---
title: "Rackspace cuts 15% of staff to fund its AMD pivot as shareholders sue; the stock is 57% below July"
description: "A federal class action says Rackspace hid what its enterprise AI pivot would cost its cloud business. The company's own filings now state the pivot outright, layoffs included, and the stock trades 57% below its July 8 close."
publisher: "The Inference"
section: "Markets"
published: 2026-10-16T21:34:32.559Z
modified: 2026-10-16T21:34:32.559Z
canonical: https://theinference.org/article/rackspace-cuts-15-of-staff-to-fund-its-amd-pivot-as-shareholders-sue-the-stock-is-57-below-july
language: en
keywords: "Rackspace Technology, AMD, Layoffs, Securities Litigation, Cloud Computing, Insider Selling"
---

# Rackspace cuts 15% of staff to fund its AMD pivot as shareholders sue; the stock is 57% below July

> A federal class action says Rackspace hid what its enterprise AI pivot would cost its cloud business. The company's own filings now state the pivot outright, layoffs included, and the stock trades 57% below its July 8 close.

[Rackspace Technology](https://theinference.org/markets/companies/rackspace-technology) (NASDAQ: RXT) traded at $2.83 on October 16, 2026, down 11.3% on the day, valuing the San Antonio cloud company near $812 million [1][7]. That is 57% below its $6.58 close on July 8, the session before management priced its artificial intelligence transition at $150 million of lost 2026 revenue [2]. The New York law firm Bronstein, Gewirtz & Grossman has solicited Rackspace investors with [notices on October 8](https://stockhouse.com/news/press-releases/2026/10/08/bronstein-gewirtz-grossman-llc-is-investigating-rackspace-technology-inc-rxt-and) and [again on October 15](https://stockhouse.com/news/press-releases/2026/10/15/bronstein-gewirtz-grossman-llc-encourages-rackspace-technology-inc-rxt-investors) [3][4].

## A 55% pop, a 15% layoff, a 33% crash

The sequence runs one direction. [A May 7 memorandum of understanding](https://www.msn.com/zh-hk/money/topstocks/amd-deal-sparks-rackspace-stock-surge-as-company-cuts-jobs/ar-AA25OSrM) with [AMD](https://theinference.org/markets/companies/amd), the chipmaker, arrived with first-quarter results and lifted the stock more than 55% in a single session [5]. On June 16 the definitive version followed: 30 megawatts of AMD-based compute for Rackspace data centers, phased from late 2026 through 2028 [5][7].

The same day, an SEC filing disclosed a "workforce realignment plan": about 15% of the global workforce, most notified around June 10, with $14 million to $19 million of one-time charges buying $75 million to $85 million of annualized savings redirected into the AMD build [5][6]. The stock closed up 4.99%, the premarket spike already fading [7]. On July 9, Rackspace [cut its 2026 revenue outlook by $150 million and adjusted EBITDA by $20 million](https://www.theglobeandmail.com/investing/markets/stocks/RXT/pressreleases/36769928/rackspace-technology-announces-plans-to-accelerate-enterprise-ai-growth-vector-provides-preliminary-2q26-results-and-updates-fy26-outlook/), and the stock fell 33.6% to $4.37 [2][8].

*Chart: **The July cut took $125M from Public Cloud and $25M from Private Cloud** Rackspace FY2026 revenue guidance midpoints fall from $1,050M to $1,025M for Private Cloud, from $1,600M to $1,475M for Public Cloud, and from $2,650M to $2,500M in total.*

*FY2026 revenue guidance midpoints, in millions of dollars, before and after Rackspace's July 9, 2026, update. Source: company press release. [8]*

## What the suit calls hidden, the filings spell out

Buyers from May 7 to July 8 [sued on August 8 in Morgan-Reed v. Rackspace Technology](https://www.theglobeandmail.com/investing/markets/stocks/RXT/pressreleases/3740206/rackspace-technology-inc-securities-fraud-class-action-lawsuit-filed-september-28-2026-lead-plaintiff-deadline/), in the Southern District of New York, alleging the company concealed the shift of capacity and capital away from profitable Private Cloud, its hosted-infrastructure segment, while Public Cloud, which resells [Amazon](https://theinference.org/markets/companies/amazon) and [Microsoft](https://theinference.org/markets/companies/microsoft) cloud services, decayed as hyperscalers took customers direct [9]. These are unproven allegations, and the October notices are law-firm solicitations, not findings; Rackspace has not admitted wrongdoing.

The strategy, though, is now in the company's own words. Finance chief Mark Marino [told the August earnings call](https://seekingalpha.com/news/4630911-rackspace-outlines-30-megawatt-amd-ai-deployment-by-end-of-2028-targeting-450m-600m-annual) the revenue decline reflects "our strategic decision to exit low-margin Public Cloud revenue over time" [1]. [The June filing](https://stocktwits.com/news-articles/markets/equity/rxt-stock-surges-25-premarket-what-s-the-connection-between-rackspace-s-latest-pact-with-amd-and-its-workforce-reduction/cZKWYexR7Ew) says the savings move "from its public cloud business unit" toward enterprise AI infrastructure with AMD [6]. Even the AMD agreement is a framework: each deployment requires a separate commercial agreement, and AMD is not obliged to approve any particular one [5].

## $450 million a year, on paper

Rackspace's own target for the 30 megawatts is $450 million to $600 million of annual revenue at full deployment by end-2028, at AI margins above 50%, figures the company labels illustrative [1][8]. The first slice, nearly 2 megawatts by end-2026, needs about $75 million of capital spending, against $111 million of cash and negative $32 million of second-quarter operating cash flow, with hardware-backed financing still being arranged [1]. A Stocktwits post pegged the build at "an average $300M annual revenue," below the company's own math [6]. The base that must carry the bill has been shrinking for three years [12].

*Chart: **Revenue has slid from $732M to $670M in twelve quarters** Line chart of Rackspace quarterly revenue declining from $732.4 million in Q3 2023 to $670.1 million in Q2 2026, dipping through 2025 and flattening in 2026.*

*Quarterly revenue in millions of dollars, Q3 2023 through Q2 2026, from Rackspace's SEC filings. [12]*

## Sellers inside, skeptics outside

The bull case is real enough to argue: the AMD agreement is signed, [Palantir](https://theinference.org/markets/companies/palantir) named Rackspace a preferred partner the same July morning, [Nvidia](https://theinference.org/markets/companies/nvidia) added it to its Cloud Partner program in September, and the full-year revenue guide of $2.45 billion to $2.55 billion held in August [1][7][8]. The friction is equally documented. Insiders sold 714,141 shares for $2.3 million last quarter, including 498,728 from chief executive Gajen Kandiah at $3.21 on September 4, under a pre-arranged plan to cover tax withholding [10]. Analyst consensus sits at Reduce with a $4.00 target, and 10.8% of the float is sold short [1][10].

## November is the next reading

Third-quarter results decide the fork; on last year's cadence they land by early November, when [the 2025 third-quarter report arrived on November 6](https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001810019&type=8-K) [11]. Three lines tell the story: whether the first 2 megawatts stay on schedule, whether the hardware-backed financing closes, and how fast Public Cloud shrinks. Until the megawatts turn into invoices, the revenue is a forecast.

## Takeaway

Rackspace's AMD pivot is now stated in its own filings, layoffs included, but the $450 million to $600 million of revenue it promises by 2028 is still a forecast: the stock sits 57% below July 8, insiders sold last quarter, and Q3 results in early November show whether the first 2 megawatts and their financing arrive on schedule.

## Sources

1. [Seeking Alpha, "Rackspace outlines 30-megawatt AMD AI deployment by end of 2028, targeting $450M-$600M annual revenue," 11 August 2026](https://seekingalpha.com/news/4630911-rackspace-outlines-30-megawatt-amd-ai-deployment-by-end-of-2028-targeting-450m-600m-annual)
2. [Faruqi & Faruqi, LLP press release via National Law Review, "RXT Shareholder Notice: Securities Class Action Lawsuit Deadline on September 28, 2026," 27 August 2026](https://natlawreview.com/press-releases/rxt-shareholder-notice-faruqi-faruqi-llp-reminds-rackspace-technology-rxt)
3. [Bronstein, Gewirtz & Grossman press release via Stockhouse, "Is Investigating Rackspace Technology, Inc. (RXT)," 8 October 2026](https://stockhouse.com/news/press-releases/2026/10/08/bronstein-gewirtz-grossman-llc-is-investigating-rackspace-technology-inc-rxt-and)
4. [Bronstein, Gewirtz & Grossman press release via Stockhouse, "Encourages RXT Investors to Inquire about Securities Investigation," 15 October 2026](https://stockhouse.com/news/press-releases/2026/10/15/bronstein-gewirtz-grossman-llc-encourages-rackspace-technology-inc-rxt-investors)
5. [TheStreet via MSN, "AMD deal sparks Rackspace stock surge as company cuts jobs," 16 June 2026](https://www.msn.com/zh-hk/money/topstocks/amd-deal-sparks-rackspace-stock-surge-as-company-cuts-jobs/ar-AA25OSrM)
6. [Stocktwits News, "RXT Stock Surges 25% Premarket: Rackspace's Pact With AMD and Its Workforce Reduction," covering the 16 June 2026 announcement](https://stocktwits.com/news-articles/markets/equity/rxt-stock-surges-25-premarket-what-s-the-connection-between-rackspace-s-latest-pact-with-amd-and-its-workforce-reduction/cZKWYexR7Ew)
7. [StockTitan, Rackspace Technology (RXT) news feed: AMD definitive agreement 16 June 2026, Q2 results 10 August 2026, NVIDIA Cloud Partner 10 September 2026, retrieved 16 October 2026](https://www.stocktitan.net/news/RXT/)
8. [Rackspace Technology press release (GlobeNewswire) via The Globe and Mail, "Announces Plans to Accelerate Enterprise AI Growth Vector; Provides Preliminary 2Q26 Results and Updates FY26 Outlook," 9 July 2026](https://www.theglobeandmail.com/investing/markets/stocks/RXT/pressreleases/36769928/rackspace-technology-announces-plans-to-accelerate-enterprise-ai-growth-vector-provides-preliminary-2q26-results-and-updates-fy26-outlook/)
9. [Kessler Topaz Meltzer & Check press release via The Globe and Mail, "Rackspace Technology Securities Fraud Class Action Lawsuit Filed; September 28, 2026 Lead Plaintiff Deadline," 8 August 2026](https://www.theglobeandmail.com/investing/markets/stocks/RXT/pressreleases/3740206/rackspace-technology-inc-securities-fraud-class-action-lawsuit-filed-september-28-2026-lead-plaintiff-deadline/)
10. [The Lincolnian Online, "Rackspace Technology (NASDAQ:RXT) Stock Price Down 6%: What's Next?," 12 October 2026](https://www.thelincolnianonline.com/2026/10/12/rackspace-technology-nasdaqrxt-stock-price-down-6-whats-next.html)
11. [SEC EDGAR, Rackspace Technology, Inc. (CIK 0001810019) filings list, retrieved 16 October 2026](https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001810019&type=8-K)
12. [Rackspace Technology, quarterly figures from its SEC filings, retrieved 16 October 2026](https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001810019)


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Rackspace cuts 15% of staff to fund its AMD pivot as shareholders sue; the stock is 57% below July — The Inference. Canonical: https://theinference.org/article/rackspace-cuts-15-of-staff-to-fund-its-amd-pivot-as-shareholders-sue-the-stock-is-57-below-july