Rackspace’s Astronomical Email Price Hike Sparks Outrage Among Longtime Partners

In a move that has sent shockwaves through the tech industry, Rackspace has implemented a dramatic price increase for its email hosting services that some partners are calling “devastating” and “astronomical.” The cloud computing and hosting giant, which has been a trusted email provider for businesses since the late 1990s, has raised prices by as much as 706 percent, leaving many longtime customers scrambling to reassess their infrastructure costs.

The New Pricing Structure

As of recent weeks, Rackspace has completely restructured its email hosting pricing model. The company’s standard email plan now costs $10 per mailbox per month—a staggering increase from the previous $3 per mailbox per month that businesses had been paying as recently as November 2025. This represents a 233 percent increase for the base service alone.

But the price hikes don’t stop there. Rackspace has also restructured its add-on services. The Email Plus add-on, which provides file storage, mobile synchronization, Office-compatible applications, and enhanced messaging capabilities, now costs an additional $2 per mailbox per month, up from the previous $1. The Archiving add-on, offering unlimited storage for email archives, has doubled in price from $3 to $6 per mailbox per month.

For businesses with hundreds or thousands of email accounts, these increases translate into massive budget overruns. A company with 1,000 mailboxes would see its annual email hosting costs jump from approximately $36,000 to $144,000—a quarter-million-dollar increase that many organizations simply weren’t prepared to absorb.

Partners Left Reeling

The most vocal criticism has come from Rackspace’s reseller partners, who have built their own businesses around the company’s email hosting services. These partners are particularly aggrieved because they’ve received minimal notice of the changes and are now facing the prospect of either absorbing massive cost increases or passing them on to their own customers.

Laughing Squid, a web hosting service provider and Rackspace reseller since 1999, has been among the most outspoken critics. In a blog post published Thursday, the company revealed that Rackspace is “increasing our email pricing by an astronomical 706 percent, with only a month-and-a-half’s notice.”

Scott Beale, founder of Laughing Squid, told Ars Technica that he received the “devastating” news via email on Wednesday. The timing couldn’t be worse for many businesses, coming just as they’re finalizing their 2026 budgets and making technology investment decisions for the year ahead.

“The price increase has a major impact on the ability to make money due to the fact that email is now our largest expense, and we were only given a month-and-a-half notice,” Beale explained to Ars. This short notice period has left many partners with little time to explore alternatives or negotiate with their own clients about price increases.

Historical Context and Industry Impact

To understand the magnitude of this price increase, it’s worth noting that the last time Rackspace raised Laughing Squid’s email prices was by 55 percent in 2019. While that increase was significant, it pales in comparison to the current hike. The company had maintained relatively stable pricing for years, making this sudden and dramatic change all the more shocking to its customer base.

The impact extends far beyond individual businesses. Many IT service providers, managed service providers (MSPs), and technology consultants have built their entire service offerings around Rackspace’s email hosting platform. These partners often bundle email hosting with other services, making it difficult to itemize costs for their own customers. Now, they’re facing the unenviable task of either significantly raising their prices across the board or finding alternative email hosting solutions on extremely short notice.

Volume Discounts and Hidden Costs

Adding insult to injury, reports from various Reddit threads and industry forums suggest that the new, higher-per-mailbox quotes don’t include volume pricing discounts that many larger customers had previously enjoyed. This means that the actual percentage increases could be even higher for some organizations than the base numbers suggest.

Beale noted that Laughing Squid’s quote doesn’t include discounts that the company previously received, indicating that the true cost increase could be even more severe than initially calculated. This lack of grandfathering or phased implementation has left many longtime customers feeling betrayed by a company they had trusted for decades.

The Broader Context: Email Hosting Market Dynamics

Rackspace’s price hike comes at a time when the email hosting market is already experiencing significant changes. Microsoft’s Office 365 and Google Workspace have been steadily gaining market share, offering integrated productivity suites that include email hosting as part of broader packages. Rackspace had positioned itself as a more flexible, business-focused alternative that could integrate with various productivity platforms.

However, this massive price increase threatens to undermine that positioning. At $10 per mailbox per month for basic email hosting, Rackspace is now significantly more expensive than many of its competitors, even before accounting for the additional costs of productivity software that customers would need to purchase separately.

Customer Reactions and Industry Response

The reaction from the tech community has been swift and largely negative. Industry forums are filled with angry customers discussing migration strategies and alternative providers. Many are questioning whether Rackspace’s move represents a fundamental shift in the company’s business strategy or simply a miscalculation of how its customer base would react to such dramatic changes.

Some industry analysts suggest that Rackspace may be attempting to reposition itself as a premium service provider, focusing on high-margin enterprise customers rather than the small and medium-sized businesses that have traditionally made up much of its customer base. However, this strategy appears to be backfiring, at least in the short term, as it’s alienating many of the very customers who helped build the company’s reputation.

What This Means for Businesses

For businesses currently using Rackspace’s email hosting services, the immediate future looks challenging. Companies now face several difficult choices: absorb the massive cost increases and watch their technology budgets balloon, pass the costs on to their own customers and risk losing business to competitors, or undertake the complex and time-consuming process of migrating to alternative email hosting providers.

The migration option, while potentially the most financially prudent in the long run, comes with its own set of challenges. Email migrations are notoriously complex, often requiring significant IT resources and carrying the risk of data loss or service interruptions. For many businesses, especially those without dedicated IT departments, the prospect of such a migration is daunting.

Looking Ahead

As the March 1, 2026, implementation date approaches, it remains to be seen how this situation will resolve. Will Rackspace backtrack on its price increases in response to customer outrage? Will it offer more generous transition periods or grandfather existing customers at their current rates? Or will it stand firm, potentially sacrificing a significant portion of its customer base in pursuit of higher margins?

What’s clear is that this move represents a significant shift in the email hosting landscape. Whether it signals a broader trend toward consolidation and premium pricing in the industry or proves to be an isolated misstep by Rackspace, businesses would be wise to carefully evaluate their email hosting strategies and consider diversifying their technology partnerships to avoid similar shocks in the future.

The coming weeks will be critical as businesses make their decisions and Rackspace gauges the true impact of its pricing strategy. One thing is certain: the email hosting market just became a lot more interesting, and businesses everywhere are paying close attention to how this drama unfolds.

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