If you had backed Rackspace Technology a year ago, the outcome would look very different from the debate investors were having in late 2025. Holding Rackspace Technology over the past year would have returned 60.8%, including dividends. At the starting line, you had bullish analysts arguing for digital transformation upside and bears highlighting falling margins and cash strain. With today's AI partnerships, lawsuits, and fresh results on the table, which of those early concerns or hopes matters most now?
This theme extends beyond Rackspace Technology. See which of 55 AI infrastructure stocks may still merit a closer look.
The Two Rackspace Technology Stories Investors Had To Weigh
The shares cost US$1.83 at the start of the period, and Rackspace Technology sat between two very different stories that both sounded plausible.
On the upbeat side, the bullish view pointed to a Fair Value of US$2. This was a price implied by expectations of 2.0% annual revenue growth and profit margins eventually reaching 7.0% after several years of AI and higher value services doing the heavy lifting.
The more cautious case saw Fair Value at US$1.63, with analysts still assuming 1.4% revenue growth and a 6.4% margin, but worrying that declining Private and Public Cloud revenues could keep pressure on the business.
What The 2026 Evidence Did To The Rackspace Technology Debate
Rackspace Technology doubled down on its governed AI cloud push with AMD and Palantir partnerships and plans for 30 MW of AI capacity, which backed the upbeat case that higher value services could reshape the business. The Q2 2026 numbers pulled the other way. Revenue moved to US$670.1 million, while the firm reported a larger loss and net margin slipped to -10.1%. The evidence cut both ways.
The original argument hinged on whether AI deals could offset weaker legacy cloud activity and improve profitability. For any other stock, you would stress test that same assumption by tracking reported segment revenue and the direction of the overall net margin each quarter against management's AI narrative.
What Rackspace Technology's Price Now Asks You To Believe
Rackspace Technology trades at US$2.83 today. The selected Narrative puts its Fair Value above that level and ties the gap to a shift toward higher margin, recurring cloud and AI services backed by industry partnerships and bookings momentum.
The live question for anyone paying today's price is whether that move into managed enterprise AI and regulated industry contracts can keep scaling fast enough to outweigh ongoing legacy cloud declines.
"Demand for managed cloud and AI-driven services is shifting revenue toward higher-margin, recurring contracts, supporting long-term growth and profitability. Strategic partnerships and focus on regulated industries are expanding high-value opportunities, improving competitive positioning and revenue visibility."
One Narrative has put a figure on that disagreement. → See the Narrative with its higher Fair Value, assumptions and all
Go Straight To The Source
You may be late to this rally, but that does not have to mean arriving late to every opportunity. Start with companies whose prices leave room for a different view of their future. Here are three trading below our estimates.
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Company 1 - 21% below our estimate - uses growing hyperscale data center backlogs to convert large infrastructure projects into cash.
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Company 2 - 29% below our estimate - integrates a new diagnostics acquisition to serve utilities upgrading grids and testing critical systems.
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Company 3 - 30% below our estimate - turns tight offshore vessel supply and multi-year contracts into improved day rates and margins.
Three companies from the same screener. Open all 29 potentially undervalued companies →
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include RXT .
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