Rackspace Technology's Q1 2025: Navigating Contradictions in Customer Behavior, Revenue Growth, and Macroeconomic Challenges
Monday, May 19, 2025 3:28 pm ET
2min read Macro Uncertainty and Customer Behavior, Infrastructure Resale Strategy, Revenue Stabilization and Growth Expectations, Services Bookings Growth, and Macroeconomic Impact on Customer Behavior are the key contradictions discussed in Rackspace Technology's latest 2025Q1 earnings call.
Revenue and Earnings Performance:
- Rackspace reported total GAAP revenue of $665 million for Q1 2025, down 4% year-over-year, meeting the high end of their guidance.
- Non-GAAP operating profit grew by 83% year-over-year, driven by operational efficiencies and cost-cutting measures.
Private Cloud Stabilization:
- Private cloud revenue was $250 million, down single digits year-over-year, showing moderation in revenue decline for the second consecutive quarter.
- The stabilization of private cloud was attributed to consistent bookings performance and improved revenue retention, along with strategic expansion into mid- and large enterprise customer segments.
Public Cloud Growth and Pivotal Change:
- Public cloud revenue reached $416 million, down low single digits year-over-year, despite a decline in lower-margin infrastructure resale and services.
- Growth was driven by a disciplined infrastructure resale strategy, a pivot to services, and a lean operating model, with a focus on higher-margin services and strategic customer engagement.
AI Initiatives and Growth Opportunities:
- Rackspace continued to make progress with its AI initiative, FAIR, with over 60 wins and more than 200 opportunities in the pipeline.
- Growth in AI-related offerings was attributed to the introduction of new AI-ready platforms and managed services for data and AI, catering to enterprise AI workloads and data pipeline management.
Cyber Resiliency and Partnerships:
- Rackspace announced a strategic partnership with Rubrik, launching the Cyber Recovery Cloud, which is expected to drive revenue in 2025.
- The solution aims to improve cyber resiliency for customers by providing clean data recovery and restoring critical business systems within hours following a breach, leveraging Rackspace's managed private cloud platform and Rubrik's technology.
Revenue and Earnings Performance:
- Rackspace reported total GAAP revenue of $665 million for Q1 2025, down 4% year-over-year, meeting the high end of their guidance.
- Non-GAAP operating profit grew by 83% year-over-year, driven by operational efficiencies and cost-cutting measures.
Private Cloud Stabilization:
- Private cloud revenue was $250 million, down single digits year-over-year, showing moderation in revenue decline for the second consecutive quarter.
- The stabilization of private cloud was attributed to consistent bookings performance and improved revenue retention, along with strategic expansion into mid- and large enterprise customer segments.
Public Cloud Growth and Pivotal Change:
- Public cloud revenue reached $416 million, down low single digits year-over-year, despite a decline in lower-margin infrastructure resale and services.
- Growth was driven by a disciplined infrastructure resale strategy, a pivot to services, and a lean operating model, with a focus on higher-margin services and strategic customer engagement.
AI Initiatives and Growth Opportunities:
- Rackspace continued to make progress with its AI initiative, FAIR, with over 60 wins and more than 200 opportunities in the pipeline.
- Growth in AI-related offerings was attributed to the introduction of new AI-ready platforms and managed services for data and AI, catering to enterprise AI workloads and data pipeline management.
Cyber Resiliency and Partnerships:
- Rackspace announced a strategic partnership with Rubrik, launching the Cyber Recovery Cloud, which is expected to drive revenue in 2025.
- The solution aims to improve cyber resiliency for customers by providing clean data recovery and restoring critical business systems within hours following a breach, leveraging Rackspace's managed private cloud platform and Rubrik's technology.
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