Share-Based Compensation and Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2025

Share-Based Payment Arrangement [Abstract]

The composition of the equity awards outstanding as of December 31, 2024 and 2025 was as follows:


	December 31, 2024	December 31, 2025
(In millions)
Restricted stock	25.3	13.2
Stock options	3.3	2.5
Total outstanding awards	28.6	15.7

Schedule of Stock Option Activity

The following table summarizes the stock option activity for the year ended December 31, 2025:


	Number of Shares (in millions)	Weighted Average Exercise Price		Weighted Average-Remaining Contractual Life	Aggregate Intrinsic Value (in millions)
Outstanding at December 31, 2024	3.3	$	13.05	4.08	$	—
Granted	—	$	—
Exercised	—	$	—
Forfeited	(0.1)	$	12.46
Expired	(0.7)	$	13.34
Outstanding at December 31, 2025	2.5	$	12.99	2.85	$	—
Vested and exercisable at December 31, 2025	2.5	$	12.99	2.85	$	—
Vested and exercisable at December 31, 2025 and expected to vest thereafter (1)	2.5	$	12.99	2.85	$	—

(1) Forfeitures are recognized as they occur, rather than estimated.

Schedule of Share-based Payment Award, PSU, Valuation Assumptions

The following table presents the assumptions used to estimate the fair values of the PSUs granted in the periods presented:


	Year Ended December 31,
	2023		2024
Expected stock volatility (1)	69% - 72%		87%
Expected dividend yield (2)	—	%	—	%
Risk-free interest rate (3)	3.76% - 3.78%		4.35%

(1) Management estimates volatility based on the historical trading volatility of a public company peer group and the implied volatility of our assets and current leverage.

(2) We have not issued dividends to date and do not anticipate issuing dividends.

(3) Based on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent expected term.

Schedule of Restricted Stock Activity

The following table summarizes our restricted stock activity for the year ended December 31, 2025:


	Number of Units or Shares (in millions)	Weighted Average Grant-Date Fair Value
Outstanding at December 31, 2024	25.3	$	2.77
Granted	11.0	$	1.43
Released	(17.2)	$	2.86
Cancelled	(5.9)	$	2.52
Outstanding at December 31, 2025	13.2	$	1.65
Expected to vest at December 31, 2025 (1)	13.2	$	1.65

(1) Forfeitures are recognized as they occur, rather than estimated.

Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions

The following table presents the assumptions used to estimate the fair value of the stock options granted:


Assumption	Amount
Expected stock volatility (1)	80	%
Expected dividend yield (2)	—	%
Risk-free interest rate (3)	3.73	%
Expected life (4)	6.25 years

(1) Management estimates volatility based on the historical trading volatility of a public company peer group and the implied volatility of our assets and current leverage.

(2) We have not issued dividends to date and do not anticipate issuing dividends.

(3) Based on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent expected term.

(4) Represents the period that our share-based awards are expected to be outstanding. Management uses the simplified method for our estimation of the expected life as we do not have adequate historical data.

Schedule of Share-based Compensation Expense Recognized Under the Incentive Plan

Total share-based compensation expense is comprised of the following equity and liability classified award amounts:


	Year Ended December 31,
(In millions)	2023		2024		2025
Equity classified awards	$	64.6	$	48.1	$	28.6
Liability classified awards	0.8		15.3		16.5
Total share-based compensation expense	$	65.4	$	63.4	$	45.1

Share-based compensation expense recognized was as follows:


	Year Ended December 31,
(In millions)	2023		2024		2025
Cost of revenue	$	9.1	$	7.6	$	5.1
Selling, general and administrative expenses	56.3		55.8		40.0
Pre-tax share-based compensation expense	65.4		63.4		45.1
Less: Income tax benefit	(13.7)		(13.3)		(9.5)
Total share-based compensation expense, net of tax	$	51.7	$	50.1	$	35.6

Rackspace Technology, Inc. 10-K