What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-03-06 compared with 2025-03-21 · 316 added, 254 removed, 1414 unchanged (29% of the section changed)

3 unchanged sentences

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Rackspace Technology, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Rackspace Technology, Inc.

and its subsidiaries (the "Company") as of December 31, 2024 and 2023, and the related consolidated statements of comprehensive loss, of stockholders’ equity (deficit) and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes (collectively referred to as the "consolidated financial statements").

We also have audited the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

To the Board of Directors and Stockholders

Rackspace Technology, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Rackspace Technology, Inc.

and subsidiaries (the Company) as of December 31, 2025, the related consolidated statements of comprehensive loss, stockholders’ equity (deficit), and cash flows for the year then ended and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year then ended in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 6, 2026 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of goodwill for the Private Cloud and Public Cloud reporting units

As described in Notes 1 and 6 to the consolidated financial statements, the Company’s consolidated net goodwill balance was $740.1 million as of December 31, 2025, which included goodwill associated with the Private Cloud and Public Cloud reporting units of $597.2 million and $142.9 million, respectively.

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets of businesses acquired.

Goodwill is subject to impairment testing on an annual basis as of October 1st and more frequently if events or circumstances indicate a potential impairment.

We identified the evaluation of the fair value of the Private Cloud and Public Cloud reporting units used in the annual goodwill impairment assessment as a critical audit matter.

We performed sensitivity analyses to determine the significant assumptions used to estimate the fair value of the Private Cloud and Public Cloud reporting units.

A high degree of subjective auditor judgment was required to evaluate certain key assumptions, including the forecasted revenue growth rates, projected EBITDA margins, risk-adjusted discount rates and terminal growth rates.

The assessment of these key assumptions was subjective as they are based largely on the outcome of future market and economic conditions and changes to these assumptions could have a significant impact on the fair value of the reporting units.

Additionally, the audit effort associated with this estimate required specialized skills and knowledge.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s goodwill impairment process.

This included controls related to the development and selection of the key assumptions used to estimate the fair value of the Private Cloud and Public Cloud reporting units.

We evaluated the reasonableness of the Company’s forecasted revenue growth rates and projected EBITDA margins for the Private Cloud and Public Cloud reporting units, by comparing them to the Company’s historical performance, available external industry data, and other internal information, taking into account changes in conditions and events affecting the company.

We compared the Company’s historical revenue and cost forecasts to actual results to assess the Company’s ability to accurately forecast.

In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:

• evaluating the Company’s terminal growth rates by comparing them to the long-term growth rate estimates that were independently observed using publicly available market data for the Company’s industry as well as U.S.

economic growth rates

• evaluating the risk-adjusted discount rates by comparing them to discount rate ranges that were independently developed using publicly available market data for comparable entities

• developing an independent estimate of the Private Cloud and Public reporting units’ fair values using each reporting unit’s cash flow forecast and discount rate and comparing the result to the Company’s fair value estimates.

We have served as the Company’s auditor since 2025.

San Antonio, Texas

March 6, 2026

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Rackspace Technology, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited Rackspace Technology, Inc.

and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2025, the related consolidated statements of comprehensive loss, stockholders’ equity (deficit), and cash flows for the year then ended, and the related notes (collectively, the consolidated financial statements), and our report dated March 6, 2026 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Interim Goodwill Impairment Assessments - Private Cloud and Public Cloud Reporting Units

As described in Notes 1 and 6 to the consolidated financial statements, the Company’s consolidated net goodwill balance was $735.7 million as of December 31, 2024, and the goodwill associated with the Private Cloud and Public Cloud reporting units was $594.1 million and $141.6 million, respectively.

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets of businesses acquired.

Goodwill is tested for impairment at the reporting unit level.

Management conducts impairment testing on an annual basis as of October 1st or more frequently if events or circumstances indicate a potential impairment.

During the first and third quarters of 2024, management determined it appropriate to perform interim quantitative assessments of the reporting units as of February 29, 2024 and September 30, 2024 after considering all available evidence in the evaluation of goodwill impairment indicators.

As a result of the quantitative assessments performed as of February 29, 2024 and September 30, 2024, management recorded non-cash impairment charges of $187.8 million and $72.5 million, respectively, for the Private Cloud reporting unit and $385.4 million and $69.2 million, respectively, for the Public Cloud reporting unit.

Management estimated the fair values of each of the reporting units using the income approach, specifically the discounted cash flow method.

The discounted cash flow models reflect management’s assumptions and considerations regarding revenue growth rates, projected gross profit margins, project operating costs, projected EBITDA margins, projected capital expenditures, risk-adjusted discount rates, terminal period growth rates, and economic market trends.

The principal considerations for our determination that performing procedures relating to the interim goodwill impairment assessments of the Private Cloud and Public Cloud reporting units is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates of the Private Cloud and Public Cloud reporting units;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth rates, projected EBITDA margins, projected capital expenditures, risk-adjusted discount rates and terminal period growth rates;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over the valuation of the Private Cloud and Public Cloud reporting units.

These procedures also included, among others, (i) testing management’s process for developing the fair value estimates of the Private Cloud and Public Cloud reporting units;

(ii) evaluating the appropriateness of the discounted cash flow models used by management;

(iii) testing the completeness and accuracy of underlying data used in the discounted cash flow models;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to revenue growth rates, projected EBITDA margins, projected capital expenditures, risk-adjusted discount rates and terminal period growth rates.

Evaluating the reasonableness of the revenue growth rates, projected EBITDA margins, and projected capital expenditures assumptions involved considering (i) the current and past performance of the Private Cloud and Public Cloud reporting units;

(ii) the consistency with external market and industry data;

and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the discounted cash flow models and (ii) the reasonableness of the risk-adjusted discount rates and terminal period growth rates assumptions.

San Antonio, Texas

March 6, 2026

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Rackspace Technology, Inc.

Opinion on the Financial Statements

We have audited the consolidated balance sheet of Rackspace Technology, Inc.

and its subsidiaries (the "Company") as of December 31, 2024, and the related consolidated statements of comprehensive loss, of stockholders’ equity (deficit) and of cash flows for each of the two years in the period ended December 31, 2024, including the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

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March 20, 2025

We have served as the Company’s auditor since 2017.

We served as the Company’s auditor from 2017 to 2025.

RACKSPACE TECHNOLOGY, INC.

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Interest expense ( 221.6 ) ( 98.0 ) ( 82.7 )

Gain (loss) on investments, net ( 0.2 ) 0.3 0.1

Gain on investments, net 0.3 0.1 0.3

Gain on debt extinguishment, net of debt modification costs 271.3 147.2 —

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Loss before income taxes ( 854.4 ) ( 881.5 ) ( 201.8 )

Benefit for income taxes 92.9 16.6 23.3

Benefit (provision) for income taxes 16.6 23.3 ( 24.0 )

Net loss $ ( 837.8 ) $ ( 858.2 ) $ ( 225.8 )

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Amount reclassified from accumulated other comprehensive income (loss) to earnings ( 29.9 ) ( 43.1 ) ( 33.8 )

Other comprehensive income (loss) 64.5 ( 11.1 ) ( 36.2 )

Other comprehensive loss ( 11.1 ) ( 36.2 ) ( 16.6 )

Comprehensive loss $ ( 848.9 ) $ ( 894.4 ) $ ( 242.4 )

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Depreciation and amortization 369.7 295.4 298.3

Amortization of operating right-of-use assets 59.8 73.2 67.6

Reduction in carrying amount of operating right-of-use assets 73.2 67.6 64.3

Deferred income taxes ( 41.9 ) ( 35.0 ) 23.7

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Unrealized loss on derivative contracts 15.5 — —

(Gain) loss on investments, net 0.2 ( 0.3 ) ( 0.1 )

Gain on investments, net ( 0.3 ) ( 0.1 ) ( 0.3 )

Provision for bad debts and accrued customer credits 9.0 19.5 6.1

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Other operating activities 0.4 ( 6.5 ) ( 2.0 )

Changes in operating assets and liabilities, net of effects of acquisitions:

Changes in operating assets and liabilities:

Accounts receivable 275.1 20.5 27.6

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Purchases of property, equipment and software ( 96.9 ) ( 111.1 ) ( 60.8 )

Acquisitions, net of cash acquired ( 7.7 ) — —

Proceeds from sale of headquarters — 16.9 —

Purchase of convertible promissory note ( 15.0 ) — —

Other investing activities 0.9 7.6 2.4

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Shares of common stock withheld for employee taxes ( 1.0 ) ( 4.3 ) ( 2.0 )

Shares of common stock repurchased ( 31.0 ) — —

Proceeds from borrowings under long-term debt arrangements 50.0 275.0 155.0

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Principal payments of financing obligations ( 22.7 ) ( 15.3 ) ( 15.9 )

Other financing activities ( 3.3 ) — —

Net cash used in financing activities ( 312.8 ) ( 3.0 ) ( 134.6 )

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Balance at December 31, 2022 215.7 $ 2.2 $ 2,573.3 $ 71.4 $ ( 1,986.4 ) 3.1 $ ( 31.0 ) $ 629.5

Exercise of stock options and release of stock awards 3.7 0.1 0.7 — — — — 0.8

Exercise of stock options and release of stock awards, net of shares withheld 4.1 — ( 1.0 ) — — — — ( 1.0 )

Issuance of shares from Employee Stock Purchase Plan 0.7 — 1.3 — — — — 1.3

Share-based compensation expense — — 69.5 — — — — 69.5

Share-based compensation expense for equity classified awards — — 64.6 — — — — 64.6

Net loss — — — — ( 837.8 ) — — ( 837.8 )

Other comprehensive income — — — 64.5 — — — 64.5

Repurchase of common stock — — — — — 3.1 ( 31.0 ) ( 31.0 )

Other comprehensive loss — — — ( 11.1 ) — — — ( 11.1 )

Balance at December 31, 2023 220.5 $ 2.2 $ 2,638.2 $ 60.3 $ ( 2,824.2 ) 3.1 $ ( 31.0 ) $ ( 154.5 )

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For ease of reference, the terms "we," "our company," "the company," "us," or "our" as used in this report refer to Rackspace Technology and its consolidated subsidiaries.

On January 18, 2022, we acquired 100 % of Just Analytics, a leading provider of cloud-based data, analytics, and AI services based in the APJ region.

The acquisition was completed for $ 7.7 million in cash consideration, net of cash acquired, together with future deferred payments that are considered post-combination compensation costs and will be recognized over the next three years .

The acquisition of Just Analytics was not material to the consolidated financial statements.

Effective on January 1, 2023, we reorganized around a two -business unit operating model, Public Cloud and Private Cloud.

This two -business unit operating model ensures increased focus, delivery, and service quality for our customers.

Beginning in 2023, we changed our segment reporting to reflect this reorganization under two reportable segments:

Public Cloud and Private Cloud.

See Note 16, "Segment Reporting" for more information.

The accompanying consolidated financial statements include the accounts of Rackspace Technology and our wholly-owned subsidiaries.

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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.

As of December 31, 2024, the New Revolving Credit Facility provided for up to $ 375.0 million of borrowings, none of which was drawn and outstanding as of December 31, 2024.

As of December 31, 2025, the New Revolving Credit Facility provided for up to $ 375.0 million of borrowings, $ 60.0 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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Buildings and leasehold improvements 2 to 39 years

In the first quarter of 2024, we completed an assessment of the useful lives of certain assets within the “Computers and equipment” asset class.

The timing of this review was based on a combination of factors accumulating over time that provided the company with updated information to make a better estimate on the economic lives of certain property and equipment.

These factors included changes in our business model and recent technological advances that have increased efficiencies in how we operate and manage customer gear.

The assessment resulted in an increase in the estimated useful life range of the “Computers and equipment” asset class from three -to- five years to five -to- seven years .

This change in accounting estimate took effect at the start of the first quarter of 2024.

The impact of this change was a reduction in depreciation expense of $ 46.0 million and an increase of $ 0.20 net basic loss per share compared to previous estimates for the year ended December 31, 2024.

Assets classified as held for sale are recorded at the lower of carrying value or its estimated fair value, less costs to sell, and no depreciation and amortization is recorded after the held for sale classification is met.

As of December 31, 2022, our corporate headquarters property was classified as held for sale.

See Note 5, "Property, Equipment and Software, net" and Note 6, "Goodwill and Intangible Assets" for more information.

As of December 31, 2022, our former corporate headquarters property was classified as held for sale.

See Note 5, "Property, Equipment and Software, net" for more information.

The cost of assets and related accumulated depreciation and amortization are written off upon retirement or disposal and any resulting gain or loss is credited or charged to income or expense.

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If the carrying amount of an asset group exceeds its estimated undiscounted future cash flows, then an impairment charge is recognized in the amount that an asset group’s carrying amount exceeds its fair value.

As of September 1, 2022, prior to performing the goodwill impairment analysis discussed below, we performed a recoverability test of our long-lived assets by asset group, including finite-lived intangible assets, in which we estimated the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group .

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 underlying assets exceeded the sum of the undiscounted cash flows, and therefore is subject to the fair value test .

Fair values of the OpenStack Public Cloud long-lived assets were determined using a combination of the income approach and the cost approach.

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.

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.

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.

As a result of the fair value test, we recorded non-cash impairment charges totaling $ 37.7 million related to property, equipment and software, net and intangible assets, which are included in "Impairment of assets, net" on our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2022.

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.

See Note 5, "Property, Equipment and Software, net," and Note 6, "Goodwill and Intangible Assets," for more information.

We 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.

Goodwill and Indefinite-Lived Intangible Assets

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Year Ended December 31, 2025

In connection with the preparation of the debt refinancing transactions that were completed in March and April 2024, as further described in Note 7, “Debt”, we updated our internal forecasts.

We performed our annual goodwill impairment test as of October 1, 2025 and the results of our test did not indicate any impairment of goodwill.

As of December 31, 2025, we evaluated several goodwill impairment indicators following a sustained decline in our stock price during the fourth quarter of 2025 and determined that it was not more likely than not that the fair values of our reporting units were less than the carrying values.

In reaching this conclusion, we evaluated the decline in our market capitalization together with other factors, including the significance of the amount of excess carrying value over fair value as of the October 1, 2025 annual test, consistency of our current and forecasted operating margins and cash flows, and budgeted-to-actual performance for the fourth quarter of 2025, among others.

We will continue to evaluate whether circumstances indicate an impairment may exist each reporting period.

If there are significant changes in events or circumstances, including further declines in our market capitalization or deterioration in the equity and debt markets, impacts to our forecasted results due to macroeconomic factors or actual operating performance of our reporting units, or other factors that may affect the significant inputs used to determine the fair value of our reporting units, it is possible that an impairment charge may be recorded in the future, which could be material.

Year Ended December 31, 2024

In connection with the debt refinancing transactions that were completed in March and April 2024, as further described in 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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Due to the change in our segment reporting and the allocation of goodwill, we completed a quantitative goodwill impairment analysis both prior and subsequent to the aforementioned change.

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.

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.

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.

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.

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.

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.

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.

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.

6 unchanged sentences

Due to the change in our reporting units as of October 1, 2023, we completed a quantitative goodwill impairment analysis.

Year Ended December 31, 2022

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.

As of September 1, 2022, 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 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.

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.

As such, as of September 1, 2022, we determined it appropriate to perform an interim quantitative assessment of our reporting units.

The results of our annual goodwill impairment test as of October 1, 2022 did not indicate any impairments of goodwill.

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 which was included in the former Apps & Cross Platform reporting unit.

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.

Quantitative Goodwill Impairment Analysis

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Year Ended December 31, 2025

The results of our quantitative goodwill impairment analysis as of October 1, 2025 indicated no impairment of goodwill.

Year Ended December 31, 2024

The results of our quantitative goodwill impairment analysis as of February 29, 2024 indicated an impairment of goodwill within our Public Cloud and Private Cloud reporting units of $ 385.4 million and $ 187.8 million, respectively.

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The results of our quantitative goodwill impairment analysis as of October 1, 2023 indicated no impairment of goodwill.

Year Ended December 31, 2022

The results of our quantitative goodwill impairment analysis as of September 1, 2022 indicated an impairment of goodwill within the former Multicloud Services reporting unit, and we recorded a non-cash impairment charge of $ 405.2 million within "Impairment of goodwill" in our Condensed Consolidated Statements of Comprehensive Loss in the third quarter of 2022.

The results of our quantitative goodwill impairment analysis as of December 31, 2022 indicated an impairment of goodwill within our former Apps & Cross Platform reporting unit, and we recorded a non-cash impairment charge of $ 129.3 million within "Impairment of goodwill" in our Consolidated Statements of Comprehensive Loss in the fourth quarter of 2022.

See Note 6, "Goodwill and Intangible Assets" for more information.

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Our estimate of the fair value of the Rackspace trade name is derived using the income approach, specifically the relief-from-royalty method.

Due to the factors discussed in the goodwill analyses above and prior to testing our goodwill for impairment, we performed a quantitative assessment of our indefinite-lived intangible asset as of September 1, 2022, December 31, 2022, September 30, 2023 and February 29, 2024.

The quantitative assessment performed as of those dates indicated the estimated fair value of the Rackspace trade name was less than its carrying value.

As a result, we recorded a $ 21.0 million, $ 12.0 million, $ 57.0 million and $ 20.0 million non-cash impairment charge as of September 1, 2022, December 31, 2022, September 30, 2023 and February 29, 2024, respectively.

These charges are included in "Impairment of assets, net" in our Consolidated Statements of Comprehensive Loss in the third quarter of 2022, fourth quarter of 2022, third quarter of 2023 and first quarter of 2024, respectively.

As a result, we recorded a $ 57.0 million and $ 20.0 million non-cash impairment charge as of September 30, 2023 and February 29, 2024, respectively.

These charges are included in " Impairment of assets, net " in our Consolidated Statements of Comprehensive Loss in the third quarter of 2023 and first quarter of 2024, respectively.

The quantitative assessments of our indefinite-lived intangible asset performed in conjunction with the other goodwill impairment testing dates, discussed above, did not indicate any impairment of the Rackspace trade name.

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These fees are recognized as revenue in the period of contract termination as we have no further obligation to perform.

Our other primary sources of revenue are for services within our Public Cloud segment and legacy OpenStack business.

Our other primary source of revenue is for services within our Public Cloud segment.

Customers are generally invoiced monthly based on usage.

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Transaction gains or losses in currencies other than the functional currency are included as a component of "Other expense, net" in the Consolidated Statements of Comprehensive Loss.

We recorded transaction losses of $ 10.1 million, gains of $ 3.9 million, and losses of $ 2.4 million for the years ended December 31, 2022, 2023 and 2024, respectively.

We recorded transaction gains of $ 3.9 million, losses of $ 2.4 million, and losses of $ 1.2 million for the years ended December 31, 2023, 2024 and 2025, respectively.

Derivative Instruments

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Recently Adopted

Segment Reporting Disclosures

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures .

ASU 2023-07 requires disclosure of incremental segment information on an annual and interim basis, including significant segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of segment profit or loss.

Additionally, the ASU requires disclosure of the title and position of our CODM and an explanation of how the CODM uses the reported measures of segment profit or loss in assessing segment performance and deciding how to allocate resources.

The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments.

We have applied this guidance retrospectively to our annual segment disclosures in Note 16, "Segment Reporting" and will apply the interim disclosures beginning with the first quarter 2025 Form 10-Q.

Recently Issued Accounting Pronouncements Not Yet Adopted

Income Tax Disclosures

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The ASU also requires the disaggregation of income taxes paid by jurisdiction for each annual period presented.

This guidance is effective for Rackspace beginning with our 2025 Form 10-K annual disclosures, with early adoption permitted.

The guidance should be applied on a prospective basis, but retrospective application is permitted.

We are currently evaluating the provisions of the ASU and, once adopted, will result in increased income tax disclosures.

We have applied this guidance prospectively to our annual income tax disclosures in Note 13 , " Taxes.

Recently Issued Accounting Pronouncements Not Yet Adopted

Disaggregation of Income Statement Expenses

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We are currently evaluating the provisions of this ASU and, once adopted, will result in additional disclosures about certain expenses in the notes to our financial statements.

Measurement of Credit Losses

In July 2025, the FASB issued ASU No.

2025-05, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses for Accounts Receivable and Contract Assets .

ASU 2025-05 allows entities to apply a practical expedient when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions under ASC 606.

This guidance is effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted.

The guidance should be applied on a prospective basis.

We are currently evaluating the potential impact of this ASU on our consolidated financial statements and related disclosures.

Internal-Use Software

In September 2025, the FASB issued ASU No.

2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) - Targeted Improvements to the Accounting for Internal-Use Software .

ASU 2025-06 removes all references to project stages within ASC No.

350-40 and clarifies the threshold entities apply to begin capitalizing internal-use software costs, including defining the “probable-to-complete” recognition threshold.

The guidance also specifies that the disclosures under ASC No.

360-10, Property, Plant, and Equipment - Overall , apply to capitalized software costs accounted for under ASC No.

350-40, regardless of how those costs are presented in the financial statements.

This guidance is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods, with early adoption permitted.

The guidance may be applied on a prospective, retrospective, or modified transition basis.

We are currently evaluating the potential impact of this ASU on our consolidated financial statements and related disclosures.

Hedge Accounting Improvements

In November 2025, the FASB issued ASU No.

2025-09, Derivatives and Hedging (Topic 815) – Hedge Accounting Improvements to clarify certain aspects of existing hedge accounting guidance and to more closely align hedge accounting with the economics of an entity’s risk management activities.

ASU 2025-09 specifically addresses five issues that are intended to better enable entities to achieve and maintain hedge accounting for highly effective economic hedges.

The issues addressed are (1) Similar Risk Assessment for Cash Flow Hedges;

(2) Hedging Forecasted Interest Payments on Choose-Your-Rate Debt Instruments;

(3) Cash Flow Hedges of Nonfinancial Forecasted Transactions;

(4) Net Written Options as Hedging Instruments;

and (5) Foreign-Currency-Denominated Debt Instrument as Hedging Instrument and Hedged Item (Dual Hedge).

This guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods, with early adoption permitted.

The guidance should be applied on a prospective basis for all hedging relationships.

Upon adoption, entities are permitted to modify certain critical terms of certain existing hedging relationships without de-designating the hedge.

We are currently evaluating the potential impact of this ASU on our consolidated financial statements and related disclosures.

Interim Reporting

In December 2025, the FASB issued ASU No.

2025-11, Interim Reporting (Topic 270) – Narrow-Scope Improvements to provide clarity on the current interim reporting requirements and the applicability of Topic 270.

ASU 2025-11 includes lists of interim disclosures required by all other codification topics and establishes a principle under which an entity must disclose events since the end of the last annual reporting period that have a material impact on the entity.

The amendment is not intended to change the fundamental nature of interim reporting or expand or reduce current interim disclosure requirements.

This guidance is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted.

The guidance can be applied prospectively or retrospectively to any or all prior periods presented in the financial statements.

We are currently evaluating the potential impact of this ASU on our condensed consolidated financial statements and related disclosures included in our interim reports.

Customer Contracts

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(1) Additions to the allowance for credit losses are charged to bad debt within "Selling, general and administrative expenses."

Amounts recognized in revenue for the years ended December 31, 2022, 2023 and 2024, which were included in deferred revenue as of the beginning of the period totaled $ 98.6 million, $ 80.9 million and $ 78.8 million, respectively.

Amounts recognized in revenue for the years ended December 31, 2023, 2024 and 2025, which were included in deferred revenue as of the beginning of each period totaled $ 80.9 million, $ 78.8 million and $ 84.2 million, respectively.

Cost Incurred to Obtain and Fulfill a Contract

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The aggregate amount of transaction price excludes variable consideration related to our usage-based arrangements for which we recognize revenue based on the right to invoice for the services performed.

Data Act became effective in September 2025 and establishes new requirements related to cloud service switching rights and limits on early termination fees.

These provisions will require modifications to our existing E.U.

contract terms.

We are currently assessing which of our contracts are subject to these requirements.

As of December 31, 2025, our existing contractual terms were in place and provide the basis for the remaining performance obligations disclosed above.

We expect to revise our contractual terms to comply with the E.U.

Data Act in 2026 which could reduce the amount of remaining performance obligations disclosed in future periods.

Convertible Promissory Note

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Cash collected on pledged accounts receivable, which have not been sold, are included in cash from operating activities in the Consolidated Statements of Cash Flows.

In connection with accounts receivable sold during 2023 and 2024, we recorded $ 10.6 million and $ 21.5 million of expense, respectively, within “Other expense, net” in the Consolidated Statements of Comprehensive Loss.

This expense consisted of $ 6.0 million and $ 20.5 million of yield charges and fees in 2023 and 2024, respectively, and $ 4.6 million and $ 1.0 million of upfront transaction costs associated with the execution of the agreement in 2023 and 2024, respectively.

In connection with accounts receivable sold during 2023, 2024 and 2025, we recorded $ 10.6 million, $ 21.5 million and $ 20.7 million of expense, respectively, within “Other expense, net” in the Consolidated Statements of Comprehensive Loss.

This expense consisted of $ 6.0 million, $ 20.5 million and $ 20.7 million of yield charges and fees in 2023, 2024 and 2025, respectively, and $ 4.6 million and $ 1.0 million of upfront transaction costs associated with the execution of the agreement in 2023 and 2024, respectively.

The outstanding portfolio of sold accounts receivable derecognized from our Consolidated Balance Sheet as of December 31, 2024 and 2025 was $ 218.7 million and $ 253.8 million, respectively.

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Property, equipment and software, net $ 601.0 $ 596.3

For the year ended December 31, 2022, we recognized property, equipment and software impairment charges of $ 15.3 million, included in "Impairment of assets, net", related to the OpenStack Public Cloud long-lived assets.

See Note 1, "Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies," for discussion of the long-lived asset impairment charges.

In October 2022, we announced our intention to sell our current corporate headquarters facility located in Windcrest, Texas and relocate our corporate headquarters to leased office space in San Antonio, Texas.

As of December 31, 2022, this property met the criteria to be classified as held for sale under GAAP.

The property's previous carrying amount of $ 82.7 million was written down to its estimated fair value, less estimated cost to sell, of $ 12.1 million, resulting in a $ 70.6 million impairment charge which is included in "Impairment of assets, net" in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2022.

We recorded this impairment charge prior to performing the December 31, 2022 goodwill impairment test.

See Note 6, "Goodwill and Intangible Assets" for more information.

As of December 31, 2022, our former corporate headquarters located in Windcrest, Texas met the criteria to be classified as held for sale under GAAP and had an estimated fair value, less estimated cost to sell, of $ 12.1 million.

In July 2023, we entered into a purchase and sale agreement with a potential buyer of the property for $ 21.5 million.

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The following table sets forth the changes in the carrying amounts of goodwill by reportable segment during the years ended December 31, 2024 and 2025.

As a result of the January 1, 2023 reorganization, we changed our segment reporting to reflect this reorganization under two reportable segments:

Public Cloud and Private Cloud.

Accordingly, we reallocated the total consolidated net balance of goodwill as of January 1, 2023 under the new segments, shown below:

(In millions) Public Cloud Private Cloud Multicloud Services Apps & Cross Platform OpenStack Public Cloud Total

(In millions) Public Cloud Private Cloud Total

Gross goodwill as of December 31, 2023

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597.7 854.7 1,452.4

Reallocation adjustment (1)

594.7 1,560.4 ( 1,956.4 ) ( 198.7 ) — —

Impairment of goodwill ( 454.6 ) ( 260.3 ) ( 714.9 )

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141.6 594.1 735.7

Impairment of goodwill ( 454.6 ) ( 260.3 ) — — — ( 714.9 )

Foreign currency translation 1.3 3.1 4.4

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$ 142.9 $ 597.2 $ 740.1

(1) Represents the adjustment to reallocate goodwill of the former Multicloud Services and Apps & Cross Platform reportable segments to Public Cloud and Private Cloud reportable segments, using the relative fair value basis, as a result of the January 1, 2023 reorganization.

(2) On a consolidated basis, gross and net goodwill as of December 31, 2024 was $ 3,041.3 million and $ 735.7 , respectively.

(1) On a consolidated basis, gross and net goodwill as of December 31, 2025 was $ 3,045.7 million and $ 740.1 million, respectively.

Accumulated impairment charges on a consolidated basis was $ 2,305.6 million as of December 31, 2025.

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Changes in these estimates and assumptions could materially affect the fair value of the reporting unit, potentially resulting in an impairment charge.

During the fourth quarter of 2025, we performed our annual goodwill impairment test as of October 1, 2025 and the results of our test did not indicate any impairment of goodwill.

During the first quarter of 2024, we performed an interim quantitative assessment of our reporting units as of February 29, 2024.

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The results of the quantitative goodwill impairment analysis indicated no impairment to goodwill.

During the third quarter of 2022, we performed an interim quantitative assessment of our reporting units as of September 1, 2022.

The results of our interim quantitative goodwill impairment analysis performed as of September 1, 2022 indicated an impairment of goodwill within our former Multicloud Services reporting unit, and we recorded a non-cash impairment charge of $ 405.2 million.

The impairment was driven by lowered projected operating results primarily due to product mix shifts and market concerns related to inflation and other macroeconomic factors.

During the fourth quarter of 2022, we performed our annual goodwill impairment test as of October 1, 2022 and the results of our test did not indicate any further impairment of goodwill.

In the fourth quarter of 2022, we performed an additional interim quantitative assessment of our reporting units 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 $ 129.3 million.

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.

See Note 1, "Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies," for additional discussion of the goodwill impairment charges recorded during the years ended December 31, 2023 and 2024.

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During the years ended December 31, 2023 and 2024 we recognized impairment charges of $ 57.0 million and $ 20.0 million, respectively, related to our trade name indefinite-lived intangible asset.

Additionally, during the year ended December 31, 2022 we recognized impairment charges of $ 33.0 million and $ 22.4 million related to our trade name indefinite-lived intangible asset and the OpenStack Public Cloud definite-lived intangible assets, respectively.

These impairment charges are recorded in “Impairment of assets, net” in our Consolidated Statements of Comprehensive Loss.

In connection with the classification of our corporate headquarters facility as held for sale as of December 31, 2022, we wrote-off the remaining $ 4.8 million net book value of the related property tax abatement asset to " Impairment of assets, net " in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2022.

For additional information, see the discussion of our impairment charges in Note 1, "Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies."

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New Revolving Credit Facility May 15, 2028 — % — 6.73 % 60.0

Revolving Credit Facility August 7, 2025 —% — —% —

3.50 % FLSO Senior Secured Notes

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(1) Contractual interest rate as of each respective balance sheet date.

The New Revolving Credit Facility interest rate is the weighted average interest rate of borrowings outstanding as of the balance sheet date.

March 2024 Refinancing Transactions

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The FLSO Term Loan Facility matures on May 15, 2028.

Borrowings under the FLSO Term Loan Facility bear interest at an annual rate equal to 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, plus an applicable margin of 2.75 %.

Borrowings under the FLSO Term Loan Facility bear interest at an annual rate equal to 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-month duration, and 0.43 % for an interest period of six-month duration, subject to a 0.75 % floor, plus an applicable margin of 2.75 %.

As of December 31, 2025, the contractual interest rate on the FLSO Term Loan Facility was 6.61 %.

We are required to make quarterly principal payments of $ 4.2 million, which began on March 31, 20 24.

We are required to make quarterly principal payments of $ 4.2 million .

See Note 14 , “ Derivatives ,” for information on interest rate swap agreements we utilize to manage the interest rate risk on the FLSO Term Loan Facility.

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As of December 31, 2025, the outstanding principal amount of the FLSO Term Loan Facility was $ 1,610.0 million, of which $ 79.7 million, or 4.9 %, is due to Apollo affiliates.

Prior to September 12, 2025, the New Borrower may prepay some or all of the FLSO Term Loan Facility, together with accrued and unpaid interest, subject to the applicable “make-whole” premium.

On or after September 12, 2025, the New Borrower may prepay some or all of the FLSO Term Loan Facility, together with accrued and unpaid interest, without prepayment premium or penalty.

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As of December 31, 2025, the contractual interest rate on the FLFO Term Loan Facility was 10.11 %.

We are required to make quarterly principal payments of $ 0.7 million, which began on June 30, 2024 .

We are required to make quarterly principal payments of $ 0.7 million .

See Note 14 , “ Derivatives ,” for information on interest rate swap agreements we utilize to manage the interest rate risk on the FLFO Term Loan Facility.

Prior to September 12, 2025, the New Borrower may prepay some or all of the FLFO Term Loan Facility, together with accrued and unpaid interest, subject to the applicable “make-whole” premium.

On or after September 12, 2025 but prior to September 12, 2027, the New Borrower may prepay some or all of the FLFO Term Loan Facility, together with accrued and unpaid interest, subject to a prepayment fee equal to (x) 3.00 % of the principal amount of the FLFO Term Loan Facility so prepaid prior to September 12, 2026 and (y) 1.00 % of the principal amount of the FLFO Term Loan Facility so prepaid on or after September 12, 2026 but prior to September 12, 2027.

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however, this covenant is only applicable and tested if the aggregate amount of outstanding borrowings under the New Revolving Credit Facility and letters of credit issued thereunder (excluding $ 25.0 million of undrawn letters of credit and cash collateralized letters of credit) as of the last day of a fiscal quarter is greater than 35 % of the New Revolving Credit Facility commitments as of the last day of such fiscal quarter.

As of December 31, 2024 , we had total commitments of $ 375.0 million, no outstanding borrowings under the New Revolving Credit Facility, and $ 23.5 million of letters of credit issued thereunder.

During the year ended December 31, 2025 , we borrowed $ 155.0 million and repaid $ 95.0 million on the New Revolving Credit Facility.

As of December 31, 2025 , we had total commitments of $ 375.0 million, $ 60.0 million of outstanding borrowings under the New Revolving Credit Facility, and $ 23.5 million of letters of credit issued thereunder.

As such, as of December 31, 2025 , we had $ 291.5 million of available commitments remaining.

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The 3.50 % FLSO Senior Secured Notes will mature on May 15, 2028 and bear interest at an annual fixed rate of 3.50 %.

Interest is payable semiannually on each February 15 and August 15, commencing on August 15, 2024.

Interest is payable semiannually on each February 15 and August 15.

The 3.50 % FLSO Senior Secured Notes are not subject to registration rights.

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.

The New Borrower may redeem some or all of the 3.50 % FLSO Senior Secured Notes at its option prior to September 12, 2025 at a redemption price equal to 100 % of the principal amount of the 3.50 % FLSO Senior Secured Notes redeemed, plus a “make-whole” premium described in the 3.50 % FLSO Senior Secured Notes Indenture, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

Commencing September 12, 2025, the New Borrower may redeem the 3.50 % FLSO 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 % of the principal amount of the 3.50 % FLSO Senior Secured Notes redeemed, plus accrued and unpaid interest, if any, to but excluding the redemption date.

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The fair value of the 3.50 % FLSO Senior Secured Notes as of December 31, 2025 was $ 117.0 million based on quoted market prices for identical assets that are traded in over-the-counter secondary markets that are not considered active.

The fair value of the 3.50 % FLSO Senior Secured Notes are classified as Level 2 within the fair value hierarchy.

The fair value of the 3.50 % FLSO Senior Secured Notes is classified as Level 2 within the fair value hierarchy.

Existing Debt Instruments

Senior Facilities

The Senior Facilities include the Term Loan Facility and included the prior Revolving Credit Facility, and is governed by the First Lien Credit Agreement with Wilmington Trust, National Association as the administrative agent.

On February 9, 2021, we amended and restated the First Lien Credit Agreement, which included a new seven-year $ 2,300.0 million senior secured first lien term loan facility due on February 15, 2028 and our prior $ 375.0 million Revolving Credit Facility.

The Senior Facilities include the Term Loan Facility and the Prior Revolving Credit Facility, and is governed by the First Lien Credit Agreement with Wilmington Trust, National Association as the administrative agent.

On February 9, 2021, we amended and restated the First Lien Credit Agreement, which included a new seven-year $ 2,300.0 million senior secured first lien term loan facility due on February 15, 2028 and the prior $ 375.0 million Revolving Credit Facility.

On April 26, 2023, we executed an amendment to our First Lien Credit Agreement to establish Term SOFR as the benchmark rate for determining the applicable interest rate, replacing LIBOR.

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 %.

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.

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.

All other material terms and conditions of the First Lien Credit Agreement were unchanged.

In addition to paying interest on the outstanding principal under the Senior Facilities, 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.

In addition to paying interest on the outstanding principal under the Senior Facilities, 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 commitment fee is subject to one step-down based on the net first lien leverage ratio.

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The only financial covenant was with respect to the Prior Revolving Credit Facility.

As discussed in “ March 2024 Refinancing Transactions ” above, on March 12, 2024, a ll revolving lenders under the prior Revolving Credit Facility exchanged their revolving loan commitments for commitments in respect of the New Revolving Credit Facility, which replaces in full the prior Revolving Credit Facility.

As discussed in “ March 2024 Refinancing Transactions ” above, on March 12, 2024, a ll revolving lenders under the Prior Revolving Credit Facility exchanged their revolving loan commitments for commitments in respect of the New Revolving Credit Facility, which replaced in full the Prior Revolving Credit Facility.

See “ New Revolving Credit Facility ” above for information regarding this new debt instrument.

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The 3.50 % Senior Secured Notes will mature on February 15, 2028 and bear interest at an annual fixed rate of 3.50 %.

Interest is payable semiannually on each February 15 and August 15, commencing on August 15, 2021.

Interest is payable semiannually on each February 15 and August 15.

The 3.50 % Senior Secured Notes are not subject to registration rights.

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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.

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:

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;

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;

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.

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.

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The 5.375 % Senior Notes will mature on December 1, 2028 and bear interest at an annual fixed rate of 5.375 %.

Interest is payable semiannually on each June 1 and December 1, commencing on June 1, 2021.

Interest is payable semiannually on each June 1 and December 1.

The 5.375 % Senior Notes are not subject to registration rights.

2 unchanged sentences

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.

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:

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;

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.

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.

During the year ended December 31, 2023, Rackspace Technology Global repurchased and surrendered for cancellation $ 352.4 million principal amount of 5.375 % Senior Notes for $ 124.1 million, including accrued interest of $ 2.8 million.

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We have contingencies that arise from various litigation, claims and commitments, none of which we consider to be material.

From time to time, we are a party to various claims asserting that certain of our services and technologies infringe the intellectual property rights of others.

From time to time, we may be party to various legal proceedings arising in the ordinary course of business.

In addition, third parties may bring intellectual property claims against us asserting that certain of our offerings, services and technologies infringe, misappropriate or otherwise violate the intellectual property or proprietary rights of others.

Adverse results in these lawsuits may include awards of substantial monetary damages, costly royalty or licensing agreements, or orders preventing us from offering certain features, products, or services, and may also cause us to change our business practices and require development of non-infringing products or technologies, which could result in a loss of revenue for us or otherwise harm our business.

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As of December 31, 2024 and 2025, there were 5.0 million authorized shares of preferred stock, of which none was issued or outstanding.

Share Repurchase Program

On March 3, 2022, our Board authorized a program to repurchase up to $ 75.0 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.

During the year ended December 31, 2022 , we repurchased $ 31.0 million, or 3.1 million shares, of our common stock on the open market under this program.

No shares were repurchased during the year ended December 31, 2023.

Shares purchased pursuant to the program are recorded as treasury stock at cost in the Consolidated Balance Sheets .

The program expired on September 30, 2023.

Datapipe Contingent Shares

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Share-Based Compensation and Employee Benefit Plans

Incentive Plans

In April 2017, the Executive Committee of the Board authorized the company to adopt the 2017 Incentive Plan.

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The maximum number of shares of our common stock available for issuance under the 2020 Incentive Plan was originally 25.0 million shares.

This amount was subsequently increased to 50.0 million in 2022 and 57.9 million in 2023.

On April 22, 2024 the Board approved a proposed amendment to increase the maximum number of shares to 87.9 million shares, which was subsequently approved by our stockholders as part of the 2024 Annual Meeting of Stockholders held on June 14, 2024.

This amount was subsequently increased to 50.0 million shares in 2022, 57.9 million shares in 2023 and 87.9 million shares in 2024.

To the exten t awards granted under the 2020 Incentive Plan terminate, expire or lapse, shares subject to such awards generally will again be available for future grant.

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In 2021, we shifted away from granting stock options as we had in previous years, to granting restricted stock.

As such, there were no stock options granted during the years ended December 31, 2022, 2023 or 2024.

As such, there were no stock options granted during the years ended December 31, 2023, 2024 or 2025 under the 2020 Incentive Plan.

See “ Employment Inducement Awards ” discussion below for stock options granted outside of the 2020 Incentive Plan.

The following table summarizes the stock option activity for the year ended December 31, 2025:

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Share-based compensation expense is recognized over the awards requisite service period or over our best estimate of the period over which the performance condition will be met, as applicable.

As of December 31, 2024 total unrecognized compensation cost related to stock options was not material.

As of December 31, 2025 compensation cost related to stock options has been fully recognized.

Restricted Stock

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The majority of the RSUs were granted as part of our annual compensation award process and vest ratable over a three-year period, subject to continued service.

In addition, during 2022, 2023 and 2024 , 2.6 million, 2.8 million and 0.6 million PSUs, respectively, were granted under the 2020 Incentive Plan.

See “ Employment Inducement Awards ” discussion below for RSUs granted outside of the 2020 Incentive Plan.

In addition, during 2023 and 2024 , 2.8 million and 0.6 million PSUs, respectively, were granted under the 2020 Incentive Plan.

No PSUs were granted in 2025.

The PSUs represent the target amount of grants, and the actual number of shares awarded upon vesting may vary depending upon the achievement of the relevant market condition which is based on Rackspace’s Total Shareholder Return (“TSR”) relative to the TSR of a comparator group of IT and Cloud Services Companies.

The awards are eligible to vest in equal annual installments over three years based on the attainment of the market condition and the employee’s continued service through the end of the applicable measurement period and were valued using a Monte Carlo simulation.

Lastly, during 2023 and 2024, 5.5 million and 32.1 million long-term incentive cash units (“LTIC units”) were granted under the 2020 Incentive Plan.

The LTIC units represent the target amount of grants, and the actual number of units awarded upon vesting may vary depending upon the achievement of the relevant market condition which is based on Rackspace’s TSR relative to the TSR of a comparator group of IT and Cloud Services Companies for LTIC units granted in 2023 and on the performance of our common stock for LTIC units granted in 2024.

Lastly, during 2023, 2024 and 2025 , 5.5 million, 32.1 million and 30.2 million long-term incentive cash units (“LTIC units”) were granted under the 2020 Incentive Plan.

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As the company intends to settle the LTIC units in cash, they are classified as a liability within "Other current liabilities" and "Other non-current liabilities" in the Consolidated Balance Sheets.

In 2025 we paid $ 13.0 million to settle LTIC units granted under the 2020 Incentive Plan.

The following table presents the assumptions used to estimate the fair values of the PSUs granted in the periods presented:

Year Ended December 31,

2022 2023 2024

Expected stock volatility (1)

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3.76 % - 3.78 %

(1) Management estimates volatility based on the historical trading volatility of a public company peer group and the implied volatility of our assets and current leverage.

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Outstanding at December 31, 2025

Expected to vest after at December 31, 2024 (1)

Expected to vest at December 31, 2025 (1)

(1) Forfeitures are recognized as they occur, rather than estimated.

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As of December 31, 2025, there was $ 13.9 million of total unrecognized compensation cost related to restricted stock, which will be recognized over a weighted average period of 1.4 years.

Additionally, as of December 31, 2025 there was $ 10.3 million of total unrecognized expense related to the LTIC awards, which will be recognized over a weighted average period of 1.5 years.

The expense ultimately recognized is dependent on the fair value of the award as of the end of the performance periods.

Employment Inducement Awards

On September 4, 2025, Rackspace registered 10.0 million shares of its common stock for 4.0 million and 6.0 million RSUs and stock options, respectively, granted to our new chief executive officer (collectively, the “Employment Inducement Awards”).

The Employment Inducement Awards were granted pursuant to RSU and non-qualified stock option inducement award agreements, outside of the 2020 Incentive Plan.

The grant date fair value was $ 1.30 and $ 0.93 for RSUs and stock options, respectively, and the Employment Inducement Awards vest ratably over a four-year period, subject to continued service.

The fair value of stock options was determined using the Black-Scholes valuation model.

The following table presents the assumptions used to estimate the fair value of the stock options granted:

Expected stock volatility (1)

Expected dividend yield (2)

Risk-free interest rate (3)

Expected life (4)

(1) Management estimates volatility based on the historical trading volatility of a public company peer group and the implied volatility of our assets and current leverage.

(2) We have not issued dividends to date and do not anticipate issuing dividends.

(3) Based on the implied yield currently available on U.S.

Treasury zero-coupon issues with an equivalent expected term.

(4) Represents the period that our share-based awards are expected to be outstanding.

Management uses the simplified method for our estimation of the expected life as we do not have adequate historical data.

As of December 31, 2025, there was $ 9.9 million of total unrecognized compensation cost related to the Employment Inducement Awards, which will recognized over a period of 3.7 years.

Employee Stock Purchase Plan

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The share-based compensation expense recognized for the ESPP was $ 0.9 million, $ 0.8 million and $ 0.2 million for the years ended December 31, 2023, 2024 and 2025, respectively.

As of December 31, 2024, there was no material unrecognized compensation cost related to the ESP P.

As of December 31, 2025, there was no unrecognized compensation cost related to the ESP P.

The shares available for issuance under the ESPP is 7.8 million shares as of December 31, 2025.

Share-Based Compensation Expense

In connection with the departure of certain executives during the years ended December 31, 2022 and 2023, we accelerated vesting of options and restricted stock for awards with service-only vesting conditions and extended the post termination option exercise period.

These modifications resulted in a reduction in expense of $ 2.0 million and $ 0.6 million during the years ended December 31, 2022 and 2023 , respectively .

There were no modifications during the year ended December 31, 2024 .

In connection with the departure of certain executives during the year ended December 31, 2023, we accelerated vesting of options and restricted stock for awards with service-only vesting conditions and extended the post termination option exercise period.

This modification resulted in a reduction in expense of $ 0.6 million during the year ended December 31, 2023.

There were no modifications during the years ended December 31, 2024.

In connection with the departure of our former chief executive officer, we accelerated vesting of all his unvested RSUs and PSUs as outlined in the original employment agreement.

In addition, all his unvested LTIC units vested and will be settled in cash per the separation agreement.

This accelerated vesting of awards resulted in an increase in expense of $ 9.6 million during the year ended December 31, 2025.

In connection with the departure of certain other executives during the year ended December 31, 2025, we accelerated vesting of restricted stock for awards with service-only vesting conditions.

This modification resulted in a reduction in expense of $ 0.1 million during the year ended December 31, 2025.

Total share-based compensation expense is comprised of the following equity and liability classified award amounts:

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Liability classified awards

0.8 15.3 16.5

Total share-based compensation expense

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Contribution expense recognized for these plans was $ 16.3 million, $ 14.2 million and $ 14.2 million for the years ended December 31, 2023, 2024 and 2025, respectively.

The benefit for income taxes consisted of the following:

The income tax provision (benefit) consisted of the following:

Year Ended December 31,

(In millions) 2023 2024 2025

Current income tax provision (benefit):

Federal $ 0.2 $ ( 0.1 ) $ ( 11.7 )

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State 7.0 0.3 1.6

Total current 15.9 25.3 11.7

Total current income tax provision

25.3 11.7 0.3

Deferred income tax provision (benefit):

Federal ( 34.3 ) ( 23.8 ) 8.4

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State 0.8 ( 8.4 ) 8.1

Total deferred ( 108.8 ) ( 41.9 ) ( 35.0 )

Total benefit for income taxes

Total deferred income tax provision (benefit)

( 41.9 ) ( 35.0 ) 23.7

Income tax provision (benefit):

Federal ( 34.1 ) ( 23.9 ) ( 3.3 )

Foreign 9.7 8.7 17.6

State 7.8 ( 8.1 ) 9.7

Total provision (benefit) for income taxes

$ ( 16.6 ) $ ( 23.3 ) $ 24.0

Loss before income taxes from U.S.

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Total loss before income taxes $ ( 854.4 ) $ ( 881.5 ) $ ( 201.8 )

A reconciliation of the statutory federal tax rate to the effective tax rate is as follows:

As described in Note 1, "Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies," we adopted ASU 2023-09 prospectively in our 2025 annual reporting disclosures.

A reconciliation of the statutory federal tax rate to the effective tax rate pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 is as follows:

(In millions) Year Ended December 31, 2025

Statutory federal tax rate $ ( 42.4 ) 21.0 %

Domestic federal:

Non-taxable or non-deductible items:

Non-deductible compensation 5.5 ( 2.7 ) %

Share-based compensation 2.3 ( 1.1 ) %

Other non-taxable or non-deductible items ( 1.0 ) 0.5 %

Effect of cross-border tax laws 1.3 ( 0.6 ) %

Changes in valuation allowances 35.3 ( 17.5 ) %

Domestic state income taxes, net of federal effect 8.1 ( 4.0 ) %

Foreign tax effects:

Effect of cross-border tax laws:

Statutory income tax rate differential 5.3 ( 2.6 ) %

Regional income taxes (cantonal) 8.0 ( 4.0 ) %

Other reconciling items ( 0.2 ) 0.1 %

United Kingdom ( 0.7 ) 0.4 %

Other foreign jurisdictions 8.2 ( 4.2 ) %

Worldwide changes in unrecognized tax benefits ( 5.7 ) 2.8 %

Total $ 24.0 ( 11.9 ) %

A reconciliation of the statutory federal tax rate to the effective tax rate for the years ended December 31, 2023 and 2024 is as follows:

Year Ended December 31,

2022 2023 2024

Statutory federal tax rate 21.0 % 21.0 %

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Tax impact of the March 2024 Refinancing Transactions

— % — % 11.7 %

Other, net ( 0.3 ) % — %

Effective tax rate 1.9 % 2.6 %

Cash paid for income taxes, net of refunds received, by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 is as follows:

(In millions) Year Ended December 31, 2025

federal $ ( 0.4 )

state and local:

Virginia ( 0.4 )

Other ( 0.4 )

state and local 0.6

Netherlands 1.6

Saudi Arabia 1.6

Switzerland 1.4

United Kingdom ( 2.7 )

Other foreign jurisdictions 1.5

Total foreign 8.1

Total cash paid for income taxes, net of refunds $ 8.3

Deferred Taxes

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Net operating loss carryforwards 20.3 39.3

Foreign tax credit 16.9 —

Research and development credits 30.5 —

Depreciation and amortization 5.0 4.0

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Net deferred tax liabilities $ 17.2 $ 23.4

As of December 31, 2024, we no longer have federal net operating loss carryforwards, federal research and development credits, and federal foreign tax credit carryforwards pursuant to IRC Section 108(b)(2) attribute reduction.

We are currently generating $ 53.0 million of federal and various state net operating losses in 2025.

We have $ 102.0 million of foreign net operating losses, $ 6.3 million of which have carryforward periods ranging from 5 to 20 years, and $ 95.7 million of which have an indefinite carryforward period.

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of $ 653.4 million that can be carried forward indefinitely.

We’ve recorded a valuation allowance with respect to certain of our deferred tax assets relating primarily to operating losses in certain U.S.

state and foreign jurisdictions that we believe are not likely to be realized.

Additionally, we’ve recorded a valuation allowance with respect to disallowed interest that we do not expect to be realizable in the future.

Furthermore, we recorded a valuation allowance with respect to other deferred tax assets based upon the determination that we would not generate enough income by reversing deferred tax liabilities to fully utilize all deferred tax assets prior to the expiration of any applicable carryforward periods.

We have recorded valuation allowances against certain deferred tax assets in the U.S.

federal, certain U.S.

state, and foreign jurisdictions where it has been determined that realization is not more likely than not.

These deferred tax assets include net operating loss carryforwards, disallowed interest expense carryforwards, and other deferred tax assets for which sufficient taxable income is not expected to be generated through the reversal of existing deferred tax liabilities prior to the expiration of applicable carryforward periods.

Valuation allowances have also been recorded in Switzerland (Canton) on this basis.

Changes to valuation allowances consisted of the following:

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Balance at December 31, $ 66.1 $ 173.4 $ 231.2

The effective tax rate for the year ended December 31, 2022 was primarily impacted by the tax impact associated with the goodwill impairments, the geographic distribution of profits, tax effects from share-based compensation and executive compensation that is nondeductible under IRC Section 162(m) of the IRC.

The effective tax rate for the year ended December 31, 2023 was impacted by the tax impact associated with the goodwill impairments, executive compensation that is nondeductible under IRC Section 162(m), the net impact of the geographic distribution of our earnings, tax effects from nondeductible share-based compensation as well as changes in our valuation allowanc e.

The effective tax rate for the year ended December 31, 2024 was impacted by the tax impact associated with changes in valuation allowance, the tax impact associated with the goodwill impairment recorded in the first and third quarters of 2024, the majority of which was nondeductible for income tax purposes, and the tax impact of the March 2024 Refinancing Transactions discussed below.

The effective tax rate for the year ended December 31, 2023 w as impacted by the tax impact associated with the goodwill impairments, executive compensation that is nondeductible under IRC Section 162(m), the net impact of the geographic distribution of our earnings, tax effects from nondeductible share-based compensation as well as changes in our valuation allowanc e.

The tax impact of the March 2024 Refinancing Transactions includes the exclusion of cancellation of indebtedness income (“CODI”), federal and state attribution reduction and changes in valuation allowance.

The effective tax rate for the year ended December 31, 2025 was impacted by the tax impact associated with changes in valuation allowance, executive compensation that is nondeductible under IRC Section 162(m), the net impact of the geographic distribution of earnings, and the tax effects from nondeductible share based compensation.

As a result of the March 2024 Refinancing Transactions, as further described in Note 7 , “ Debt ”, specifically upon the completion of the Private Exchange and Public Term Loan Exchange in March 2024, and the completion of the Public Note Exchange in April 2024, the company realized CODI for US tax purposes of $ 531.5 million and $ 80.5 million, respectively.

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The company currently estimates that the level of its insolvency (as defined for US Tax purposes) exceeds the amount of CODI resulting from the March 2024 Refinancing Transactions, such that all resulting CODI will be excluded from the company’s taxable income.

As of December 31, 2024, we have reduced various tax attributes, including $ 14.8 million of federal and certain state net operating loss deferred tax assets, $ 29.2 million of federal research and development credits, and $ 12.6 million of federal foreign tax credits.

The process for determining the amount of tax attribute reduction is complex and the actual reduction to attributes does not occur until the first day of the company’s tax year subsequent to the date of the discharge event, or January 1, 2025.

Therefore, the estimated impact of the tax attribute reduction from the March 2024 Refinancing Transactions is subject to change until the finalization of the company’s tax returns for the year ending December 31, 2024.

As of December 31, 2025, we have reduced various tax attributes, including $ 12.5 million of federal and certain state net operating loss deferred tax assets, $ 33.1 million of federal research and development credits, and $ 11.5 million of federal foreign tax credits after the finalization of the company’s tax returns for the year ending December 31, 2024.

We do not permanently reinvest our foreign earnings due to the debt service requirements of our capital structure.

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We do not expect the amount of unrecognized tax benefits disclosed above to change significantly over the next 12 months.

We recognize interest expense and penalties related to income tax matters within “Benefit for income taxes” on our Consolidated Statements of Comprehensive Loss.

We recognize interest expense and penalties related to income tax matters within “Benefit (provision) for income taxes” on our Consolidated Statements of Comprehensive Loss.

Accrued interest and penalties as of December 31, 2023, 2024 and 2025 were $ 6.6 million, $ 8.5 million and $ 10.4 million, respectively.

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federal and state income tax examinations for the tax years 2018 through 2025 and in the foreign jurisdictions in which we operate for varying periods from 2007 through 2025.

We currently have income tax examinations open in Texas for tax years 2014 through 2021 and New York City for 2017 through 2019.

We are currently under examination by the IRS for tax year 2022 and have income tax examinations open in Texas for tax years 2014 through 2021, New York City for 2017 through 2019, and New York state for 2021 through 2023.

Additionally, we have an income tax examination open in India for tax year 2023.

Although the outcome of open tax audits is uncertain, in management’s opinion, adequate provisions for income taxes have been made.

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To the extent additional information becomes available prior to resolution, such accruals are adjusted to reflect probable outcomes.

Prior to January 9, 2020, none of our floating-to-fixed interest rate swap agreements were designated as cash flow hedges of interest rate risk for accounting purposes, therefore, all changes in the fair value of the interest rate swap agreements were recorded to "Interest expense" in the Consolidated Statements of Comprehensive Loss.

On July 4, 2025, the U.S.

government enacted the One Big Beautiful Bill Act (“OBBBA”).

The OBBBA legislation includes changes to U.S federal tax law, including modifications to bonus depreciation, modifications to interest expense limitations, and an available election for the full expensing of domestic research expenditures, which may be subject to further clarification and the issuance of interpretive guidance.

Our income tax provision for the year ended December 31, 2025 reflects these changes which have no material net impact to tax expense.

On January 9, 2020, we designated certain of our swaps as cash flow hedges.

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The income tax effects of cash flow hedges are released from "Accumulated other comprehensive income" in the period when the underlying transaction affects earnings.

Any stranded income tax effects are released from "Accumulated other comprehensive income" into "Benefit for income taxes" under the portfolio approach.

Any stranded income tax effects are released from "Accumulated other comprehensive income" into "Benefit (provision) for income taxes" under the portfolio approach.

During the year ended December 31, 2021, we completed a series of transactions to modify our interest rate swap positions as follows:

(i) All the interest rate swaps outstanding as of December 31, 2020, with the exception of the agreement that matured on February 3, 2021, were de-designated as cash flow hedges on January 31, 2021, (ii) on February 12, 2021, we entered into a $ 900.0 million receive-fixed interest rate swap which was designed to offset the terms of two December 2016 swaps, and (iii) on February 12, 2021, we terminated all December 2018 swaps and entered into a $ 1.35 billion pay-fixed interest rate swap, effectively blending the liability position of our existing interest rate swap agreements into the new swap and extending the term of our hedged position to February 2026.

The amount remaining in “Accumulated other comprehensive income" for the de-designated December 2016 and December 2018 swaps at the de-designation date was app roximately $ 51.6 million, and is being amortized as an increase to "Interest expense" over the effective period of the original swap agreements.

The amount remaining in “Accumulated other comprehensive income" for the de-designated December 2016 and December 2018 swaps at the de-designation date was app roximately $ 51.6 million, and was amortized as an increase to "Interest expense" over the effective period of the original swap agreements.

The new receive-fixed interest rate swap qualifies as a hybrid instrument in accordance with ASC No.

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The key terms of interest rate swaps are presented below:

Effective Date Fixed Rate Paid (Received) December 31, 2023 December 31, 2024

Effective Date Fixed Rate Paid December 31, 2024 December 31, 2025

Notional Amount (in millions) Status Notional Amount (in millions) Status Maturity Date

Entered into December 2018:

February 3, 2017 1.9040 % $ — Matured $ — Matured February 3, 2022

February 3, 2017 1.9040 % — Matured — Matured February 3, 2022

Entered into December 2018:

February 3, 2019 2.7490 % — Matured — Matured November 3, 2023

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Entered into February 2021:

February 3, 2021 ( 1.9040 )% — Matured — Matured February 3, 2022

February 9, 2021 2.34150 % (1)

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Interest rate swaps Other current liabilities (1)

— 17.3 — 17.3

Interest rate swaps Other non-current liabilities (1)

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Interest expense was $ 221.6 million, $ 98.0 million and $ 82.7 million for the years ended December 31, 2023, 2024 and 2025, respectively.

As of December 31, 2024, the amount of cash flow hedge gain included within "Accumulated other comprehensive income" that is expected to be reclassified as a reduction to "Interest expense" over the next 12 months is approximately $ 42.0 million.

As of December 31, 2025, the amount of cash flow hedge gain included within "Accumulated other comprehensive income" that is expected to be reclassified as a reduction to "Interest expense" through the February 9, 2026 maturity date is $ 4.0 million.

See Note 15, "Accumulated Other Comprehensive Income," for information regarding changes in fair value of our derivatives designated as hedging instruments.

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Accumulated other comprehensive income consisted of the following:

(In millions) Accumulated Foreign Currency Translation Adjustments Accumulated Gain (Loss) on Derivative Contracts

(In millions) Accumulated Foreign Currency Translation Adjustments Accumulated Gain on Derivative Contracts

Accumulated Other Comprehensive Income

Balance at December 31, 2022 $ ( 10.0 ) $ 81.4 $ 71.4

Foreign currency translation adjustments, net of tax benefit of $ 2.3 million

( 27.2 ) — ( 27.2 )

Unrealized gain on derivative contracts, net of tax expense of $ 30.0 million

Amount reclassified from Accumulated comprehensive income (loss) into earnings, net of tax benefit of $ 1.6 million (1)

Balance at December 31, 2022 $ ( 10.0 ) $ 81.4 $ 71.4

Foreign currency translation adjustments, net of tax expense of $ 1.0 million

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Balance at December 31, 2024 $ ( 10.2 ) $ 34.3 $ 24.1

(1) Includes amortization of off-market swap value and accumulated loss at hedge de-designation of $ 18.5 million for the year ended December 31, 2022, partially offset by a reduction to interest expense recognized of $ 12.1 million.

(2) Includes a reduction to interest expense recognized of $ 55.6 million related to the cash flow hedge gain for the year ended December 31, 2023, partially offset by an increase to interest expense for the amortization of off-market swap value and accumulated loss at hedge de-designation of $ 15.5 million.

Foreign currency translation adjustments, net of tax benefit of $ 1.3 million

Unrealized gain on derivative contracts, net of tax expense of $ 0.6 million

Amount reclassified from Accumulated comprehensive income (loss) into earnings, net of tax expense of $ 11.0 million (3)

— ( 33.8 ) ( 33.8 )

Balance at December 31, 2025 $ 5.0 $ 2.5 $ 7.5

(1) Includes a reduction to interest expense recognized $ 55.6 million related to the cash flow hedge gain for the year ended December 31, 2023, partially offset by an increase to interest expense for the amortization of off-market swap value and accumulated loss at hedge de-designation of $ 15.5 million.

(2) Includes a reduction to interest expense recognized of $ 57.7 million related to the cash flow hedge gain for the year ended December 31, 2024.

(3) Includes a reduction to interest expense recognized of $ 44.9 million related to the cash flow hedge gain for the year ended December 31, 2025 .

Segment Reporting

Effective on January 1, 2023, we reorganized around a two -business unit operating model, Public Cloud and Private Cloud.

This two -business unit operating model allows for each segment to be managed separately based on the different service offerings and respective operational and marketing strategies, ensuring increased focus, delivery, and service quality for our customers.

We have changed our segment reporting to reflect this reorganization under two operating segments, which correspond directly to our reportable segments:

We have organized our operations into two operating segments, which correspond directly to our reportable segments:

Public Cloud, 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;

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Private Cloud also includes our legacy OpenStack Public Cloud business that we ceased to actively market to customers in 2017.

Our prior Multicloud Services segment has been separated into its public and private cloud components and the offerings previously reported in our Apps & Cross Platform segment have been reassigned to either the Public Cloud or Private Cloud segment based on the nature of the offering.

Our segments are based upon a number of factors, including, the basis for our budgets and forecasts, organizational and management structure and the financial information regularly provided to our Chief Operating Decision Maker (“CODM”), who we have determined to be our Chief Executive Officer.

Our Board appointed a new chief executive officer, effective September 3, 2025, who immediately assumed the CODM responsibilities.

The CODM is responsible for making key operating and strategic decisions to assess performance for each segment.

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Corporate function costs that are not allocated to the segments are included in the row labeled "Corporate functions" in the table below.

During the first quarter of 2024, we identified that an immaterial amount of revenue for a certain Private Cloud product offering was incorrectly reported in the Public Cloud segment in historical periods.

Revenue by segment has been corrected in the table below by reducing Public Cloud revenue by $ 2.3 million and increasing Private Cloud revenue by $ 2.3 million for the year ended December 31, 2022 and reducing Public Cloud revenue by $ 4.7 million and increasing Private Cloud revenue by $ 4.7 million for the year ended December 31, 2023.

Beginning in the fourth quarter of 2024, we have updated the presentation of our segment operating profit 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 reconciliation below.

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.

All prior periods have been recasted to reflect current period presentation.

In connection with this presentation change, we also updated segment operating profit included in the financial information provided to our CODM.

Certain cash compensation paid to employees who remain employed with Rackspace is now included in the Public Cloud and Private Cloud segment operating profit performance measure.

The table below presents revenue and segment operating profit by reportable segment and a reconciliation of consolidated segment operating profit to consolidated loss before income taxes for the years ended December 31, 2023, 2024 and 2025.

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Interest expense ( 221.6 ) ( 98.0 ) ( 82.7 )

Gain (loss) on investments, net ( 0.2 ) 0.3 0.1

Gain on investments, net 0.3 0.1 0.3

Gain on debt extinguishment, net of debt modification costs 271.3 147.2 —

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Other segment items for each segment include directly allocable research and development expenses, sales and marketing expenses, and certain other general and administrative expenses.

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.

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.

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.

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.

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.

All of our intangible assets are attributable to acquisitions, including the Rackspace Acquisition in 2016.

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Geographic Information

The tables below present revenue by geographic region and by country for the years ended December 31, 2022, 2023 and 2024.

Revenue amounts are based upon the location of the support function servicing the cus tomer.

Year Ended December 31,

(In millions) 2022 2023 2024

Americas $ 2,341.7 $ 2,181.4 $ 1,990.4

EMEA 626.6 620.0 620.0

APJ 154.0 155.7 126.7

Total revenue $ 3,122.3 $ 2,957.1 $ 2,737.1

The table below presents revenue by country for the years ended December 31, 2023, 2024 and 2025.

For the year ended December 31, 2025, we changed the basis for attributing revenue amounts to be based upon the customer’s primary address.

Revenue amounts for the years ended December 31, 2023 and 2024 are based upon the location of the support function servicing the customer.

Year Ended December 31,

66 unchanged sentences

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.

What changed 10-K

Item 8. Financial Statements and Supplementary Data