After Thursday's closing bell the San Antonio company reported a loss of $64 million, or 32 cents a share, widened from a loss of $47 million, or 28 cents, in the year-earlier period.
Adjusted earnings of 26 cents a share on revenue of $716 million exceeded analyst expectations of earnings of 23 cents a share on revenue of $705 million.
Rackspace "is extremely well positioned to capitalize on the tectonic shift to the cloud," Chief Executive Kevin Jones said in a statement. "We have the people, partners, expertise and automation to help customers of all sizes optimize their multicloud journey."
But the company's 2021 earnings guidance, 95 cents to $1.05 a share, was short of analyst estimates of $1.11 a share, according to Yahoo Finance.
Rackspace shares at last check fell 11% to $22.11.
BMO's Keith Bachman expects 2021 margins to shrink and free-cash-flow estimates to start falling. The results were "far from perfect," the analyst said, according to Bloomberg.
But Bachman still remains encouraged by the stock's long-term potential. He raised his price target to $26 from $24 a share and maintained an outperform rating.
Evercore analyst Amit Daryanani said "[we] understand investor angst around the lack of operating leverage in calendar year 2021."
He maintained his outperform rating and $26 price target, according to Bloomberg. Rackspace is well-positioned to capitalize on the shift to multicloud over the next several years, according to Daryanani.