Rackspace terminates 750 workers to focus on new AI services

Rackspace announced plans to cut 15% of its global workforce, approximately 750 employees, as part of a strategic shift towards technology infrastructure and AI services.
The layoffs are driven by the company’s decision to focus less on legacy services and more on building its enterprise AI infrastructure, especially within its AI buildout.
Historically, Rackspace gained prominence in the 2000s due to cloud management and customer service, but now aims to lead in governed enterprise AI infrastructure.
The layoffs involve primarily its Public Cloud business unit and reflect geographic rationalizations rather than layoffs based on performance.
The financial impact of these layoffs is estimated to be $14 million to $19 million, which will then be redirected towards growing AI solutions and infrastructure.
Rackspace anticipates annual savings from these cuts between $75 million and $85 million.
These strategic workforce reductions come while the company has a notable amount of debt, having accumulated over $2.7 billion at the end of 2025, despite a modest 2% year-over-year revenue increase.
The company has renewed its commitment to AI technologies and recently partnered with Advanced Micro Devices (AMD) to expand its capabilities in this area.

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