Rackspace customers grapple with “devastating” email hosting price hike

“We had really good reseller pricing that we negotiated with Rackspace due to the number of mailboxes we had with them and how long we had been a customer. All of that seemed to vanish when they notified us of their new pricing,” he said.

Ars contacted Rackspace asking about the 706 percent price hike that Laughing Squid says it’s facing, why Rackspace decided to increase its prices now, and why it didn’t give its partners more advanced notice. A company spokesperson responded, saying:

Rackspace Email is a reliable and secure business-class email solution for small businesses. To continue delivering the service levels our customers expect, effective March 2026, Rackspace Technology is increasing the price of Rackspace Email. We have a support team available to help our customers to discuss their options.

The spokesperson added that Rackspace’s “mission is to deliver quality, trusted and reliable hosted email solution for businesses.”

Email hosting is a tough business

Despite Rackspace’s stated commitment to email hosting, the prohibitive pricing seems like a deterrent for a business being viewed as high-effort and low-margin. Email has grown complex over the years, requiring time and expertise for proper management at scale. It’s become simpler, or more lucrative, for some cloud companies to focus on selling their managed services on top of offerings like Microsoft 365—as Rackspace does—or Google Workspace and let the larger companies behind those solutions deal with infrastructure costs and complexities.

Rackspace’s price hike also comes as an AI-driven RAM shortage is impacting the availability and affordability of other computing components, including storage.

With Rackspace, which went public in 2020, also having quit hosting Microsoft Exchange following a costly 2022 ransomware attack, the Texas-headquartered company may be looking to minimize its email hosting duties as much as possible.

Meanwhile, Laughing Squid is increasing prices for Rackspace mailboxes and offering services with a different email provider, PolarisMail, to customers at lower prices. Beale said he has reached out to Rackspace about the new pricing but hasn’t heard back yet.