line guidance, narrative hinges on sustained services margin expansion and execution in regulated verticals; monitor Q2 services growth and infra resale mix as key stock drivers .