A securities fraud class-action lawsuit has been filed against San Antonio-based Rackspace Technology Inc. and senior executives, which were unnamed. The complaint alleges the company misled investors about its artificial intelligence strategy and the impact those investments would have on the company’s financial performance.
Bleichmar Fonti & Auld LLP announced Aug. 4 that the lawsuit was filed in the U.S. District Court for the Southern District of New York. The case, Morgan-Reed v. Rackspace Technology Inc., No. 26-cv-6491, alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.
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According to the complaint, Rackspace told investors that its AI initiatives, including a memorandum of understanding with Advanced Micro Devices Inc. to expand AI infrastructure capabilities bolstered its growth strategy and its full-year private cloud revenue outlook.
The lawsuit alleges those statements were misleading. Rackspace’s AI investments required the company to reprioritize resources and shift capacity away from revenue-generating business segments, according to the complaint.
Rackspace disclosed on July 9 that its AI investments would require a significant reallocation of resources and a transition away from certain revenue-generating segments. At the same time, the company lowered its full-year 2026 revenue guidance by $150 million, or about 6%, and reduced its private cloud revenue outlook by $25 million, according to the lawsuit.
Rackspace shares fell $2.21, or 33.6%, from $6.58 at the close July 8 to $4.37 at the close July 9, according to the complaint.
The proposed class includes investors who purchased Rackspace securities between May 7 and July 8, 2026. Investors have until Sept. 28 to seek appointment as lead plaintiff.
The allegations have not been proven in court, and Rackspace has not been found liable for any wrongdoing.
Rackspace did not respond to a request for comment before publication. Bleichmar Fonti & Auld LLP also did not respond to requests for additional information about the case.
In June, the Business Journal reported Rackspace cut approximately 15% of its global workforce as part of a sweeping restructuring. The San Antonio-based cloud computing company disclosed the reductions in a filing with the U.S. Securities and Exchange Commission on June 16. The company’s global workforce stands at roughly 5,000, resulting in approximately 750 positions cut worldwide.
Read more of this story at the San Antonio Business Journal website.
Editor’s note: This story was published through a partnership between KSAT and the San Antonio Business Journal.
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