Voss Capital: Rackspace Technology ($RXT) Investment Case

In their Q2 2026 letter to partners, dated August 25th, 2026, Voss Capital discloses a new, small position in Rackspace Technology ($RXT), a global managed service provider across public and private cloud. Voss describes the setup as a classic high-leverage “stub” stock turnaround, in which a heavily indebted balance sheet leaves the equity behaving, in the firm’s words, like a long-dated call option. Voss frames the opportunity around underutilized data center capacity that the firm believes can be re-monetized through sovereign AI demand, a Palantir partnership, and an AMD compute agreement. The firm reports that the Voss Value Fund, LP and Voss Value Offshore Fund, Ltd. returned +22.4% and +23.2% net in Q2 2026, against +21.5% for the Russell 2000 and +15.2% for the S&P 500.

Investment Highlight: Rackspace Technology, Inc. ($RXT)

Business Overview and Capital Structure

• Voss describes RXT as a managed service provider operating in both public and private cloud
• The firm cites a ~$900 million equity market capitalization at $3.42 per share, resting on a ~$3.8 billion enterprise value, with ~$2.7 billion of net debt (FactSet data as of August 19, 2026)
• Voss estimates majority owner Apollo holds a ~51% stake at roughly an $8.50 per share cost basis, which the firm believes keeps management aligned with minority holders

The Idle Capacity Argument

• According to Voss, while neoclouds such as Nebius and CoreWeave race to build new data centers, Rackspace already owns or leases a large footprint under long-term contracts of 15+ years with substantial unused capacity
• The firm notes that at higher utilization only a few years ago, the company generated over $800 million in run-rate EBITDA
• Voss states that figure will likely fall below $300 million in 2026 due to high fixed costs, and the firm expresses confidence RXT can move much closer to the prior level over the next 18–24 months

Three Pillars of the Voss Thesis

• Private Cloud: Voss argues sovereign AI has slowed and even reversed prior customer migration to public cloud, as customers in hospital systems, financial organizations, and governments treat data as a strategic asset. The firm points to management guiding to Private Cloud growth in 2026 and expects that to accelerate significantly in 2027
• AI positioning: Voss describes new management as going “all in” on AI infrastructure, highlighting a partnership with Palantir — which the firm notes took a small stake in Rackspace — pairing Palantir’s Foundry and AIP with Rackspace’s cloud backbone and jointly trained Forward Deployed Engineers
• AMD agreement: Voss calls the 30 megawatt AMD compute deployment the potential gamechanger, estimating an incremental $500–600 million in revenue and $250–400 million in EBITDA at full deployment, with optionality to expand beyond the initial agreement

Why the Stock Has Sold Off

• Voss attributes recent weakness to aggressive repositioning, noting the company is cycling lower-margin Private Cloud customers out in favor of higher-margin ones, which can create coverage gaps
• The firm says RXT continues to exit low- and negative-value public cloud contracts that function as AWS compute resale agreements
• According to Voss, this drove lowered 2026 revenue guidance and liquidity levels the firm describes as making it somewhat uncomfortable in the near term

Early Evidence Voss Points To

• The firm highlights Q2 2026 total remaining performance obligations of $809.1 million, up 40% sequentially
• Voss notes long-term RPO of $623.0 million, nearly doubling year over year
• The firm observes that Rackspace bonds have moved from signaling distress to trading near par, and argues the equity has materially underreacted from a credit standpoint

Valuation and Scenarios

• Voss suggests that if RXT converts idle capacity and surging RPOs into $500–800 million+ of run-rate EBITDA within two years, a 10x multiple — versus peers the firm cites at 25–30x — could support an $11–$15 stock
• The firm describes blue-sky scenarios reaching $20–$30+, while explicitly noting price targets are estimates and inherently uncertain
• Voss also sees potential optionality to reduce leverage by selling the Public Cloud business and becoming a Private Cloud managed services AI pure play

Risks

• Voss states plainly that RXT remains a high-wire act and has sized the position at roughly 2% accordingly
• The firm warns that high financial leverage means severe dilution is possible if liquidity breaks or execution falters, noting an open ATM adds to the bear case
• Voss acknowledges near-term discomfort with liquidity levels following reduced 2026 guidance

Voss Capital views Rackspace as an asymmetric, small-sized bet in which high leverage makes the equity behave like a long-dated option on a capacity re-monetization story. The firm’s opinion is that high-profile customer signings, combined with funding details around the AMD chip buildout, could be the match that lights a virtuous cycle — lowering the cost of capital, enabling an “amend and extend” on the debt stack, and giving Rackspace room to expand relationships with AMD and other chip suppliers while driving long-term shareholder value.

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