Rackspace Technology, Inc. (Rackspace Technology (RXT)) shares are extending a massive rally this Monday, building on Friday's 54% surge that sent the stock to a new 52-week high. Investors are cheering the company's strategic pivot toward artificial intelligence and a stronger-than-expected quarterly sales report.

Rackspace Revenue Topples Street Estimates

Rackspace reported first-quarter sales of $678.1 million, a 2% year-over-year increase that topped the Street estimate of $660.83 million. Growth was driven by public cloud revenue, which climbed 7% to $443 million. On the flip side, private cloud revenue fell 6% to $235 million.

Strategic AMD AI Partnership

A major catalyst for the stock is a new Memorandum of Understanding with Advanced Micro Devices, Inc. (AMD (AMD)). The companies plan to create managed enterprise AI infrastructure, integrating AMD's Instinct GPUs and EPYC CPUs into Rackspace's offerings. This partnership signals Rackspace's commitment to riding the AI wave.

Profitability and Margin Shifts

Adjusted operating profit jumped 20% to $31 million, but the company reported an adjusted loss of six cents per share, missing the analyst consensus of a four-cent loss. Gross margins also contracted to 17.6% from 19.1% in the prior year, a point of concern for some investors.

Rackspace 2026 Fiscal Outlook

Management reaffirmed its fiscal 2026 sales guidance of $2.6 billion to $2.7 billion, which aligns with the Street estimate of $2.64 billion. That steady outlook, combined with the AI partnership, seems to be keeping the momentum alive.

RXT Price Action: Rackspace Technology shares were up 3.46% at $5.68 during premarket trading on Monday, approaching its 52-week high of $6.00.