Equinix, Inc. Q3 FY2025 earnings call

Top line growth

• Continued revenue acceleration with MRR growth of 8% year-over-year on normalized and constant currency basis.
• Achieved record annualized gross bookings of $394 million, a 25% year-over-year increase and 14% over Q2, from a highly diversified set of customers.

Profitability

• Delivered strong adjusted EBITDA margins and AFFO was up 12% year-over-year on normalized and constant currency basis, better than expected.
• Raising adjusted EBITDA, AFFO and AFFO per share guidance for the full year.

Expansion

• Advancing Build Bolder strategic move to double capacity by 2029, with substantial land acquisitions in Greater Amsterdam, Chicago, Johannesburg, London and Toronto supporting over 900 megawatts of retail and xScale capacity.
• Added seven new projects, opened 77th market in Chennai, India, with over 75% of retail expansion in major metros and over 90% of expansion CapEx on owned land or long-term ground leases.

Customer resonance

• Closed over 4,400 deals with more than 3,400 customers in Q3, reflecting demand for latency-sensitive AI and non-AI workloads, data residency and sovereignty requirements.
• Examples include Hyundai Motor Group, Zetaris, ING, Nitori using Equinix's infrastructure.

Serve Better

• Record $394 million annualized gross bookings, with $185 million presold balance of annualized gross bookings. Over 40% of Q4 bookings plan closed as of yesterday.

Solve Smarter

• Interconnection products had exceptional quarter with 8% year-over-year revenue growth and 7,100 net additions. Added two new native cloud on-ramps in Barcelona and Dubai. Unveiled distributed AI infrastructure solution.

Build Bolder

• Advancing delivery of capacity, with 58 major projects underway globally including 12 xScale projects, 20% of retail capacity accelerated, and North American JV showing progress.

Global Q3 revenues were approximately $2.32 billion, up 5% over the same quarter last year. Recurring revenue growth stepped up 8%. Global Q3 adjusted EBITDA was $1.15 billion or approximately 50% of revenues, up 8% over the same quarter last year. Global Q3 AFFO was $965 million, up 12% over the same quarter last year. MRR grew 8% year-over-year on a normalized and constant currency basis. Annualized gross bookings reached $394 million, a meaningful 25% increase year-over-year and up 14% over Q2. Interconnection revenue grew 8% year-over-year on a normalized and constant currency basis to $422 million, with 7,100 net physical and virtual connections added in Q3, bringing the total to more than 499,000. Revenues from owned assets are 69% of recurring revenues.

• Maintaining underlying revenue outlook with 7% to 8% normalized and constant currency growth rate for the full year.
• Raising underlying 2025 adjusted EBITDA guidance by $21 million, with adjusted EBITDA margins expected to range between 49% and 50% for the full year.
• Raising underlying 2025 AFFO guidance by $31 million, with AFFO expected to grow between 11% and 13%, and AFFO per share growth between 8% and 10%.
• 2025 CapEx expected to range between $3.8 billion and $4.3 billion, including approximately $290 million of recurring CapEx spend.

• Statements made are forward-looking and involve risks and uncertainties. Actual results may vary significantly from forward-looking statements and be affected by risks identified in SEC filings, including the most recent Form 10-K filed on February 12, 2025, and Form 10-Q.

Q: You have a very strong position with cloud on-ramps, and that's obviously helped to pull a lot of enterprise business over time. You've been starting to land some new cloud on-ramps and network nodes. Adaire, I think you mentioned Nebius and Groq in your prepared remarks. I guess how strategic do you think these deployments will be relative to some of the more traditional cloud on-ramps? And what are you doing to actively attract AI magnets like these?

A: Yes. Thank you very much for the question. Yes, you're right. We have a market-leading position in native cloud on-ramps, which is, I think, a very important part of the connectivity narrative that we have for our customers, and we're in a position to add two additional on-ramps this quarter to our installed base. We also, as you mentioned, have a very strong presence in terms of AI magnets sitting inside the Equinix ecosystem. Companies that I mentioned in my prepared remarks, they are like Zetaris, Lyceum who is a GPU as a service provider in Germany, Block, Groq with a Q, Outrider, Nebius, CoreWeave to name but a few. Many of these Neoclouds are using Equinix as a point of connectivity and a point of presence. And I suspect there's an element of attraction in terms of our 10,000-plus enterprise customers who are also making use of Neoclouds for data storage and for connectivity. So our team, particularly our team in the Americas focuses on this aspect of our customer cohort and manages and engages those relationships appropriately in order to ensure that we have the right magnet representation in our ecosystem going forward.

Q: On the strength in presale activity, I think you changed your approach with sales not that long ago to enable them to sell capacity further out from delivery. Is that some of what you're seeing helping to drive the strength there? And then maybe on a related basis, there's a lot of capacity that's set to come online in some of your most important markets. How much pre-leasing activity are you seeing for those?

A: Okay. Thanks very much for the question and for the repeat. I think that you saw in Q3 in addition to the annualized gross bookings of the $394 million that the team delivered, we also shared the cumulative total presold balance of $185 million of annualized gross bookings, which will be recognized in future quarters. This presales motion is a relatively newer motion for our core retail business. And we have recently extended the window for our sales team to be able to sell retail capacity ahead of delivery for the next 12 months. Previous to that, it was a 3- to 6-month window, and this presales opportunity is something that gives our sales team critical capacity to sell into. And it actually is a degree of comfort for our customers because it enables our customers to know where their deployments will be placed when they need them. And I think in the overall macro environment with the demand continuing to outpace supply, we actually have seen the velocity of presales increase over the course of 2025 through to Q3. I think Keith mentioned in his remarks that 40% of our total presales balance was signed in Q3 of 2025. So providing these two elements, I think, provides greater visibility to our investor community. That being said, when we look at the presales activity, it's fairly evenly spread across the capacity that's coming online, and we certainly have seen very significant activity around locations like Frankfurt, London and others where capacity is in short supply, New York, et cetera. And yes. So definitely seeing the uptick in this, which is why we decided to share that data point with you.

Q: Just wanted to touch on what you're seeing in kind of the pricing environment today. You said you're doing more presales. Are you seeing firm pricing or improving pricing just based on some of the capacity constraints we see in the market? And maybe just if I could squeeze one more in. I know you guys have kind of preguided to about a 5% AFFO growth rate next year. I know there's a lot of moving parts as we think into next year, but obviously, interest rates, financing costs looking a little better than you guided to. So any thoughts to some of the moving parts as we kind of roll our models forward to 2026?

A: Okay. Maybe I'll take the second piece first and then make some comments on the remarks, I think a part on your questions around pricing. So I guess as we look ahead into 2026, we're certainly focused on our execution in Q4. So revenue is a very prime focus for us, ensuring that we have a very strong exit from Q4. And we're certainly feeling very confident about the demand that we're seeing. And I guess our presale and our Q3 gross bookings is evidence of that demand. And Pete also mentioned the ability of our amazing design and construction team to be able to accelerate forward RFS dates. We are monitoring and forecasting RFS with the same intensity that we do for revenue. And we did see a 20% acceleration on the 58 projects that we have underway. So the first, I guess, two elements of our 2026 color is this focus on revenue, this focus on RFS acceleration date. We will also continue to focus on cost and how we are operating the business from an efficiency and effectiveness perspective in order to ensure that we're delivering a very strong operating performance. And I think you can already see some very positive trends there as it relates to that. And then, of course, there is the capital model and the astute management of our capital and our CapEx requirements, which Keith, you may want to comment on?

Q: You talked about the 900 megawatts of land acquisitions that you did in Amsterdam, Chicago, Johannesburg, London and Toronto. Can you give us just some more details on if any 1 or 2 of those sites are particularly larger than the others and where you might be expecting to build scale versus retail within those markets on that new land?

A: Okay. Yes. Thank you very much. We were very excited about those land acquisitions. We believe they're very meaningful and associated closely with the metros where we have a lot of demand from our customers. So as you know, these recent land acquisitions have really brought our land under control to a very significant level, enabling us to -- actually since last quarter to increase land under control to nearly -- by nearly 50%. In terms of how we view the various different elements of the portfolio here, in alignment with the long-term capital investments that we detailed at Analyst Day, we do plan to double our overall capacity, both inclusive of retail and xScale by 2029. And whilst we're not providing a very specific breakdown of the anticipated megawatt delivery between retail and xScale within these recent land acquisitions, we do anticipate that a significant proportion of London and Chicago land purchases will be earmarked for xScale business and will be contributed to the JV for which we will be compensated. And I think our global design and construction teams also remain highly focused on delivering critical capacity across the portfolio. And so to some extent, the split of megawatts between retail and xScale is somewhat fungible because of the full product continuum that Equinix offers across traditional retail, larger footprint retail and xScale. And so really, we're looking to maximize the value based on the opportunity that we see for each of those land acquisitions.