Equinix, Inc. (EQIX.US) Q3 Performance Meeting: Plans to double capacity by 2029, ecosystem continues to expand in multiple industries such as AI.

Equinix, Inc. (EQIX.US) held its third-quarter earnings call. The company reported third-quarter revenue of $2.316 billion, a year-on-year increase of 5.23%; net income of $374 million, a year-on-year increase of 25.93%; and basic EPS of $3.82, a year-on-year increase of 22.83%. Executives stated that the company delivered a very strong performance in the third quarter, demonstrating strong revenue growth and profit improvement while undergoing significant expansion investments. The strong performance was attributed to three main highlights: First, revenue growth. The company saw accelerated revenue growth, with MRR (monthly recurring revenue) increasing by 8% year-on-year on a comparable basis. Additionally, the company achieved a record annualized gross bookings of $394 million, a 25% year-on-year increase and a 14% increase from the second quarter. This accelerated growth came from a highly diverse customer base in terms of geography, industry, and customer type. Second, profitability. The company achieved strong adjusted EBITDA profit margins and saw a 12% year-on-year increase in AFFO on a comparable basis. This exceeded expectations and reflected good operational results, lower net interest expenses, and favorable impacts from timing of routine capital expenditures. As a result, the company increased its full-year adjusted EBITDA, AFFO, and per share AFFO guidance. Third, expansion. Due to strong market demand, the company is actively advancing its "Build Bolder" strategy, aiming to double its capacity by 2029. Recent land acquisitions in major cities such as Amsterdam, Chicago, Johannesburg, London, and Toronto will support over 900 megawatts of retail and xScale capacity. These achievements demonstrate increasing customer recognition of the strategy and the delivery of differentiated infrastructure, products, and service levels. On the customer front, the company made significant progress in the third quarter, signing over 4,400 deals covering more than 3,400 customers. These deals reflect continued demand for various low-latency AI and non-AI workloads, supporting data localization and sovereignty requirements, and seamless connections to distributed data sources. The ecosystem continues to expand in multiple industries including automotive, financial services, networking, cloud computing, and AI service providers. Based on the strong profit performance in the third quarter, the company raised its full-year adjusted EBITDA guidance by $21 million for 2025, with an expected EBITDA profit margin of 49%-50%. It also raised its 2025 AFFO guidance by $31 million, expecting AFFO to grow by 11%-13% year-on-year and per share AFFO to increase by 8%-10%, significantly higher than the previous year. Lastly, capital expenditures are expected to be $3.8-$4.3 billion in 2025, with approximately $290 million being routine capital expenditures. Q&A Q: You have a very strong market position in cloud on-ramps, which has attracted many enterprise customers. You mentioned the addition of new cloud on-ramps and network nodes recently. Adaire, I noticed you mentioned Nebius and Groq in your presentation. What is the strategic significance of these deployments compared to traditional cloud on-ramps? A: Thank you for your question. Yes, you are right. We have a market-leading position in native cloud on-ramps, which I believe is a critical part of our connectivity value narrative for customers. In this quarter, we added two new on-ramps to our existing deployment system. As you mentioned, we also have many AI magnet customers within the Equinix ecosystem. The companies I mentioned in my presentation include Zetaris, Lyceum (a GPU as a Service provider in Germany), Block, Groq, Outrider, Nebius, CoreWeave, and more. Many of these new cloud enterprises use Equinix as a connection point and node deployment center. Moreover, our 10,000+ enterprise customers are also using these Neocloud platforms for data storage and connectivity, creating a natural draw towards them. Our teams, especially in the Americas, focus on this customer segment to ensure we have influential "AI magnet" customers in our ecosystem by managing and maintaining these relationships properly. Q: You mentioned a strong performance in pre-sales activity, and I remember you adjusted your sales strategy recently to allow the sales team to sell capacity earlier on projects that have not been delivered yet. Has this contributed to the growth in pre-sales activities? In addition, can you share the pre-leasing activity status in some key markets where a significant amount of new capacity is about to come online? A1: Thank you for your question, and thank you for repeating it. I believe you have seen in our third-quarter performance that in addition to the $394 million annualized gross bookings we achieved, we also disclosed a $185 million annualized pre-sale balance that will be recognized in future quarters. This pre-sale model is relatively new for our core retail business. Recently, we extended the sales team's window for selling "future delivery period" to 12 months when it was previously only 3-6 months. This adjustment provided critical capacity for the sales team while giving confidence to customers who could know in advance the specific location and timing of future deployments. Looking at the macro level, demand remains higher than supply, so we have indeed seen accelerated pre-sales activity from 2025 to the third quarter, as Keith mentioned. 40% of our pre-sale balance was signed in the third quarter of 2025. Therefore, the disclosure of this data helps provide higher business transparency for investors. In terms of structure, pre-sales activities are relatively evenly distributed among upcoming capacity projects, but we see particularly active pre-leasing activities in areas with tight capacity like Frankfurt, London, and New York. So, we decided to share this data point with everyone. A2: Aryeh, I'd like to add to Adaire's explanation. The reason we introduced a new sales model is partly due to the changing supply and demand landscape - we are currently in a high-demand market, and we are doing our best to speed up capacity deployment. We want the sales team to have a forward-looking sales vision, and we also want Raouf and our Global Design & Construction department to accelerate project construction, delivering projects one quarter or even two quarters ahead of the original schedule. This is the fundamental reason we implemented the pre-sale strategy: in a high-demand environment, we need to accelerate supply in sync. Therefore, as Adaire mentioned, the combination of $394 million + $185 million reflects our business momentum - a significant increase not only from two quarters ago but also well above last year's levels. A3: I'd like to add a further explanation: here, pre-sales refer to our retail business segment and do not include the entire company's business scope. For xScale business, we use the metric of pre-leasing, and they represent different concepts. Therefore, the pre-sales disclosed here correspond entirely to the retail business sector. Q: I'd like to ask about the current pricing environment. You mentioned that more pre-sale activities are being conducted and that in the current tight market, have you seen prices remain firm, possibly even improve? Also, I would like to ask another question: I know you previously forecasted around 5% AFFO growth for next year (2026 fiscal year). Although we all know there are many variables for next year - such as interest rates and financing costs currently appearing more favorable than previous guidance - could you please share your preliminary thoughts on your financial model for 2026 under these changing variables? A1: Well, perhaps I'll answer the second question first and then talk about pricing. Looking towards 2026, our top priority is still implementing the fourth-quarter execution plan. Revenue growth is our main focus, ensuring a strong end to the fourth quarter. We remain confident in market demand. In fact, the pre-sales performance in the third quarter and gross bookings both confirmed this demand. As Pete mentioned, our design and construction team has excellent capabilities and can deliver projects ahead of the Ready For Service (RFS) date. The monitoring and forecasting of RFS and revenue indicators are managed with the same rigor. In the third quarter, we achieved early delivery progress in 20% of the 58 projects under construction. Therefore, in terms of forward-looking information for 2026, the first two key points are revenue growth and early RFS delivery. At the same time, we will continue to focus on cost management and operational efficiency, ensuring the company maintains a strong operational performance overall. We have already seen very positive trends in this regard. This also includes capital structure and capital expenditure management, which Keith can perhaps add more about? A2: Sure, Eric. On the balance sheet side, apart from the positive progress Adaire just mentioned, there is another noteworthy change: the current and future financing costs are lower than previously expected - this is obviously good news. Additionally, we are very strong in financing in various markets worldwide (including synthetic structured financing or other forms) to further reduce the cost of funds. Looking ahead, as I mentioned in previous earnings calls, we will continue diversifying financing in markets such as Canada, Europe, etc., to further reduce the cost of capital. Also, the fact that our business operates globally allows us to achieve higher capital returns when repatriating funds from overseas to the U.S., enabling us to be very efficient in both balance sheet management and cost control on the profit and loss statement. Lastly, with the increase in our construction in progress scale, we are continuously evaluating how to capitalize and capitalize interest expenses related to construction, whether it's land acquisitions or project development. Looking at the current quarter and the next few quarters, our investments in land and power-related land will continue to increase, and we will capitalize related interests to match the pace of business growth. A3: Okay, heading back to the pricing question - at present, we have not observed any signs of price decreases - prices remain very firm. Q: You mentioned that you completed a total of 900 MW of land acquisitions in Amsterdam, Chicago, Johannesburg, London, and Toronto. Could you share more specific details? For example, are there one or two projects significantly larger in scale? And in these markets, how do you plan to allocate construction scales between retail and xScale business? A: Thank you for your question. We are very excited about these land acquisitions as they are significantly meaningful and closely related to the metros with the highest demand. As you know, these new land acquisitions have significantly increased our controlled land reserves - our controlled land size has increased by almost 50% compared to the previous quarter. From a portfolio investment perspective, these acquisitions align with our long-term capital investment plan as outlined on Analyst Day. We aim to double our overall capacity by 2029, and we currently cannot disclose the specific MW distribution between retail and xScale. However, we expect a significant portion of the land acquisitions in London and Chicago to be allocated to the xScale business, which will be injected into joint ventures (JV), and we will receive corresponding compensation. Additionally, our global design and construction team remains highly focused on delivering critical capacity across the entire asset portfolio. To some extent, the allocation of MW between retail and xScale is fungible, as Equinix offers a complete product spectrum - from traditional retail data centers to large retail and to extra-large xScale. Our overall goal is to maximize the potential value of each land project and optimize the allocation based on specific market opportunities. Q: Great, thank you. I'd like to venture a bit further with one more question. In reviewing the municipal documents for the [Manuka] campus, I noticed some information in the meeting records suggesting that the Chicago campus may be divided between xScale and retail business. Could you share your thoughts on the planning orientation of this campus in terms of retail and xScale business? Additionally, as an extension to this question, you mentioned signing a significant bank-related transaction this quarter. Currently, we see some large banking projects in the market. I'd like to ask, do you still plan to only serve hyperscale customers in the xScale business, or are you now considering integrating large enterprise customers into this sector? A1: Okay, these are two separate questions, and I'll answer each one separately. Firstly, regarding the concept of the mega campus, we are indeed considering the possibility of deploying xScale and retail business simultaneously in the same campus. This is a direction that we are actively evaluating and planning, as we believe this mixed layout can create additional value for all stakeholders, whether they belong to the xScale ecosystem or the broader Equinix ecosystem. As for the bank-related transaction you mentioned, we did notice that the financial services sector performed exceptionally well in the third quarter. Especially in EMEA, new regulatory requirements such as the Digital Operational Resilience Act (DORA) are driving increased demand for more resilient and compliant infrastructure from Financial Institutions, Inc. This is one of the key factors driving the growth in our financial services segment. Overall, we believe that the xScale and retail business capacity is somewhat fungible. If a large customer project emerges, we can provide services to them using existing xScale capacity, and we will negotiate with partners to ensure we can flexibly meet the needs of such customers. A2: Mike, I'd like to add to Adaire's explanation. The reason we are introducing new sales models is due in part to the changing supply and demand dynamics - we are currently in a high-demand market and are working hard to accelerate the pace of supply. We hope the sales team will have a forward-looking sales vision, and the Global Design & Construction team led by Raouf will do their best to accelerate project construction to deliver projects one quarter or even two quarters ahead of the original schedule. This is why we are implementing the pre-sale strategy: in a high-demand environment, we need to accelerate the pace of supply synchronously. As Adaire mentioned, the combination of $394 million and $185 million reflects significant business momentum - a marked increase not only from two quarters ago but well above last year's levels. Q: I have a few questions. First, Adaire, you mentioned larger footprint retail deployments. This was listed as one of Equinix's future capital investment directions on Analyst Day. Could you provide insights about the current market demand in this area? Additionally, as these projects near commercial launch stages, will we see significant pre-leasing activities similar to your other business lines? Secondly, I'd like to clarify, Keith, you mentioned that the range for revenue guidance is wider than in the past. The revenue guidance range for the fourth quarter of this year is approximately $120 million, compared to $40 million in the fourth quarter of 2024. Could you please explain specifically, how the non-recurring revenue part of revenue differs in two scenarios: 1) a large xScale transaction successfully completed in Q4 2025; or 2) the transaction is delayed to recognize revenue in 2026? A1: Thank you, Mike. Regarding the "larger footprint retail" segment, we saw a very healthy mix in our revenue composition this quarter: contributions from large lease transactions, as well as significant growth in our retail and interconnection businesses. In terms of these large projects and the relationship with pre-sale sales motion, indeed, many customers in the pre-sale phase are requesting contiguous capacity to ensure long-term access to contiguous cabinet resources in the future, especially in high-demand markets. A2: David, I'd like to add to Adaire's response. It's worth noting that pre-sales orders are not included in the $394 million annualized gross bookings we mentioned. In some strategically important markets with capacity shortages, we may see a shift towards early pre-sales. We have indeed seen significant seasonal fluctuations in the past, but due to the changing supply and demand landscape, these fluctuations have diminished significantly. However, this also means that in some future quarters, pre-sales activities may exceed normal gross bookings, and these pre-sales will convert into revenue later. Therefore, we anticipate a dynamic equilibrium in the future: sometimes gross bookings grow faster, sometimes pre-sales are stronger. We will guide the market forward when clear trends emerge. For example, if we find that capacity has been sold out in five key markets, we will alert the market that pre-sales activity is expected to outperform normal gross bookings in those regions, which are often slower to convert to actual revenue. Q: Very good. Please talk about the revenue growth and ARPU (Average Revenue Per User) of your cross-connect revenue. What is driving this increase? Is it due to higher power densities, or changes in customer structure? Also, this growth primarily comes from the Americas region, is it possible to replicate this strong performance in other regions or globally? Can it be said that the success in the Americas can serve as a model for other regions? A: Thank you for your question. Indeed, the Americas region is currently our strongest region in terms of demand for interconnection products. In this quarter, we saw the addition of 7,100 physical and virtual interconnections, driving an 8% year-on-year increase in our interconnection revenue. In terms of customer groups, technology and infrastructure service providers and cloud service providers are the main drivers of this growth, particularly focused in the Americas business. As these customer groups and industries expand to other regional markets, we expect this growth momentum to gradually replicate and spread to other regions. However, as you rightly assessed, the strong performance in this quarter is primarily driven by the Americas region. The main factor driving this growth is the customer structure. Q: Firstly, I'd like Keith to answer a question. You mentioned on the call that you are accelerating the pace of some construction projects and capitalizing some related expenses. Will this change your view of the AFFO level or growth trajectory? In other words, has there been an adjustment compared to the mid-term AFFO growth path disclosed on Analyst Day? Secondly, Adaire, from a technical perspective, could you talk about the addressable market size for the distributed AI infrastructure solution and other emerging products? How do you view these opportunities? A1: Okay, I'll answer the first question, and then hand it over to Adaire. As I mentioned earlier, our current borrowing costs are lower than originally planned, and there will be multiple refinancing operations in 2026, 2027, and 2028. The underlying assumptions have also changed accordingly. However, I don't want to modify guidance prematurely on today's call because we will provide a detailed plan next year in our February 2026 earnings call. But I can say that borrowing costs are lower, cash returns are good, and with the increased capitalization of expenses associated with accelerated construction pace, you will see more interest being capitalized on the balance sheet. A2: Addressing the product portfolio - as you saw, our interconnection revenue reached $4.22 billion this quarter, showing a significant increase year-over-year. The growth in our Fabric product has been particularly pronounced, with a 57% year-over-year increase and reaching a total Fabric bandwidth allocation of 110 Tbps. These figures confirm Equinix's connectivity advantages and market opportunities, showcasing the range of services we provide - covering deployment needs for AI and non-AI workloads. It can be said that connectivity is Equinix's "secret sauce." But I believe that connectivity is not the only dimension customers choose Equinix for. For customers deploying inferencing workloads on Equinix, they consider not only low latency but also: 1) Model provider flexibility; 2) Edge processing - to lower data transfer costs; 3) Data residency and compliance - ensuring sensitive data is handled locally; 4) IP protection. All these elements reflect the comprehensive advantage of Platform Equinix in workload deployment and layout. Therefore, I believe this business segment represents a very substantial growth opportunity, and we will continue to evolve