SAN ANTONIO - Rackspace Technology (NASDAQ: NASDAQ:RXT), a prominent provider of hybrid, multicloud, and AI technology services, has announced a Strategic Collaboration Agreement (SCA) with Amazon (NASDAQ:AMZN) Web Services (AWS). The partnership aims to offer comprehensive cloud advisory, financial operations, migration, modernization, cloud data, machine learning, and generative AI solutions.
The SCA includes a significant investment to expand the Rackspace Technology Migration and Modernization Center of Excellence, leveraging the AWS Migration Acceleration Program (MAP) expertise. The company also introduced the Rackspace Rapid Migration Offer (RRMO), available on AWS Marketplace, to expedite data center migrations to AWS, offering services like migration planning and 24/7 cloud operations support.
D K Sinha, President of Public Cloud at Rackspace Technology, stated that the enhanced collaboration underscores their commitment to delivering business outcomes for customers globally. The agreement focuses on accelerating customer value through migrations, modernization, data, and generative AI initiatives.
Convera, a leader in commercial payments, partnered with Rackspace Technology to transform its customer support operations by leveraging Amazon Bedrock. This move automated complex email classifications, reducing processing times and enabling quicker customer response.
Rackspace and AWS are also set to collaborate on helping customers unlock value from data and solve challenging business problems using generative AI through Foundry for AI by Rackspace (FAIR). FAIR aims to accelerate responsible AI adoption and operate AI workloads at scale within AWS. Rackspace plans to launch AWS-validated generative AI industry accelerators and solutions in AWS Marketplace starting early 2025.
Matt Yanchyshyn, VP of Marketplace and Partner Solutions at AWS, expressed enthusiasm for the expanded collaboration, highlighting the impact of generative AI on industry innovation. The partnership is designed to drive flexibility and innovation, unlocking greater business value for customers across various industries.
This report is based on a press release statement from Rackspace Technology.
"In other recent news, Rackspace Technology has been making significant strides in its financial performance. The company has exceeded second-quarter earnings expectations, showcasing robust revenue, profit, and earnings per share. This success is partly attributed to a strategic shift towards hybrid cloud and AI solutions, with a focus on regulated industries such as healthcare and finance. Despite a 3% sequential decrease in Private Cloud revenue, Rackspace's Public Cloud segment demonstrated growth.
Furthermore, Jefferies increased the price target for Rackspace Technology to $137.00, up from the previous $120.00, maintaining a Hold rating on the stock. This adjustment was influenced by a strong third quarter performance by Raytheon (NYSE:RTN) Defense, which contributed to an estimated earnings per share increase for 2024. On the other hand, BMO Capital maintained its Market Perform rating for Rackspace Technology, acknowledging the company's positive momentum, particularly in the core professional services segment.
Lastly, Rackspace is investing in AI capabilities and expects an increase in digital transformation spending. The company repurchased $68 million of debt and anticipates generating positive cash flow for the rest of the year. These recent developments highlight Rackspace's commitment to its strategic repositioning and capital structure rightsizing."
InvestingPro Insights
Rackspace Technology's strategic collaboration with Amazon Web Services comes at a crucial time for the company, as reflected in recent financial data and analyst insights from InvestingPro.
Despite facing challenges, Rackspace has shown resilience in its stock performance. According to InvestingPro data, the company has seen a remarkable 107.38% price total return over the past year, with a significant 47.09% increase in the last six months alone. This upward trend suggests that investors are optimistic about Rackspace's strategic moves, including the AWS partnership.
However, the company's financial health presents a mixed picture. InvestingPro data shows that Rackspace's revenue for the last twelve months as of Q2 2023 stood at $2.83 billion, with a concerning revenue decline of 8.18% during this period. This decline aligns with an InvestingPro Tip indicating that analysts anticipate a sales decline in the current year.
On a positive note, another InvestingPro Tip highlights that five analysts have revised their earnings upwards for the upcoming period. This could be interpreted as a vote of confidence in Rackspace's strategic initiatives, including the AWS collaboration and its focus on AI-driven solutions.
It's worth noting that InvestingPro offers additional insights, with 10 more tips available for Rackspace Technology. These tips could provide further context on the company's valuation, profitability prospects, and market position, which may be valuable for investors considering the impact of this AWS partnership on Rackspace's future performance.
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