Rackspace Technology (RXT 4.10%), a provider of cloud computing and managed hosting services, released its earnings for the second quarter of fiscal 2025 on August 7, 2025. The headline from the report was that GAAP revenue reached $666 million, exceeding analyst expectations of $659.4 million (GAAP). However, non-GAAP earnings per share (EPS) came in at $(0.06), missing the consensus estimate of $(0.05) (non-GAAP). The results reflect tightening losses, improving profit metrics, and sequential progress on the company’s turnaround strategy, though top-line performance (GAAP revenue) still declined compared to last year.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $(0.06) | $(0.05) | $(0.09) | 33.3 % |
| EPS (GAAP) | $(0.23) | $0.11 | NM | |
| Revenue | $666 million | $659.4 million | $685 million | (2.7 %) |
| Non-GAAP Operating Profit | $27 million | $20 million | 34 % | |
| Adjusted EBITDA | $64 million | $55 million | 16 % |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
About the Business and Key Focus Areas
Rackspace Technology delivers services that help businesses manage their public cloud, private cloud, and hybrid cloud environments. The company enables customers to run workloads on leading cloud platforms by offering technical support, consulting, and managed services. Its clients rely on both its technical platform, known as Rackspace Fabric, and its expertise navigating complex cloud infrastructure set-ups.
Recently, the company's strategy has centered on deepening partnerships with major cloud vendors like Amazon Web Services, Google Cloud Platform, Microsoft Azure, and VMware by Broadcom. Its proprietary software, service differentiation, and focus on automating operations set it apart from competitors. Key success factors include maintaining strong partnerships, driving innovation and automation, and shifting from low-margin infrastructure resale to higher-margin managed services and consulting. The company’s execution in winning new business and retaining clients in regulated industries such as healthcare, energy, and banking has also been important for performance.
Quarter in Review: Financials, Operations, and Strategy
In the second quarter, Rackspace’s total revenue (GAAP) declined 2.7% year over year, with both the Private Cloud and Public Cloud segments experiencing lower sales. Private Cloud revenue was $250 million, down 4% on a reported basis, while Public Cloud revenue landed at $417 million, a decrease of 2% from the prior year.
The quarter saw notable improvements in profitability metrics, including a higher non-GAAP operating profit, despite remaining in a net loss position. Loss from operations (GAAP) shrank to $25 million, a 53% improvement compared to the $54 million operating loss in Q2 2024. Non-GAAP operating profit rose 34% to $27 million. The gross margin (GAAP) stayed nearly flat year-over-year, showing a slight improvement of 0.2 percentage points. This reflects ongoing focus on cost control and driving efficiency, as selling, general and administrative expenses fell 16.7%.
Bookings—a measure of new contracts signed during the period—grew 16%, signaling strong sales execution and building momentum for potential future revenue. Management pointed to “go‑to‑market execution across both business units” and highlighted the positive impact of reprioritized sales and pipeline development. While total net loss (GAAP) was $55 million, this figure is a shift from the prior year, which benefited from a one-off $72.5 million GAAP gain related to debt extinguishment in Q2 2024. Excluding these non-recurring items, the company’s ongoing loss narrowed from year-ago levels.
On a segment basis, Public Cloud saw an upturn in profitability, with segment operating profit rising to $16.2 million. Operating profit for Public Cloud jumped 51% to $16.2 million, with Public Cloud segment operating margins increasing from 2.5% in Q2 2024 to 3.9%. This improvement was attributed to the company’s move away from lower-margin hardware resale sales, and a greater focus on managed services attached to cloud deployments. Private Cloud operating profit of $61.5 million declined 10.6%, as the segment continues to face revenue attrition tied to legacy product roll-offs. Still, Private Cloud margins remain higher than the company average, standing at 24.6%.
Notably, the company continues investing in its Rackspace Fabric automation platform. This proprietary cloud software is key to automation and cost management efforts. Rackspace reports ongoing work in regulated industries and partnerships with technology firms. The new Cyber Recovery Cloud solution, a recently launched managed security product developed in partnership with Rubrik, is expected to support growth as it ramps through 2025. The company's OpenStack Flex infrastructure-as-a-service platform and the UK Sovereign Secure platform, both intended for hybrid or regulated cloud use cases, also remain focal points for growth.
There were no dividends declared during the quarter, and Rackspace Technology does not currently pay a dividend. Capital expenditures for the first six months of 2025 were $29 million, down from $67 million for the first six months of 2024. Operating cash flow was positive at $8 million, and total liquidity stood at $414 million. The balance sheet remains highly leveraged, with total liabilities of $4.0 billion and negative stockholders’ equity of $1.1 billion as of June 30, 2025 (GAAP).
Looking Ahead: Guidance and Watchpoints
For the third quarter of fiscal 2025, management projected revenue in the range of $660 million to $674 million for Q3 2025. This would represent another slight contraction from the prior-year quarter, as GAAP revenue declined to $666 million in Q2 2025 from $685 million in Q2 2024. The company forecast Private Cloud revenue between $246 million and $254 million, and Public Cloud revenue in the range of $414 million to $420 million. Non-GAAP operating profit was projected to improve further, with a range of $30 million to $32 million expected, and non-GAAP loss per share guided at $(0.04) to $(0.06) for Q3 2025.
Investors should continue to monitor the pace of the company’s shift towards managed services, trends in bookings (as these signal future revenue potential), and the evolution of gross and segment-level margins. The company’s ability to execute on its turnaround strategy, maintain liquidity, and gradually stabilize the top line remain the central issues for the periods ahead.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
