Is Rackspace Back From The Dead?
Is this month's stock price jump a story of a phoenix from the ashes, or a dead cat bounce?
RXT, The San Antonio-founded cloud computing and hosting company, has had a big week. It’s up 10x in share price from mid-February, and announced:
1) Its first quarterly profit in 2 years, and
2) A partnership with chip-maker AMD to develop AI cloud networks for private and public customers.
In February 2026 the stock had also jumped with unusually high trading volume following the announcement of a partnership with Palantir. Big stuff.
The history
When I moved to San Antonio in 2009, there was one single company that mattered to the city’s self-perception of its future. It was a regionally important home-grown cloud-computing company called Rackspace. In large cities this would be just one of several dozen cool business stories, but in a 2-horse non-tech town like San Antonio it was the only story.
In previous decades you could count on one single hand the “economic drivers” of the city’s success.1 Then with this fast-growing cloud-hosting tech company, there was another thing to point to.
But even in 2009 the roots of its decline were already present. The fundamental problem of Rackspace began at least 15 years ago but became acute 10 years ago: If you are a medium-size player in a business dominated by the largest and most capable tech giants in the world (Amazon, Microsoft, Google) how do you survive?
Even while the future of Rackspace was dimming, the then leadership of Rackspace 15 years ago seemed to pivot to ecosystem concerns: How to inculcate an entrepreneurial spirit in the city? How to plant seeds for a future next dozen “mini-Rackspaces?” How to make peace with the idea that if Rackspace doesn’t or can’t keep pace with Amazon, Google, and Microsoft, that it sets up the conditions for regional tech growth. A lot of civic energy went into posing and answering these questions, with considerable cheerleading from inside and outside the circle.
They experimented with different capital structures - an IPO as RAX on the Nasdaq in 2008 for starters. Then a sale to private equity/distressed buyer Apollo Global Management in 2016. Then a re-IPO in 2020 under a new ticker RXT and under a new name, Rackspace Technology.
Unfortunately the company since then seems to have followed a nearly one-way path to shrinkage. Until this month.
Different capital structures - private, then public, then private, then public again - are a sign of executive leadership “doing something” but in themselves rarely solve underlying market conditions.
Rackspace - Fundamentals
The fundamental story of RXT for the past 6 years is declining/plateaued revenue and declining profit. The stock price (until this month) reflected those fundamentals.
Below the chart of the shrinking stock price is a listing of annual revenue, gross profit, and net loss from operations
2021: $3.01B revenue, $937 million gross profit, -$2 million net loss from operations
2022: $3.12B revenue, $857 million gross profit, -679 million net loss from operations
2023: $2.96B revenue, $629 million gross profit, -$899 million net loss from operations
2024: $2.74B revenue, $533 million gross profit, -$909 million net loss from operations
2025: $2.69B revenue, $506 million gross profit, -$101 million net loss from operations
Those are the numbers of a company circling the drain, with declining revenue and declining “gross profit” and a significant annual loss after accounting for operating costs. The best that can be said about those fundamental numbers is that the net losses last year were not as bad as the previous 4 years.
Simultaneously with the spike in the stock last week, however, the company reported its first profitable quarter in the last 2 years, according to the SA Express-News, a small but healthy sign of green shoots.
The Technicals of RXT stock
A technical issue for the last few years of this small and shrinking stock is that, with much of the US stock market holdings driven by passive indexes, you have to be included in something like the Russell 2000 list of small cap companies to put a floor underneath demand for your shares.
Passive index holdings can create a self-fulfilling demand problem.2 If your market capitalization shrinks for fundamental reasons, (like declining revenue and no profitability for a few years in a row) the shrinking market capitalization will also mean fewer investors “must” hold your stock as a pro-rata share of an index like the Russell 2000.3 At the beginning of 2026, the market capitalization of RXT4 was very likely too low for inclusion in the Russell 2000 when the index would be reset in June. Anticipation of being dropped from the index is therefore, in a technical sense, both cause and effect of a falling stock price.
Are we optimistic?
In other words, is RXT a Phoenix or a Dead Cat Bounce?
Whenever you see a stock jump by 6x in two weeks with an incantation that includes the spell words of the moment (in this case the magic two letters “AI”) you should be cautious. Did they use the spell words because it has worked magic in the past on other stocks? Or did they - in partnership with Palantir and AMD in 2026 - actually come up with a profitable business model after (at least) 8 years of losses?5
As of today’s writing, the market cap is up to $1.5 billion, enough to keep it inside the Russell 2000, and 10X what it was at the beginning of the year.
So Rackspace until now has faded nearly to a whisper in the city’s self-perception and storyline. Much of the operations and ownership were outsourced to beyond the city limits. The outright market capitalization and direction of market capitalization (until this month) pointed to a company heading to ignominious obscurity. One thousand points of light did not bloom as a result of ecosystem efforts by former Rackspace executives. RXT hasn’t been the new hand to supplement the five fingers of the city’s economic growth that it seemed to promise in 2010.
It would be delightful if a San Antonio home-grown tech company could survive and thrive and capture a slice of AI-driven growth. I don’t make future predictions about companies so all we can do is note the past, as well as the future that didn’t happen.
Stock Disclosure. I don’t directly own any RXT, never have, and highly likely never will. I only rarely would own any individual stock, because passive indexes are the way to go. RXT is a tiny component of the Russell 2000, an index which I do own through a Vanguard mutual fund.
Pinky finger - Valero, Ring finger - HEB, Middle finger - USAA, Pointer finger - tourism and Thumb - military bases.
Or opportunity. At the top end of the market-weighted S&P 500 are the tech darlings which have swallowed up the index, comprising 35% of market cap among just 7 companies in the last few years. In an inverse of the Rackspace situation, as the market cap of Microsoft (plus Amazon, Google, NVIDIA, Meta, Apple, Tesla) has grown, the S&P 500 index holders have (passively) been forced to purchase more shares to remain “properly weighted.” Thus market cap expansion begets more market cap-driven expansion.
The Russell 2000 is the index of approximately 2000 “small cap” companies that make up the approximately-ranked #s 1000 to 3000 of the largest US public companies, with some other criteria like liquidity, float, and limits on insider holdings. The size of small cap companies range in recent years from $300 million to around $2 billion.
Market capitalization is calculated as the number of RXT shares outstanding (249 million) and the price of the shares. That was around 0.50 in February, implying a market cap around $125 million. Then it jumped above $2 per share in March ($500 million market cap). It faded in April to between 1 and 1.5, before jumping to above $5 a share this past week $1.25 billion+, or 10x what is had been just 3 months ago. At $150 million market capitalization, it would likely have dropped from the Russell 2000. It could still have been included in the Russell Microcap index, but there is a much smaller pool of capital dedicated to that index.
The losses go back to at least 2018, I just started with 2021 because that matches the float period of the RXT stock.