Rackspace Technology is cutting approximately 750 jobs, or about 15% of its global workforce, as the cloud computing company shifts resources toward enterprise artificial intelligence, a move that comes less than a year after CEO Gajen Kandiah took over the company.
The workforce reduction, approved by Rackspace’s executive committee on June 10, is expected to generate annual savings of between $75 million and $85 million once fully implemented. The company said the savings will be reinvested into AI-focused growth areas, including enterprise AI infrastructure, engineering teams and AI solutions delivery.
Most affected employees were notified around June 10, with additional departures expected over the next six months, depending on local employment regulations. Rackspace expects to incur between $14 million and $19 million in severance and related restructuring costs during 2026.
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The layoffs were announced as the company pivots away from portions of its legacy public cloud business to focus on what it describes as “governed enterprise AI” for customers in regulated industries such as healthcare, financial services and government.
Kandiah, who became CEO in September 2025 after leadership roles at Hitachi Digital and a 16-year career at Cognizant, has made AI the centerpiece of Rackspace’s turnaround strategy. The company recently announced partnerships with AMD to build enterprise AI infrastructure and with Palantir to provide AI platforms for regulated customers.
Rackspace employs roughly 5,000 people globally, including about 1,800 in North America, 800 across Europe, the Middle East and Africa, and approximately 2,400 in Asia. The company has not disclosed how many U.S. employees are affected by the restructuring, and no WARN notice has been filed in Texas, where its headquarters are located.
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The layoffs have attracted attention on social media, where some users have claimed the reductions primarily impact American workers and questioned whether cost savings are intended to boost executive compensation. Those claims remain unverified, and Rackspace has not provided a geographic breakdown of the affected employees. The company has also not stated that the layoffs are intended to fund executive stock awards.
The restructuring comes as Rackspace continues to recover from years of financial challenges. The company, which was taken private by Apollo Global Management in 2016 before returning to public markets in 2020, has struggled against larger cloud providers while repositioning itself as an AI infrastructure and managed services provider. Earlier this year, Rackspace reported narrowing its annual losses while outlining its long-term AI growth strategy.
Company executives say the transformation is designed to position Rackspace as a provider of secure AI infrastructure for enterprises operating in highly regulated environments, though they have acknowledged that additional restructuring measures could follow as the business evolves.