Rackspace Technology, Inc. 10-K

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA RACKSPACE TECHNOLOGY, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID: 185 ) 89 Report of Independent Registered Public Accounting Firm (PCAOB ID: 238) 92 Consolidated Balance Sheets 93 Consolidated Statements of Comprehensive Loss 94 Consolidated Statements of Cash Flows 95 Consolidated Statements of Stockholders' Equity (Deficit) 97 Notes to the Consolidated Financial Statements 98 - 88 - Table of Contents Report of Independent Registered Public Accounting Firm 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 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 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 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: (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. - 89 - Table of Contents 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. /s/ KPMG LLP We have served as the Company’s auditor since 2025. San Antonio, Texas March 6, 2026 - 90 - Table of Contents 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 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 (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. /s/ KPMG LLP San Antonio, Texas March 6, 2026 - 91 - Table of Contents 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. 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. 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. 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. 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. 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. We believe that our audits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Austin, Texas March 20, 2025 We served as the Company’s auditor from 2017 to 2025. - 92 - Table of Contents RACKSPACE TECHNOLOGY, INC. CONSOLIDATED BALANCE SHEETS (In millions, except per share data) December 31, 2024 December 31, 2025 ASSETS Current assets: Cash and cash equivalents $ 144.0 $ 105.8 Accounts receivable, net of allowance for credit losses and accrued customer credits of $ 27.0 and $ 12.2 , respectively 298.8 266.5 Prepaid expenses 84.9 84.4 Other current assets 91.1 61.1 Total current assets 618.8 517.8 Property, equipment and software, net 601.0 596.3 Goodwill, net 735.7 740.1 Intangible assets, net 844.7 698.3 Operating right-of-use assets 134.6 144.6 Other non-current assets 119.3 102.7 Total assets $ 3,054.1 $ 2,799.8 LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable and accrued expenses $ 389.6 $ 413.9 Accrued compensation and benefits 96.7 85.4 Deferred revenue 84.2 94.6 Debt 29.2 27.3 Accrued interest 7.4 5.4 Operating lease liabilities 55.9 54.7 Finance lease liabilities 53.1 48.0 Financing obligations 16.4 14.0 Other current liabilities 34.1 23.4 Total current liabilities 766.6 766.7 Non-current liabilities: Debt 2,756.4 2,718.7 Operating lease liabilities 77.8 84.2 Finance lease liabilities 293.1 297.7 Financing obligations 39.2 39.3 Deferred income taxes 30.2 34.7 Other non-current liabilities 95.0 78.0 Total liabilities 4,058.3 4,019.3 Commitments and Contingencies (Note 10) Stockholders' deficit: Preferred stock, $ 0.01 par value per share: 5.0 shares authorized; no shares issued or outstanding — — Common stock, $ 0.01 par value per share: 1,495.0 shares authorized; 232.2 and 248.4 shares issued; 229.1 and 245.3 shares outstanding, respectively 2.3 2.5 Additional paid-in capital 2,682.8 2,709.7 Accumulated other comprehensive income 24.1 7.5 Accumulated deficit ( 3,682.4 ) ( 3,908.2 ) Treasury stock, at cost; 3.1 shares held ( 31.0 ) ( 31.0 ) Total stockholders' deficit ( 1,004.2 ) ( 1,219.5 ) Total liabilities and stockholders' deficit $ 3,054.1 $ 2,799.8 See accompanying notes to the consolidated financial statements. - 93 - Table of Contents RACKSPACE TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS Year Ended December 31, (In millions, except per share data) 2023 2024 2025 Revenue $ 2,957.1 $ 2,737.1 $ 2,685.7 Cost of revenue ( 2,328.3 ) ( 2,203.7 ) ( 2,179.3 ) Gross profit 628.8 533.4 506.4 Selling, general and administrative expenses ( 767.2 ) ( 707.6 ) ( 607.1 ) Impairment of goodwill ( 708.8 ) ( 714.9 ) — Impairment of assets, net ( 52.2 ) ( 20.0 ) — Loss from operations ( 899.4 ) ( 909.1 ) ( 100.7 ) Other income (expense): Interest expense ( 221.6 ) ( 98.0 ) ( 82.7 ) Gain on investments, net 0.3 0.1 0.3 Gain on debt extinguishment, net of debt modification costs 271.3 147.2 — Other expense, net ( 5.0 ) ( 21.7 ) ( 18.7 ) Total other income (expense) 45.0 27.6 ( 101.1 ) Loss before income taxes ( 854.4 ) ( 881.5 ) ( 201.8 ) Benefit (provision) for income taxes 16.6 23.3 ( 24.0 ) Net loss $ ( 837.8 ) $ ( 858.2 ) $ ( 225.8 ) Other comprehensive income (loss), net of tax Foreign currency translation adjustments $ 8.0 $ ( 8.2 ) $ 15.2 Unrealized gain on derivative contracts 10.8 15.1 2.0 Amount reclassified from accumulated other comprehensive income (loss) to earnings ( 29.9 ) ( 43.1 ) ( 33.8 ) Other comprehensive loss ( 11.1 ) ( 36.2 ) ( 16.6 ) Comprehensive loss $ ( 848.9 ) $ ( 894.4 ) $ ( 242.4 ) Net loss per share: Basic and diluted $ ( 3.89 ) $ ( 3.82 ) $ ( 0.95 ) Weighted average number of shares outstanding: Basic and diluted 215.3 224.8 238.7 See accompanying notes to the consolidated financial statements. - 94 - Table of Contents RACKSPACE TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, (In millions) 2023 2024 2025 Cash Flows From Operating Activities Net loss $ ( 837.8 ) $ ( 858.2 ) $ ( 225.8 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 369.7 295.4 298.3 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 Share-based compensation expense 65.4 63.4 45.1 Impairment of goodwill 708.8 714.9 — Impairment of assets, net 52.2 20.0 — Gain on debt extinguishment, net of debt modification costs ( 271.3 ) ( 147.2 ) — Unrealized loss on derivative contracts 15.5 — — Gain on investments, net ( 0.3 ) ( 0.1 ) ( 0.3 ) Provision for bad debts and accrued customer credits 9.0 19.5 6.1 Amortization of debt issuance costs and debt discount and premium 7.9 2.2 6.0 Third party fees paid in connection with the March 2024 Refinancing Transactions — ( 31.7 ) — Non-cash fair value adjustments ( 1.0 ) ( 2.2 ) ( 2.1 ) Other operating activities 0.4 ( 6.5 ) ( 2.0 ) Changes in operating assets and liabilities: Accounts receivable 275.1 20.5 27.6 Prepaid expenses and other current assets 24.6 10.5 ( 2.8 ) Accounts payable, accrued expenses, and other current liabilities ( 44.2 ) ( 22.2 ) ( 26.4 ) Deferred revenue ( 5.8 ) 2.4 10.4 Operating lease liabilities ( 65.6 ) ( 82.8 ) ( 68.8 ) Other non-current assets and liabilities 41.0 9.4 ( 1.9 ) Net cash provided by operating activities 374.9 39.9 151.4 Cash Flows From Investing Activities Purchases of property, equipment and software ( 96.9 ) ( 111.1 ) ( 60.8 ) Proceeds from sale of headquarters — 16.9 — Other investing activities 0.9 7.6 2.4 Net cash used in investing activities ( 96.0 ) ( 86.6 ) ( 58.4 ) Cash Flows From Financing Activities Proceeds from employee stock plans 1.3 0.9 0.5 Shares of common stock withheld for employee taxes ( 1.0 ) ( 4.3 ) ( 2.0 ) Proceeds from borrowings under long-term debt arrangements 50.0 275.0 155.0 Payments on long-term debt ( 241.9 ) ( 163.0 ) ( 198.2 ) Debt extinguishment costs — ( 22.1 ) — Payments on financing component of interest rate swap ( 18.8 ) ( 17.3 ) ( 17.4 ) Principal payments of finance lease liabilities ( 79.7 ) ( 56.9 ) ( 56.6 ) Principal payments of financing obligations ( 22.7 ) ( 15.3 ) ( 15.9 ) Net cash used in financing activities ( 312.8 ) ( 3.0 ) ( 134.6 ) Effect of exchange rate changes on cash, cash equivalents, and restricted cash 2.2 ( 3.0 ) 2.6 Decrease in cash, cash equivalents, and restricted cash ( 31.7 ) ( 52.7 ) ( 39.0 ) Cash, cash equivalents, and restricted cash at beginning of period 231.4 199.7 147.0 Cash, cash equivalents, and restricted cash at end of period $ 199.7 $ 147.0 $ 108.0 - 95 - Table of Contents Supplemental Cash Flow Information Cash payments for interest, net of amount capitalized $ 213.9 $ 103.6 $ 82.8 Cash payments for income taxes, net of refunds $ 11.9 $ 10.8 $ 8.3 Non-cash Investing and Financing Activities Acquisition of property, equipment and software by finance leases $ 67.7 $ 40.8 $ 50.6 Acquisition of property, equipment and software by financing obligations 25.0 4.4 13.7 Increase (decrease) in property, equipment and software accrued in liabilities ( 13.6 ) ( 9.9 ) 15.3 Other non-cash activity 5.3 ( 10.0 ) ( 1.0 ) Non-cash purchases of property, equipment and software $ 84.4 $ 25.3 $ 78.6 The following table provides a reconciliation of cash, cash equivalents, and restricted cash to the total of such amounts shown on the Consolidated Statements of Cash Flows. Year Ended December 31, (In millions) 2023 2024 2025 Cash and cash equivalents $ 196.8 $ 144.0 $ 105.8 Restricted cash included in other non-current assets 2.9 3.0 2.2 Total cash, cash equivalents, and restricted cash shown in the statement of cash flows $ 199.7 $ 147.0 $ 108.0 See accompanying notes to the consolidated financial statements. - 96 - Table of Contents RACKSPACE TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (In millions) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income Accumulated Deficit Treasury Stock, at Cost Total Stockholders' Equity (Deficit) Shares Amount Shares Amount 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, 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 for equity classified awards — — 64.6 — — — — 64.6 Net loss — — — — ( 837.8 ) — — ( 837.8 ) 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 ) Exercise of stock options and release of stock awards, net of shares withheld 11.1 0.1 ( 4.4 ) — — — — ( 4.3 ) Issuance of shares from Employee Stock Purchase Plan 0.6 — 0.9 — — — — 0.9 Share-based compensation expense for equity classified awards — — 48.1 — — — — 48.1 Net loss — — — — ( 858.2 ) — — ( 858.2 ) Other comprehensive loss — — — ( 36.2 ) — — — ( 36.2 ) Balance at December 31, 2024 232.2 $ 2.3 $ 2,682.8 $ 24.1 $ ( 3,682.4 ) 3.1 $ ( 31.0 ) $ ( 1,004.2 ) Exercise of stock options and release of stock awards, net of shares withheld 15.7 0.2 ( 2.2 ) — — — — ( 2.0 ) Issuance of shares from Employee Stock Purchase Plan 0.5 — 0.5 — — — — 0.5 Share-based compensation expense for equity classified awards — — 28.6 — — — — 28.6 Net loss — — — — ( 225.8 ) — — ( 225.8 ) Other comprehensive loss — — — ( 16.6 ) — — — ( 16.6 ) Balance at December 31, 2025 248.4 $ 2.5 $ 2,709.7 $ 7.5 $ ( 3,908.2 ) 3.1 $ ( 31.0 ) $ ( 1,219.5 ) See accompanying notes to the consolidated financial statements. - 97 - Table of Contents RACKSPACE TECHNOLOGY, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies Nature of Operations and Basis of Presentation Rackspace Technology is a Delaware corporation controlled by investment funds affiliated with Apollo. Rackspace Technology was formed on July 21, 2016 but had no assets, liabilities or operating results until November 3, 2016 when Rackspace Hosting (now named Rackspace Technology Global), a global provider of modern information technology-as-a-service, was acquired by Inception Parent, a wholly-owned entity indirectly owned by Rackspace Technology. Rackspace Technology Global commenced operations in 1998 as a limited partnership, and was incorporated in Delaware in March 2000. Rackspace Technology serves as the holding company for Rackspace Technology Global and does not engage in any material business or operations other than those related to its indirect ownership of the capital stock of Rackspace Technology Global and its subsidiaries or business or operations otherwise customarily undertaken by a holding company. 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. The accompanying consolidated financial statements include the accounts of Rackspace Technology and our wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates, including those related to the allowance for credit losses, useful lives of property, equipment and software, software capitalization, incremental borrowing rates for lease liability measurement, fair values of intangible assets and reporting units, useful lives of intangible assets, share-based compensation, contingencies, and income taxes, among others. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from our estimates. Liquidity Overview We are a highly leveraged company. As of December 31, 2025, we had $ 2,429.2 million aggregate principal amount outstanding under our debt instruments, which are comprised of the FLFO Term Loan Facility, the FLSO Term Loan Facility, the Term Loan Facility, the 3.50 % FLSO Senior Secured Notes, the 5.375 % Senior Notes, and the 3.50 % Senior Secured Notes. 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, 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. Based on our current level of operations and available cash and cash equivalents of $ 105.8 million as of December 31, 2025, we believe our sources will provide sufficient liquidity over at least the next twelve months. We cannot provide assurance, however, that our business will generate sufficient cash flows from operations or that future borrowings will be available to us under the New Revolving Credit Facility or from other sources in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. Our ability to do so depends on our ability to deliver on our strategic objectives and prevailing economic conditions and other factors, many of which are beyond our control. - 98 - Table of Contents Cash, Cash Equivalents, and Restricted Cash We consider all highly liquid investments, such as money market funds, with original maturities of three months or less when acquired to be cash equivalents. Restricted cash, included in "Other non-current assets" in our Consolidated Balance Sheets, represents collateral for letters of credit. Restricted cash was $ 3.0 million and $ 2.2 million as of December 31, 2024 and 2025, respectively. Property, Equipment and Software and Definite-Lived Intangible Assets Property, equipment and software is stated at cost, net of accumulated depreciation and amortization. Included in property, equipment and software are capitalized costs related to computer software developed or acquired for internal use. Capitalized computer software costs consist of purchased software licenses, implementation costs, and salaries and related compensation costs of employees and consultants for certain projects that qualify for capitalization. For cloud computing arrangements that include a software license, the software license element of the arrangement is accounted for in a manner consistent with the acquisition of other software licenses. For cloud computing arrangements that do not include a software license, the arrangement is accounted for as a service contract and is expensed as the services are provided. Replacements and major improvements to property, equipment and software are capitalized, while maintenance and repairs are charged to expense as incurred. We also capitalize interest costs incurred during the acquisition, development and construction of certain assets until the asset is ready for its intended use. We capitalized interest of $ 0.8 million, $ 0.9 million and $ 0.7 million for the years ended December 31, 2023, 2024 and 2025, respectively. Property, equipment and software is depreciated on a straight-line basis over the estimated useful life of the asset. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the remaining lease term. Depreciation expense is recorded within "Cost of revenue" and "Selling, general and administrative expenses" on our Consolidated Statements of Comprehensive Loss. The following table shows the estimated useful lives used for property, equipment and software: Classification Estimated Useful Lives Computers and equipment 5 to 7 years Software 3 years Furniture and fixtures 7 years Buildings and leasehold improvements 2 to 39 years 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 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. Definite-lived intangible assets are primarily comprised of customer relationships and are stated at their acquisition date fair value less accumulated amortization. Definite-lived intangible assets are amortized using the straight-line method over their estimated useful lives as this method best approximates the economic benefit derived from such assets. Amortization expense is recorded within "Selling, general and administrative expenses" on our Consolidated Statements of Comprehensive Loss. Long-lived assets, including operating and finance lease assets (see "Leases" below for more information) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets is measured at the asset group level. 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. - 99 - Table of Contents 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 Goodwill Qualitative Goodwill Impairment Analysis Goodwill represents the excess of the purchase price over the fair value of identifiable net assets of businesses acquired. Goodwill and indefinite-lived intangible assets are not amortized but are subject to impairment testing on an annual basis as of October 1st or more frequently if events or circumstances indicate a potential impairment. These events or circumstances could include a significant change in the business climate, regulatory environment, established business plans, operating performance indicators or competition. Potential impairment indicators may also include, but are not limited to, (i) significant changes to estimates and assumptions used in the most recent annual or interim impairment testing, (ii) downward revisions to internal forecasts, and the magnitude thereof, (iii) declines in our market capitalization below our book value, and the magnitude and duration of those declines, (iv) a reorganization resulting in a change to our operating segments, and (v) other macroeconomic factors, such as increases in interest rates that may affect the weighted average cost of capital, volatility in the equity and debt markets, or fluctuations in foreign currency exchange rates that may negatively impact our reported results of operations. Year Ended December 31, 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. 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. Our Board reviewed and approved our internal budget for fiscal year 2024 on February 28, 2024. As of February 29, 2024, we assessed our Board approved 2024 internal budget along with several events and circumstances that could affect the significant inputs used to determine the fair value of our reporting units, including the significance of the amount, if any, of excess carrying value over fair value, consistency of our current and forecasted operating margins and cash flows, budgeted-to-actual performance, timing of the expected effects of our strategic initiatives, overall change in economic climate, changes in the industry and competitive environment, changes to our risk-adjusted discount rates and earnings quality and sustainability. After considering all available evidence in our evaluation of goodwill impairment indicators, we determined it appropriate to perform an interim quantitative assessment of our reporting units as of February 29, 2024. - 100 - Table of Contents During the third quarter of 2024, as part our assessment of our annual plan, we updated our internal forecasts to consider our year-to-date operating performance, current customer bookings and revised expectations based on actuals, 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. As of September 30, 2024, we assessed our internal budget along with several events and circumstances that could affect the significant inputs used to determine the fair value of our reporting units, including the significance of the amount, if any, of excess carrying value over fair value, consistency of our current and forecasted operating margins and cash flows, budgeted-to-actual performance, timing of the expected effects of our strategic initiatives, overall change in economic climate, changes in the industry and competitive environment, changes to our risk-adjusted discount rates and earnings quality and sustainability. After considering all available evidence in our evaluation of goodwill impairment indicators, we determined it appropriate to perform an interim quantitative assessment of our reporting units as of September 30, 2024. During the fourth quarter of 2024, we performed our annual goodwill impairment test as of October 1, 2024 and the results of our test did not indicate any further impairment of goodwill. Year Ended December 31, 2023 On January 1, 2023, as a result of the reorganization of our business around a two -business unit operating model, we changed our operating and reportable segments to Private Cloud and Public Cloud. 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 prior OpenStack Public Cloud segment is included in Private Cloud. As a result of the segment change, we allocated the goodwill of our former Multicloud Services and Apps & Cross Platform reporting units to the Public Cloud and Private Cloud reporting units based on their relative fair value. OpenStack Public Cloud remained a separate reporting unit for goodwill purposes at that time. 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. 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. 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. After considering all available evidence in our evaluation of goodwill impairment indicators, we determined it appropriate to perform an interim quantitative assessment of our reporting units as of September 30, 2023. Prior to October 1, 2023, we had two reporting units with goodwill: Public Cloud and Private Cloud. Goodwill allocated to our third reporting unit, OpenStack Public Cloud, was fully impaired during the fourth quarter of 2021. As of October 1, 2023, we reassessed our reporting unit structure and aggregated the OpenStack Public Cloud reporting unit into our Private Cloud reporting unit. We currently have two reporting units: Public Cloud and Private Cloud. Due to the change in our reporting units as of October 1, 2023, we completed a quantitative goodwill impairment analysis. - 101 - Table of Contents Quantitative Goodwill Impairment Analysis Goodwill is tested for impairment at the reporting unit level. A reporting unit is an operating segment or one level below an operating segment (referred to as a component). We allocate goodwill to reporting units based on the reporting unit expected to benefit from the business combination. Assets and liabilities are assigned to each of our reporting units if they are employed by a reporting unit and are considered in the determination of the reporting unit fair value. Certain assets and liabilities are shared by multiple reporting units, and thus, are allocated to each reporting unit based on the relative size of a reporting unit, primarily based on revenue. For the goodwill impairment tests completed during the years ended December 31, 2023, 2024 and 2025, including the interim quantitative analyses, we compare the fair values of each of our reporting units to their respective carrying amounts. The fair values of each of our reporting units were derived using the income approach, specifically the discounted cash flow method. The discounted cash flow models reflect our assumptions and considerations regarding revenue growth rates, projected gross profit margins, projected operating costs, projected EBITDA margins, projected capital expenditures, risk-adjusted discount rates, terminal period growth rates, and economic market trends . As part of the goodwill impairment test, we also consider our market capitalization in assessing the reasonableness of the combined fair values estimated for our reporting units. Goodwill impairment is measured as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the carrying amount of goodwill for that reporting unit. 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. We recorded these non-cash impairment charges within "Impairment of goodwill" in our Condensed Consolidated Statements of Comprehensive Loss in the first quarter of 2024. The results of our quantitative goodwill impairment analysis as of September 30, 2024 indicated an impairment of goodwill within our Public Cloud and Private Cloud reporting units of $ 69.2 million and $ 72.5 million, respectively. We recorded these non-cash impairment charges within "Impairment of goodwill" in our Condensed Consolidated Statements of Comprehensive Loss in the third quarter of 2024. Year Ended December 31, 2023 The results of our quantitative goodwill impairment analyses as of January 1, 2023 and March 31, 2023 indicated an impairment of goodwill within our Private Cloud reporting unit, and we recorded non-cash impairment charges of $ 270.8 million and $ 272.3 million, respectively, within "Impairment of goodwill" in our Condensed Consolidated Statements of Comprehensive Loss in the first quarter of 2023. The results of our quantitative goodwill impairment analysis as of September 30, 2023 indicated an impairment of goodwill within our Private Cloud reporting unit, and we recorded non-cash impairment charges of $ 165.7 million, within "Impairment of goodwill" in our Condensed Consolidated Statements of Comprehensive Loss in the third quarter of 2023. The results of our quantitative goodwill impairment analysis as of October 1, 2023 indicated no impairment of goodwill. See Note 6, "Goodwill and Intangible Assets" for more information. Indefinite-Lived Intangible Assets Our indefinite-lived intangible asset consists of our Rackspace trade name, which was recorded at fair value on our balance sheet at the date of the Rackspace Acquisition. Our indefinite-lived intangible asset is tested for impairment at the consolidated level. In evaluating the recoverability of the Rackspace trade name, we compare the fair value of the asset to its carrying amount to determine potential impairment. Our estimate of the fair value of the Rackspace trade name is derived using the income approach, specifically the relief-from-royalty method. - 102 - Table of Contents 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 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 $ 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. The fair value determination of our reporting units and our indefinite-lived intangible asset is judgmental in nature and requires the use of significant estimates and assumptions that are sensitive to changes. Assumptions include estimation of the royalty rate for the trade name, estimation of future revenue growth rates, projected gross profit margins, projected operating costs, projected EBITDA margins, and projected capital expenditures, which are dependent on internal cash flow forecasts, estimation of the terminal growth rates and determination of risk-adjusted discount rates. As a result, there can be no assurance that the estimates and assumptions made for purposes of the quantitative indefinite-lived intangible impairment tests will prove to be an accurate prediction of future results. Examples of events or circumstances that could reasonably be expected to negatively affect the underlying key assumptions and ultimately impact the estimated fair value of our reporting units may include such items as: (i) volatility in the equity and debt markets or other macroeconomic factors, (ii) an increase in the weighted-average cost of capital due to further increases in interest rates, (iii) decrease in future cash flows due to lower than expected sales or greater than expected customer churn, or (iv) fluctuations in foreign currency exchange rates that may negatively impact our reported results of operations. Accordingly, if our current cash flow assumptions are not realized, we experience sustained declines in our stock price or market capitalization, or increases in costs of capital, it is possible that an additional impairment charge may be recorded in the future, which could be material. Business Combinations Mergers and acquisitions are accounted for using the acquisition method, in accordance with accounting guidance for business combinations. Under the acquisition method, we allocate the fair value of purchase consideration to the tangible and intangible assets ("identifiable assets") acquired and liabilities assumed based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of the identifiable assets and liabilities is recorded as goodwill. When determining the fair values of identifiable assets acquired and liabilities assumed, including contingent consideration when applicable, we make significant estimates and assumptions based on historical data, estimated discounted future cash flows, expected royalty rates for trade names, as well as certain other information. During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the fair value of identifiable assets acquired and liabilities assumed, with the corresponding offset to goodwill. Investments We have equity investments in entities in which we do not exercise significant influence. Investments in equity securities with readily determinable fair values are measured at fair value with changes in fair value recognized in net loss. Investments in equity securities that do not have readily determinable fair values are measured at cost less any impairments, adjusted for observable pricing changes in orderly transactions for identical or similar investments of the same issuer. We perform a qualitative assessment on these investments at each reporting period to determine whether any indicators of impairment exist. If an impairment exists, we recognize an impairment charge equal to the amount by which the carrying value exceeds the fair value of the investment. The aggregate carrying value of equity investments that do not have a readily determinable fair value was $ 5.1 million as of December 31, 2024 and 2025. Leases We determine if an arrangement is or contains a lease at inception. This determination depends on whether the arrangement conveys to us the right to control the use of an explicitly or implicitly identified asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to us if we obtain the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. - 103 - Table of Contents We classify leases with contractual terms greater than 12 months as either operating or finance. Finance leases are generally those leases that allow us to substantially utilize an asset over its estimated life. Our finance leases primarily consist of equipment and certain data center facilities. All other leases are categorized as operating leases, which primarily consist of certain data centers and office space. Our leases generally have terms ranging from 1 to 20 years for data centers, 3 to 5 years for equipment and 1 to 11 years for office space. Lease liabilities are recognized based on the present value of lease payments, reduced by lease incentives, at the lease commencement date. For finance leases, we use the rate implicit in the lease to determine the present value of lease payments where available. For operating leases, we use an incremental borrowing rate to determine the present value of lease payments as the interest rate implicit in most of our operating leases is not readily determinable. Our incremental borrowing rate is the rate of interest that we would have to pay to borrow an amount equal to the lease payments, on a collateralized basis and in a similar economic environment over a similar term. The rate is dependent on several factors, including the lease term, currency of the lease payments and the company’s credit rating. Operating and finance lease liabilities are recorded in our Consolidated Balance Sheets as current and non-current liabilities. Lease assets are recognized based on the related lease liabilities, plus any prepaid lease payments and initial direct costs from executing the leasing arrangement. Operating and finance lease assets are included in "Operating right-of-use assets" and "Property, equipment and software, net," respectively, in our Consolidated Balance Sheets. Our lease terms include the base, non-cancelable lease term, and any options to extend or terminate the lease when it is reasonably certain at commencement that we will exercise such options. Some of our data center and office space leases contain such extension and termination options. We will remeasure our lease liability and adjust the related right-of-use asset upon the occurrence of the following: lease modifications not accounted for as a separate contract; a triggering event that changes the certainty of the lessee exercising an option to renew or terminate the lease, or purchase the underlying asset; or the resolution of a contingency upon which any variable lease payments are based such that those payments become fixed. Operating lease expense is recognized on a straight-line basis over the lease term. Finance lease assets are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or the lease term. The interest component of a finance lease is included in "Interest expense" and recognized using the effective interest method over the lease term. Leases with terms of less than 12 months at commencement are expensed on a straight-line basis over the lease term in accordance with the short-term lease practical expedient under ASC 842. We have also elected the practical expedient under ASC 842 to not separate lease and non-lease components within a leasing arrangement. Non-lease components primarily include payments for maintenance and utilities. We have elected to apply both of these practical expedients to all classes of underlying assets. Variable payments related to a lease are expensed as incurred. These costs often relate to payments for a proportionate share of real estate taxes, insurance, common area maintenance, and other operating costs in addition to base rent. We are the intermediate lessor in certain sublease arrangements and account for both the head lease and the associated sublease as separate operating leases. We offset rental income against head lease operating costs within "Cost of revenue" or "Selling, general and administrative expenses," depending on whether the head lease is a data center or office space lease. We are deemed a lessor in certain hosting arrangements where we have determined that the contract contains an identified asset and that control of that asset has transferred to the customer. We account for these arrangements as either sales-type or direct finance leases. - 104 - Table of Contents Debt Issuance Costs Debt issuance costs such as underwriting, financial advisory, professional fees and other similar fees are deferred and recognized in interest expense over the estimated life of the related debt instrument using the effective interest method or the straight-line method, as applicable. Debt issuance costs related to our debt instruments are classified as a direct deduction from the carrying value of the long-term debt liability or as an asset within "Other non-current assets" on the Consolidated Balance Sheets. Financing Obligations From time to time, we enter into installment payment arrangements with certain equipment and software vendors. These arrangements are generally non-interest bearing, and require the calculation of an imputed interest rate. We also may enter into sale-leaseback arrangements for certain equipment in which we sell the assets to a third party and concurrently lease the assets back for a specified term. These arrangements generally do not qualify as asset sales because they include a purchase option that we are reasonably certain to exercise and therefore they are accounted for as failed sale-leasebacks. In addition, we lease properties that were deemed failed sale-leasebacks upon the adoption of ASC 842 due to options to purchase the underlying assets at an exercise price that is not at fair value or due to the present value of the future minimum lease payments exceeding the fair value of the underlying assets. See Note 9, "Financing Obligations" for disclosure of future minimum payments under vendor financing and failed sale-leaseback arrangements. Restructuring Activities We record restructuring activities including costs for one-time termination benefits in accordance with ASC 420 . The timing of recognition for severance costs accounted for under ASC 420 depends on whether employees are required to render service until they are terminated in order to receive the termination benefits. If employees are required to render service until they are terminated in order to receive the termination benefits, a liability is recognized ratably over the future service period. Otherwise, a liability is recognized when management has committed to a restructuring plan and has communicated those actions to employees. Under ASC 420-10, we establish a liability for a cost associated with an exit or disposal activity, including severance and non-lease contract termination obligations, and other related costs, when the liability is incurred, rather than at the date that we commit to an exit plan. We reassess the expected cost to complete the exit or disposal activities at the end of each reporting period and adjust our remaining estimated liabilities, if necessary. - 105 - Table of Contents Revenue Recognition All of our revenue is from contracts with customers. We account for a contract when it has approval and commitment from all parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. We provide cloud computing to customers, which is broadly defined as the delivery of computing, storage and applications over the Internet. Cloud computing is a service transaction under which the services we provide vary on a daily basis. The totality of services provided represent a single integrated solution tailored to the customer’s specific needs. As such, our performance obligations to our customers consist of a single integrated solution delivered as a series of distinct daily services. We recognize revenue on a daily basis as services are provided in an amount that reflects the consideration to which we expect to be entitled in exchange for the services. Certain hosting contracts contain terms that require us to evaluate whether an embedded lease arrangement exists. If we determine the contract contains a lease arrangement within a multiple-element arrangement, the revenue associated with the lease component is recognized in accordance with the lease accounting standard ASC 842, whereas the revenue associated with the non-lease component is recognized in accordance with the ASC 606 revenue standard. Our usage-based arrangements generally include variable consideration components consisting of monthly utility fees with a defined price and undefined quantity. Additionally, our contracts contain service level guarantees that provide discounts when we fail to meet specific obligations and certain services may include volume discounts based on usage. As these variable consideration components consist of a single distinct daily service provided on a single performance obligation, we account for this consideration as services are provided and earned. In accordance with the series guidance within ASC 606, regarding modification to a single performance obligation, when contracts are modified to add, remove or change existing services, the modification will only affect the accounting for the remaining distinct goods and services provided. As such, our contract modifications are accounted for prospectively. A substantial amount of revenue, particularly within our Private Cloud segment, relates to fees associated with offerings that generally have a fixed term, typically from 12 to 36 months, with a monthly recurring fee based on the computing resources utilized and provided to the customer, the complexity of the underlying infrastructure, and the level of support we provide. Customers generally have the right to cancel their contracts by providing prior written notice to us of their intent to cancel the remainder of the contract term. Many of our contracts require our customers to pay early termination fees in the event they cancel a contract prior to the end of its term, typically amounting to the outstanding value of the contract. These fees are recognized as revenue in the period of contract termination as we have no further obligation to perform. Our other primary source of revenue is for services within our Public Cloud segment. Customers are generally invoiced monthly based on usage. Contracts for these arrangements typically operate on a consumption model and can be canceled at any time without penalty. We also provide customers with professional services for the design and implementation of application, security and data services. Professional service contracts are either fixed-fee or time-and-materials based. We typically consider these services to be a separate performance obligation from other integrated solutions being provided to the same customer. Our performance obligations under these arrangements are typically to provide the services on a daily basis over a period of time and therefore we recognize revenue as the services are performed. We also offer customers the flexibility to select the best combination of offerings in order to meet the requirements of their unique applications and provide the technology to seamlessly operate and manage multiple cloud computing environments. Judgment is required in assessing whether a service is distinct, including determination of whether the customer could benefit from the service on its own or in conjunction with other readily available resources and whether certain services are highly integrated into a bundle of services that represent the combined output specified by the customer. Arrangements can contain multiple performance obligations that are distinct, which are accounted for separately. Each performance obligation is recognized as services are provided based on their SSP. Judgment is required to determine the SSP for each of our distinct performance obligations. We utilize a range of prices when developing our estimates of SSP. Revenue recognition for revenue generated from arrangements in which we resell third party infrastructure bundled with our managed services, requires judgment to determine whether revenue can be recorded at the gross sales price or net of third party fees. Typically, revenue is recognized on a gross basis when it is determined that we are the principal in the relationship. We are considered the principal in the relationship when we are primarily responsible for fulfilling the contract and obtain control of the third party infrastructure before transferring it as an integral part of our performance obligation to provide services to the customer. Revenue is recognized net of third party fees when we determine that our obligation is only to facilitate the customers’ purchase of third party infrastructure. Revenue is reported net of customer credits and sales and use tax. - 106 - Table of Contents Contract Balances Timing of revenue recognition may differ from the timing of invoicing to customers. Invoiced amounts and accrued unbilled usage are recorded in accounts receivable and either deferred revenue or revenue. Trade accounts receivable are recorded at the invoiced amount and generally do not bear interest. Our accounts receivable balance also includes unbilled amounts representing revenue recorded for usage-based services provided in the period but which are invoiced in arrears. We record an allowance for credit losses for estimated losses resulting from uncollectible receivables. When evaluating the adequacy of the allowance, we consider historical bad debt write-offs and all known facts and circumstances such as current economic conditions and trends, customer creditworthiness, and specifically identified customer risks. Our arrangements contain service level commitments with our customers. To the extent that such service levels are not achieved or are otherwise disputed, we are required to issue service credits for a portion of the service fees paid by our customers. At each reporting period, we accrue for credits which are due to customers, but not yet issued. We recognize revenue for certain fixed term contracts in which services are provided in advance of the first invoice. This revenue is recognized as a contract asset, separate from accounts receivable. A contract liability, presented as deferred revenue on our Consolidated Balance Sheets, is recognized when services are invoiced prior to being provided. Cost Incurred to Obtain and Fulfill a Contract We recognize assets for the incremental costs to obtain and fulfill a contract with a customer. Incremental costs to obtain a contract include sales commissions on the initial contract while costs to fulfill a contract include implementation and set-up related expenses. These costs are capitalized within the Consolidated Balance Sheets and are recognized as expense over the period the related services are expected to be delivered to the customer, which is approximately 30 months including expected renewals. If such period is less than 12 months, we have elected to apply the practical expedient under ASC 606 and expense costs as incurred. We include expected renewals in the period over which related services are expected to be delivered because sales commissions paid on renewals are not material and not commensurate with sales commissions paid on the initial contract. Sales commissions expense is recorded within "Selling, general and administrative expenses" and implementation and amortization of set-up costs are recorded within "Cost of revenue" in the Consolidated Statements of Comprehensive Loss. These capitalized costs are included in "Other non-current assets" in the Consolidated Balance Sheets. Cost of Revenue Cost of revenue primarily consists of expenses related to personnel, software licenses, the costs to operate our data center facilities, including depreciation expense, and infrastructure expense related to our service offerings bundled with third party clouds. Personnel expenses include the salaries, share-based compensation, non-equity incentive compensation and related expenses of our support teams and data center employees. Data center facility costs include rent, utility costs, maintenance fees, and bandwidth. Selling, General and Administrative Expenses SG&A expenses primarily consist of: (i) employee-related costs for functions such as executive management, sales and marketing, R&D, finance and accounting, human resources, information technology, and legal; (ii) costs for advertising and promoting our services and to generate customer demand; (iii) general costs such as professional fees, office facilities, software, and equipment expenses, including the related depreciation, and other overhead costs; and (iv) definite-lived intangibles amortization expense. Advertising costs are expensed in the period incurred. Advertising expense was $ 27.6 million, $ 26.4 million and $ 22.8 million for the years ended December 31, 2023, 2024 and 2025, respectively. R&D expense was $ 43.7 million, $ 45.4 million and $ 39.1 million, for the years ended December 31, 2023, 2024 and 2025, respectively. - 107 - Table of Contents Share-Based Compensation We grant equity awards, including stock options and restricted stock, to eligible participants. Share-based compensation expense for equity awards is measured at fair value on the grant date. The fair value of stock options with either solely a service requirement or with the combination of service and performance requirements is determined using the Black-Scholes valuation model, which requires us to make assumptions and judgments about variables related to our common stock and the related awards. The fair value of restricted stock with either solely a service requirement or with the combination of service and performance requirements is based on the closing fair market value of our common stock on the date of grant. The fair value of awards with vesting conditions dependent upon market performance is determined using a Monte Carlo simulation. Share-based compensation expense is recognized over the awards requisite service period. For awards with graded vesting that are subject only to a service condition, the expense is recognized on a straight-line basis over the service period for the entire award. Expense for awards with a performance condition is recognized over our best estimate of the period over which the performance condition will be met. Forfeitures are recognized as incurred, rather than estimated. Income Taxes Income taxes are accounted for using the asset and liability method. Deferred income taxes are provided for temporary differences in recognizing certain income, expense, and credit items for financial reporting purposes and tax reporting purposes. Such deferred income taxes primarily relate to the difference between the tax bases of assets and liabilities and their financial reporting amounts. Deferred tax assets and liabilities are measured by applying enacted statutory tax rates applicable to the future years in which deferred tax assets or liabilities are expected to be settled or realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. We are periodically under certain domestic and foreign tax audits. Due to the complexity involved with certain tax matters, there is the possibility that the various taxing authorities may disagree with certain tax positions filed on our income tax returns. We have considered all relevant facts and circumstances and believe that we have made adequate provision for all uncertain tax positions. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy below prioritizes the inputs used in measuring fair value into three categories: Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and Level 3 – Unobservable inputs that are supported by little or no market activity, which require management judgment or estimation. The fair values are therefore determined using model-based techniques, including discounted cash flow models. Financial instruments measured at fair value on a recurring basis primarily consist of money market funds and derivative instruments. The fair values of money market funds are measured using Level 1 inputs, which are based on a market approach using prices and other relevant information generated by market transactions involving identical or comparable assets. The fair values of derivative instruments are measured using Level 2 inputs. See "Derivative Instruments" below for more information on the inputs used to fair value our derivative instruments. The fair values of our long-term debt instruments are measured using Level 2 inputs. See Note 7, "Debt" for more information on the inputs used to fair value our long-term debt instruments. - 108 - Table of Contents The fair values of acquired identifiable assets and liabilities assumed in acquisitions accounted for as business combinations are measured using Level 3 inputs. Refer to "Business Combinations" above for more information on the inputs used to fair value our identifiable assets and liabilities assumed in acquisitions. The fair values of our reporting units and indefinite-lived intangible assets are measured using Level 3 inputs. See "Goodwill and Indefinite-lived Intangible Assets" above for more information on the inputs used to fair value our reporting units and indefinite-lived intangible assets. The fair value of the convertible promissory note described in Note 2, "Customer Contracts" is classified as Level 3 in the fair value hierarchy due to the use of unobservable inputs such as the issuer's credit risk and probabilities of various settlement scenarios. Foreign Currency We have assessed the functional currency of each of our international subsidiaries and have generally designated the local currency to be their respective functional currencies. The assets and liabilities of our international subsidiaries are translated to the U.S. dollar at the end-of-period exchange rates. Capital accounts are determined to be of a permanent nature and are therefore translated using historical exchange rates. Revenue and expenses are translated using average exchange rates. Foreign currency translation adjustments arising from differences in exchange rates from period to period are recorded within "Accumulated other comprehensive income" in the Consolidated Balance Sheets. 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 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 We utilize derivative instruments, including interest rate swap agreements, foreign currency hedging contracts and fixed price power contracts, to manage our exposure to interest rate risk, foreign currency fluctuations and commodity price risk. We only hold such instruments for economic hedging purposes, not for speculative or trading purposes. Our derivative instruments are transacted only with highly-rated institutions, which reduces our exposure to credit risk in the event of nonperformance. Interest Rate Swaps We are exposed to interest rate risk associated with fluctuations in interest rates on the floating-rate Term Loan Facility, FLSO Term Loan Facility, and FLFO Term Loan Facility . The objective in using interest rate derivatives is to manage our exposure to interest rate movements. To accomplish this objective, we have entered into interest rate swap agreements as part of our interest rate risk management strategy. Interest rate swaps involve the receipt of variable amounts from a counterparty in exchange for the company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Our interest rate swaps, excluding the portion treated as debt, are recognized at fair value in the Consolidated Balance Sheets and are valued using pricing models that rely on market observable inputs such as yield curve data, which are classified as Level 2 inputs within the fair value hierarchy. - 109 - Table of Contents Foreign Currency Hedging Contracts The majority of our customers are invoiced, and the majority of our expenses are paid, by us or our subsidiaries in the functional currency of our company or our subsidiaries, respectively. We also have exposure to foreign currency transaction gains and losses as the result of certain receivables due from our foreign subsidiaries. As such, the results of operations and cash flows of our foreign subsidiaries are subject to fluctuations in foreign currency exchange rates. The objective of our foreign currency hedging contracts is to manage our exposure to foreign currency movements. To accomplish this objective, we may enter into foreign currency forward contracts and collars. A forward contract is an agreement to buy or sell a quantity of a currency at a predetermined future date and at a predetermined exchange rate. A collar is a strategy that uses a combination of a purchased put option and a sold call option with equal premiums to hedge a portion of anticipated cash flows, or to limit possible gains or losses on an underlying asset or liability to a specific range. The put and call options have identical notional amounts and settlement dates. These contracts are recognized at fair value in the Consolidated Balance Sheets and are valued using pricing models that rely on market observable inputs such as current exchange rates, which are classified as Level 2 inputs within the fair value hierarchy. We have not designated these contracts as cash flow hedges for accounting purposes, therefore, all changes in the fair value are recorded in "Other expense, net." As of December 31, 2024 and 2025, we do not have any outstanding foreign currency hedging contracts. Fixed Price Power Contracts We consume a large quantity of power to operate our data centers and as such are exposed to risk associated with fluctuations in the price of power. The objective of our fixed price power contracts is to manage our exposure to the price of power. The fixed price power contracts, which we enter into from time to time to manage the risk related to the uncertainty of future power prices, allow for the purchase of a set volume of power at a fixed rate. We evaluate every fixed price power contract to determine if the contract meets the definition of a derivative, which requires recognizing the contract at fair value on the Consolidated Balance Sheets with changes in the fair value recorded in the Consolidated Statements of Comprehensive Loss. If a contract is deemed to be a derivative, we also determine if it qualifies for the normal purchases and normal sales scope exception to derivative accounting, which would result in expensing electricity usage as incurred. Power contracts accounted for as derivatives are valued using pricing models that rely on market observable inputs such as current power prices, which are classified as Level 2 inputs within the fair value hierarchy. As of December 31, 2024 and 2025, we do not have any power contracts recorded at fair value on the Consolidated Balance Sheets, as we have applied the normal purchases and normal sales scope exception to derivative accounting for all fixed priced power contracts. Recent Accounting Pronouncements Recently Adopted Income Tax Disclosures In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures . ASU 2023-09 expands the existing disclosure requirements for the annual rate reconciliation between the effective tax rate and the statutory federal tax rate by requiring reconciliation items to be disaggregated by defined categories and disclosed as both percentages and amounts. The ASU also requires the disaggregation of income taxes paid by jurisdiction for each annual period presented. We have applied this guidance prospectively to our annual income tax disclosures in Note 13 , " Taxes. " - 110 - Table of Contents Recently Issued Accounting Pronouncements Not Yet Adopted Disaggregation of Income Statement Expenses In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses . ASU 2024-03 requires disclosure, on an annual and interim basis, of detailed information about the types of expenses included in commonly presented income statement expense captions. Specifically, the guidance requires disaggregated disclosure of specific expense categories including (a) purchases of inventory; (b) employee compensation; (c) depreciation; and (d) intangible asset amortization presented on the face of the income statement within continuing operations. The guidance also requires inclusion of certain amounts already required to be disclosed under generally accepted accounting principles, a qualitative description of remaining amounts in relevant expense captions that are not separately disaggregated quantitatively, the total amount of selling expenses, and, in annual reporting periods, an entity’s definition of selling expenses. This guidance is effective for Rackspace beginning with our 2027 Form 10-K for annual disclosures and interim disclosures beginning with the first quarter 2028 Form 10-Q, with early adoption permitted. The guidance should be applied either prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements. 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. - 111 - Table of Contents 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. - 112 - Table of Contents 2. Customer Contracts The following table presents the balances related to customer contracts: (In millions) Consolidated Balance Sheets Account December 31, 2023 December 31, 2024 December 31, 2025 Accounts receivable, net Accounts receivable, net (1) $ 339.7 $ 298.8 $ 266.5 Current portion of contract assets Other current assets $ 10.7 $ 6.2 $ 3.8 Non-current portion of contract assets Other non-current assets $ 8.6 $ 6.4 $ 3.5 Current portion of deferred revenue Deferred revenue $ 78.8 $ 84.2 $ 94.6 Non-current portion of deferred revenue Other non-current liabilities $ 5.3 $ 2.0 $ 2.6 (1) Allowance for credit losses and accrued customer credits was $ 20.1 million, $ 27.0 million and $ 12.2 million as of December 31, 2023, 2024 and 2025, respectively. The following table sets forth the changes in the allowance for credit losses during the years ended December 31, 2023, 2024 and 2025: (In millions) Beginning Balance Additions (1) Write-offs of Accounts Receivables, Net of Recoveries Ending Balance For the years ending December 31, 2023 $ 18.4 $ 9.2 $ ( 13.4 ) $ 14.2 2024 $ 14.2 $ 18.3 $ ( 12.6 ) $ 19.9 2025 $ 19.9 $ 11.2 $ ( 21.0 ) $ 10.1 (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, 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 As of December 31, 2024 and 2025, the balances of capitalized costs to obtain a contract were $ 38.6 million and $ 30.8 million, respectively, and the balances of capitalized costs to fulfill a contract were $ 13.7 million and $ 16.3 million, respectively. These capitalized costs are included in "Other non-current assets" on the Consolidated Balance Sheets. Amortization of capitalized sales commissions and implementation costs were as follows: Year Ended December 31, (In millions) 2023 2024 2025 Amortization of capitalized sales commissions $ 38.1 $ 29.4 $ 25.3 Amortization of capitalized implementation costs $ 13.0 $ 9.6 $ 9.7 Remaining Performance Obligations As of December 31, 2025, the aggregate amount of transaction price allocated to remaining performance obligations was $ 585.0 million, of which approximately 49 % is expected to be recognized as revenue during 2026 and the remainder thereafter. These remaining performance obligations primarily relate to our fixed-term arrangements. 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. The E.U. 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. - 113 - Table of Contents Convertible Promissory Note On September 27, 2022, we entered into a convertible note purchase agreement with a private company that is also a customer and a vendor. Pursuant to the purchase agreement, we purchased an unsecured convertible promissory note (the "Note") in an aggregate principal amount of $ 15.0 million. The Note accrues simple interest at a rate of 6 % per annum and matures on September 27, 2027, unless earlier converted per the terms of the agreement. Principal and accrued interest are due and payable on the maturity date. We have elected to apply the fair value option under ASC No. 825, Financial Instruments , to account for the Note. As of December 31, 2024 and 2025, the fair value of the Note was $ 15.0 million and $ 17.1 million, respectively, and is included in "Other non-current assets" on our Consolidated Balance Sheets. The increase in the fair value of the Note is included in “Other expense, net” in the Consolidated Statements of Comprehensive Loss. - 114 - Table of Contents 3. Sale of Receivables On September 29, 2023 (the “Closing Date”), Rackspace US and Rackspace Receivables II, LLC, a bankruptcy-remote SPV, each an indirect subsidiary of the company, entered into the Receivables Purchase Facility with PNC and other parties thereto. On February 12, 2024, the Receivables Purchase Facility was amended to include certain international subsidiaries of the company as parties to the agreement. Under the Receivables Purchase Facility, certain indirect wholly-owned subsidiaries of the company have sold and/or contributed, and may continue to sell and/or contribute on a revolving basis, their current and future accounts receivable to the SPVs, which, in turn, will sell and transfer, and may continue to sell and transfer, certain of the accounts receivable to PNC in exchange for cash. The Receivables Purchase Facility will terminate on September 29, 2026 unless earlier terminated in accordance with its terms and the SPV can sell accounts receivable based upon the face amount of eligible receivables in the collateral pool up to an aggregate maximum limit of $ 300.0 million. The purpose of this arrangement is to enhance the company's financial flexibility by providing additional liquidity. The Receivables Purchase Facility is subject to yield charges based upon a rate as specified in the agreement. The SPV is also required to pay certain customary fees on a monthly basis in addition to an upfront fee and a commitment fee. The Receivables Purchase Facility contains certain customary termination events, as well as customary representations and warranties, affirmative and negative covenants, indemnification provisions, and events of default, including those providing for the acceleration of amounts owed by the SPV to PNC upon the occurrence of certain events. The transfers of accounts receivable to PNC are accounted for as sales in accordance with ASC 860 because effective control and risk associated with the transferred accounts receivable is passed to PNC. As these transfers represent true sales, we derecognize the sold accounts receivable from our Consolidated Balance Sheets. Cash proceeds related to the accounts receivable sold are included in cash from operating activities in the Consolidated Statements of Cash Flows. Yield charges and fees recorded in connection with the sales are recorded within “Other expense, net” in the Consolidated Statements of Comprehensive Loss. The company maintains continuing involvement with the sold accounts receivable by providing collection services in exchange for a servicing fee. Servicing fees are immaterial and no servicing asset or liability has been recognized. The company may incur a recourse obligation on the sold accounts receivable in limited circumstances. Separate accruals have been established for recourse obligations and are immaterial as of December 31, 2024 and 2025. 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, 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. The SPVs hold unsold accounts receivable of $ 62.2 million as of December 31, 2025 that are pledged as collateral to PNC. - 115 - Table of Contents 4. Net Loss Per Share Basic net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is calculated based on the weighted average number of shares of common stock plus the dilutive effect of potential common share equivalents outstanding during the period as determined under the treasury stock method. The following table sets forth the computation of basic and diluted net loss per share: Year Ended December 31, (In millions, except per share data) 2023 2024 2025 Basic and diluted net loss per share: Net loss attributable to common stockholders $ ( 837.8 ) $ ( 858.2 ) $ ( 225.8 ) Weighted average shares outstanding: Common stock 215.3 224.8 238.7 Number of shares used in per share computations 215.3 224.8 238.7 Net loss per share $ ( 3.89 ) $ ( 3.82 ) $ ( 0.95 ) Potential common share equivalents consist of shares issuable upon the exercise of stock options, vesting of restricted stock or purchase under the ESPP, as well as contingent shares associated with our acquisition of Datapipe. Since we were in a net loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods as the inclusion of all potential common shares outstanding would have been anti-dilutive. We excluded 38.6 million, 28.9 million and 26.0 million potential common shares from the computation of dilutive loss per share for the years ended December 31, 2023, 2024 and 2025, respectively, because the effect would have been anti-dilutive. - 116 - Table of Contents 5. Property, Equipment and Software, net Property, equipment and software, net, consisted of the following: (In millions) December 31, 2024 December 31, 2025 Computers and equipment $ 1,142.9 $ 1,114.5 Software 448.1 428.6 Furniture and fixtures 10.2 7.3 Buildings and leasehold improvements 409.7 416.6 Property, equipment and software, at cost 2,010.9 1,967.0 Less: Accumulated depreciation ( 1,420.7 ) ( 1,377.7 ) Work in process 10.8 7.0 Property, equipment and software, net $ 601.0 $ 596.3 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. Under held for sale accounting, the carrying amount of the property held for sale should be remeasured each reporting period for changes in fair value less cost to sell. As such, we increased the property’s estimated fair value, less estimated cost to sell, to $ 20.7 million as of September 30, 2023, resulting in an $ 8.6 million gain, which is included in "Impairment of assets, net" in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2023. In December 2023, we entered into an amendment to the purchase and sale agreement originally executed in July 2023. This amendment lowered the original purchase price of $ 21.5 million to $ 17.5 million. As such, we reduced the property’s estimated fair value, less estimated cost to sell, to $ 16.9 million as of December 31, 2023, resulting in a $ 3.8 million loss, which is included in "Impairment of assets, net" in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2023. In March 2024, we completed the sale of the property. The property’s estimated fair value, less estimated cost to sell prior to the sale was $ 16.9 million and we received cash proceeds of $ 17.5 million, less brokerage and professional fees of $ 0.6 million, resulting in net cash proceeds of $ 16.9 million. In connection with the completion of the sale, we paid a $ 9.0 million early termination fee to certain local governments related to our termination of the MEIA associated with the property. This amount is included in “Selling, general and administrative expenses” in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2024. Depreciation expense related to property, equipment and software was $ 208.7 million, $ 141.3 million and $ 151.4 million for the years ended December 31, 2023, 2024 and 2025, respectively. Included in the balance of property, equipment and software as of December 31, 2024 and 2025 are assets recorded under finance leases. See Note 8, "Leases" for a discussion of the lease arrangements and the amounts within property, equipment and software as of December 31, 2024 and 2025. - 117 - Table of Contents 6. Goodwill and Intangible Assets 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. (In millions) Public Cloud Private Cloud Total Gross goodwill as of December 31, 2023 $ 597.7 $ 1,563.5 $ 2,161.2 Less: Accumulated impairment charges — ( 708.8 ) ( 708.8 ) Goodwill, net as of December 31, 2023 597.7 854.7 1,452.4 Impairment of goodwill ( 454.6 ) ( 260.3 ) ( 714.9 ) Foreign currency translation ( 1.5 ) ( 0.3 ) ( 1.8 ) Goodwill, net as of December 31, 2024 $ 141.6 $ 594.1 $ 735.7 Gross goodwill as of December 31, 2024 $ 596.2 $ 1,563.2 $ 2,159.4 Less: Accumulated impairment charges ( 454.6 ) ( 969.1 ) ( 1,423.7 ) Goodwill, net as of December 31, 2024 141.6 594.1 735.7 Foreign currency translation 1.3 3.1 4.4 Goodwill, net as of December 31, 2025 $ 142.9 $ 597.2 $ 740.1 Gross goodwill as of December 31, 2025 $ 597.5 $ 1,566.3 $ 2,163.8 Less: impairment charges (1) ( 454.6 ) ( 969.1 ) ( 1,423.7 ) Goodwill, net as of December 31, 2025 $ 142.9 $ 597.2 $ 740.1 (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. Management exercised significant judgment related to the determination of the fair value of each reporting unit. The fair value of each reporting unit was estimated using the discounted cash flow method. The discounted cash flow methodology requires significant judgment, including estimation of our assumptions and considerations regarding (i) the estimation of future revenue growth rates, projected gross profit margins, projected operating costs, projected EBITDA margins, and projected capital expenditures, which are dependent on internal cash flow forecasts; (ii) estimation of the terminal growth rates; and (iii) determination of the risk-adjusted discount rates. 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. The results of this goodwill impairment analysis indicated an impairment of goodwill within our Public Cloud and Private Cloud reporting units of $ 385.4 million and $ 187.8 million, respectively, and we recorded a non-cash impairment charge in the first quarter of 2024. During the third quarter of 2024, we performed an interim quantitative assessment of our reporting units as of September 30, 2024. The results of this goodwill impairment analysis indicated an impairment of goodwill within our Public Cloud and Private Cloud reporting units of $ 69.2 million and $ 72.5 million, respectively, and we recorded a non-cash impairment charge in the third quarter of 2024. During the fourth quarter of 2024, we performed our annual goodwill impairment test as of October 1, 2024 and the results of our test did not indicate any further impairment of goodwill. Due to the change in our segment reporting as a result of the business reorganization as of January 1, 2023, we completed a quantitative goodwill impairment analysis as of January 1, 2023, subsequent to the aforementioned change. The results of the quantitative goodwill impairment analysis indicated an impairment within our Private Cloud reporting unit, and we recorded a non-cash impairment charge of $ 270.8 million in the first quarter of 2023. - 118 - Table of Contents During the first quarter of 2023, we performed an interim quantitative assessment of our reporting units as of March 31, 2023. The results of our interim quantitative goodwill impairment analysis performed as of March 31, 2023 indicated an impairment of goodwill within our Private Cloud reporting unit, and we recorded an additional non-cash impairment charge of $ 272.3 million in the first quarter of 2023. The impairment was driven by the company's most recent cash flow projections as revised in the first quarter of 2023 which reflected current market conditions and current trends in business performance, including slower than anticipated actualization of bookings. During the third quarter of 2023, we performed an interim quantitative assessment of our reporting units as of September 30, 2023. The results of our interim quantitative goodwill impairment analysis performed as of September 30, 2023 indicated an impairment of goodwill within our Private Cloud reporting unit, and we recorded a non-cash impairment charge of $ 165.7 million in the third quarter of 2023. The impairment was driven by the company's cash flow projections as revised in the third quarter of 2023 to reflect current market conditions and business mix shifts. As of October 1, 2023, we reassessed our reporting units and combined our Private Cloud and OpenStack Public Cloud reporting units into a new Private Cloud reporting unit. We completed a quantitative goodwill impairment analysis as of October 1, 2023, subsequent to the aforementioned change. The results of the quantitative goodwill impairment analysis indicated no impairment to goodwill. 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. The following table provides information regarding our intangible assets other than goodwill: December 31, 2024 December 31, 2025 (In millions) Gross carrying amount Accumulated amortization Net carrying amount Gross carrying amount Accumulated amortization Net carrying amount Customer relationships $ 1,930.6 $ ( 1,226.2 ) $ 704.4 $ 1,935.4 $ ( 1,377.6 ) $ 557.8 Other 27.1 ( 26.8 ) 0.3 26.7 ( 26.2 ) 0.5 Total definite-lived intangible assets 1,957.7 ( 1,253.0 ) 704.7 1,962.1 ( 1,403.8 ) 558.3 Trade name (indefinite-lived) 140.0 — 140.0 140.0 — 140.0 Total intangible assets other than goodwill $ 2,097.7 $ ( 1,253.0 ) $ 844.7 $ 2,102.1 $ ( 1,403.8 ) $ 698.3 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. These impairment charges are recorded in “Impairment of assets, net” in our Consolidated Statements of Comprehensive Loss. For additional information, see the discussion of our impairment charges in Note 1, "Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies." Amortization expense related to intangibles was $ 161.0 million, $ 154.1 million and $ 146.9 million for the years ended December 31, 2023, 2024 and 2025, respectively. - 119 - Table of Contents As of December 31, 2025, amortization of intangible assets for the next five years and thereafter is expected to be as follows: (In millions) Intangible Assets Year ending: 2026 $ 124.4 2027 117.3 2028 117.3 2029 111.2 2030 84.6 Thereafter 3.5 Total $ 558.3 - 120 - Table of Contents 7. Debt Debt consisted of the following: (In millions, except %) December 31, 2024 December 31, 2025 Debt Instrument Maturity Date Interest Rate (1) Amount Interest Rate (1) Amount FLSO Term Loan Facility May 15, 2028 7.35 % $ 1,626.8 6.61 % $ 1,610.0 FLFO Term Loan Facility May 15, 2028 10.85 % 272.9 10.11 % 270.2 Term Loan Facility February 15, 2028 7.35 % 61.8 6.60 % 61.1 New Revolving Credit Facility May 15, 2028 — % — 6.73 % 60.0 3.50 % FLSO Senior Secured Notes May 15, 2028 3.50 % 318.6 3.50 % 318.6 3.50 % Senior Secured Notes February 15, 2028 3.50 % 43.9 3.50 % 43.9 5.375 % Senior Notes December 1, 2028 5.375 % 125.4 5.375 % 125.4 Total principal amount outstanding 2,449.4 2,489.2 Unamortized debt issuance costs, debt premium, and debt discount 336.2 256.8 Total debt 2,785.6 2,746.0 Less: current portion of debt ( 29.2 ) ( 27.3 ) Debt, excluding current portion $ 2,756.4 $ 2,718.7 (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 Private Exchange On March 12, 2024, we (together with certain of our subsidiaries) closed a private debt exchange (the “Private Exchange”) with (i) holders of the 3.50 % Senior Secured Notes (the “Existing Secured Notes”) issued by Rackspace Technology Global (the “Existing Borrower”) representing more than 64 % of the aggregate principal amount outstanding of the Existing Secured Notes as of December 31, 2023, and (ii) lenders representing more than 72 % of the aggregate principal amount of the outstanding term loan facility under the First Lien Credit Agreement (the “Existing Term Loans”) as of December 31, 2023. Pursuant to the Private Exchange, (i) $ 331.4 million aggregate principal amount of Existing Secured Notes and $ 1,588.8 million aggregate principal amount of the Existing Term Loans were exchanged or purchased for cancellation and (ii) $ 267.3 million aggregate principal amount of the 3.50 % FLSO Senior Secured Notes and $ 1,312.0 million aggregate principal amount of the FLSO Term Loan Facility were issued by Rackspace Finance, a new subsidiary of the company (the “New Borrower”). In addition, the New Borrower issued $ 275.0 million aggregate principal amount of the FLFO Term Loan Facility and we repurchased and cancelled $ 69.3 million aggregate principal amount of the 5.375 % Senior Notes. See “ New Debt Instruments ” below for additional discussion of the new 3.50 % FLSO Senior Secured Notes, FLSO Term Loan Facility, and FLFO Term Loan Facility. Public Exchanges On March 13, 2024, we launched an offer to all of the holders of the Existing Borrower’s remaining Existing Term Loans (the “Public Term Loan Exchange”). On March 26, 2024, we closed the Public Term Loan Exchange, pursuant to which (i) $ 529.9 million aggregate principal amount of the Existing Term Loans were exchanged or purchased for cancellation and (ii) $ 375.1 million aggregate principal amount of FLSO Term Loans was issued by the New Borrower. - 121 - Table of Contents On March 14, 2024, we launched an offer to all of the holders of the Existing Borrower’s remaining Existing Secured Notes (the “Public Note Exchange”). On April 16, 2024, we completed the Public Note Exchange, pursuant to which (i) $ 138.4 million aggregate principal amount of Existing Secured Notes were exchanged or purchased for cancellation and (ii) $ 96.9 million aggregate principal amount of 3.50 % FLSO Senior Secured Notes were issued by the New Borrower. New Revolving Credit Facility On March 12, 2024, the New Borrower also established the New Revolving Credit Facility with commitments in an aggregate principal amount of $ 375.0 million. All 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. The New Revolving Credit Facility matures on May 15, 2028. See “ New Debt Instruments ” below for additional discussion of the New Revolving Credit Facility. We refer to the Private Exchange, the Public Term Loan Exchange, the Public Note Exchange and the entry into the New Revolving Credit Facility, collectively, as the “March 2024 Refinancing Transactions.” Accounting Impacts We performed an assessment of the March 2024 Refinancing Transactions and determined it met the criteria to be accounted for as a troubled debt restructuring under ASC No. 470-60, Troubled Debt Restructurings by Debtors . For each series of the Existing Debt Instruments exchanged, the undiscounted cash flows associated with the New Debt Instruments issued were compared to the carrying value of the Existing Debt Instruments exchanged for such New Debt Instruments and the applicable exchange was accounted for as follows: (i) to the extent the undiscounted cash flows of the New Debt Instruments in question were lower than the carrying value of the applicable Existing Debt Instruments exchanged, the carrying value of the applicable New Debt Instruments was established at the total of these undiscounted cash flows, with a gain recorded for the remaining difference between this value and the carrying value of the applicable Existing Debt Instruments (as such, no interest expense will be recorded for the applicable 3.50 % FLSO Senior Secured Notes prospectively) and (ii) to the extent the undiscounted cash flows of the New Debt Instruments in question exceeded the carrying value of the applicable Existing Debt Instruments exchanged, the carrying value of the applicable New Debt Instruments was established at the carrying value of the applicable Existing Debt Instruments and the company established new effective interest rates based on the carrying value of the applicable Existing Term Loans prior to the March 2024 Refinancing Transactions. The difference between the principal amount of the 3.50 % FLSO Senior Secured Notes and the carrying value was recorded as a premium and is included in long-term debt on our Consolidated Balance Sheets. The premium recorded on the 3.50 % FLSO Senior Secured Notes was $ 39.1 million, which will be reduced as contractual interest payments are made on the 3.50 % FLSO Senior Secured Notes. In connection with the March 2024 Refinancing Transactions, we recorded a gain in the first quarter of 2024 of $ 56.7 million after deducting third-party costs and lender fees incurred. The gain is included in "Gain on debt extinguishment, net of debt modification costs" in our Consolidated Statements of Comprehensive Loss. We incurred third party fees of $ 28.4 million. The March 2024 Refinancing Transactions were completed in April 2024 with the closing of the Public Note Exchange. In connection with the Public Note Exchange, we recorded a $ 23.3 million gain, after deducting $ 3.3 million of third-party fees, in the second quarter of 2024. The gain is included in " Gain on debt extinguishment, net of debt modification costs " in our Consolidated Statements of Comprehensive Loss. New Debt Instruments New Senior Facilities On March 12, 2024, Rackspace Finance Holdings, the New Borrower, the lenders and issuing banks party thereto and Citi, as the administrative agent and collateral agent, entered into the New First Lien Credit Agreement. - 122 - Table of Contents FLSO Term Loan Facility The New Borrower issued the FLSO Term Loan Facility in an aggregate principal amount of $ 1,687.2 million. 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-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 . 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. Affiliates of Apollo are FLSO Term Loan Facility lenders under the New First Lien Credit Agreement. 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. 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. During the year ended December 31, 2024, the New Borrower repurchased and surrendered for cancellation $ 43.4 million principal amount of the FLSO Term Loan Facility for $ 20.6 million. In connection with these repurchases, we recorded a gain, included in " Gain on debt extinguishment, net of debt modification costs ", of $ 32.1 million in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2024, which includes $ 9.0 million of unamortized debt issuance costs and debt premium write-offs. The fair value of the FLSO Term Loan Facility as of December 31, 2025 was $ 595.7 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 FLSO Term Loan Facility is classified as Level 2 within the fair value hierarchy. The New Borrower is the borrower and all obligations under the FLSO Term Loan Facility are guaranteed on a senior secured basis, jointly and severally, by Rackspace Finance Holdings on a limited-recourse basis and by certain of the New Borrower’s subsidiaries (the “Subsidiary Guarantors”). The obligations under the FLSO Term Loan Facility are secured by a pledge of the New Borrower’s capital stock directly held by Rackspace Finance Holdings and substantially all of the New Borrower’s and the Subsidiary Guarantors’ assets, subject to exceptions. The FLSO Term Loan Facility contains certain customary affirmative covenants, negative covenants, and events of default. - 123 - Table of Contents FLFO Term Loan Facility The New Borrower issued the FLFO Term Loan Facility in an initial aggregate principal amount of $ 275.0 million. The FLFO Term Loan Facility matures on May 15, 2028. Borrowings under the FLFO 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 6.25 % and were issued with 1.00 % of original issue discount. 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 . 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. 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. On or after September 12, 2027, the New Borrower may prepay some or all of the FLFO Term Loan Facility, together with accrued and unpaid interest, without prepayment premium or penalty. The fair value of the FLFO Term Loan Facility as of December 31, 2025 was $ 277.0 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 FLFO Term Loan Facility is classified as Level 2 within the fair value hierarchy. The New Borrower is the borrower and all obligations under the FLFO Term Loan Facility are guaranteed on a senior secured basis, jointly and severally, by Rackspace Finance Holdings on a limited-recourse basis and by the Subsidiary Guarantors. The obligations under the FLFO Term Loan Facility are secured by the same collateral that secures the FLSO Term Loan Facility, the New Revolving Credit Facility and the 3.50 % FLSO Senior Secured Notes. The FLFO Term Loan Facility contains certain customary affirmative covenants, negative covenants, and events of default. New Revolving Credit Facility The New Borrower established the New Revolving Credit Facility in an aggregate principal amount of $ 375.0 million of commitments. The New Revolving Credit Facility matures on May 15, 2028 and bears 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, subject to a 1.00 % floor, plus an applicable margin of initially 3.00 %. After June 30, 2024, the applicable margin became subject to a net first lien leverage-based pricing grid as set forth in the New First Lien Credit Agreement. In addition to paying interest on the outstanding principal under the New Revolving Credit Facility, the New Borrower is required to pay a commitment fee equal to initially 0.50 % per annum to the lenders under the New Revolving Credit Facility in respect of the unutilized commitments thereunder. After June 30, 2024, the commitment fee became subject to a net first lien leverage-based pricing grid as set forth in the New First Lien Credit Agreement. The New Borrower may prepay loans incurred under the New Revolving Credit Facility, together with accrued and unpaid interest, without prepayment premium or penalty. The New Borrower is the borrower and all obligations under the New Revolving Credit Facility are guaranteed on a senior secured basis, jointly and severally, by Rackspace Finance Holdings on a limited-recourse basis and by the Subsidiary Guarantors. The obligations under the New Revolving Credit Facility are secured by the same collateral that secures the FLSO Term Loan Facility, the FLFO Term Loan Facility and the 3.50 % FLSO Senior Secured Notes. The New Revolving Credit Facility contains certain customary affirmative covenants, negative covenants, and events of default. In addition, the New Revolving Credit Facility contains a financial covenant which limits the super-priority net senior secured leverage ratio to a maximum of 5.00 to 1.00; 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. - 124 - Table of Contents 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. As of December 31, 2025, we were in compliance with all covenants under the New Senior Facilities. 3.50 % FLSO Senior Secured Notes due 2028 On March 12, 2024, the New Borrower issued $ 267.3 million initial aggregate principal amount of the 3.50 % FLSO Senior Secured Notes. On April 2, 2024 and April 16, 2024, the New Borrower issued additional 3.50 % FLSO Senior Secured Notes in an aggregate principal amount of $ 93.3 million and $ 3.6 million, respectively. 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. The 3.50 % FLSO Senior Secured Notes are not subject to registration rights. The New Borrower is the borrower and all obligations under the 3.50 % FLSO Senior Secured Notes are fully and unconditionally guaranteed, jointly and severally, by Rackspace Finance Holdings on a limited-recourse basis and by the Subsidiary Guarantors. 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. 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. During the year ended December 31, 2024, the New Borrower repurchased and surrendered for cancellation $ 45.7 million principal amount of the 3.50 % FLSO Senior Secured Notes for $ 19.3 million, including accrued interest of $ 0.4 million. In connection with these repurchases, we recorded a gain, included in " Gain on debt extinguishment, net of debt modification costs ", of $ 33.0 million, in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2024, which includes $ 6.3 million of unamortized debt issuance costs and debt premium write-offs. The 3.50 % FLSO Senior Secured Notes Indenture contains covenants that, among other things, limit our ability to incur certain additional debt, incur certain liens securing debt, pay certain dividends or make other restricted payments, make certain investments, make certain asset sales and enter into certain transactions with affiliates. These covenants are subject to a number of exceptions, limitations, and qualifications as set forth in the 3.50 % FLSO Senior Secured Notes Indenture. Additionally, upon the occurrence of a change of control (as defined in the 3.50 % FLSO Senior Secured Notes Indenture), we will be required to make an offer to repurchase all of the outstanding 3.50 % FLSO Senior Secured Notes at a price in cash equal to 101.000 % of the aggregate principal amount, plus accrued and unpaid interest, if any, to, but not including the purchase date. The 3.50 % FLSO Senior Secured Notes Indenture also contains customary events of default. As of December 31, 2025, we were in compliance with all covenants under the 3.50 % FLSO Senior Secured Notes Indenture. 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 is classified as Level 2 within the fair value hierarchy. - 125 - Table of Contents Existing Debt Instruments Senior Facilities 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 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 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. As of December 31, 2025, the interest rate on the Term Loan Facility was 6.60 %. We are required to make quarterly principal payments of $ 0.2 million. See Note 14, "Derivatives" for information on interest rate swap agreements we utilize to manage the interest rate risk on the Term Loan Facility. In addition to the quarterly amortization payments discussed above, the Senior Facilities require us to make certain mandatory prepayments, including using (i) a portion of annual excess cash flow, as defined in the First Lien Credit Agreement, to prepay the Term Loan Facility, (ii) net cash proceeds of certain non-ordinary assets sales or dispositions of property to prepay the Term Loan Facility, and (iii) net cash proceeds of any issuance or incurrence of debt not permitted under the Senior Facilities to prepay the Term Loan Facility. We may make voluntary prepayments at any time without penalty. During the year ended December 31, 2023, Rackspace Technology Global repurchased and surrendered for cancellation $ 55.6 million principal amount of the Term Loan Facility for $ 29.5 million. In connection with this repurchase, we recorded a gain on debt extinguishment of $ 25.5 million included in “ Gain on debt extinguishment, net of debt modification costs ” in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2023, which includes $ 0.6 million of unamortized debt issuance costs and debt discount write-offs. As a result of the Private Exchange and the Public Term Loan Exchange, discussed within “ March 2024 Refinancing Transactions ” above, over 97 % of the $ 2,181.2 million aggregate principal amount of the Term Loan Facility outstanding as of December 31, 2023 was exchanged or purchased for cancellation. - 126 - Table of Contents Rackspace Technology Global is the borrower under the Senior Facilities, and all obligations under the Senior Facilities are (i) guaranteed by Inception Parent, Rackspace Technology Global’s immediate parent company, on a limited recourse basis and secured by the equity interests of Rackspace Technology Global held by Inception Parent, and (ii) guaranteed by Rackspace Technology Global’s wholly-owned domestic restricted subsidiaries and secured by substantially all material owned assets of Rackspace Technology Global and the subsidiary guarantors, including the equity interests held by each, in each case subject to certain exceptions. 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 replaced in full the Prior Revolving Credit Facility. See “ New Revolving Credit Facility ” above for information regarding this new debt instrument. As of December 31, 2025, we were in compliance with all covenants under the Senior Facilities. The fair value of the Term Loan Facility as of December 31, 2025 was $ 18.6 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 Term Loan Facility is classified as Level 2 within the fair value hierarchy. 3.50 % Senior Secured Notes due 2028 On February 9, 2021, Rackspace Technology Global issued $ 550.0 million aggregate principal amount of 3.50 % Senior Secured Notes due 2028. 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. The 3.50 % Senior Secured Notes are not subject to registration rights. Rackspace Technology Global is the issuer of the 3.50 % Senior Secured Notes, and obligations under the 3.50 % Senior Secured Notes are fully and unconditionally guaranteed, jointly and severally, by all of Rackspace Technology Global’s wholly-owned domestic restricted subsidiaries (as subsidiary guarantors) that guarantee the Senior Facilities. The 3.50 % Senior Secured Notes and the related guarantees are secured by first-priority security interests in substantially all material owned assets of Rackspace Technology Global and the subsidiary guarantors, including the equity interest held by each, subject to certain exceptions, which assets also secure the Senior Facilities. 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 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. During the year ended December 31, 2023, Rackspace Technology Global repurchased and surrendered for cancellation $ 36.3 million principal amount of 3.50 % Senior Secured Notes for $ 18.4 million, including accrued interest of $ 0.3 million. In connection with this repurchase, we recorded a gain on debt extinguishment of $ 17.9 million included in “ Gain on debt extinguishment, net of debt modification costs ” in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2023, which includes $ 0.3 million of unamortized debt issuance costs write-offs. As a result of the Private Exchange and the Public Note Exchange, discussed above, over 91 % of the $ 513.7 million aggregate principal amount of the 3.50 % Senior Secured Notes outstanding as of December 31, 2023 was exchanged or purchased for cancellation. - 127 - Table of Contents The 3.50 % Notes Indenture contains covenants that, among other things, limit our ability to incur certain additional debt, incur certain liens securing debt, pay certain dividends or make other restricted payments, make certain investments, make certain asset sales and enter into certain transactions with affiliates. These covenants are subject to a number of exceptions, limitations, and qualifications as set forth in the 3.50 % Notes Indenture. Additionally, upon the occurrence of a change of control (as defined in the 3.50 % Notes Indenture), we will be required to make an offer to repurchase all of the outstanding 3.50 % Senior Secured Notes at a price in cash equal to 101.000 % of the aggregate principal amount, plus accrued and unpaid interest, if any, to, but not including the purchase date. As of December 31, 2025, Rackspace Technology Global was in compliance with all covenants under the 3.50 % Notes Indenture. The fair value of the 3.50 % Senior Secured Notes as of December 31, 2025 was $ 9.4 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 % Senior Secured Notes are classified as Level 2 within the fair value hierarchy. 5.375 % Senior Notes due 2028 Rackspace Technology Global issued $ 550.0 million aggregate principal amount of the 5.375 % Senior Notes on December 1, 2020. 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. The 5.375 % Senior Notes are not subject to registration rights. Rackspace Technology Global is the issuer of the 5.375 % Senior Notes, and obligations under the 5.375 % Senior Notes are guaranteed on a senior unsecured basis by all of Rackspace Technology Global’s wholly-owned domestic restricted subsidiaries (as subsidiary guarantors) that guarantee the Senior Facilities. The 5.375 % Senior Notes are effectively junior to the indebtedness under the Senior Facilities and the 3.50 % Senior Secured Notes, to the extent of the collateral securing the Senior Facilities and the 3.50 % Senior Secured Notes. 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, 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. In connection with these repurchases, we recorded a gain on debt extinguishment of $ 227.9 million included in “ Gain on debt extinguishment, net of debt modification costs ” in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2023, which includes $ 3.2 million of unamortized debt issuance costs write-offs. As previously described in “ March 2024 Refinancing Transactions ” above, as part of the Private Exchange, we repurchased and cancelled $ 69.3 million aggregate principal amount of the 5.375 % Senior Notes during the year ended December 31, 2024. In addition, during the year ended December 31, 2024, Rackspace Technology Global repurchased and surrendered for cancellation $ 2.9 million principal amount of 5.375 % Senior Notes for $ 0.8 million. In connection with these repurchases, we recorded a gain, included in " Gain on debt extinguishment, net of debt modification costs ", of $ 2.1 million, in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2024. The 5.375 % Notes Indenture contains covenants that, among other things, limit our ability to incur certain additional debt, incur certain liens securing debt, pay certain dividends or make other restricted payments, make certain investments, make certain asset sales and enter into certain transactions with affiliates. These covenants are subject to a number of exceptions, limitations, and qualifications as set forth in the 5.375 % Notes Indenture. Additionally, upon the occurrence of a change of control (as defined in the 5.375 % Notes Indenture), we will be required to make an offer to repurchase all of the outstanding 5.375 % Senior Notes at a price in cash equal to 101.000 % of the aggregate principal amount, plus accrued and unpaid interest, if any, to, but not including the purchase date. As of December 31, 2025, Rackspace Technology Global was in compliance with all covenants under the 5.375 % Notes Indenture. - 128 - Table of Contents The fair value of the 5.375 % Senior Notes as of December 31, 2025 was $ 26.4 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 5.375 % Senior Notes are classified as Level 2 within the fair value hierarchy. Debt Maturities The maturities of debt obligations for the next five years at December 31, 2025 are as follows: (In millions) Amount Year ending: 2026 $ 20.3 2027 20.3 2028 2,448.6 2029 — 2030 — Thereafter — Total $ 2,489.2 - 129 - Table of Contents 8. Leases Assets recorded as property and equipment under finance leases, and the related accumulated depreciation balances as of December 31, 2024 and 2025 were as follows: December 31, 2024 December 31, 2025 (In millions) Computers and equipment $ 128.8 $ 78.2 Buildings 291.0 297.0 Less: Accumulated depreciation ( 115.0 ) ( 110.5 ) Net book value of property and equipment under finance leases $ 304.8 $ 264.7 The components of operating and finance lease expense for the years ended December 31, 2023, 2024 and 2025 were as follows: Year Ended December 31, (In millions) 2023 2024 2025 Operating lease expense: Fixed lease expense $ 63.3 $ 66.7 $ 66.3 Variable lease expense 21.7 22.2 24.4 Short-term lease expense 1.2 1.2 1.9 Sublease income ( 0.8 ) — ( 0.1 ) Total operating lease expense $ 85.4 $ 90.1 $ 92.5 Finance lease expense: Depreciation of finance lease assets $ 55.8 $ 31.8 $ 32.2 Interest expense on finance lease liabilities 26.6 25.4 28.0 Total finance lease expense $ 82.4 $ 57.2 $ 60.2 - 130 - Table of Contents Supplemental operating cash flow information related to operating and finance leases for the years ended December 31, 2023, 2024 and 2025 were as follows: Year Ended December 31, (In millions) 2023 2024 2025 Cash payments for lease liabilities included within operating activities: Operating leases $ ( 80.2 ) $ ( 89.5 ) $ ( 74.6 ) Finance leases ( 29.2 ) ( 28.9 ) ( 28.6 ) Operating leases: New lease assets obtained in exchange for lease liabilities $ 43.1 $ 33.3 $ 17.3 Modified/renewed lease assets obtained in exchange for lease liabilities 15.5 44.8 51.6 Total lease assets obtained in exchange for lease liabilities $ 58.6 $ 78.1 $ 68.9 As of December 31, 2024 and 2025, the weighted average remaining lease term and weighted average discount rate of our operating and finance leases, respectively, were as follows: December 31, 2024 December 31, 2025 Weighted average remaining lease term (in years) Operating leases 4 4 Finance leases 11 10 Weighted average discount rate Operating leases 6.3 % 6.1 % Finance leases 7.9 % 8.1 % Future lease payments under operating and finance leases as of December 31, 2025 are as follows: (In millions) Operating leases (1) Finance leases (1) Year ending: 2026 $ 63.4 $ 72.2 2027 35.5 66.2 2028 22.5 39.5 2029 13.1 33.0 2030 9.4 33.8 Thereafter 11.5 244.7 Total future lease payments 155.4 489.4 Less amount representing interest ( 16.5 ) ( 143.7 ) Total lease liability $ 138.9 $ 345.7 (1) There are no material finance or operating leases that have not yet commenced. - 131 - Table of Contents 9. Financing Obligations We have entered into installment payment arrangements with certain equipment and software vendors. In addition, we have entered into certain sale-leaseback agreements that do not qualify as asset sales and are accounted for as failed sale-leasebacks. These arrangements include the sale and leaseback of equipment with third party financial institutions and certain property leases we assumed upon the acquisition of Datapipe. The weighted average imputed interest rate for our financing obligations was 9.6 % as of December 31, 2025. As of December 31, 2025, future payments under financing obligations were as follows: (In millions) Amount Year ending: 2026 $ 18.6 2027 10.4 2028 9.2 2029 2.6 2030 2.7 Thereafter 12.9 Total future payments 56.4 Plus amount representing residual asset balance 12.8 Less amount representing interest ( 15.9 ) Total financing obligations $ 53.3 10. Commitments and Contingencies Purchase Commitments Non-cancelable purchase commitments primarily consist of commitments for certain software licenses, hardware purchases, third party infrastructure purchases, and costs associated with our data centers, such as bandwidth and electricity. The agreements provide for either penalties for early termination or may require minimum commitments for the remaining term. The minimum commitments for all of these agreements, as of December 31, 2025, are approximated as follows: (In millions) Amount Year ending: 2026 $ 720.6 2027 409.1 2028 330.2 2029 80.3 2030 30.7 Thereafter 101.1 Total $ 1,672.0 We also have purchase orders and construction contracts primarily related to data center equipment and facility build-outs. We generally have the right to cancel these open purchase orders prior to delivery or terminate the contracts without cause. Contingencies We have contingencies that arise from various litigation, claims and commitments, none of which we consider to be material. - 132 - Table of Contents 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. We record an accrual for a loss contingency when a loss is considered probable and reasonably estimable. As additional facts concerning a loss contingency become known, we reassess our position and make appropriate adjustments to a recorded accrual. The amount that will ultimately be paid related to a matter may differ from the recorded accrual, and the timing of such payments, if any, may be uncertain. We are not a party to any litigation, the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material and adverse effect on our business, financial position or results of operations. Indemnifications As permitted under Delaware law, we have agreements whereby we indemnify our officers and directors for certain events or occurrences while the officer or director is, or was, serving at our request in such capacity. In addition, from time to time we may enter into indemnification agreements with certain of our employees so that such employees will agree to serve as directors or officers of our foreign subsidiaries. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we have a director and officer insurance policy that limits our exposure and enables us to recover a portion of any future amounts paid. As a result of the insurance policy coverage, we believe the estimated fair value of these indemnification agreements is minimal. We had no material liabilities recorded for these agreements as of December 31, 2024 or 2025. Additionally, in the normal course of business, we indemnify certain parties, including customers, vendors and lessors, with respect to certain matters. We have agreed to hold certain parties harmless against losses arising from a breach of representations or covenants or out of intellectual property infringement or other claims made against certain parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. We had no material liabilities recorded for these agreements as of December 31, 2024 or 2025. - 133 - Table of Contents 11. Stockholders' Equity Common Stock As of December 31, 2024 and 2025, we had 232.2 million and 248.4 million shares of our common stock legally issued and 229.1 million and 245.3 million common stock outstanding, respectively. We have one class of authorized common stock. The rights and privileges provided to our common stockholders are as follows: • Voting Rights —The holders of our common stock are entitled to one vote per share on all matters submitted for action by the stockholders generally. • Dividend Rights —Subject to any preferential rights of any then outstanding preferred stock, all shares of our common stock are entitled to share equally in any dividends our Board may declare from legally available sources. • Liquidation Rights —Upon our liquidation, dissolution or winding up, whether voluntary or involuntary, after payment in full of the amounts required to be paid to holders of any then outstanding preferred stock, all shares of our common stock are entitled to share equally in the assets available for distribution to stockholders after payment of all of our prior obligations. Preferred Stock As of December 31, 2024 and 2025, there were 5.0 million authorized shares of preferred stock, of which none was issued or outstanding. Datapipe Contingent Shares On September 6, 2017, we entered into an Agreement and Plan of Merger (the "Datapipe Merger Agreement") pursuant to which we acquired Datapipe. In addition, the Datapipe Merger Agreement provides that we will be required to issue additional shares of our common stock to an affiliate of ABRY based on a MOIC on any “Measurement Date” (which is defined in the Datapipe Merger Agreement as (i) each date following the occurrence of a change in control or closing date of the IPO on which Apollo receives cash distributions, cash proceeds and/or marketable securities of the company in respect of their ownership interest in the company and (ii) each day after the IPO on which the company’s shares of capital stock are (a) freely tradeable without violating any “lockup” agreements, other contractual restrictions or securities laws and (b) are listed on a public stock exchange). The maximum number of shares of common stock issuable will not exceed 10,663,741 shares in the aggregate, subject to adjustment for stock splits, stock dividends, recombinations, reclassifications and similar equitable adjustments. On February 2, 2021, we issued 2,665,935 shares of common stock for no additional consideration pursuant to the Datapipe Merger Agreement. If the MOIC exceeds 3.0 x, which is indicated by a volume weighted average trading price of our common stock over 30 consecutive trading days of more than $ 25.00 per share, we will be required to issue an additional 2,665,935 shares. No shares were issued under the Datapipe Merger Agreement during the years ended December 31, 2023, 2024 or 2025. - 134 - Table of Contents 12. 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. On July 24, 2020, the Board approved, effective on August 7, 2020, the 2020 Incentive Plan and amendments to the 2017 Incentive Plan which, among other things, resulted in the termination of the 2017 Incentive Plan, except as it relates to outstanding awards, and any remaining shares reserved for future grants under the 2017 Incentive Plan were released. The 2020 Incentive Plan provides for the grant of stock options, including incentive stock options, and nonqualified stock options, stock appreciation rights, restricted stock, RSUs, other stock-based incentive awards, dividend equivalents and cash-based awards (collectively, "awards"). Incentive stock options may be granted only to our employees or an employee of a parent or subsidiary. All other awards may be granted to employees and consultants of the company and its parents and subsidiaries, as well as all non-employee members of our Board. For the years ended December 31, 2023, 2024 and 2025, the company granted RSU's (including performance-based RSUs) and restricted stock (collectively "restricted stock") under the Incentive Plans. The company issues new shares of its common stock to satisfy vesting of restricted stock and exercise of stock options under the Incentive Plans. All awards deduct one share from the Incentive Plans shares available for issuance for each share granted. The 2017 Incentive Plan began with 12.2 million shares authorized for grant and contained an evergreen feature whereby shares available increased each grant date based on the quantity of certain types of awards granted. Upon the approval of the 2020 Incentive Plan, the 2017 Incentive Plan was terminated, except as it relates to outstanding awards. 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 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. As of December 31, 2025, the total number of shares outstanding and the total number of shares available for future grants under the Incentive Plans was 15.7 million and 38.5 million, respectively. The composition of the equity awards outstanding as of December 31, 2024 and 2025 was as follows: December 31, 2024 December 31, 2025 (In millions) Restricted stock 25.3 13.2 Stock options 3.3 2.5 Total outstanding awards 28.6 15.7 Stock Options Stock options have been granted for a term of 10 years and generally vest ratably over a three-year period, subject to continued service. 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, 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. - 135 - Table of Contents The following table summarizes the stock option activity for the year ended December 31, 2025: Number of Shares (in millions) Weighted Average Exercise Price Weighted Average-Remaining Contractual Life Aggregate Intrinsic Value (in millions) Outstanding at December 31, 2024 3.3 $ 13.05 4.08 $ — Granted — $ — Exercised — $ — Forfeited ( 0.1 ) $ 12.46 Expired ( 0.7 ) $ 13.34 Outstanding at December 31, 2025 2.5 $ 12.99 2.85 $ — Vested and exercisable at December 31, 2025 2.5 $ 12.99 2.85 $ — Vested and exercisable at December 31, 2025 and expected to vest thereafter (1) 2.5 $ 12.99 2.85 $ — (1) Forfeitures are recognized as they occur, rather than estimated . The total pre-tax intrinsic value of the stock options exercised during the years ended December 31, 2023 and 2024 was not material. 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, 2025 compensation cost related to stock options has been fully recognized. Restricted Stock In 2021, we shifted away from granting stock options as we had in previous years, to granting restricted stock. The majority of our restricted stock grants were made as part of our annual compensation award process and vest ratably over a three-year period, subject to continued service. Restricted stock has also been granted to certain executives that vest in part subject to continued service ratably over a three or five-year period and in part based upon the attainment of performance and market conditions. The fair value of the service-vesting awards is measured based on the fair value of the underlying common stock on the date of the grant. The fair value of restricted stock with vesting conditions dependent upon market performance is determined using a Monte Carlo simulation. Share-based compensation expense is recognized on a straight-line basis over the service period or over our best estimate of the period over which the performance condition will be met, as applicable. Certain non-executive board members elected to receive a portion of their annual compensation in the form of restricted stock. The fair value of these service-vesting awards is measured based on the fair value of the underlying common stock on the date of grant, and share-based compensation expense is recognized on a straight-line basis over the one-year service period. During 2023, 2024 and 2025, we granted 28.5 million, 10.1 million and 11.0 million RSUs, respectively, under the 2020 Incentive Plan with a weighted average grant date fair value of $ 2.17 , $ 1.89 and $ 1.43 , respectively. 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. 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. - 136 - Table of Contents 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. 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 and 2025. 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. As of December 31, 2025, the remaining outstanding LTIC units granted in 2023, 2024, and 2025 had a weighted average fair value of $ 0.00 , $ 0.71 and $ 0.68 , respectively. 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, 2023 2024 Expected stock volatility (1) 69 % - 72 % 87 % Expected dividend yield (2) — % — % Risk-free interest rate (3) 3.76 % - 3.78 % 4.35 % (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. The following table summarizes our restricted stock activity for the year ended December 31, 2025: Number of Units or Shares (in millions) Weighted Average Grant-Date Fair Value Outstanding at December 31, 2024 25.3 $ 2.77 Granted 11.0 $ 1.43 Released ( 17.2 ) $ 2.86 Cancelled ( 5.9 ) $ 2.52 Outstanding at December 31, 2025 13.2 $ 1.65 Expected to vest at December 31, 2025 (1) 13.2 $ 1.65 (1) Forfeitures are recognized as they occur, rather than estimated. The weighted-average grant-date fair value of restricted stock granted during the years ended December 31, 2023 and 2024 was $ 2.15 and $ 1.93 , respectively. The total pre-tax intrinsic value of the restricted stock released during the years ended December 31, 2023, 2024 and 2025 was $ 9.5 million, $ 26.9 million and $ 30.6 million, respectively. 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, 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. - 137 - Table of Contents 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: Assumption Amount Expected stock volatility (1) 80 % Expected dividend yield (2) — % Risk-free interest rate (3) 3.73 % Expected life (4) 6.25 years (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 The ESPP was approved by the Board on July 24, 2020 and became effective on August 7, 2020. Under the ESPP, eligible employees may purchase a limited number of shares of our common stock at the lesser of 85 % of the market value on the enrollment date or 85 % of the market value on the purchase date. The fair value on each enrollment date is determined using the Black-Scholes option-pricing model. Share-based compensation expense is recognized on a straight-line basis over the offering period. We issued 0.7 million, 0.6 million and 0.5 million shares through the ESPP during the years ended December 31, 2023, 2024 and 2025, respectively. 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, 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. - 138 - Table of Contents Share-Based Compensation Expense 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: Year Ended December 31, (In millions) 2023 2024 2025 Equity classified awards $ 64.6 $ 48.1 $ 28.6 Liability classified awards 0.8 15.3 16.5 Total share-based compensation expense $ 65.4 $ 63.4 $ 45.1 Share-based compensation expense recogniz ed was as follows: Year Ended December 31, (In millions) 2023 2024 2025 Cost of revenue $ 9.1 $ 7.6 $ 5.1 Selling, general and administrative expenses 56.3 55.8 40.0 Pre-tax share-based compensation expense 65.4 63.4 45.1 Less: Income tax benefit ( 13.7 ) ( 13.3 ) ( 9.5 ) Total share-based compensation expense, net of tax $ 51.7 $ 50.1 $ 35.6 Employee Benefit Plans We sponsor defined contribution plans whereby employees may elect to contribute a portion of their annual compensation to the plans, after complying with certain limitations. The plans also include a discretionary employer contribution. 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. - 139 - Table of Contents 13. Taxes 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 ) Foreign 18.1 11.5 10.4 State 7.0 0.3 1.6 Total current income tax provision 25.3 11.7 0.3 Deferred income tax provision (benefit): Federal ( 34.3 ) ( 23.8 ) 8.4 Foreign ( 8.4 ) ( 2.8 ) 7.2 State 0.8 ( 8.4 ) 8.1 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. and foreign operations were as follows: Year Ended December 31, (In millions) 2023 2024 2025 U.S. $ ( 678.4 ) $ ( 782.9 ) $ ( 160.6 ) Foreign ( 176.0 ) ( 98.6 ) ( 41.2 ) Total loss before income taxes $ ( 854.4 ) $ ( 881.5 ) $ ( 201.8 ) - 140 - Table of Contents 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: Switzerland: 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, 2023 2024 Statutory federal tax rate 21.0 % 21.0 % State taxes, net of federal benefit 0.3 % 0.7 % Tax rate differentials for international jurisdictions 2.5 % ( 1.0 ) % Effects of other enacted tax law and rate changes ( 3.0 ) % ( 0.1 ) % Valuation allowance ( 0.8 ) % ( 12.5 ) % Share-based compensation ( 1.1 ) % ( 0.6 ) % Nondeductible compensation ( 0.8 ) % ( 0.6 ) % Tax impact of goodwill impairment ( 15.9 ) % ( 16.0 ) % Tax impact of the March 2024 Refinancing Transactions — % 11.7 % Other, net ( 0.3 ) % — % Effective tax rate 1.9 % 2.6 % - 141 - Table of Contents 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 U.S. federal $ ( 0.4 ) U.S. state and local: Texas 1.4 Virginia ( 0.4 ) Other ( 0.4 ) Total U.S. state and local 0.6 Foreign: Colombia 1.2 Germany 1.0 India 2.5 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 - 142 - Table of Contents Deferred Taxes Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes using the enacted tax rates in effect for the year in which the differences are expected to be reversed. Significant components of our deferred tax assets and liabilities are as follows: (In millions) December 31, 2024 December 31, 2025 Deferred tax assets: Deferred revenue $ 13.9 $ 5.3 Share-based compensation 9.7 5.4 Accruals not currently deductible 17.8 16.0 Finance lease liabilities 85.8 59.3 Net operating loss carryforwards 20.3 39.3 Depreciation and amortization 5.0 4.0 Disallowed interest carryforward 118.8 155.8 Operating lease liabilities 35.4 35.5 March 2024 Refinancing Transactions 100.5 72.2 Other 20.8 19.8 Total gross deferred tax assets 428.0 412.6 Valuation allowance ( 173.4 ) ( 231.2 ) Total net deferred tax assets 254.6 181.4 Deferred tax liabilities: Depreciation and amortization 204.5 144.3 Finance lease liabilities 4.4 2.7 Capitalized costs 8.8 6.0 Interest rate swaps 11.9 1.1 Operating right-of-use assets 33.3 37.2 Other 8.9 13.5 Total gross deferred tax liabilities 271.8 204.8 Net deferred tax liabilities $ 17.2 $ 23.4 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. Certain foreign net operating loss carryforwards are subject to various limitations under the applicable statutory foreign tax laws. We have disallowed interest expense carryforwards in the U.S. of $ 653.4 million that can be carried forward indefinitely. 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: (In millions) 2023 2024 2025 Balance at January 1, $ 58.5 $ 66.1 $ 173.4 Additions charged to income tax expense 39.2 124.1 61.1 Reductions credited to income tax expense ( 31.6 ) ( 16.8 ) ( 3.3 ) Balance at December 31, $ 66.1 $ 173.4 $ 231.2 - 143 - Table of Contents 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 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. 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. We realized an additional $ 13.1 million CODI for US tax purposes from third quarter 2024 debt repurchase activity, for a total $ 625.1 million for the year ended December 31, 2024 . Pursuant to IRC Section 108, an insolvent debtor may exclude CODI from taxable income to the extent of the debtor’s insolvency (liabilities greater than the fair value of its assets) but must reduce its tax attributes, subject to certain limitations and according to prescribed ordering rules, based on the amount of CODI excluded from taxable income. 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, 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. Due to historic, internal tax restructurings, we have effectively recognized any tax impact of the repatriation of foreign earnings. Thus, as of December 31, 2025, there is no deferred tax liability for undistributed foreign earnings. Uncertain Tax Positions We file income tax returns in each jurisdiction in which we operate, both domestically and internationally. Due to the complexity involved with certain tax matters, we have considered all relevant facts and circumstances for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. We believe that there are no other jurisdictions in which the outcome of uncertain tax matters is likely to be material to our results of operations, financial position or cash flows. We further believe that we have made adequate provision for all income tax uncertainties. A rollforward of unrecognized tax benefits, excluding accrued penalties and interest, for the years ended December 31, 2023, 2024 and 2025 is as follows: Year Ended December 31, (In millions) 2023 2024 2025 Balance, beginning of period $ 57.0 $ 63.6 $ 64.9 Additions based on tax positions related to the current year 12.6 12.7 13.7 Additions for tax positions of prior years 0.9 0.6 0.7 Reduction for statute expiration ( 4.8 ) ( 7.0 ) ( 12.0 ) Reductions for tax positions of prior years ( 2.1 ) ( 5.0 ) ( 10.0 ) Balance, end of period (1) $ 63.6 $ 64.9 $ 57.3 (1) Included within non-current liabilities in the Consolidated Balance Sheets Of the total amount of unrecognized tax benefits as of December 31, 2023, 2024 and 2025, $ 47.0 million, $ 57.1 million and $ 51.3 million, respectively, if recognized, would favorably impact our effective tax rate. We do not expect the amount of unrecognized tax benefits disclosed above to change significantly over the next 12 months. - 144 - Table of Contents 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. We are subject to U.S. federal income tax and various state, local, and international income taxes in numerous jurisdictions. Our domestic and international tax liabilities are subject to the allocation of revenue and expenses in different jurisdictions and the timing of recognizing revenue and expenses. As such, our effective tax rate is impacted by the geographical distribution of income and mix of profits in the various jurisdictions. Additionally, the amount of income taxes paid is subject to our interpretation of applicable tax laws in the jurisdictions in which we file. We currently file income tax returns in the U.S. and all foreign jurisdictions in which we have entities, which are periodically under audit by federal, state, and foreign tax authorities. These audits can involve complex matters that may require an extended period of time for resolution. We remain subject to U.S. 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 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. If actual outcomes differ materially from these estimates, they could have a material impact on our financial condition and results of operations. Differences between actual results and assumptions or changes in assumptions in future periods are recorded in the period they become known. To the extent additional information becomes available prior to resolution, such accruals are adjusted to reflect probable outcomes. Other 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. - 145 - Table of Contents 14. Derivatives On January 9, 2020, we designated certain of our swaps as cash flow hedges. On the designation date, the cash flow hedges were in a $ 39.9 million liability position. The cash flow hedges were expected to be highly effective on the designation date and, on a quarterly basis, we performed retrospective and prospective regression assessments to determine whether the cash flow hedges continue to be highly effective. As long as the cash flow hedges are highly effective, changes in fair value are recorded to "Accumulated other comprehensive income" in the Consolidated Balance Sheets and reclassified to "Interest expense" in the period when the underlying transaction affects earnings. 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 (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 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. 815, Derivatives and Hedging , consisting of a loan and an embedded derivative for which the fair value option has been elected. This $ 900.0 million swap remained undesignated to economically offset the undesignated December 2016 swaps. This new swap and the December 2016 swaps matured on February 3, 2022. Cash settlements related to this receive-fixed interest rate swap offset and are classified as operating activities in the Consolidated Statements of Cash Flows. The new pay-fixed interest rate swap also qualifies as a hybrid instrument in accordance with ASC No. 815, Derivatives and Hedging , consisting of a loan and an embedded at-market derivative that was designated as a cash flow hedge. The loan is accounted for at amortized cost over the life of the swap while the embedded at-market derivative is accounted for at fair value. The $ 1.35 billion swap was originally indexed to three-month LIBOR and net settled on a quarterly basis with the counterparty for the difference between the fixed rate of 2.3820 % and the variable rate based upon three-month LIBOR (subject to a floor of 0.75 %) as applied to the notional amount of the swap. In connection with the transactions discussed above, no cash was exchanged between us and the counterparty. The liability of the terminated interest rate swaps as well as the inception value of the receive-fixed interest rate swap was blended into the new pay-fixed interest rate swap. The cash flows related to the portion treated as debt is classified as financing activities in the Consolidated Statements of Cash Flows while the portion treated as an at-market derivative is classified as operating activities. As discussed in Note 7, “Debt”, on April 26, 2023 we executed an amendment to our First Lien Credit Agreement, which governs borrowings under our Term Loan Facility. This amendment established Term SOFR as the benchmark rate for determining the applicable interest rate, replacing LIBOR. To continue to manage our exposure to interest rate risk associated with our Term Loan Facility, effective May 9, 2023, we amended our remaining swap agreement to change the index from three-month LIBOR (subject to a floor of 0.75 %) to one-month Term SOFR (subject to a floor of 0.75 %). The fixed rate also changed from 2.3820 % to 2.34150 % as a result of the swap agreement amendment. On a monthly basis, we net settle with the counterparty for the difference between the fixed rate of 2.34150 % and the variable rate based upon the one-month Term SOFR (subject to a floor of 0.75 %) as applied to the notional amount of the swap. - 146 - Table of Contents In conjunction with the March 2024 Refinancing Transactions, as discussed in Note 7, “Debt”, we issued additional borrowings and used the proceeds to repay previously hedged borrowings under the Term Loan Facility. Given that the specific intent of the new borrowings was a replacement of the previously hedged borrowings and the economic characteristics were the same, we continue to apply hedge accounting on the replacement borrowings. As of December 31, 2024 and 2025 , the cash flow hedge was highly effective. The key terms of interest rate swaps are presented below: 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, 2019 2.7490 % — Matured — Matured November 3, 2023 February 3, 2020 2.7350 % — Matured — Matured November 3, 2023 February 3, 2021 2.7360 % — Matured — Matured November 3, 2023 February 3, 2022 2.7800 % — Matured — Matured November 3, 2023 Entered into February 2021: February 9, 2021 2.34150 % (1) 1,350.0 Active 1,350.0 Active February 9, 2026 Total $ 1,350.0 $ 1,350.0 (1) Fixed rate paid prior to the May 9, 2023 amendment was 2.3820 %. Fair Values of Derivatives on the Consolidated Balance Sheets The fair values of our derivatives and their location on the Consolidated Balance Sheets as of December 31, 2024 and 2025 were as follows: December 31, 2024 December 31, 2025 (In millions) Assets Liabilities Assets Liabilities Derivatives designated as hedging instruments Location Interest rate swaps Other current assets $ 39.6 $ — $ 4.0 $ — Interest rate swaps Other non-current assets 6.6 — — — Interest rate swaps Other current liabilities (1) — 17.3 — 3.0 Interest rate swaps Other non-current liabilities (1) — 3.0 — — Total $ 46.2 $ 20.3 $ 4.0 $ 3.0 (1) The entire balance is comprised of the financing component of the pay-fixed interest rate swap. For financial statement presentation purposes, we do not offset assets and liabilities under master netting arrangements and all amounts above are presented on a gross basis. The following table, however, is presented on a net asset and net liability basis: December 31, 2024 December 31, 2025 (In millions) Gross Amounts on Balance Sheet Effects of Counterparty Netting Net Amounts Gross Amounts on Balance Sheet Effects of Counterparty Netting Net Amounts Assets Interest rate swaps $ 46.2 $ ( 20.3 ) $ 25.9 $ 4.0 $ ( 3.0 ) $ 1.0 Liabilities Interest rate swaps $ 20.3 $ ( 20.3 ) $ — $ 3.0 $ ( 3.0 ) $ — - 147 - Table of Contents Effect of Derivatives on the Consolidated Statements of Comprehensive Loss The effect of our derivatives and their location on the Consolidated Statements of Comprehensive Loss for the years ended December 31, 2023, 2024 and 2025 was as follows: Year Ended December 31, (In millions) 2023 2024 2025 Derivatives not designated as hedging instruments Location Interest rate swaps Interest income (expense) $ ( 15.5 ) $ — $ — Derivatives designated as hedging instruments Location Interest rate swaps Interest income (expense) $ 55.5 $ 57.6 $ 44.8 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, 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. Credit-risk-related Contingent Features We have agreements with interest rate swap counterparties that contain a provision whereby if we default on any of our material indebtedness, then we could also be declared in default of our interest rate swap agreements. As of December 31, 2025, our outstanding interest rate swap agreement was in a net asset position. - 148 - Table of Contents 15. Accumulated Other Comprehensive Income Accumulated other comprehensive income consisted of the following: (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 expense of $ 1.0 million 8.0 — 8.0 Unrealized gain on derivative contracts, net of tax expense of $ 3.8 million — 10.8 10.8 Amount reclassified from Accumulated comprehensive income (loss) into earnings, net of tax expense of $ 10.3 million (1) — ( 29.9 ) ( 29.9 ) Balance at December 31, 2023 $ ( 2.0 ) $ 62.3 $ 60.3 Foreign currency translation adjustments, net of tax benefit of $ 0.3 million ( 8.2 ) — ( 8.2 ) Unrealized gain on derivative contracts, net of tax expense of $ 4.9 million — 15.1 15.1 Amount reclassified from Accumulated comprehensive income (loss) into earnings, net of tax expense of $ 14.5 million (2) — ( 43.1 ) ( 43.1 ) Balance at December 31, 2024 $ ( 10.2 ) $ 34.3 $ 24.1 Foreign currency translation adjustments, net of tax benefit of $ 1.3 million 15.2 — 15.2 Unrealized gain on derivative contracts, net of tax expense of $ 0.6 million — 2.0 2.0 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 . - 149 - Table of Contents 16. Segment Reporting 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; and Private Cloud, a technology-forward, capital-intensive model providing managed service offerings for customer environments hosted in one of our data centers as well as in those owned by customers or by third parties such as colocation providers. Private Cloud also includes our legacy OpenStack Public Cloud business that we ceased to actively market to customers in 2017. 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. 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. We assess financial performance of our segments on the basis of revenue and segment operating profit. The CODM utilizes both revenue and segment operating profit or loss before interest and income taxes to allocate resources and assesses performance of each segment by comparing actual revenue and operating profit or loss results, respectively, to historical results and previously forecasted financial information. Segment operating profit includes expenses directly attributable to running the respective segments' business. This excludes any corporate overhead expenses. We have centralized corporate functions that provide services to the segments in areas such as accounting, information technology, marketing, legal and human resources. Corporate function costs that are not allocated to the segments are included in the row labeled "Corporate functions" in the table below. - 150 - Table of Contents 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. Year Ended December 31, (In millions) 2023 2024 2025 Public Cloud Revenue $ 1,742.7 $ 1,682.6 $ 1,696.0 Third party infrastructure (1) ( 1,320.7 ) ( 1,325.1 ) ( 1,328.9 ) Other cost of revenue (2) ( 228.6 ) ( 202.6 ) ( 211.3 ) Other segment items (3) ( 111.6 ) ( 110.7 ) ( 88.2 ) Segment operating profit $ 81.8 $ 44.2 $ 67.6 Private Cloud Revenue $ 1,214.4 $ 1,054.5 $ 989.7 Cost of revenue ( 749.1 ) ( 646.8 ) ( 624.3 ) Other segment items (3) ( 122.3 ) ( 113.3 ) ( 113.0 ) Segment operating profit $ 343.0 $ 294.4 $ 252.4 Total Consolidated Revenue $ 2,957.1 $ 2,737.1 $ 2,685.7 Segment operating profit $ 424.8 $ 338.6 $ 320.0 Corporate functions ( 267.6 ) ( 233.0 ) ( 193.9 ) Share-based compensation expense ( 65.4 ) ( 63.4 ) ( 45.1 ) Transaction related adjustments, net (4) ( 5.2 ) ( 5.2 ) ( 2.5 ) Restructuring and transformation expenses (5) ( 56.7 ) ( 58.5 ) ( 32.3 ) Hosted Exchange incident expenses, net of proceeds received or expected to be received under our insurance coverage 4.8 1.4 — Amortization of intangible assets (6) ( 161.0 ) ( 154.1 ) ( 146.9 ) Impairment of goodwill ( 708.8 ) ( 714.9 ) — UK office closure (7) ( 12.1 ) — — Impairment of assets, net ( 52.2 ) ( 20.0 ) — Interest expense ( 221.6 ) ( 98.0 ) ( 82.7 ) Gain on investments, net 0.3 0.1 0.3 Gain on debt extinguishment, net of debt modification costs 271.3 147.2 — Other expense, net ( 5.0 ) ( 21.7 ) ( 18.7 ) Total consolidated loss before income taxes $ ( 854.4 ) $ ( 881.5 ) $ ( 201.8 ) (1) Represents usage charges from public cloud infrastructure providers. (2) Other cost of revenue excludes third party infrastructure expenses and is comprised of certain license costs, labor, and other designated expenses. (3) Other segment items for each segment include directly allocable research and development expenses, sales and marketing expenses, and certain other general and administrative expenses. (4) Includes purchase accounting adjustments, exploratory acquisition and divestiture costs, and expenses related to financing activities. (5) 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, 2024 includes a $ 9.0 million MEIA early termination fee associated with the sale of our corporate headquarters in March 2024. (6) All of our intangible assets are attributable to acquisitions, including the Rackspace Acquisition in 2016. (7) Expense recognized related to the closure of a UK office that we exited in the second quarter of 2023 prior to the lease end date. - 151 - Table of Contents The table below presents depreciation expense included in segment operating profit above for the years ended December 31, 2023, 2024 and 2025. Year Ended December 31, (In millions) 2023 2024 2025 Public Cloud $ 9.2 $ 7.0 $ 6.9 Private Cloud 171.3 115.1 124.1 Corporate functions 28.2 19.2 20.4 Total depreciation expense $ 208.7 $ 141.3 $ 151.4 Management does not use total assets by segment to evaluate segment performance or allocate resources. As such, total assets by segment are not disclosed. Geographic Information 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, (In millions) 2023 2024 2025 United States $ 2,035.6 $ 1,847.7 $ 1,781.4 United Kingdom 484.5 468.0 365.2 Other foreign countries (1) 437.0 421.4 539.1 Total revenue $ 2,957.1 $ 2,737.1 $ 2,685.7 (1) No other foreign country had revenue that exceeded 10% of total consolidated revenue for the years ended December 31, 2023, 2024 and 2025. The table below presents property, equipment and software, net by country, based on the physical location of the assets: (In millions) December 31, 2023 December 31, 2024 December 31, 2025 United States $ 478.4 $ 480.8 $ 441.2 United Kingdom 109.0 100.3 97.6 Other foreign countries (1) 21.4 19.9 57.5 Total property, equipment and software, net $ 608.8 $ 601.0 $ 596.3 (1) No other foreign country had property, equipment and software, net that exceeded 10% of total consolidated property, equipment and software, net. - 152 - Table of Contents 17. Condensed Financial Information of Registrant (Parent Company Only) RACKSPACE TECHNOLOGY, INC. (Parent Company Only) CONDENSED BALANCE SHEETS (In millions, except per share data) December 31, 2024 December 31, 2025 ASSETS Investment in subsidiaries of Parent $ ( 1,004.2 ) $ ( 1,219.5 ) Total assets $ ( 1,004.2 ) $ ( 1,219.5 ) LIABILITIES AND STOCKHOLDERS' DEFICIT Stockholders' deficit: Preferred stock, $ 0.01 par value per share: 5.0 shares authorized; no shares issued or outstanding — — Common stock, $ 0.01 par value per share: 1,495.0 shares authorized; 232.2 and 248.4 shares issued; 229.1 and 245.3 shares outstanding, respectively 2.3 2.5 Additional paid-in capital 2,682.8 2,709.7 Accumulated other comprehensive income 24.1 7.5 Accumulated deficit ( 3,682.4 ) ( 3,908.2 ) Treasury stock, at cost; 3.1 shares held ( 31.0 ) ( 31.0 ) Total stockholders' deficit ( 1,004.2 ) ( 1,219.5 ) Total liabilities and stockholders' deficit $ ( 1,004.2 ) $ ( 1,219.5 ) The accompanying note is an integral part of these condensed financial statements. RACKSPACE TECHNOLOGY, INC. (Parent Company Only) CONDENSED STATEMENTS OF COMPREHENSIVE LOSS Year Ended December 31, (In millions, except per share data) 2023 2024 2025 Equity in net losses in Parent's subsidiaries $ ( 837.8 ) $ ( 858.2 ) $ ( 225.8 ) Net loss and total comprehensive loss $ ( 837.8 ) $ ( 858.2 ) $ ( 225.8 ) Net loss per share Basic and diluted $ ( 3.89 ) $ ( 3.82 ) $ ( 0.95 ) Weighted average number of shares outstanding: Basic and diluted 215.3 224.8 238.7 The accompanying note is an integral part of these condensed financial statements. A condensed statement of cash flows has not been presented as Rackspace Technology did not have any cash as of, or at any point in time during, the years ended December 31, 2023, 2024 and 2025. NOTE TO CONDENSED FINANCIAL STATEMENTS OF REGISTRANT (Parent Company Only) Basis of Presentation These condensed parent company-only financial statements have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X, as the restricted net assets of the subsidiaries of Rackspace Technology, Inc. (“Parent”) (as defined in Rule 4-08(e)(3) of Regulation S-X) exceed 25% of the consolidated net assets of the Parent. The ability of Parent’s operating subsidiaries to pay dividends may be restricted due to the terms of the subsidiaries’ New First Lien Credit Agreement, First Lien Credit Agreement and the Indentures, as described in Note 7, “Debt” to the audited consolidated financial statements. These condensed parent company financial statements have been prepared using the same accounting principles and policies described in the notes to the consolidated financial statements, with the only exception being that the parent company accounts for its subsidiaries using the equity method. These condensed financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included elsewhere in this report. - 153 - Table of Contents ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.