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The call conveyed a balance of strategic progress and execution momentum alongside near-term financial pressures. Highlights include multi-pronged partnerships (AMD, Palantir, Uniphore), notable customer and sovereign wins, Public Cloud growth (+7% YoY) and a 20% increase in non-GAAP operating profit. Lowlights include gross margin compression (-160 bps overall), a 6% YoY decline in Private Cloud revenue driven by timing, weak operating and free cash flow (operating cash flow $5M; FCF -$9M), and that the AMD collaboration remains a nonbinding MOU with financing and timing risks. Management reaffirmed full-year guidance and is actively deleveraging, but the financial trade-offs and execution/timing risks keep the tone mixed.
Rackspace reaffirmed its full‑year 2026 guidance in its entirety, saying revenue, EBITDA and cash‑flow outlooks are unchanged and that the Q1 Private Cloud timing is fully reflected in the annual plan with confidence the Private Cloud growth profile will materialize as large deals onboard. In Q1 the company reported total GAAP revenue of $678 million (up 2% YoY), company non‑GAAP gross profit margin of 18.3% of revenue (down 160 bps YoY), non‑GAAP operating profit of $31 million (up 20% YoY) and non‑GAAP loss per share of $0.06 (flat YoY); cash flow from operations was $5 million and free cash flow was negative $9 million. Segment metrics: Private Cloud GAAP revenue was $235 million (down 6% YoY) with non‑GAAP gross margin of 36% (down 110 bps) and segment operating margin of 24.7% (up 30 bps); Public Cloud GAAP revenue was $443 million (up 7% YoY) with services revenue up 10% YoY, non‑GAAP gross margin of 8.9% (down 60 bps) and segment operating margin of 4.7% (up 50 bps). The company ended the quarter with $94 million in cash, $295 million of total liquidity, repurchased about $96 million of debt, and noted the recently announced AMD partnership and related compute capacity are not materially factored into 2026 guidance given supply/delivery timing.
Total GAAP revenue of $678 million, up 2% year-over-year. Public Cloud revenue of $443 million, up 7% year-over-year, with services revenue growing 10% year-over-year, reflecting a shift toward higher-value engagements.
Non-GAAP operating profit was $31 million, up 20% year-over-year. Private Cloud segment operating margin improved to 24.7% (up 30 basis points YoY). Public Cloud segment operating margin improved to 4.7% (up 50 basis points YoY).
Announced an MOU with AMD to integrate AMD Instinct GPUs, EPYC CPUs and ROCm into a governed enterprise AI stack across four capabilities (Enterprise AI Cloud, Enterprise Inference Engine, Inference as a Service, Bare Metal Accelerated Compute). Expanded Palantir collaboration (first joint deal closed in 41 days) and strengthened Uniphore partnership for agent-based, context-aware inference. Deepening VMware Cloud Foundation 9 (Broadcom) relationship as the control plane for governed AI.
Closed regulated and sovereign Private Cloud deals across healthcare, telecom and financial services. Examples: expanded AdventHealth relationship to host 400 additional workloads, multiyear agreement with a major U.K. NHS Foundation Trust, recommitment from a leading global online trading platform. BT selected Rackspace for BT Sovereign Cloud and SDAIA partnership in Saudi Arabia validates sovereign capability.
Repurchased approximately $96 million of debt during the quarter to reduce interest burden. Ended the quarter with $94 million in cash and $295 million in total liquidity (including undrawn revolver). Reported reduction in leverage from 8.6x to 8.3x quarter-over-quarter.
Management reaffirmed full-year 2026 guidance in its entirety (revenue, EBITDA and cash flow outlook unchanged) and stated Private Cloud full-year growth outlook remains on track despite timing dynamics in Q1.
Good day, and thank you for standing by. Welcome to the Rackspace First Quarter 2026 Earnings Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Sagar Hebbar, Head of Investor Relations. Please go ahead.
Thank you, and welcome to Rackspace Technologies First Quarter 2026 Earnings Conference Call. I'm Sagar Hebbar, Head of Investor Relations. Joining me today are Gajen Kandiah, our Chief Executive Officer; and Mark Marino, our Chief Financial Officer. As a reminder, certain comments we make on this call will be forward-looking. These statements involve risks and uncertainties, which could cause actual results to differ. A discussion of these risks and uncertainties is included in our SEC filings. Rackspace Technology assumes no obligation to update the information presented on the call, except as required by law. In particular, our discussion today will include forward-looking statements regarding our recently announced memorandum of understanding with AMD, including statements regarding the anticipated scope, benefits, commercial potential of the collaboration, deployment timelines or financial projections, the expected execution of definitive agreements and the anticipated impact of the partnership on our business, financial results and capital structure.
The MOU represents a nonbinding framework only and does not constitute a binding commitment by either party to complete any specific transaction, financing or other commercial arrangement. No definitive agreements with AMD have been rea...