8 unchanged sentences
We are a leading end-to-end hybrid cloud and AI solutions company.
−Removed: We design, build and operate our customers’ cloud environments across all major technology platforms, irrespective of technology stack or deployment model.
−Removed: We partner with our customers at every stage of their cloud journey, enabling them to modernize applications, build new products and adopt innovative technologies.
+Added: We serve as a trusted operator of the full technology stack, from governed private cloud infrastructure to AI deployed in production environments.
+Added: From edge to core to cloud, we design, integrate and operate the infrastructure, data foundations and software platforms required to deliver business outcomes with predictable cost, resilience, security and compliance.
+Added: Our solutions are purpose-built for regulated and mission-critical environments where uptime, data sovereignty and operational accountability are essential.
We serve our customers with a unique combination of proprietary technology resulting from over $1 billion of investment and services expertise from a team of highly skilled consultants and engineers.
−Removed: And we provide our customers with unbiased expertise and technology solutions, delivered over the world’s leading cloud services, all wrapped in Fanatical Experience.
+Added: We also provide our customers with unbiased expertise and technology solutions, delivered over the world’s leading cloud services, all wrapped in Fanatical Experience.
We aim to be our customers’ most trusted advisor and services partner in their path to cloud transformation and to accelerate the value of their cloud investments.
6 unchanged sentences
We have a strong presence with customers of all sizes, including enterprise businesses (revenue in excess of $3 billion), mid-market businesses (revenue of $300 million to $3 billion) and commercial customers (revenue less than $300 million).
−Removed: Effective on January 1, 2023, we reorganized around a two-business unit operating model, Public Cloud and Private Cloud.
−Removed: This two-business unit operating model ensures increased focus, delivery, and service quality for our customers.
−Removed: Beginning in 2023, we changed our segment reporting to reflect this reorganization under two reportable segments:
+Added: We operate our business and report our results through two reportable segments:
Public Cloud and Private Cloud.
−Removed: We have reflected this change in all historical comparative periods presented within this MD&A.
Our Public Cloud segment is a services-centric, capital-light model providing value-added cloud solutions through managed services, Elastic Engineering and professional services offerings for customer environments hosted on the AWS, Microsoft Azure and Google Cloud public cloud platforms .
5 unchanged sentences
Arrangements within our Private Cloud segment generally have a fixed term, typically from 12 to 36 months, with a monthly recurring fee based on the computing resources provided to and utilized by the customer, the complexity of the underlying infrastructure and the level of support we provide.
−Removed: Our other primary sources of revenue are for services within our Public Cloud segment and legacy OpenStack business.
+Added: Our other primary source of revenue is for services within our Public Cloud segment.
Contracts for these arrangements typically operate on a consumption model and can be canceled at any time without penalty.
4 unchanged sentences
We believe our combination of proprietary technology, automation capabilities and technical expertise creates a value proposition for our customers that is hard to replicate for both competitors and in-house IT departments.
−Removed: Our continued success depends to a significant extent on our ability to meet the challenges presented by our highly competitive and dynamic market, including the following key factors:
+Added: We and our customers face a variety of challenges, including evolving technologies (including AI and GenAI) and an uncertain regulatory landscape, including international trade policies and tariffs, as well as other macroeconomic and geopolitical factors.
+Added: These factors have and will continue to affect demand for our products and services.
+Added: Our continued success depends to a significant extent on our ability to respond to these and other challenges presented by our highly competitive and dynamic market, including the following key factors:
Differentiating Our Service Offerings in a Competitive Market Environment
35 unchanged sentences
SG&A also includes transaction costs related to acquisitions and financings along with costs related to integration and business transformation initiatives which may impact the comparability of SG&A between periods .
−Removed: Our income tax benefit and deferred tax assets and liabilities reflect management’s best assessment of estimated current and future taxes to be paid.
−Removed: To date, we have recorded consolidated tax benefits, reflecting our net losses, though certain of our non-U.S.
−Removed: subsidiaries have incurred corporate tax expense according to the relevant taxing jurisdictions.
+Added: Our income tax benefit (provision) and deferred tax assets and liabilities reflect management’s best assessment of estimated current and future taxes to be paid.
+Added: During 2025 we recorded consolidated tax expense, despite our net losses, due to the recording of valuation allowances against our deferred tax assets.
+Added: Certain of our non-U.S.
+Added: subsidiaries continue to incur corporate tax expense or benefit according to the relevant taxing jurisdictions.
We are under certain domestic and foreign tax audits.
22 unchanged sentences
147.2 5.4 % — — % (147.2) (100.0) %
−Removed: Other expense, net (5.0) (0.2) % (21.7) (0.8) % (16.7) NM
−Removed: Total other income (expense) 45.0 1.5 % 27.6 1.0 % (17.4) (38.7) %
+Added: Other expense, net (21.7) (0.8) % (18.7) (0.7) % 3.0 (13.8) %
+Added: Total other income (expense) 27.6 1.0 % (101.1) (3.8) % (128.7) NM
Loss before income taxes (881.5) (32.2) % (201.8) (7.5) % 679.7 (77.1) %
−Removed: Benefit for income taxes 16.6 0.6 % 23.3 0.8 % 6.7 40.4 %
+Added: Benefit (provision) for income taxes 23.3 0.8 % (24.0) (0.9) % (47.3) NM
Net loss $ (858.2) (31.4) % $ (225.8) (8.4) % $ 632.4 (73.7) %
1 unchanged sentence
Revenue decreased $51 million, or 1.9%, to $2,686 million in 2025 from $2,737 million in 2024.
−Removed: Revenue declined due to decreases in both Private Cloud and Public Cloud revenue, as discussed below.
+Added: Revenue declined primarily due to a decrease in Private Cloud revenue, as discussed below.
After re moving the impact from foreign currency fluctuations, on a constant currency basis, revenue decreased 2.1% .
−Removed: The following table presents revenue growth by segment:
+Added: The following table presents revenue by segment:
Year Ended December 31, % Change
5 unchanged sentences
(1) Refer to " Non-GAAP Financial Measures " in this section for further explanation and reconciliation.
−Removed: Public Cloud revenue in 2024 decreased 3.4% on an actual basis and 3.5% on a constant currency basis, from 2023.
−Removed: The decline was due to weaker demand for services in the earlier part of the year.
−Removed: Private Cloud revenue in 2024 decreased 13.2% on an actual basis and 13.6% on a constant currency basis, from 2023, due to customers rolling off legacy private cloud offerings.
+Added: Public Cloud revenue in 2025 increased 0.8% on an actual basis and 0.7% on a constant currency basis, from 2024.
+Added: The increase was driven by higher services revenue, partially offset by a reduction in infrastructure volumes.
+Added: Private Cloud revenue in 2025 decreased 6.1% on an actual basis and 6.7% on a constant currency basis, from 2024, reflecting customer transitions off legacy platforms, partially offset by revenue from new bookings, including revenue related to certain customer contracts that include embedded sales-type lease arrangements for hardware.
Cost of Revenue
Cost of revenue decreased $24 million, or 1%, to $2,179 million in 2025 from $2,204 million in 2024.
−Removed: The decrease in cost of revenue was primarily due to an increase in the useful life of certain customer gear assets, as discussed in Item 8 of Part II, Financial Statements and Supplementary Data - Note 1, "Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies", which resulted in a decline in depreciation expense between periods.
−Removed: Additionally, a reduction in headcount drove a decrease in personnel costs.
−Removed: Also contributing to the reduction in cost of revenue was license expense due to decreased usage between periods.
−Removed: As a percentage of revenue, cost of revenue increased 180 basis points in 2024 to 80.5% from 78.7% in 2023, a s the decline in revenue outpaced the decrease in cost of revenue.
−Removed: Usage charges for third-party infrastructure drove a 370 basis point increase.
−Removed: The decrease in other expenses, discussed above, partially offset the increase.
+Added: The largest drivers of the decrease were a reduction in license expense, due to decreased usage between periods, and a reduction in data center expense as a result of continued optimization initiatives.
+Added: Also contributing to the overall decrease in cost of revenue was a decline in personnel costs, driven by a reduction in headcount and severance expense between periods.
+Added: These decreases were partially offset by higher expense for hardware mainly related to certain customer contracts that include embedded sales-type lease arrangements and an increase in depreciation expense.
+Added: As a percentage of revenue, cost of revenue increased 60 basis points in 2025 to 81.1% from 80.5% in 2024, as the decline in revenue outpaced the decrease in cost of revenue.
Our gross profit was $506 million in 2025, a decrease of $27 million from $533 million in 2024.
1 unchanged sentence
Selling, General and Administrative Expenses
−Removed: SG&A expenses decreased $60 million, or 8%, to $708 million in 2024 from $767 million in 2023.
−Removed: 2023 includes $12 million of expense recognized for a UK office that we exited in the second quarter of 2023, prior to the lease end date.
−Removed: Further contributing to the decrease year-over-year was additional insurance recovery proceeds related to the Hosted Exchange incident received in the current period.
−Removed: In addition, personnel costs decreased due to a reduction in salaries driven by lower headcount and decreases in severance and commissions expense, partially offset by an increase in non-equity incentive compensation.
−Removed: Other non-personnel cost fluctuations included lower professional fees, a reduction in depreciation and amortization expense, and business optimization related expenses between periods.
−Removed: We also had an increase in the gain on sale of certain assets which further contributed to the reduction in SG&A expenses.
−Removed: SG&A expenses as a percentage of revenue was 25.9% for 2024 and 2023.
+Added: SG&A expenses decreased $101 million, or 14%, to $607 million in 2025 from $708 million in 2024, primarily due to a reduction in personnel costs.
+Added: The decrease in personnel costs was largely due to a decline in headcount between periods and a reduction in share-based compensation and non-equity incentive compensation, partially offset by an increase in severance expense driven by the departure of our former chief executive officer.
+Added: Also driving the overall decrease in selling, general and administrative expenses was a $9 million early termination fee associated with the sale of our corporate headquarters in the first quarter of 2024 and a decrease in other business optimization related expenses between periods.
+Added: Insurance recovery proceeds related to the Hosted Exchange incident received in the prior period partially offset the overall reduction in selling, general and administrative expenses year-over-year.
+Added: As a percentage of revenue, SG&A expenses decreased 330 basis points in 2025 to 22.6% from 25.9% in 2024 for the reasons discussed above.
Loss from Operations, Segment Operating Profit, and Non-GAAP Operating Profit
Our loss from operations was $101 million in 2025 compared to $909 million in 2024.
−Removed: Our Non-GAAP Operating Profit was $106 million in 2024, a decrease of $52 million from $157 million in 2023.
+Added: Our Non-GAAP Operating Profit was $126 million in 2025, an increase of $21 million from $106 million in 2024.
Non-GAAP Operating Profit is a non-GAAP financial measure.
9 unchanged sentences
Impairment of goodwill 714.9 —
−Removed: UK office closure (c)
Impairment of assets, net 20.0 —
−Removed: Amortization of intangible assets (d)
+Added: Amortization of intangible assets (c)
Non-GAAP Operating Profit $ 105.6 $ 126.1
−Removed: (a) Includes legal, professional, accounting and other advisory fees related to acquisitions, integration costs of acquired businesses, purchase accounting adjustments, and exploratory acquisition and divestiture costs and expenses related to financing activities.
+Added: (a) Includes purchase accounting adjustments, exploratory acquisition and divestiture costs, and expenses related to financing activities.
(b) Includes consulting and advisory fees related to business transformation and optimization activities, as well as associated severance, certain facility closure costs, and lease termination expenses.
1 unchanged sentence
The year ended December 31, 2024 also includes a $9.0 million MEIA early termination fee associated with the sale of our corporate headquarters in March 2024.
−Removed: (c) Expense recognized related to the closure of a UK office that we exited in the second quarter of 2023 prior to the lease end date.
All of our intangible assets are attributable to acquisitions, including the Rackspace Acquisition in 2016.
10 unchanged sentences
$ 105.6 $ 126.1 $ 20.5 19.4 %
−Removed: Public Cloud operating profit decreased 46% in 2024 from 2023.
−Removed: Segment operating profit as a percentage of segment revenue decreased by 210 basis points, reflecting a 3% decrease in segment revenue, partially offset by a 1% decrease in segment operating expenses .
+Added: Public Cloud operating profit increased 53% in 2025 from 2024.
+Added: Segment operating profit as a percentage of segment revenue increased by 140 basis points, reflecting a 1% increase in segment revenue and a 1% decrease in segment operating expenses .
+Added: The decrease in expenses was mainly driven by operational improvements and cost optimization initiatives.
Private Cloud operating profit decreased 14% in 2025 from 2024.
−Removed: Segment operating profit as a percentage of segment `revenue decreased by 30 basis points, due to a 13% decrease in segment revenue;
−Removed: inline with a 13% decrease in segment operating expenses.
−Removed: The decrease in operating expenses was largely driven by a reduction in depreciation expense due to an increase in the useful life of certain customer gear assets, as discussed in “Cost of Revenue” above.
−Removed: Also contributing to the reduction in Private Cloud operating expenses was a decrease in license expense and personnel costs between periods.
+Added: Segment operating profit as a percentage of segment revenue decreased by 240 basis points, due to a 6% decrease in segment revenue, partially offset by a 3% decrease in segment operating expenses.
+Added: The decrease in expenses was mainly driven by cost optimization activities.
Centralized corporate functions that provide services to the segments in areas such as accounting, information technology, marketing, legal and human resources are not allocated to the segments and are included in "corporate functions" in the tabl e abov e.
−Removed: This expense decreased 13% in 2024 due to a reduction in depreciation and amortization expense driven by certain assets reaching the end of their useful life.
−Removed: Additionally, our continued focus on cost management further contributed to the cost reduction.
+Added: This expense decreased 17% in 2025 due to our continued focus on cost management.
For more information about our segment operating profit, see Item 8 of Part II, Financial Statements and Supplementary Data - Note 16, "Segment Reporting."
Impairment of Goodwill
−Removed: We recorded a total of $715 million and $709 million in non-cash goodwill impairment charges in 2024 and 2023, respectively.
−Removed: In connection with the preparation of the March 2024 Refinancing Transactions that were completed in March and April 2024, as further described in Item 8 of Part II, Financial Statements and Supplementary Data - Note 7, "Debt", we updated our internal forecasts.
+Added: We recorded a total of $715 million in non-cash goodwill impairment charges in 2024.
+Added: In connection with the March 2024 Refinancing Transactions that were completed in March and April 2024, as further described in Item 8 of Part II, Financial Statements and Supplementary Data - Note 7, "Debt", we updated our internal forecasts.
As of February 29, 2024, we assessed our Board approved 2024 internal budget along with several events and circumstances that could affect the significant inputs used to determine the fair value of our reporting units, including the significance of the amount, if any, of excess carrying value over fair value, consistency of our current and forecasted operating margins and cash flows, budgeted-to-actual performance, timing of the expected effects of our strategic initiatives, overall change in economic climate, changes in the industry and competitive environment, changes to our risk-adjusted discount rates and earnings quality and sustainability.
3 unchanged sentences
The results of this goodwill impairment analysis indicated an impairment of goodwill within our Public Cloud and Private Cloud reporting units of $69 million and $73 million, respectively, recorded in the third quarter of 2024.
−Removed: Due to the change in our segment reporting as a result of the business reorganization as of January 1, 2023, we completed a quantitative goodwill impairment analysis both prior and subsequent to the aforementioned change.
−Removed: The results of the quantitative goodwill impairment analysis performed as of January 1, 2023, subsequent to the change, indicated an impairment within our Private Cloud reporting unit, and we recorded a non-cash impairment charge of $271 million in the first quarter of 2023.
−Removed: During the first quarter of 2023, we experienced a sustained decline in our stock price resulting in our market capitalization being less than the carrying value of our combined reporting units.
−Removed: As of March 31, 2023, we assessed several events and circumstances that could affect the significant inputs used to determine the fair value of our reporting units, including the significance of the amount, if any, of excess carrying value over fair value, consistency of operating margins and cash flows, budgeted-to-actual performance for the first three months of the year, overall change in economic climate, changes in the industry and competitive environment, and earnings quality and sustainability.
−Removed: After considering all available evidence in our evaluation of goodwill impairment indicators, we determined it appropriate to perform an interim quantitative assessment of our reporting units as of March 31, 2023.
−Removed: The results of this quantitative goodwill impairment analysis indicated an impairment within our Private Cloud reporting unit, and we recorded an additional non-cash impairment charge of $272 million in the first quarter of 2023.
−Removed: We performed an interim goodwill impairment analysis as of September 30, 2023 based on our assessment of several events and circumstances that affect the significant inputs used to determine the fair value of our reporting units, including the significance of the amount of excess carrying value over fair value, consistency of operating margins and cash flows, budgeted-to-actual performance, overall change in economic climate, changes in the industry and competitive environment, market capitalization and earnings quality and sustainability.
−Removed: As a result, we determined that the carrying value of our Private Cloud reporting unit exceeded its fair value and recorded a non-cash impairment of goodwill of $166 million in the third quarter of 2023.
−Removed: As of October 1, 2023, we reassessed our reporting units and combined our Private Cloud and OpenStack Public Cloud reporting units into a new Private Cloud reporting unit.
−Removed: We completed a quantitative goodwill impairment analysis as of October 1, 2023, subsequent to the aforementioned change.
−Removed: The results of the quantitative goodwill impairment analysis indicated no impairment to goodwill.
+Added: There was no such impairment in 2025.
See Item 8 of Part II, Financial Statements and Supplementary Data - Note 6, "Goodwill and Intangible Assets" for further discussion.
Impairment of Assets, Net
−Removed: We recorded a total of $20 million and $52 million in net asset impairment charges in 2024 and 2023, respectively.
We evaluated our indefinite-lived intangible asset for impairment as of February 29, 2024.
As a result of this evaluation, we recorded a $20 million impairment of our indefinite-lived intangible asset in the first quarter of 2024.
−Removed: We also performed a quantitative assessment of our indefinite-lived intangible asset prior to testing our goodwill for impairment as September 30, 2024, which did not indicate any impairment of the Rackspace trade name.
−Removed: Similarly, we evaluated our indefinite-lived intangible asset for impairment as of September 30, 2023.
−Removed: As a result of this evaluation, we recorded a $57 million impairment of our indefinite-lived intangible asset in the third quarter of 2023.
−Removed: In addition, during 2023, we recorded a $5 million net increase in the estimated fair value, less estimated cost to sell, of our corporate headquarters w hich was classified as held for sale under GAAP as of December 31, 2022.
−Removed: See Item 8 of Part II, Financial Statements and Supplementary Data - Note 5 , " Property, Equipment and Software, net " and Note 6, "Goodwill and Intangible Assets" for further discussion.
+Added: There was no such impairment in 2025.
+Added: See Item 8 of Part II, Financial Statements and Supplementary Data - Note 6, "Goodwill and Intangible Assets" for further discussion.
Interest Expense
1 unchanged sentence
Gain on Debt Extinguishment, Net of Debt Modification Costs
−Removed: We recorded $80 million gain on debt extinguishment, net of debt modification costs in 2024 related to the March 2024 Refinancing Transactions.
+Added: We recorded an $80 million gain on debt extinguishment, net of debt modification costs in 2024 related to the March 2024 Refinancing Transactions.
In addition, we recorded $67 million total gain on debt extinguishment related to repurchases of an aggregate $92 million principal amount of 3.50% FLSO Senior Secured Notes, FLSO Term Loan Facility, and 5.375% Senior Notes in 2024.
−Removed: We recorded a $228 million gain on debt extinguishment in 2023 related to repurchases of $352 million principal amount of 5.375% Senior Notes.
−Removed: In addition, we repurchased $36 million principal amount of 3.50% Senior Secured Notes and $56 million principal amount of the Term Loan Facility, which resulted in an $18 million and $26 million gain on debt extinguishment, respectively.
See Item 8 of Part II, Financial Statements and Supplementary Data - Note 7, "Debt" for further discussion.
Other Expense, Net
−Removed: The increase in other expense, net to $22 million in 2024 from $5 million in 2023 is primarily due to a full year of costs incurred in 2024 related to the Receivables Purchase Facility entered into in September 2023.
+Added: Other expense, net decreased $3 million, or 14%, to $19 million in 2025 from $22 million in 2024, primarily due to foreign currency transactions gains between periods and upfront transaction costs incurred in 2024 related to the Receivables Purchase Facility.
See Item 8 of Part II, Financial Statements and Supplementary Data - Note 3, "Sale of Receivables" for further discussion regarding the Receivables Purchase Facility.
−Removed: Benefit for Income Taxes
−Removed: Our income tax benefit increased by $7 million to $23 million in 2024 from $17 million in 2023.
−Removed: Our effective tax rate increased from 1.9% in 2023 to 2.6% in 2024.
−Removed: The increase in the effective tax rate year-over-year is primarily due to the tax impact associated with goodwill impairments recorded in both the first and third quarters of 2024 as well as goodwill impairments recorded in 2023, the majority of which were nondeductible for income tax purposes, and the income tax benefit of $103 million related to the March 2024 Refinancing Transactions discussed above.
−Removed: The difference between the effective tax rate and the statutory rate in 2024 is primarily due to the tax impact associated with changes in the valuation allowance, the tax impact associated with the goodwill impairments recorded in the first and third quarters of 2024, the majority of which were nondeductible for income tax purposes, and the tax impact of the March 2024 Refinancing Transactions.
+Added: Benefit (Provision) for Income Taxes
+Added: Our income tax expense was $24 million in 2025 compared to $23 million income tax benefit in 2024.
+Added: Our effective tax rate decreased from 2.6% in 2024 to (11.9)% in 2025.
+Added: The decrease in the effective tax rate year-over-year is primarily due to the tax impact associated with changes in the valuation allowance, geographic distribution of profits, the tax impact associated with goodwill impairments recorded in both the first and third quarters of 2024, the majority of which were nondeductible for income tax purposes, and the income tax benefit related to the March 2024 Refinancing Transactions.
+Added: The difference between the effective tax rate and the statutory rate in 2025 is primarily due to the tax impact associated with changes in valuation allowance, executive compensation that is non-deductible under IRC Section 162(m), the net impact of the geographic distribution of our earnings, and tax effects from non-deductible share-based compensation.
For a full reconciliation of our effective tax rate to the U.S.
−Removed: federal statutory rate and further explanation of our benefit for income taxes, see Item 8 of Part II, Financial Statements and Supplementary Data - Note 13 , " Taxes ."
+Added: federal statutory rate and further explanation of our income tax expense, see Item 8 of Part II, Financial Statements and Supplementary Data - Note 13 , " Taxes ."
Year Ended December 31, 2023 Compared to Year Ended December 31, 2024
13 unchanged sentences
Interest expense (221.6) (7.5) % (98.0) (3.6) % 123.6 (55.8) %
−Removed: Gain (loss) on investments, net
−Removed: (0.2) (0.0) % 0.3 0.0 % 0.5 NM
−Removed: Gain on debt extinguishment
+Added: Gain on investments, net
0.3 0.0 % 0.1 0.0 % (0.2) (66.7) %
−Removed: Other expense, net
+Added: Gain on debt extinguishment, net of debt modification costs
271.3 9.2 % 147.2 5.4 % (124.1) (45.7) %
−Removed: Total other income (expense) (218.7) (7.0) % 45.0 1.5 % 263.7 NM
+Added: Other expense, net
+Added: (5.0) (0.2) % (21.7) (0.8) % (16.7) NM
+Added: Total other income (expense) 45.0 1.5 % 27.6 1.0 % (17.4) (38.7) %
Loss before income taxes (854.4) (28.9) % (881.5) (32.2) % (27.1) 3.2 %
3 unchanged sentences
Revenue decreased $220 million, or 7.4%, to $2,737 million in 2024 from $2,957 million in 2023.
−Removed: Revenue declined primarily due to Private Cloud, partially offset by growth in Public Cloud, as discussed below.
−Removed: Revenue was not materially impacted by foreign currency fluctuations as revenue on a constant currency basis also declined 5.3% .
−Removed: The following table presents revenue growth by segment:
+Added: Revenue declined due to decreases in both Private Cloud and Public Cloud revenue, as discussed below.
+Added: After re moving the impact from foreign currency fluctuations, on a constant currency basis, revenue decreased 7.7% .
+Added: The following table presents revenue by segment:
Year Ended December 31, % Change
5 unchanged sentences
(1) Refer to " Non-GAAP Financial Measures " in this section for further explanation and reconciliation.
−Removed: Public Cloud revenue in 2023 increased 0.2% on an actual basis and 0.3% on a constant currency basis, from 2022.
−Removed: Underlying growth was driven by both the acquisition of new customers and increased spend by existing customers, partially offset by cancellations by existing customers.
−Removed: Offerings in this segment with the strongest growth include infrastructure resale on AWS, Microsoft Azure and Google Cloud.
−Removed: Private Cloud revenue in 2023 decreased 12.2% on an actual basis and 12.3% on a constant currency basis, from 2022, due to customers rolling off old generation private cloud offerings, expected decline in legacy OpenStack offerings, and the impact from the December 2022 Hosted Exchange ransomware incident.
+Added: Public Cloud revenue in 2024 decreased 3.4% on an actual basis and 3.5% on a constant currency basis, from 2023.
+Added: The decline was due to weaker demand for services in the earlier part of the year.
+Added: Private Cloud revenue in 2024 decreased 13.2% on an actual basis and 13.6% on a constant currency basis, from 2023, reflecting customer transitions off legacy platforms.
Cost of Revenue
−Removed: Cost of revenue increased $63 million, or 3%, to $2,328 million in 2023 from $2,265 million in 2022, primarily due to an increase in usage charges for third-party infrastructure associated with growth in these offerings.
−Removed: Consulting professional fees and data center costs increased primarily to support growth for certain large customers.
−Removed: Personnel costs declined between periods due to lower headcount and a decrease in non-equity incentive compensation, partially offset by higher severance expense in 2023.
−Removed: As a percentage of revenue, cost of revenue increased 610 basis points in 2023 to 78.7% from 72.6% in 2022, primarily driven by a 440 basis point increase in usage charges for third-party infrastructure.
−Removed: Higher data center and professional fees also contributed to the increase in basis points between periods.
+Added: Cost of revenue decreased $125 million, or 5%, to $2,204 million in 2024 from $2,328 million in 2023.
+Added: The decrease in cost of revenue was primarily due to an increase in the useful life of certain customer gear assets which resulted in a decline in depreciation expense between periods.
+Added: Additionally, a reduction in headcount drove a decrease in personnel costs.
+Added: Also contributing to the reduction in cost of revenue was license expense due to decreased usage between periods.
+Added: As a percentage of revenue, cost of revenue increased 180 basis points in 2024 to 80.5% from 78.7% in 2023, a s the decline in revenue outpaced the decrease in cost of revenue.
+Added: Usage charges for third-party infrastructure drove a 370 basis point increase.
+Added: The decrease in other expenses, discussed above, partially offset the increase.
Our gross profit was $533 million in 2024, a decrease of $95 million from $629 million in 2023.
2 unchanged sentences
SG&A expenses decreased $60 million, or 8%, to $708 million in 2024 from $767 million in 2023.
−Removed: Contributing to the reduction in expense was a wind down of certain business optimization initiatives between periods.
−Removed: In addition, personnel costs declined between periods due to lower headcount and decreases in non-equity incentive compensation and commissions, partially offset by higher severance expense.
−Removed: Other non-personnel costs fluctuations include lower marketing spend, professional fees, and depreciation and amortization expense, offset by higher office rent.
−Removed: The increase in office rent includes $12 million of expense recognized for a UK office that we exited in the second quarter of 2023, prior to the lease end date.
−Removed: As a percentage of revenue, SG&A expenses decreased 150 basis points, to 25.9% in 2023 from 27.4% in 2022, for the reasons discussed above.
+Added: 2023 includes $12 million of expense recognized for a UK office that we exited in the second quarter of 2023, prior to the lease end date.
+Added: Further contributing to the decrease year-over-year was additional insurance recovery proceeds related to the Hosted Exchange incident received in 2024.
+Added: In addition, personnel costs decreased due to a reduction in salaries driven by lower headcount and decreases in severance and commissions expense, partially offset by an increase in non-equity incentive compensation.
+Added: Other non-personnel cost fluctuations included lower professional fees, a reduction in depreciation and amortization expense, and business optimization related expenses between periods.
+Added: We also had an increase in the gain on sale of certain assets which further contributed to the reduction in SG&A expenses.
+Added: SG&A expenses as a percentage of revenue was 25.9% for 2024 and 2023.
Loss from Operations, Segment Operating Profit, and Non-GAAP Operating Profit
16 unchanged sentences
Non-GAAP Operating Profit $ 157.2 $ 105.6
−Removed: (a) Includes legal, professional, accounting and other advisory fees related to acquisitions, certain one-time compliance costs related to being a public company, integration costs of acquired businesses, purchase accounting adjustments, and exploratory acquisition and divestiture costs and expenses related to financing activities.
+Added: (a) Includes purchase accounting adjustments, exploratory acquisition and divestiture costs, and expenses related to financing activities.
(b) Includes consulting and advisory fees related to business transformation and optimization activities, as well as associated severance, certain facility closure costs, and lease termination expenses.
Also includes payroll taxes associated with the exercise of stock options and vesting of restricted stock.
−Removed: This amount also includes total charges of $5.2 million for the year ended December 31, 2022 related to the July 2021 Restructuring Plan which are not accounted for as exit and disposal costs under ASC 420, including one-time offshore build out costs.
+Added: The year ended December 31, 2024 also includes a $9.0 million MEIA early termination fee associated with the sale of our corporate headquarters in March 2024.
(c) Expense recognized related to the closure of a UK office that we exited in the second quarter of 2023 prior to the lease end date.
12 unchanged sentences
Public Cloud operating profit decreased 46% in 2024 from 2023.
−Removed: Segment operating profit as a percentage of segment revenue decreased by 220 basis points, reflecting a 3% increase in segment operating expenses as segment revenue growth remained relatively flat.
−Removed: The increase in costs was mainly driven by higher third-party infrastructure costs due to the increase in revenue, partially offset by a decrease in personnel costs.
+Added: Segment operating profit as a percentage of segment revenue decreased by 210 basis points, reflecting a 3% decrease in segment revenue, partially offset by a 1% decrease in segment operating expenses .
Private Cloud operating profit decreased 14% in 2024 from 2023.
−Removed: Segment operating profit as a percentage of segment revenue decreased by 770 basis points, due to a 12% decrease in segment revenue, partially offset by a 2% decrease in segment operating expenses.
−Removed: The decrease in costs was mainly driven by a reduction in personnel costs.
+Added: Segment operating profit as a percentage of segment revenue decreased by 30 basis points, due to a 13% decrease in segment revenue;
+Added: inline with a 13% decrease in segment operating expenses.
+Added: The decrease in operating expenses was largely driven by a reduction in depreciation expense due to an increase in the useful life of certain customer gear assets, as discussed in “Cost of Revenue” above.
+Added: Also contributing to the reduction in Private Cloud operating expenses was a decrease in license expense and personnel costs between periods.
Centralized corporate functions that provide services to the segments in areas such as accounting, information technology, marketing, legal and human resources are not allocated to the segments and are included in "corporate functions" in the tabl e abov e.
−Removed: This expense decreased 10% in 2023 primarily due to a decline in depreciation expense as certain property, equipment, and software reached the end of its useful life.
+Added: This expense decreased 13% in 2024 due to a reduction in depreciation and amortization expense driven by certain assets reaching the end of their useful life.
+Added: Additionally, our continued focus on cost management further contributed to the cost reduction.
For more information about our segment operating profit, see Item 8 of Part II, Financial Statements and Supplementary Data - Note 16, "Segment Reporting."
1 unchanged sentence
We recorded a total of $715 million and $709 million in non-cash goodwill impairment charges in 2024 and 2023, respectively.
+Added: In connection with the March 2024 Refinancing Transactions that were completed in March and April 2024, as further described in Item 8 of Part II, Financial Statements and Supplementary Data - Note 7, "Debt", we updated our internal forecasts.
+Added: As of February 29, 2024, we assessed our Board approved 2024 internal budget along with several events and circumstances that could affect the significant inputs used to determine the fair value of our reporting units, including the significance of the amount, if any, of excess carrying value over fair value, consistency of our current and forecasted operating margins and cash flows, budgeted-to-actual performance, timing of the expected effects of our strategic initiatives, overall change in economic climate, changes in the industry and competitive environment, changes to our risk-adjusted discount rates and earnings quality and sustainability.
+Added: After considering all available evidence in our evaluation of goodwill impairment indicators, we determined it appropriate to perform an interim quantitative assessment of our reporting units as of February 29, 2024.
+Added: The results of this goodwill impairment analysis indicated an impairment of goodwill within our Public Cloud and Private Cloud reporting units of $385 million and $188 million, respectively, recorded in the first quarter of 2024.
+Added: We performed an interim goodwill impairment analysis as of September 30, 2024 based on our assessment of several events and circumstances that could affect the significant inputs used to determine the fair value of our reporting units, including the significance of the amount, if any, of excess carrying value over fair value, consistency of our current and forecasted operating margins and cash flows, budgeted-to-actual performance, timing of the expected effects of our strategic initiatives, overall change in economic climate, changes in the industry and competitive environment, changes to our risk-adjusted discount rates and earnings quality and sustainability.
+Added: The results of this goodwill impairment analysis indicated an impairment of goodwill within our Public Cloud and Private Cloud reporting units of $69 million and $73 million, respectively, recorded in the third quarter of 2024.
Due to the change in our segment reporting as a result of the business reorganization as of January 1, 2023, we completed a quantitative goodwill impairment analysis both prior and subsequent to the aforementioned change.
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The results of the quantitative goodwill impairment analysis indicated no impairment to goodwill.
−Removed: During the third quarter of 2022, we experienced a sustained decline in our stock price resulting in our market capitalization being less than the carrying value of our combined reporting units.
−Removed: We performed an interim goodwill impairment analysis as of September 1, 2022 based on our assessment of several events and circumstances that affect the significant inputs used to determine the fair value of our reporting units, including the significance of the amount of excess carrying value over fair value, consistency of operating margins and cash flows, budgeted-to-actual performance from prior year, overall change in economic climate, changes in the industry and competitive environment, and earnings quality and sustainability.
−Removed: In addition, as of September 1, 2022, we lowered our projected operating results primarily due to product mix shifts and market concerns related to inflation and other macroeconomic factors.
−Removed: As a result, we determined that the carrying value of our former Multicloud Services reporting unit exceeded its fair value and recorded an impairment of goodwill of $405 million during the third quarter of 2022.
−Removed: The results of our annual goodwill impairment test as of October 1, 2022 did not indicate any impairments of goodwill.
−Removed: During the fourth quarter of 2022, subsequent to our annual goodwill impairment analysis, we experienced a decline in our market capitalization following a ransomware incident in early December which caused service disruptions on our Hosted Exchange email business.
−Removed: We therefore determined it appropriate to perform an interim quantitative assessment of our reporting units as of December 31, 2022.
−Removed: As a result, we determined that the carrying value of our former Apps & Cross Platform reporting unit exceeded its fair value and recorded an impairment of goodwill of $129 million during the fourth quarter of 2022.
See Item 8 of Part II, Financial Statements and Supplementary Data - Note 6, "Goodwill and Intangible Assets" for further discussion.
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We recorded a total of $20 million and $52 million in net asset impairment charges in 2024 and 2023, respectively.
−Removed: We evaluated our indefinite-lived intangible asset for impairment as of September 30, 2023.
+Added: We evaluated our indefinite-lived intangible asset for impairment as of February 29, 2024.
+Added: As a result of this evaluation, we recorded a $20 million impairment of our indefinite-lived intangible asset in the first quarter of 2024.
+Added: We also performed a quantitative assessment of our indefinite-lived intangible asset prior to testing our goodwill for impairment as September 30, 2024, which did not indicate any impairment of the Rackspace trade name.
+Added: Similarly, we evaluated our indefinite-lived intangible asset for impairment as of September 30, 2023.
As a result of this evaluation, we recorded a $57 million impairment of our indefinite-lived intangible asset in the third quarter of 2023.
−Removed: Similarly, we evaluated our indefinite-lived intangible asset and long-lived assets for impairment as of September 1, 2022.
−Removed: As a result of these evaluations, we recorded total impairment charges of $59 million in the third quarter of 2022, consisting of a $21 million impairment of our indefinite-lived trade name intangible asset and a $38 million impairment of OpenStack Public Cloud long-lived assets.
−Removed: As of December 31, 2022, we recorded an additional $12 million impairment of our indefinite-lived trade name intangible asset.
−Removed: Additionally, as of December 31, 2022, our corporate headquarters property was classified as held for sale.
−Removed: The property's previous carrying amount of $83 million was written down to its estimated fair value, less estimated cost to sell, of $12 million, resulting in a $71 million impairment charge recorded in the fourth quarter of 2022.
−Removed: We also wrote-off the remaining $5 million net book value of the related property tax abatement asset in connection with the held for sale classification.
−Removed: During 2023, we recorded a $5 million net increase in the estimated fair value, less estimated cost to sell, of our corporate headquarters.
+Added: In addition, during 2023, we recorded a $5 million net increase in the estimated fair value, less estimated cost to sell, of our corporate headquarters w hich was classified as held for sale under GAAP as of December 31, 2022.
See Item 8 of Part II, Financial Statements and Supplementary Data - Note 5, " Property, Equipment and Software, net " and Note 6, "Goodwill and Intangible Assets" for further discussion.
Interest Expense
−Removed: Interest expense increased $13 million, or 6%, to $222 million in 2023 from $209 million in 2022 , due primarily to rising interest rates and the impact on our variable-rate Term Loan Facility, partially offset by debt repurchases during 2023, as discussed below.
−Removed: Gain on Debt Extinguishment
+Added: Interest expense decreased $124 million, or 56%, to $98 million in 2024 from $222 million in 2023 , primarily due to the accounting for contractual interest payments on debt instruments entered into as part of the March 2024 Refinancing Transactions, portions of which are recorded as a reduction of related premiums and not as interest expense, which reduces interest expense relative to contractual interest cost.
+Added: Gain on Debt Extinguishment, Net of Debt Modification Costs
+Added: We recorded $80 million gain on debt extinguishment, net of debt modification costs in 2024 related to the March 2024 Refinancing Transactions.
+Added: In addition, we recorded $67 million total gain on debt extinguishment related to repurchases of an aggregate $92 million principal amount of 3.50% FLSO Senior Secured Notes, FLSO Term Loan Facility, and 5.375% Senior Notes in 2024.
We recorded a $228 million gain on debt extinguishment in 2023 related to repurchases of $352 million principal amount of 5.375% Senior Notes.
2 unchanged sentences
Other Expense, Net
−Removed: The decrease in other expense, net to $5 million in 2023 from $10 million in 2022 is primarily related to foreign currency transaction gains, partially offset by costs incurred in 2023 related to the Receivables Purchase Facility entered into in September 2023.
+Added: The increase in other expense, net to $22 million in 2024 from $5 million in 2023 is primarily due to a full year of costs incurred in 2024 related to the Receivables Purchase Facility entered into in September 2023.
See Item 8 of Part II, Financial Statements and Supplementary Data - Note 3, "Sale of Receivables" for further discussion regarding the Receivables Purchase Facility.
Benefit for Income Taxes
−Removed: Our income tax benefit decreased by $76 million to $17 million in 2023 from $93 million in 2022.
−Removed: Our effective tax rate decreased from 10.3% in 2022 to 1.9% in 2023.
−Removed: The decrease in the effective tax rate year-over-year is primarily due to the tax impact associated with the goodwill impairments recorded in 2023 as well as changes in the valuation allowance.
−Removed: The majority of the goodwill impairments recorded in 2023 were nondeductible for income tax purposes.
−Removed: The difference between the effective tax rate and the statutory rate in 2023 is primarily due to the tax impact associated with the goodwill impairments recorded during the year, executive compensation that is nondeductible under IRC Section 162(m), the geographic distribution of profits, tax effects from nondeductible share-based compensation as well as changes in the valuation allowance.
+Added: Our income tax benefit increased by $7 million to $23 million in 2024 from $17 million in 2023.
+Added: Our effective tax rate increased from 1.9% in 2023 to 2.6% in 2024.
+Added: The increase in the effective tax rate year-over-year is primarily due to the tax impact associated with goodwill impairments recorded in both the first and third quarters of 2024 as well as goodwill impairments recorded in 2023, the majority of which were nondeductible for income tax purposes, and the income tax benefit of $103 million related to the March 2024 Refinancing Transactions discussed above.
+Added: The difference between the effective tax rate and the statutory rate in 2024 is primarily due to the tax impact associated with changes in the valuation allowance, the tax impact associated with the goodwill impairments recorded in the first and third quarters of 2024, the majority of which were nondeductible for income tax purposes, and the tax impact of the March 2024 Refinancing Transactions.
For a full reconciliation of our effective tax rate to the U.S.
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We have reconciled each of these non-GAAP measures to the applicable most comparable GAAP measure throughout this MD&A.
−Removed: Update to Non-GAAP Financial Measures
−Removed: Beginning in the fourth quarter of 2024, we have updated the presentation of our non-GAAP financial measures to no longer exclude certain cash compensation paid to employees who remain employed with Rackspace which were previously included in “special bonuses and other compensation expenses” and “restructuring and transformation expenses” line items of our reconciliations.
−Removed: Additionally, we have removed “special bonuses and other compensation expenses” line item and the remaining adjustments are now presented within “restructuring and transformation expenses” line item.
−Removed: All prior period Non-GAAP Gross Profit, Non-GAAP Net Income (Loss), Non-GAAP Operating Profit, Adjusted EBITDA and Non-GAAP Earnings (Loss) Per Share financial measures have been recasted to reflect current period presentation.
Constant Currency Revenue
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Also includes payroll taxes associated with the exercise of stock options and vesting of restricted stock.
−Removed: The year ended December 31, 2022 also includes certain costs associated with the July 2021 Restructuring Plan which are not accounted for as exit and disposal costs under ASC 420, including one-time offshore build out costs.
Non-GAAP Net Income (Loss), Non-GAAP Operating Profit and Adjusted EBITDA
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Investors are cautioned against using these measures to the exclusion of our results in accordance with GAAP.
−Removed: The following tables present a reconciliation of Non-GAAP Net Income (Loss) and Adjusted EBITDA to the most directly comparable GAAP financial measures.
−Removed: For a reconciliation of income (loss) from operations to Non-GAAP Operating Profit, see “ Loss from Operations, Segment Operating Profit, and Non-GAAP Operating Profit ” in the year-over-year comparisons under "Results of Operations" above.
−Removed: Net loss reconciliation to Non-GAAP Net Income (Loss)
+Added: The following tables present a reconciliation of Non-GAAP Net Loss and Adjusted EBITDA to the most directly comparable GAAP financial measures.
+Added: For a reconciliation of loss from operations to Non-GAAP Operating Profit, see “ Loss from Operations, Segment Operating Profit, and Non-GAAP Operating Profit ” in the year-over-year comparisons under "Results of Operations" above.
+Added: Net loss reconciliation to Non-GAAP Net Loss
Year Ended December 31,
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Impairment of assets, net 52.2 20.0 —
−Removed: Net (gain) loss on divestiture and investments (d)
+Added: Net gain on divestiture and investments (d)
(0.3) (0.1) (0.3)
2 unchanged sentences
Interest expense impact from the March 2024 Refinancing Transactions (e)
+Added: — (72.9) (83.0)
Other adjustments (f)
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1.7 (1.0) 39.7
−Removed: Non-GAAP Net Income (Loss) $ 82.1 $ (52.1) $ (63.5)
+Added: Non-GAAP Net Loss $ (52.1) $ (63.5) $ (44.7)
Net loss reconciliation to Adjusted EBITDA
10 unchanged sentences
Impairment of assets, net 52.2 20.0 —
−Removed: Net (gain) loss on divestiture and investments (d)
+Added: Net gain on divestiture and investments (d)
(0.3) (0.1) (0.3)
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Interest expense 221.6 98.0 82.7
−Removed: Benefit for income taxes (92.9) (16.6) (23.3)
+Added: Provision (benefit) for income taxes (16.6) (23.3) 24.0
Depreciation and amortization (j)
1 unchanged sentence
Adjusted EBITDA $ 362.6 $ 244.8 $ 275.7
−Removed: Includes legal, professional, accounting and other advisory fees related to acquisitions, certain one-time compliance costs related to being a public company, integration costs of acquired businesses, purchase accounting adjustments, and exploratory acquisition and divestiture costs and expenses related to financing activities.
+Added: Includes purchase accounting adjustments, exploratory acquisition and divestiture costs, and expenses related to financing activities.
Includes consulting and advisory fees related to business transformation and optimization activities, as well as associated severance, certain facility closure costs, and lease termination expenses.
Also includes payroll taxes associated with the exercise of stock options and vesting of restricted stock.
−Removed: The year ended December 31, 2022 includes charges of $5.2 million related to the July 2021 Restructuring Plan which are not accounted for as exit and disposal costs under ASC 420, including one-time offshore build out costs.
−Removed: In addition, the year ended December 31, 2024 includes a $9.0 million MEIA early termination fee associated with the sale of our corporate headquarters in March 2024.
+Added: The year ended December 31, 2024 includes a $9.0 million MEIA early termination fee associated with the sale of our corporate headquarters in March 2024.
Expense recognized related to the closure of a UK office that we exited in the second quarter of 2023 prior to the lease end date.
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Non-GAAP Earnings (Loss) Per Share
−Removed: We define Non-GAAP Earnings (Loss) per Share as Non-GAAP Net Income (Loss) divided by our GAAP weighted average number of shares outstanding for the period on a diluted basis and further adjusted for the weighted average number of shares associated with securities which are anti-dilutive to GAAP loss per share but dilutive to Non-GAAP Earnings (Loss) per Share.
−Removed: Management uses Non-GAAP Earnings (Loss) per Share to evaluate the performance of our business on a comparable basis from period to period, including by adjusting for the impact of the issuance of shares that would be dilutive to Non-GAAP Earnings (Loss) per Share.
−Removed: The following table reconciles Non-GAAP Earnings (Loss) per Share to our GAAP net loss per share on a diluted basis:
+Added: We define Non-GAAP Earnings (Loss) Per Share as Non-GAAP Net Income (Loss) divided by our GAAP weighted average number of shares outstanding for the period on a diluted basis and further adjusted for the weighted average number of shares associated with securities which are anti-dilutive to GAAP loss per share.
+Added: Management uses Non-GAAP Earnings (Loss) Per Share to evaluate the performance of our business on a comparable basis from period to period, including by adjusting for the impact of the issuance of shares.
+Added: The following table reconciles Non-GAAP Loss Per Share to our GAAP net loss per share on a diluted basis:
Year Ended December 31,
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Net loss attributable to common stockholders $ (837.8) $ (858.2) $ (225.8)
−Removed: Non-GAAP Net Income (Loss) $ 82.1 $ (52.1) $ (63.5)
+Added: Non-GAAP Net Loss $ (52.1) $ (63.5) $ (44.7)
Weighted average number of shares - Diluted 215.3 224.8 238.7
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3.65 3.54 0.76
−Removed: Per share impacts of shares dilutive after adjustments to net loss (a)
+Added: Per share impacts of shares after adjustments to net loss (a)
0.00 0.01 0.01
−Removed: Non-GAAP Earnings (Loss) Per Share
+Added: Non-GAAP Loss Per Share
$ (0.24) $ (0.27) $ (0.18)
−Removed: (a) Reflects impact of awards that would have been anti-dilutive to net loss per share, and therefore not included in the calculation, but would be dilutive to Non-GAAP Earnings (Loss) Per Share and are therefore included in the share count for purposes of this non-GAAP measure.
−Removed: Potential common share equivalents consist of shares issuable upon the exercise of stock options, vesting of restricted stock units (including performance-based restricted stock units) or purchases under the ESPP, as well as contingent shares associated with our acquisition of Datapipe.
+Added: (a) Potential common share equivalents consist of shares issuable upon the exercise of stock options, vesting of restricted stock units (including performance-based restricted stock units) or purchases under the ESPP, as well as contingent shares associated with our acquisition of Datapipe.
Certain of our potential common share equivalents are contingent on certain investment funds managed by affiliates of Apollo achieving pre-established performance targets based on a MOIC, which are included in the denominator for the entire period if such shares would be issuable as of the end of the reporting period assuming the end of the reporting period was the end of the contingency period.
−Removed: (b) Reflects the aggregate adjustments made to reconcile Non-GAAP Net Income (Loss) to our net loss, as noted in the above table, divided by the GAAP diluted number of shares outstanding for the relevant period.
+Added: (b) Reflects the aggregate adjustments made to reconcile Non-GAAP Net Loss to our net loss, as noted in the above table, divided by the GAAP diluted number of shares outstanding for the relevant period.
Liquidity and Capital Resources
We primarily finance our operations and capital expenditures with internally-generated cash from operations and hardware leases, and if necessary, borrowings under the New Revolving Credit Facility.
−Removed: As of December 31, 2024, the New Revolving Credit Facility provided for up to $375 million of borrowings, none of which was drawn and outstanding as of December 31, 2024.
+Added: As of December 31, 2025, the New Revolving Credit Facility provided for up to $375 million of borrowings, $60 million of which was drawn and outstanding as of December 31, 2025.
Our primary uses of cash are working capital requirements, debt service requirements and capital expenditures.
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From time to time, depending upon market and other conditions, as well as upon our cash balances and liquidity, we, our subsidiaries or our affiliates may acquire (and have acquired) our outstanding debt securities or our other indebtedness through open market purchases, privately negotiated transactions, tender offers, redemption or otherwise, upon such terms and at such prices as we, our subsidiaries or our affiliates may determine (or as may be provided for in the Indentures, if applicable), for cash or other consideration.
−Removed: On February 2, 2021, we issued 2,665,935 shares of common stock to DPH 123, LLC, an ABRY affiliate, for no additional consideration pursuant to the Agreement and Plan of Merger, dated as of September 6, 2017, (the "Datapipe Merger Agreement") in connection with our November 15, 2017 acquisition of Datapipe.
−Removed: We will be required to issue additional shares of our common stock to DPH 123, LLC based on the MOIC exceeding certain thresholds as defined in the Datapipe Merger Agreement.
−Removed: If the MOIC exceeds 3.0x, which is indicated by a volume weighted average trading price of our common stock over 30 consecutive trading days of more than $25.00, we will be required to issue an additional 2,665,935 shares.
−Removed: On March 3, 2022, our Board authorized a program to repurchase up to $75 million of shares of our common stock from time to time through open-market transactions, privately negotiated transactions, accelerated share repurchases and other transactions in accordance with applicable security laws.
−Removed: During the year ended December 31, 2022, we repurchased $31 million , or 3.1 million shares, of our common stock on the open market under this program.
−Removed: No shares were repurchased during the year ended December 31, 2023 and the program authorization expired on September 30, 2023.
On September 29, 2023, indirect subsidiaries of the company entered into a revolving agreement where a bankruptcy-remote SPV can sell accounts receivable, based upon the face amount of eligible receivables in the collateral pool, up to an aggregate maximum limit of $300 million to a financial institution on a recurring basis in exchange for cash.
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Refer to Item 8 of Part II, Financial Statements and Supplementary Data - Note 8, "Leases" for more information regarding our operating and finance leases.
−Removed: As of December 31, 2024, we had $2,449 million aggregate principal amount outstanding under t he FLSO Term Loan Facility, the FLFO Term Loan Facility, the Term Loan Facility, 3 .50% FLSO Senior Secured Notes, 5.375% Senior Notes, and 3.50% Senior Secured Notes, with $375 million of borrowing capacity available under the New Revolving Credit Facility.
+Added: As of December 31, 2025, we had $2,429 million aggregate principal amount outstanding under t he FLSO Term Loan Facility, the FLFO Term Loan Facility, the Term Loan Facility, 3 .50% FLSO Senior Secured Notes, 5.375% Senior Notes, and 3.50% Senior Secured Notes.
+Added: The New Revolving Credit Facility provides for up to $ 375 million of borrowings, $60 million of which was drawn and outstanding as of December 31, 2025.
Our liquidity requirements are significant, primarily due to debt service requirements.
11 unchanged sentences
As of December 31, 2025, the contractual interest rate on the FLSO Term Loan Facility was 6.61%.
−Removed: We are required to make quarterly principal payments of $4 million, which began on March 31, 20 24.
+Added: We are required to make quarterly principal payments of $4 million .
Rackspace Finance is the borrower and all obligations under the FLSO Term Loan Facility are guaranteed on a senior secured basis, jointly and severally, by Rackspace Finance Holdings on a limited-recourse basis and by certain of Rackspace Finance’s subsidiaries (the “Subsidiary Guarantors”).
The obligations under the FLSO Term Loan Facility are secured by a pledge of Rackspace Finance’s capital stock directly held by Rackspace Finance Holdings and substantially all of Rackspace Finance’s and the Subsidiary Guarantors’ assets, subject to exceptions.
−Removed: During the year ended December 31, 2024, Rackspace Finance repurchased and surrendered for cancellation an aggregate $43 million principal amount of the FLSO Term Loan Facility for $21 million.
As of December 31, 2025, $1,610 million in aggregate principal amount of the FLSO Term Loan Facility remained outstanding.
5 unchanged sentences
As of December 31, 2025, the contractual interest rate on the FLFO Term Loan Facility was 10.11%.
−Removed: We are required to make quarterly principal payments of $0.7 million, which began on June 30, 2024 .
+Added: We are required to make quarterly principal payments of $0.7 million .
Rackspace Finance is the borrower and all obligations under the FLFO Term Loan Facility are guaranteed on a senior secured basis, jointly and severally, by Rackspace Finance Holdings on a limited-recourse basis and by the Subsidiary Guarantors.
11 unchanged sentences
The obligations under the New Revolving Credit Facility are secured by the same collateral that secures the FLSO Term Loan Facility, the FLFO Term Loan Facility and the 3.50% FLSO Senior Secured Notes.
−Removed: As of December 31, 2024 , we had total commitments of $375 million, no outstanding borrowings under the New Revolving Credit Facility, and $24 million of letters of credit issued thereunder.
+Added: As of December 31, 2025 , we had total commitments of $375 million, $60 million of outstanding borrowings under the New Revolving Credit Facility, and $24 million of letters of credit issued thereunder.
As such, as of December 31, 2025 , we had $292 million of available commitments remaining.
2 unchanged sentences
The 3.50% FLSO Senior Secured Notes will mature on May 15, 2028 and bear interest at an annual fixed rate of 3.50%.
−Removed: Interest is payable semiannually on each February 15 and August 15, commencing on August 15, 2024.
+Added: Interest is payable semiannually on each February 15 and August 15.
On April 16, 2024, we completed the Public Note Exchange, pursuant to which (i) $138 million aggregate principal amount of the existing 3.50% Senior Secured Notes were exchanged or purchased for cancellation and (ii) $97 million aggregate principal amount of 3.50% FLSO Senior Secured Notes were issued by Rackspace Finance.
1 unchanged sentence
The obligations under the 3.50% FLSO Senior Secured Notes are secured by the same collateral that secures the FLSO Term Loan Facility, the FLFO Term Loan Facility and the New Revolving Credit Facility.
−Removed: During the year ended December 31, 2024, Rackspace Finance repurchased and surrendered for cancellation $46 million principal amount of the 3.50% FLSO Senior Secured Notes for $19 million, including accrued interest of $0.4 million.
As of December 31, 2025, $319 million aggregate principal amount of the 3.50% FLSO Senior Secured Notes were outstanding.
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Borrowings under the Senior Facilities bear interest at an annual rate equal to an applicable margin plus, at our option, either (a) Term SOFR equal to the forward-looking term rate, based on the secured overnight financing rate as administered by the Federal Reserve Bank of New York, for the interest period relevant to such borrowing, plus a credit spread adjustment of 0.11% for an interest period of one-month's duration, 0.26% for an interest period of three-months' duration, and 0.43% for an interest period of six-months' duration, subject to a 0.75% floor, in the case of the Term Loan Facility, and a 1.00% floor, in the case of the Prior Revolving Credit Facility, or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate last quoted by The Wall Street Journal and (iii) adjusted Term SOFR for a one-month tenor plus 1.00%.
−Removed: The applicable margin for the Term Loan Facility is 2.75% for SOFR loans and 1.75% for base rate loans and the applicable margin for the Revolving Credit Facility was 3.00% for SOFR loans and 2.00% for base rate loans.
+Added: The applicable margin for the Term Loan Facility is 2.75% for SOFR loans and 1.75% for base rate loans and the applicable margin for the Prior Revolving Credit Facility was 3.00% for SOFR loans and 2.00% for base rate loans.
Interest is due at the end of each interest period elected, not exceeding 90 days, for SOFR loans and at the end of every calendar quarter for base rate loans.
−Removed: The Revolving Credit Facility also included a commitment fee equal to 0.50% per annum in respect of the unused commitments that was due quarterly.
+Added: The Prior Revolving Credit Facility also included a commitment fee equal to 0.50% per annum in respect of the unused commitments that was due quarterly.
This fee was subject to one step-down based on the net first lien leverage ratio.
2 unchanged sentences
Rackspace Technology Global, our wholly-owned subsidiary, is the borrower under the Senior Facilities, and all obligations under the Senior Facilities are (i) guaranteed by Inception Parent, Rackspace Technology Global’s immediate parent company, on a limited recourse basis and secured by the equity interests of Rackspace Technology Global held by Inception Parent and (ii) guaranteed by Rackspace Technology Global’s wholly-owned domestic restricted subsidiaries and secure d by substantially all material owned assets of Rackspace Technology Global and the subsidiary guarantors, including the equity interests held by each, in each case subject to certain exceptions.
−Removed: As a result of the March 2024 Refinancing Transactions, discussed above, over 97% of the $2,181 million aggregate principal amount of the Term Loan Facility outstanding as of December 31, 2023 was exchanged or purchased for cancellation.
As of December 31, 2025, the interest rate on the Term Loan Facility was 6.60% and the outstanding principal balance was $61 million.
6 unchanged sentences
The 3.50% Senior Secured Notes will mature on February 15, 2028 and bear interest at an annual fixed rate of 3.50%.
−Removed: Interest is payable semiannually on each February 15 and August 15, commencing on August 15, 2021.
+Added: Interest is payable semiannually on each February 15 and August 15.
The 3.50% Senior Secured Notes are not subject to registration rights.
2 unchanged sentences
The 3.50% Notes Indenture describes certain terms and conditions under which other current and future domestic subsidiaries are required to become guarantors of the 3.50% Senior Secured Notes.
−Removed: Rackspace Technology Global may redeem the 3.50% Senior Secured Notes at its option, in whole at any time or in part from time to time, at the following redemption prices:
−Removed: from February 15, 2024 to February 14, 2025, at a redemption price equal to 101.750% of the principal amount, plus accrued and unpaid interest, if any, to but excluding the redemption date;
−Removed: from February 15, 2025 to February 14, 2026, at a redemption price equal to 100.875% of the principal amount, plus accrued and unpaid interest, if any, to but excluding the redemption date;
−Removed: and from February 15, 2026 and thereafter, at a redemption price equal to 100.000% of the principal amount, plus accrued and unpaid interest, if any, to but excluding the redemption date.
+Added: Rackspace Technology Global may redeem the 3.50% Senior Secured Notes at its option, in whole at any time or in part from time to time at a redemption price equal to 100.000% of the principal amount, plus accrued and unpaid interest, if any, to but excluding the redemption date.
Notwithstanding the foregoing, Rackspace Technology Global may redeem during each twelve-month period, commencing with February 9, 2021, up to 10.0% of the original aggregate principal amount of the 3.50% Senior Secured Notes at a redemption price of 103.000%, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.
−Removed: As a result of the March 2024 Refinancing Transactions , over 91% of the $514 million aggregate principal amount of the 3.50% Senior Secured Notes outstanding as of December 31, 2023 was exchanged or purchased for cancellation.
As of December 31, 2025, $44 million aggregate principal amount of the 3.50% Senior Secured Notes remained outstanding.
1 unchanged sentence
Rackspace Technology Global issued $550 million aggregate principal amount of the 5.375% Senior Notes on December 1, 2020.
−Removed: The 5.375% Senior Notes will mature on December 1, 2028 and bear interest at a fixed rate of 5.375% per year, payable semi-annually on each June 1 and December 1, commencing on June 1, 2021.
+Added: The 5.375% Senior Notes will mature on December 1, 2028 and bear interest at a fixed rate of 5.375% per year, payable semi-annually on each June 1 and December 1.
The 5.375% Senior Notes are not subject to registration rights.
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The 5.375% Notes Indenture describes certain terms and conditions under which other current and future domestic subsidiaries are required to become guarantors of the 5.375% Senior Notes.
−Removed: Rackspace Technology Global may redeem the 5.375% Senior Notes at its option, in whole at any time or in part from time to time, at the following redemption prices:
−Removed: from December 1, 2024 to November 30, 2025, at a redemption price equal to 101.344% of the principal amount, plus accrued and unpaid interest, if any, to but excluding the redemption date;
−Removed: and from December 1, 2025 and thereafter, at a redemption price equal to 100.000% of the principal amount, plus accrued and unpaid interest, if any, to but excluding the redemption date.
−Removed: As part of the March 2024 Refinancing Transactions, we repurchased and cancelled $69 million aggregate principal amount of the 5.375% Senior Notes during the year ended December 31, 2024.
−Removed: In addition, during the year ended December 31, 2024, Rackspace Technology Global repurchased and surrendered for cancellation $3 million principal amount of 5.375% Senior Notes for $1 million.
+Added: Rackspace Technology Global may redeem the 5.375% Senior Notes at its option, in whole at any time or in part from time to time, from December 1, 2025 and thereafter, at a redemption price equal to 100.000% of the principal amount, plus accrued and unpaid interest, if any, to but excluding the redemption date.
As of December 31, 2025, $125 million aggregate principal amount of the 5.375% Senior Notes remained outstanding.
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These covenants are subject to a number of exceptions, limitations, and qualifications as set forth in the Indentures.
−Removed: Additionally, upon the occurrence of a change of control (as defined in the Indentures), we will be required to make an offer to repurchase all of the outstanding 3.50% FLSO Senior Secured Notes, 5.375% Senior Notes and 3.50% Senior Secured Notes at a price in cash equal to 101.000% of the aggregate principal amount, plus accrued and unpaid interest, if any, to, but not including the purchase date.
+Added: Additionally, upon the occurrence of a change of control (as defined in the Indentures), we will be required to make an offer to repurchase all of the outstanding 3.50% FLSO Senior Secured Notes, 5.375% Senior Notes and 3.50% Senior Secured Notes, respectively, at a price in cash equal to 101.000% of the aggregate principal amount, plus accrued and unpaid interest, if any, to, but not including the purchase date.
Our “consolidated EBITDA,” as defined under our debt instruments, is calculated in the same manner as our Adjusted EBITDA, presented elsewhere in this report, except that our debt instruments allow us to adjust for additional items, including certain start-up costs, and to give pro forma effect to acquisitions, including resulting synergies, and internal cost savings initiatives.
−Removed: In addition, under the Indentures, the calculation of consolidated EBITDA does not take into account substantially any changes in GAAP subsequent to the date of issuance, whereas under the New Senior Facilities and Senior Facilities, the calculation of consolidated EBITDA takes into account the impact of certain changes in GAAP subsequent to December 1, 2020 other than with respect to capital leases.
+Added: In addition, under the Indentures, the calculation of consolidated EBITDA does not take into account any changes in GAAP subsequent to the date of issuance, whereas under the New Senior Facilities and Senior Facilities, the calculation of consolidated EBITDA takes into account the impact of certain changes in GAAP subsequent to December 1, 2020 other than with respect to capital leases.
As of December 31, 2025, we were in compliance with all covenants under the New Senior Facilities, the Senior Facilities and the Indentures.
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(4) Includes salaries and payroll-related costs of employees and consultants who devote time to the development of certain internal-use software projects, purchased software licenses and other projects that meet the criteria for capitalization.
−Removed: The $40 million increase and $45 million decrease in capital expenditures from 2022 to 2023 and from 2023 to 2024, respectively, was primarily driven by purchases of customer gear originally intended to support a specific new customer during the first quarter of 2023.
+Added: Total capital expenditures were relatively flat from 2024 to 2025 as increased purchases of customer gear were partially offset by a reduction in capitalized software and other projects between periods.
+Added: The $45 million decrease from 2023 to 2024 was primarily driven by purchases of customer gear originally intended to support a specific new customer during the first quarter of 2023.
This new customer did not materialize as expected;
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Net cash provided by operating activities results primarily from cash received from customers, offset by cash payments made for employee and consultant compensation (less amounts capitalized related to internal-use software that are reflected as cash used in investing activities), data center costs, license costs, third-party infrastructure costs, marketing programs, interest, taxes, and other general corporate expenditures.
+Added: Net cash provided by operating activities for 2025 increased $112 million from 2024.
+Added: The increase in operating cash between periods was primarily driven by a decrease of $25 million of cash paid for operating expenses in 2025 compared to 2024.
+Added: Additionally, there was an increase in c ash proceeds related to accounts receivable sold of $35 million in 2025 compared to a decrease of $5 million in 2024.
+Added: Lastly, in 2024, $32 million in third party fees were paid in connection with the March 2024 Refinancing Transactions and a $9 million early termination fee associated with the sale of our corporate headquarters was paid.
+Added: There were no similar one time fees paid in 2025.
Net cash provided by operating activities for 2024 decreased $335 million, or 89% , from 2023.
The reduction in operating cash between periods was primarily driven by $209 million of cash proceeds received during 2023 related to the sale of our receivables, an increase of $98 million of operating expenses between periods, $32 million in third party fees paid in connection with the March 2024 Refinancing Transactions, and a $9 million early termination fee associated with the sale of our corporate headquarters in the first quarter of 2024.
−Removed: Net cash provided by operating activities for 2023 increased $128 million, or 52%, from 2022.
−Removed: The increase in operating cash was primarily driven by $209 million of cash proceeds related to the initial sale of a portion of our receivables upon execution of the Receivables Purchase Facility in September 2023 and a $58 million decrease in payroll and payroll taxes due to lower levels of severance payouts in 2023 compared to 2022.
−Removed: Partially offsetting this increase in cash was a $103 million increase in operating expense payments, largely for third-party infrastructure costs, and a $38 million increase in interest payments on debt.
Cash Used in Investing Activities
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The largest outlays of cash are for purchases of customer gear, data center and office build-outs, and capitalized payroll costs related to internal-use software development.
+Added: Net cash used in investing activities for 2025 decreased $28 million, or 33%, from 2024 primarily due to a $50 million reduction in cash purchases of property, equipment, and software between periods, partially offset by $17 million of net proceeds received in 2024 from the March 2024 sale of our corporate headquarters facility.
Net cash used in investing activities for 2024 decreased $9 million, or 10%, from 2023 primarily due to $17 million of net proceeds received in the current year from the March 2024 sale of our corporate headquarters facility.
1 unchanged sentence
These cash inflows were partially offset by a $14 million increase in cash purchases of property, equipment, and software from 2023 to 2024.
−Removed: Net cash used in investing activities for 2023 decreased $2 million, or 2%, from 2022.
−Removed: During 2022, we made an $8 million cash payment in connection with the acquisition of Just Analytics and a $15 million payment for the purchase of a convertible promissory note.
−Removed: These cash outflows were partially offset by a $17 million increase in cash purchases of property, equipment, and software year-over-year.
−Removed: Other investing activities comprised the remainder of the variance in cash used between periods.
Cash Used in Financing Activities
Financing activities generally include cash activity related to debt and other long-term financing arrangements (for example, finance lease obligations and financing obligations), including proceeds from and repayments of borrowings, and cash activity related to the issuance and repurchase of equity.
+Added: Net cash used in financing activities for 2025 increased $132 million from 2024.
+Added: The change was primarily driven by $275 million of proceeds received in 2024 from the FLFO Term Loan Facility as part of the March 2024 Refinancing Transactions compared to just $155 million of debt proceeds in the current period from borrowings on the New Revolving Credit Facility.
+Added: An increase in debt repayments of $35 million between periods further contributed to the increase in cash used in financing activities.
+Added: This activity was partially offset by $22 million of payments in 2024 related to debt extinguishment costs.
Net cash used in financing activities for 2024 decreased $310 million, or 99%, from 2023.
1 unchanged sentence
This activity was partially offset by $22 million of payments related to debt extinguishment costs.
−Removed: Net cash used in financing activities for 2023 increased $126 million, or 67% from 2022.
−Removed: The change was driven by a $169 million increase in net payments related to long-term debt between periods as 2023 includes $121 million of 5.375% Senior Note repurchases, $18 million of 3.50% Senior Secured Note repurchases, and $30 million of Term Loan Facility repurchases, while 2022 only includes quarterly principal payments on our Term Loan Facility.
−Removed: In addition, there was a $13 million increase in finance lease principal payments between periods.
−Removed: Partially offsetting these drivers was $31 million in common stock share repurchases during 2022 as part of the program authorized in March 2022 and a $26 million reduction in principal payments of financing obligations.
Off-Balance Sheet Arrangements
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Recoverability of assets is measured at the asset group level and if the carrying amount of the asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset group exceeds its fair value.
−Removed: As of September 1, 2022, due to the factors discussed below, we performed an interim impairment review of the recoverability of our long-lived assets by asset group.
−Removed: Based on the results of the recoverability test, we determined that, as of September 1, 2022, the carrying amount of the OpenStack Public Cloud asset group’s long-lived assets exceeded the sum of the undiscounted cash flows.
−Removed: Fair values of the OpenStack Public Cloud long-lived assets were determined using a combination of the income approach and the cost approach.
−Removed: The income approach utilized assumptions including management’s best estimates of the expected future cash flows, risk-adjusted discount rate, and the estimated useful life of the asset group.
−Removed: The cost approach utilized assumptions for the current replacement costs of similar assets adjusted for estimated depreciation and deterioration of the existing equipment and economic obsolescence.
−Removed: Estimates of floor values for the property, equipment and software, net, were considered relative to potential economic support for the assets such that the concluded value did not fall below the estimated floor value of these assets.
−Removed: We concluded that the carrying value of the OpenStack Public Cloud long-lived assets, including customer relationship intangibles and property, equipment and software, net, were impaired and recorded non-cash impairment charges of $38 million during the third quarter of 2022, which is included in "Impairment of assets, net" in our Consolidated Statements of Comprehensive Loss.
−Removed: We also performed recoverability tests of our long-lived assets in conjunction with the goodwill impairment analyses performed subsequent to September 1, 2022 which did not result in any impairment charges.
+Added: We also performed recoverability tests of our long-lived assets in conjunction with the goodwill impairment analyses discussed below which did not result in any impairment charges.
We capitalize the salaries and related compensation costs of employees and consultants who devote time to the development of certain internal-use software projects.
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The discount rates used are based on our weighted average cost of capital and are adjusted for risks and uncertainties inherent in our business and in our estimation of future cash flows.
−Removed: As part of the goodwill impairment test, we also consider our market capitalization in assessing the reasonableness of the combined fair values estimated for our reporting units, including OpenStack Public Cloud.
+Added: As part of the goodwill impairment test, we also consider our market capitalization in assessing the reasonableness of the combined fair values estimated for our reporting units.
The estimates and assumptions used to calculate the fair value of our reporting units and the Rackspace trade name from year to year are based on operating results, market conditions, and other factors.
4 unchanged sentences
The terminal period growth rate is selected based on economic conditions and consideration of growth rates used in the forecast period and historical performance of the reporting unit.
+Added: October 1, 2025 Assessment
+Added: In connection with our annual impairment analysis as of October 1, 2025, we completed a quantitative goodwill impairment analysis.
+Added: The results of the quantitative goodwill impairment analysis performed as of October 1, 2025 indicated no impairment charges to our Private Cloud or Public Cloud reporting units.
February 29, 2024 Assessment
−Removed: In connection with the preparation of the debt refinancing transactions that were completed in March and April 2024, as further described in Item 8 of Part II, Financial Statements and Supplementary Data - Note 7, “Debt”, we updated our internal forecasts.
+Added: In connection with the debt refinancing transactions that were completed in March and April 2024, as further described in Item 8 of Part II, Financial Statements and Supplementary Data - Note 7, “Debt”, we updated our internal forecasts.
Our updated internal forecasts considered our year-to-date operating performance, current customer bookings and revised expectations based on current performance, revisions to our expected growth and timing of such growth based on current and expected performance, current customer retention rates, revisions to the timing of the expected effects of our strategic initiatives and overall related risks, including macroeconomic factors, to achieving our forecasts.
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March 31, 2023 Assessment
−Removed: During the first quarter of 2023, we experienced a sustained decline in our stock price resulting in our market capitalization being less than the carrying value of our combined reporting units.
−Removed: As of March 31, 2023, we assessed several events and circumstances that could affect the significant inputs used to determine the fair value of our reporting units, including the significance of the amount, if any, of excess carrying value over fair value, consistency of operating margins and cash flows, budgeted-to-actual performance for the first three months of the year, overall change in economic climate, changes in the industry and competitive environment, and earnings quality and sustainability.
+Added: As of March 31, 2023, we evaluated several goodwill impairment indicators following a sustained decline in our stock price during the first quarter of 2023 that resulted in our market capitalization being less than the carrying value of our combined reporting units.
+Added: This evaluation included the assessment of several events and circumstances that could affect the significant inputs used to determine the fair value of our reporting units, including the significance of the amount, if any, of excess carrying value over fair value, consistency of operating margins and cash flows, budgeted-to-actual performance for the first three months of the year, overall change in economic climate, changes in the industry and competitive environment, and earnings quality and sustainability.
After considering all available evidence in our evaluation of goodwill impairment indicators, we determined it appropriate to perform an interim quantitative assessment of our reporting units as of March 31, 2023.
7 unchanged sentences
September 30, 2023 Assessment
−Removed: During the third quarter of 2023, we experienced a sustained decline in our stock price resulting in our market capitalization being less than the carrying value of our combined reporting units.
−Removed: As of September 30, 2023, we assessed several events and circumstances that could affect the significant inputs used to determine the fair value of our reporting units, including the significance of the amount, if any, of excess carrying value over fair value, consistency of operating margins and cash flows, budgeted-to-actual performance for the first nine months of the year, overall change in economic climate, changes in the industry and competitive environment, and earnings quality and sustainability.
+Added: As of September 30, 2023, we evaluated several goodwill impairment indicators following a sustained decline in our stock price during the third quarter of 2023 that resulted in our market capitalization being less than the carrying value of our combined reporting units.
+Added: This evaluation included the assessment of several events and circumstances that could affect the significant inputs used to determine the fair value of our reporting units, including the significance of the amount, if any, of excess carrying value over fair value, consistency of operating margins and cash flows, budgeted-to-actual performance for the first nine months of the year, overall change in economic climate, changes in the industry and competitive environment, and earnings quality and sustainability.
After considering all available evidence in our evaluation of goodwill impairment indicators, we determined it appropriate to perform an interim quantitative assessment of our reporting units as of September 30, 2023.
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Assuming all other assumptions and inputs used in the discounted cash flow analysis are held constant, a 50 basis point increase in the discount rate assumption would result in decreases in fair value of our Private Cloud and Public Cloud reporting units of approximately $67 million and $52 million, respectively.
−Removed: September 1, 2022 Assessment
−Removed: As of September 1, 2022, after considering all available evidence in our evaluation of goodwill impairment indicators, we determined it appropriate to perform an interim quantitative assessment of our reporting unit as of September 1, 2022.
−Removed: For the interim quantitative goodwill impairment analysis performed as of September 1, 2022, we utilized a range of our weighted-average cost of capital of 10.0% to 12.0% as our discount rate, which was risk-adjusted for each reporting unit.
−Removed: After determining the fair value of our reporting units, we reconciled the combined fair value of the reporting units to the company's market capitalization as of September 1, 2022.
−Removed: As a result of our interim goodwill impairment test performed as of September 1, 2022, we determined that the carrying amount of our former Multicloud Services reporting unit exceeded its fair value and recorded a goodwill impairment charge of $405 million during the third quarter of 2022, which is included in "Impairment of goodwill" in our Consolidated Statements of Comprehensive Loss.
−Removed: The impairment was driven by deteriorating forecasted margins and cash flows within this reporting unit primarily due to slower than anticipated product mix shifts.
−Removed: Our former Apps & Cross Platform reporting unit was determined to have a fair value that exceeded its carrying value by approximately 15% and therefore no impairment was recognized.
−Removed: We performed sensitivity analyses on the key inputs and assumptions used in determining the estimated fair value of our reporting unit by utilizing changes in assumptions that reflect reasonably likely future changes in the discount rate used in the weighted-average cost of capital calculation and the terminal growth rate.
−Removed: Assuming all other assumptions and inputs used in the discounted cash flow analysis are held constant, a 50 basis point increase in the discount rate assumption would result in decreases in fair value of our former Multicloud Services and Apps & Cross Platform reporting units of approximately $235 million and $33 million, respectively.
−Removed: October 1, 2022 Assessment
−Removed: We performed our annual quantitative goodwill impairment test as of October 1, 2022.
−Removed: For the quantitative goodwill impairment analysis performed as of October 1, 2022, we utilized a range of our weighted-average cost of capital of 10.0% to 12.0% as our discount rate, which was risk-adjusted for each reporting unit.
−Removed: After determining the fair value of our reporting units, we reconciled the combined fair value of the reporting units to the company's market capitalization as of October 1, 2022.
−Removed: As a result of our goodwill impairment test performed as of October 1, 2022, we determined that the fair value exceeded the carrying amounts for each of our reporting units.
−Removed: The fair value exceeded the carrying value for the former Multicloud Services reporting unit by 1% and the former Apps & Cross Platform reporting unit by 15%.
−Removed: Therefore no impairment was recognized.
−Removed: We performed sensitivity analyses on the key inputs and assumptions used in determining the estimated fair value of our reporting unit by utilizing changes in assumptions that reflect reasonably likely future changes in the discount rate used in the weighted-average cost of capital calculation and the terminal growth rate.
−Removed: Assuming all other assumptions and inputs used in the discounted cash flow analysis are held constant, a 50 basis point increase in the discount rate assumption would result in decreases in fair value of our former Multicloud Services and Apps & Cross Platform reporting units of approximately $236 million and $38 million, respectively.
−Removed: December 31, 2022 Assessment
−Removed: During the fourth quarter of 2022, subsequent to our annual goodwill impairment analysis, we experienced decline in our market capitalization following a ransomware incident in early December which caused service disruptions on our Hosted Exchange email business which was included in our former Apps & Cross Platform reporting unit.
−Removed: After considering all available evidence in our evaluation of goodwill impairment indicators, including our lowered projected operating results within this reporting unit, we determined it appropriate to perform an interim quantitative assessment of our reporting units as of December 31, 2022.
−Removed: For the quantitative goodwill impairment analysis performed as of December 31, 2022, we utilized a range of our weighted-average cost of capital of 10.5% to 12.0% as our discount rate, which was risk-adjusted for each reporting unit.
−Removed: After determining the fair value of our reporting units, we reconciled the combined fair value of the reporting units to the company's market capitalization as of December 31, 2022.
−Removed: As a result of our goodwill impairment test performed as of December 31, 2022, we determined that the carrying amount of our former Apps & Cross Platform reporting unit exceeded its fair value and recorded a goodwill impairment charge of $129 million during the fourth quarter of 2022, which is included in "Impairment of goodwill" in our Consolidated Statements of Comprehensive Loss.
−Removed: The impairment was driven by a decrease in forecasted revenues, margins, and cash flows within the reporting unit primarily due to the Hosted Exchange incident and other macroeconomic factors.
−Removed: The former Multicloud Services reporting unit was determined to have a fair value that exceeded its carrying value by approximately 1% and therefore no impairment was recognized.
−Removed: We performed sensitivity analyses on the key inputs and assumptions used in determining the estimated fair value of our reporting unit by utilizing changes in assumptions that reflect reasonably likely future changes in the discount rate used in the weighted-average cost of capital calculation and the terminal growth rate.
−Removed: Assuming all other assumptions and inputs used in the discounted cash flow analysis are held constant, a 50 basis point increase in the discount rate assumption would result in decreases in fair value of our former Multicloud Services and Apps & Cross Platform reporting units of approximately $218 million and $22 million, respectively.
As of December 31, 2025, the carrying amount of goodwill was $740.1 million.
1 unchanged sentence
Year Ended December 31, 2025
+Added: We completed the quantitative assessments of our indefinite-lived intangible asset prior to testing our goodwill for impairment as of October 1, 2025 which did not indicate any impairment of the Rackspace trade name.
+Added: Year Ended December 31, 2024
As of February 29, 2024 and September 30, 2024, due to the factors discussed above, we performed a quantitative assessment of our indefinite-lived intangible asset utilizing a relief from royalty method.
12 unchanged sentences
We completed the quantitative assessments of our indefinite-lived intangible asset prior to testing our goodwill for impairment as of October 1, 2023 which did not indicate any impairment of the Rackspace trade name.
−Removed: Year Ended December 31, 2022
−Removed: As of September 1, 2022, October 1, 2022 and December 31, 2022, due to the factors discussed above, we performed a quantitative assessment of our indefinite-lived intangible asset utilizing a relief from royalty method.
−Removed: Significant estimates and assumptions included in the relief from royalty method are expectations of revenue growth rates, and selection of royalty rate and discount rate.
−Removed: We utilized a royalty rate of 0.5% for all periods and a discount rate of 10.7% as of September 1, 2022 and October 1, 2022, and a discount rate of 11.0% as of December 31, 2022.
−Removed: We completed the quantitative assessments of our indefinite-lived intangible asset prior to testing our goodwill for impairment.
−Removed: As of September 1, 2022, we determined the estimated fair value of the Rackspace trade name was less than its carrying value.
−Removed: As a result, we recorded a $21 million non-cash impairment charge during the third quarter of 2022, which is included in "Impairment of assets, net" in our Consolidated Statements of Comprehensive Loss.
−Removed: As of October 1, 2022, we determined the estimated fair value of the Rackspace trade name was greater than its carrying value, and therefore no impairment was recognized.
−Removed: As of December 31, 2022, we determined the estimated fair value of the Rackspace trade name was less than its carrying value.
−Removed: As a result, we recorded a $12 million non-cash impairment charge during the fourth quarter of 2022, which is included in "Impairment of assets, net" in our Consolidated Statements of Comprehensive Loss.
The fair value determination of our reporting units and our indefinite-lived intangible asset is judgmental in nature and requires the use of estimates and assumptions that are sensitive to changes.
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Share-based compensation cost is measured at the grant date based on the fair value of the underlying common stock and is recognized as expense over the requisite service period.
−Removed: The fair value of stock options with vesting conditions dependent upon market performance is determined using a Monte Carlo simulation.
+Added: The fair value of awards with vesting conditions dependent upon market performance is determined using a Monte Carlo simulation.
Determining the grant date fair value of share-based awards with performance vesting conditions and the probability of such awards vesting requires judgment.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.