Rackspace Technology (RXT) saw its stock price soar 33.8% to $8.31 in heavy Nasdaq trading on Wednesday, building on two consecutive days of strong gains. The cloud-services company converted a preliminary May memorandum with Advanced Micro Devices (AMD) into a binding agreement for AI data center capacity, a move that has significantly boosted investor sentiment.
Under the terms of the deal, Rackspace will initially provide 30 megawatts (MW) of AMD-powered compute capacity, utilizing AMD Instinct GPUs and EPYC CPUs across its international data centers. The rollout will occur in phases from late 2026 through 2028, according to a joint statement from both companies.
In a separate filing, Rackspace announced a workforce realignment approved on June 10 that will reduce its global headcount by approximately 15%. The restructuring is expected to cost between $14 million and $19 million but is projected to generate annualized run-rate savings of $75 million to $85 million. The company stated that the job cuts are part of a broader strategy to shift resources toward enterprise AI initiatives.
Rackspace has been repositioning itself as an enterprise AI infrastructure operator rather than simply a managed cloud provider. CEO Gajen Kandiah emphasized that regulated companies require AI infrastructure that is "governed from the ground up." AMD's Dan McNamara added that clients need the "right mix" of accelerated and general-purpose compute, with accelerated compute referring to GPUs and specialized chips designed to handle large AI workloads faster than traditional processors.
The AMD deal provides investors with a clearer narrative for Rackspace, which had previously traded like an underperforming IT-services company rather than a growth-oriented cloud stock. According to Dow Jones Market Data cited by MarketWatch, Rackspace had already been the top performer in the Russell 2000 index for 2026 before Wednesday's surge, outpacing gains from Micron, Arm Holdings, and Marvell Technology.
Rackspace's first-quarter financial results support the AI-focused story. The company reported revenue of $678 million, up 2% year-over-year. Public Cloud revenue grew 7%, while Private Cloud revenue slipped 6%. For the full year 2026, Rackspace has set revenue guidance between $2.6 billion and $2.7 billion.
However, there are important caveats. The SEC filing notes that individual deployments under the AMD agreement require additional terms, including pricing and financial details. Rackspace also needs to secure further financing before proceeding with deployments, and AMD is not obligated to approve any specific deployment under the agreement.
BMO Capital analyst Keith Bachman maintained a Hold rating on Rackspace last month, though he raised his price target to $5. Bachman acknowledged the importance of the AMD and Palantir links but cautioned that Rackspace is still in the early stages of a turnaround, with uneven growth across its segments. Not all analysts are chasing the rally.
With U.S. markets closed on Friday, June 19, for Juneteenth, investors have a shortened trading week to assess whether the AMD deal signals a lasting transformation for Rackspace or is merely another short-term AI-driven trade in small-cap stocks.
