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Item 3 — Quantitative and Qualitative Disclosures About Market Risk
Rackspace Technology, Inc. · 10-Q · Q2 FY2026 · Period ended Jun 30, 2026
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Interest Rates
We are exposed to interest rate risk associated with fluctuations in interest rates on our floating-rate Senior Facilities, which includes our $375 million Revolving Credit Facility and $1,870 million outstanding under the FLSO Term Loan Facility and FLFO Term Loan Facility, and $61 million outstanding under our floating-rate Term Loan Facility. As of June 30, 2026, there was $260 million of outstanding borrowings under the Revolving Credit Facility. As of June 30, 2026, assuming the Revolving Credit Facility was fully drawn, each 0.125% change in assumed blended interest rates would result in a $3 million change in annual interest expense on indebtedness under the Senior Facilities and Term Loan Facility.
Our Term Loan Facility, FLSO Term Loan Facility, and FLFO Term Loan Facility bear interest at an annual rate equal to an applicable margin plus one-month Term SOFR, subject to a 0.75% floor. We have in the past and may in the future enter into interest rate swap agreements to manage our risk from fluctuations in one-month Term SOFR above the 0.75% floor.
Foreign Currencies
We are subject to foreign currency translation risk due to the translation of the results of our subsidiaries from their respective functional currencies to the U.S. dollar, our functional currency. As a result, we discuss our revenue on a constant currency as well as actual basis, highlighting our sensitivity to changes in foreign exchange rates. See "Constant Currency Revenue." While the majority of our customers are invoiced, and the majority of our expenses are paid, by us or our subsidiaries in their respective functional currencies, 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. In the six months ended June 30, 2026, we recognized foreign currency transaction losses of $0.1 million within "Other expense, net" in our Condensed Consolidated Statements of Comprehensive Loss. As we grow our international operations, our exposure to foreign currency translation and transaction risk could become more significant.
We have in the past and may in the future enter into foreign currency hedging instruments to limit our exposure to foreign currency risk.
Power Prices
We are a large consumer of power. In the six months ended June 30, 2026, we expensed approximately $18 million for utility companies to power our data centers, representing approximately 1% of our revenue. Power costs vary by geography, the source of power generation and seasonal fluctuations and are subject to certain proposed legislation and geopolitical tensions that may increase our exposure to increased power costs. We have power contracts for data centers in the Dallas-Fort Worth, San Jose, Somerset, New Jersey and London areas that allow us to procure power either on a fixed price or on a variable price basis.
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