The tech world is abuzz with AI, and rightfully so. But while everyone chases the shiny object of generative AI, a quiet revolution is brewing in the less glamorous, but arguably more critical, world of healthcare technology. And at the center of this revolution, defying expectations and even its own recent history, stands Rackspace Technology (RXT).

A closer look at RXT's Q1 2024 <a href="https://seekingalpha.com/symbol/RXT">earnings call</a> reveals a story that goes beyond the headline numbers. It paints a picture of a company strategically repositioning itself to capitalize on a burgeoning market: the cloud-powered transformation of healthcare. While analysts are focused on RXT's overall turnaround efforts and its foray into AI, a key detail emerges that suggests a far more targeted and potentially lucrative strategy.

RXT's Private Cloud unit, historically a source of concern due to revenue runoff, is now exhibiting signs of remarkable resilience. This strength isn't just a result of general market improvement; it's fueled by a laser-focus on the healthcare vertical. RXT isn't just dabbling in healthcare; it's going all-in, securing major wins and building a formidable pipeline in this sector.

The numbers tell a compelling story. In Q1 2024, RXT's Private Cloud unit secured "double-digit year-over-year growth in bookings" with "continued strength in healthcare." This follows an exceptionally strong Q4 2023, where RXT landed contracts with "two of the country's 10 largest healthcare peers, a large healthcare solutions provider, and a regional hospital and related services system provider." Moreover, RXT boasts a TCV pipeline in excess of $700 million within healthcare alone, even after closing several deals in Q1.

The linchpin of RXT's healthcare strategy is its unique and differentiated "Epic-as-a-Service" offering. RXT holds all Epic certifications, making it an ideal partner for hosting, operating, and managing electronic medical record (EMR) workloads—the lifeblood of modern healthcare systems. The successful implementation of Epic EMR at Seattle's Children's Health Hospital in April underscores the viability and attractiveness of RXT's healthcare cloud solution.

This focus on healthcare isn't a knee-jerk reaction; it's a calculated bet on a market primed for explosive growth. The healthcare industry is grappling with an unprecedented confluence of challenges, from aging populations and chronic diseases to cybersecurity threats and the need for greater data interoperability. Cloud computing, with its scalability, security, and cost-efficiency, offers a compelling solution to these challenges.

RXT is shrewdly leveraging its existing expertise in Private Cloud to address this need. It's not just about providing infrastructure; it's about offering a holistic solution that encompasses the entire lifecycle of healthcare data, from hosting and management to security and compliance.

Hypothesis:

RXT's strategic focus on healthcare could be a significant driver of its Private Cloud turnaround, potentially exceeding current market expectations.

Supporting Numbers:

Double-digit year-over-year Private Cloud bookings growth in Q1 2024, driven by healthcare.

$225 million in TCV healthcare wins in 2023, including a major contract with a large hospital system.

$700 million TCV healthcare pipeline, indicating continued momentum in this vertical.

Private Cloud Bookings Growth

Source: <a href="https://seekingalpha.com/symbol/RXT">RXT Earnings Call Transcripts</a>

Projected Revenue Stabilization

The market may be fixated on AI, but RXT is quietly building a fortress in healthcare. By leveraging its proven expertise in Private Cloud, its deep understanding of the healthcare industry, and its unique Epic-as-a-Service offering, RXT is poised to become a dominant player in this rapidly growing market. While the company's journey back to sustained profitability is still unfolding, the healthcare hero emerging within RXT suggests a potential upside that even the most optimistic analysts may be overlooking.

"Fun Fact: Did you know that the first digital image of the human brain was produced in 1972 using a CAT scanner, a technology that relied on early cloud computing concepts? Rackspace Technology's current work in healthcare cloud solutions is a testament to how far we've come in harnessing the power of technology to improve human health."