Equinix Q3 2026 Earnings Call Transcript

Equinix (NASDAQ:EQIX) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Equinix delivered strong Q3 results with double-digit growth in monthly recurring revenue, interconnection revenue, and AFFO per share, leading to an upward revision of the full-year guidance.

The company highlighted durable demand driven by a broad customer base and strong pricing power, with a 12% year-over-year increase in new deal pricing and a focus on renewals at higher rates.

Equinix expanded its capacity significantly, exceeding its retail capacity plan by nearly 40% for the year, while maintaining a strong balance sheet with low leverage and a 27% cash-on-cash return on stabilized assets.

Innovations such as Equinix Inference Exchange and Equinix Fabric 1 were launched, enhancing interconnection capabilities and supporting AI infrastructure deployments.

Management emphasized strategic execution in expanding capacity amidst industry headwinds, maintaining investment-grade credit ratings, and capitalizing on market opportunities for sustained growth.

Full Transcript

OPERATOR

Good afternoon and welcome to the Equinix third quarter earnings conference call. All participant lines will be able to listen only until we open for questions. We ask that you please limit yourself to one question and, if needed, one follow-up. Today’s conference is being recorded. If you object, please disconnect at this time. I will now turn the call over to Ryan Burke, Vice President of Investor Relations. You may begin.

Ryan Burke (Vice President of Investor Relations)

Good afternoon and welcome to our third quarter conference call. Before we get started, I want to remind you that some of the statements that we make today are forward-looking in nature and involve certain risks and uncertainties. Actual results may vary significantly from those statements and may be affected by the risks we identified in today’s press release. In our filings with the SEC, Equinix assumes no obligation and does not intend to update or comment on forward-looking statements made on this call.

In addition, in light of Regulation Fair Disclosure, it is our policy to not comment on our financial guidance during the quarter unless it is done through an explicit public disclosure. On today’s conference call, we will provide non-GAAP measures. We provide a reconciliation of those measures to the most directly comparable GAAP measures, included in today’s press release on the Equinix Investor Relations page at www.equinix.com. We have made available on the IR page of our website a presentation that we will refer to along with certain supplemental financial information and other data. With us today are Adair Fox Martin, CEO and President, Olivier Leonetti, CFO, and Philip Kanesmi, SVP of Finance.

At this time, I’ll turn the call over to Adair.

Charles Meyers (he/him) (Chief Executive Officer and President)

Thank you, Ryan, and good afternoon, everyone. Q3 was a strong quarter that demonstrated the growing importance and differentiated position of Equinix in an evolving market. Enterprises are relying on our interconnected ecosystem more than ever, and you can see this in our results. We delivered double-digit growth in monthly recurring revenue, interconnection revenue, and AFFO per share. These are the key metrics that drive long-term value creation, and we are once again raising our full-year guidance.

I want to thank our teams around the world for the disciplined execution that went into delivering such strong performance. We’ve met with many of you over the past few months. A few common themes emerged. I’d like to speak to these themes directly today. First, why we believe our demand is durable and how our pricing strategy reflects the value we enable for customers and partners. Second, how we are delivering capacity at pace in an environment where power availability, legislation, and community sentiment are creating some industry headwinds.

Third, how our balance sheet is an advantage when it comes to funding growth amidst the volatility we have all seen in recent weeks. I will frame this quarter’s results through these three lenses so that you have a clear view of each. I’ll start with demand. It’s strong, it’s broad-based, and it’s durable. We have a unique purview to this. We serve customers across nearly every industry and workload, and no single customer accounts for more than 2.5% of our revenue. During the quarter, we executed more than 25,000 transactions across more than 3,200 customers. The breadth of our customer base means that our results don’t rely on any single customer, industry, geography, or technology trend.

Our ecosystem adds to the durability of demand, including more than half a million interconnections, and every new participant makes it more valuable for everyone within it. As we actively engage with our customers and review market data, we see firm evidence of sustained enterprise infrastructure investment, both traditional and AI-related. Large enterprises, particularly in financial services, are building out their own hybrid AI infrastructure.

This is contributing to what you see in the industry. Data server spending is projected to grow more than 80% and AI server backlogs have doubled this year. More than 80% of enterprises are running or planning AI at the edge, and more than one third of large enterprises have used five or more AI models, a trend we expect will continue as they optimize their token costs. Against this backdrop, enterprises have a growing need for solutions that simplify complexity, accelerate deployment times, maximize returns on their investments, and deliver lasting value.

These are the things that Equinix does exceptionally well, and it’s showing up in our results. Monthly recurring revenue grew 11% on a normalized and constant currency basis, our fourth straight quarter of double-digit growth. Interconnection revenue grew 10%, with Fabric up 24%. Churn was just 1.7%, an indicator of how enduring our customer and partner relationships are, strengthened by interconnection. Sales volume accelerated. We delivered record annualized gross bookings of 533 million, up 35%.

Total sales activity, which includes pre-sales, grew 38%, marking our third straight quarter north of 30% growth. We are profitably growing our market share, and we have already booked 60% of our Q4 bookings target. All of this is contributing to strong financial performance. AFFO per share grew 12% on a normalized basis, excluding the AT North transaction. Including AT North, AFFO per share was up 18%. In this environment of growing demand and constrained supply, pricing is a top focus. There’s no question this is becoming a more meaningful lever for us, and we expect that strength to continue. It starts with new deals, which are a leading indicator. Pricing on new deals was up 12% year over year in the quarter. That same demand strength also benefits in-place contracts that come up over time. We’ve made renewals a focus, and we are already seeing results, including healthy increases in negotiated pricing.

Customers need access to an ecosystem, not just space and power. The value we deliver for them is reflected both in our pricing and in our strong yields. We see a meaningful pricing opportunity as contracts renew and our innovation creates even more value for our customers. This quarter we announced strong innovation across our portfolio. Last month we introduced Equinix Inference Exchange with NVIDIA and Together AI; it gives enterprises a faster path from pilot to production with the freedom to choose from more than 200 open models for every workload. We also unveiled Equinix Fabric 1, which will broaden the opportunity for interconnection. It lets customers simply define the connectivity outcome they need and the network composes itself.

AWS and Google Cloud are our lead integration partners, and we’re entering beta with a broad range of customers ahead of general availability early next year. And just last week we opened a global network of innovation centers where enterprises can test liquid-cooled AI infrastructure in real-world conditions before they scale. This is an area of growth, with Q3 liquid cooling bookings up more than tenfold year over year. These kinds of solutions will help us stay ahead of what our customers and partners need.

I’ll highlight just a few examples of these types of needs we’re seeing and how we met them in Q3. Eaton, a global leader in intelligent power management, used Equinix Managed Solutions, Network Edge, and Fabric to deploy a new compute, storage, and network platform for rapid application migration. They chose Equinix because we bring these capabilities together in one place with the global reach and necessary interconnection between systems. Virtu Financial, one of the world’s leading electronic market makers, continues to expand its footprint with Equinix.

Our proximity to major exchanges, market data providers, and partners helps Virtu deliver the speed, availability, and connectivity its trading platforms demand. We are collaborating with Texas A&M Engineering Experiment Station to build a next-generation AI research environment. Together with Dell and AMD, Equinix is delivering a 1.2 megawatt liquid-cooled AI deployment in Dallas, providing the agency with the power, connectivity, and room to scale needed to achieve new breakthroughs.

Customer demand is only part of the picture. Capacity is what ultimately turns that demand into sustained growth, so I’ll turn to that next. We’ve been building data centers for nearly 30 years. Whilst power availability, legislation, and community sentiment have created some headwinds for the industry, our results continue to demonstrate our ability to expand our capacity and accelerate our delivery timelines. We have significantly increased the number of cabinets we initially planned to deliver in the second half of this year, and we now expect to exceed our retail capacity plan for the full year by nearly 40%.

We expect more than 13,000 cabinets in Q4, our highest quarter of delivery on record. And more than 20% of that Q4 capacity has been pre-sold. We’re well on our way to filling future capacity, with 15% of retail capacity coming online in 2027 already pre-sold. But what matters most of all for the road ahead is our pipeline. We have 3 gigawatts of developable capacity, which includes our projects currently in progress. About 80% of that is in our top 25 metros, and the land, power, and permitting is largely secured.

On top of that 3 gigawatts, the AT North transaction we completed this quarter with CPP Investments brings an active development pipeline of 800 megawatts coming online over the next five years, as well as an additional 1 gigawatt of opportunity for future expansion. I want to emphasize that capacity isn’t simply a numbers game. Where our megawatts sit matters. A megawatt in a major interconnection hub is worth more than one elsewhere. That’s why we focus on yield, not just megawatts, and why we can deliver returns well above our cost of capital.

We serve core, critical workloads that run the everyday economy. Our new retail builds are sized for these use cases, generally 60 megawatts or less, and they are substantially smaller than the large-scale campuses drawing the most regulatory attention. We also don’t depend on any single build to meet our growth objectives. We have 48 projects across 32 markets currently in progress. That lets us manage risk and opportunity across the construction process.

All of this gives us a high degree of confidence in our ability to execute against our development pipeline as our industry expands. Communities have legitimate questions and concerns. We take these concerns seriously. It’s incumbent on companies to earn trust in their communities. Equinix has built strong relationships with municipalities, utilities, and neighbors since our founding. We show up early and we engage openly before we build. We listen intently and adapt to local feedback, and we invest for the long term. That’s how we’ve always done business and it’s why we’re so well positioned today.

Our teams bring deep experience and a clear understanding of how to align the needs of our business with the needs of our neighbors, and our recent work in Georgia is a good example of this. This quarter we announced a 20-year agreement with Central Georgia Electric Membership Corporation. Equinix will fund the new substation and transmission lines our campus requires and cover all costs undertaken by the utility on our behalf. This protects local ratepayers whilst giving us reliable, long-term access to the power we need to grow.

Our investment is also expected to bring up to 20 million a year in local property tax revenue and nearly 1,000 local jobs, creating a true win-win. We build with communities, not around them, and this will remain our approach as we deliver the capacity our customers need. Delivering capacity at pace takes capital. My view on this is pretty simple: how and where you allocate capital matters as much as what you build, especially when markets are volatile and uncertain. This is where our financial strength is a true competitive advantage, as it provides stability whilst enabling value-creating investments and growth. We believe we will be able to drive significant capacity expansion whilst maintaining our investment-grade credit ratings, low leverage, and favorable cost of capital.

Our stabilized portfolio generated a 27% cash-on-cash return during the quarter. We have consistently earned mid-20% returns, and we expect to do the same on new capacity in the coming years. Those returns, combined with our broader competitive advantages, create an engine of compounding growth and value creation. That’s why we expect revenue and AFFO growth through our long-term outlook period. Our financial strength allows us to make sustained investment in growth, and it’s a big reason we’re confident in the road ahead.

Olivier will walk you through more detail on our performance, balance sheet, and outlook. Olivier, over to you.

Olivier Leonetti (Chief Financial Officer)

Thank you, Adaire. Our strong third quarter performance reflects our differentiated market position and ability to support a diverse and evolving set of technology requirements. Through unmatched infrastructure, interconnection and ecosystem, we’re helping customers simplify complexity, accelerate deployment, maximize returns and deliver value. Turning to slide 7 on the earnings presentation, with all growth rates presented on a normalized and constant currency basis, monthly recurring revenues increased 11% year over year and total revenues increased 12% year over year, reflecting underlying demand strength and conversion of record bookings into revenue. Our adjusted EBITDA margin was 51.4%, up 180 basis points year over year, driven by strong revenue performance, continued cost discipline and operating leverage, and AFFO per share increased 12% year over year on a normalized basis, including the Up North closing.

FFO per share increased 18% year over year. Our nonfinancial metrics also demonstrated continued momentum and clear progress against our strategy. As Adaire mentioned, pricing on new deals was up 12% year over year. We expect this pricing strength will be durable. Churn was again well managed at 1.7%, primarily due to renewal execution and timing. Customers churned out at an average density of 5 kilowatts per cabinet and in at an average density of 7 kilowatts per cabinet, reflecting rising densities, probably from AI workloads.

We added 6,900 net interconnections in the quarter and we increased net cabinets billed by 5,700 in the quarter, while our backlog, sold but not yet installed, reached a record level. Slide 10 details the strong performance and returns generated by our investments. Our 193 stabilized assets are collectively 83% utilized. Interconnection revenue in this pool increased 10% year over year, outpacing colocation revenue performance at a strong 7% growth year over year. We generated a 27% cash-on-cash yield, reflecting the differentiated value we provide for our customers. On slide 11, total capital expenditures for the quarter were approximately $1.6 billion, with roughly 90% directed towards capacity expansion.

Since our last earnings call, we opened six new projects across six metros including Dubai, Frankfurt, Miami, Paris and Sydney. Turning to Slide 12, our balance sheet and capital strategy are competitive advantages that enable significant growth due to the mix of low leverage, favorable cost of capital and the strong returns which we generate. A few highlights: we have 4.1x net leverage, $9.1 billion of available liquidity, a 3.2% blended in-place borrowing rate, primarily fixed with an average maturity over six years, access to lower-cost capital globally to fund growth and, as Adaire mentioned, a significant spread between our cost of capital and the mid-20% cash-on-cash yields we achieve on investment.

We utilize the wide range of capital sources available to us. Our capital strategy is helping drive multiple years of outsized growth while retaining the stability-focused aspects of our financial position. Per our long-term outlook, we plan to double the size of our portfolio with only a modest leverage increase, allowing us to maintain our current and critically important investment-grade credit ratings. Please now turn to slides 14 to 17 for an update to our guidance. All growth rates are presented on a normalized and constant currency basis. Supported by the robust demand environment and strong execution, we are raising our 2026 guidance. It reflects our recent outperformance and improved outlook for the remainder of the year. For the fourth quarter, we expect continuing strength, including year over year monthly recurring revenue growth of 10% to 11% and total revenue growth of 12% to 13%.

For the full year, we’re raising guidance for the following key items: total revenue by $100 million to approximately 12% growth year over year; monthly recurring revenue to a range of 10% to 11% growth year over year; adjusted EBITDA by $70 million to a margin of approximately 51%; AFFO by $19 million, including a $31 million contribution from Up North; and AFFO per share of $0.92, to a range of 11% to 12% growth year over year. Excluding real estate acquisitions and Excel, we continue to expect total capital expenditures of $5 to $6 billion.

As Adaire noted, a significant proportion of our planned capacity addition for the remainder of 2026 and 2027 is through bookings and presales, increasing visibility into future growth and returns. In closing, our differentiated positioning, strong performance and strategic execution provide a high degree of confidence in our robust outlook for 2026 and the coming years. I now turn the call back over to Adaire.

Adaire Fox-Martin (Chief Executive Officer & President)

Thanks, Olivier. I’ll sum up by saying demand is strong across our diverse customer base, with greater pricing power beginning to materialize in our results. Capacity is expanding ahead of plan and the strength of our balance sheet is enabling investments in growth at attractive returns. We’re extremely well positioned in the current market and our Q3 results bear this out. Driven by sustained progress against our strategic pillars of Serve Better, Solve Smarter and Build Bolder, we will remain agile and resilient with a relentless focus on what we control and disciplined execution to capitalize on the significant opportunities ahead.

Equinix is the neutral exchange enterprises trust to run, connect and orchestrate their most critical workloads. Our differentiated platform, our disciplined approach to capital and our ability to execute at scale set us apart. That’s the foundation of long-term value creation and it’s why we’re confident in our direction. With that, let’s open the line for questions.

OPERATOR

Thank you. We will now begin the Q&A session. We ask that you please limit yourself to one question and, if needed, one follow-up, and again press Star One to be added to the queue. Our first question comes from David Guarino with Green Street. Your line is open.

David Guarino (Analyst)

Hey, thanks. Question on the gross bookings number. Since that’s still a new metric we’re getting used to, any additional detail is helpful. But was this an outlier quarter or do you think the business has the potential to push north of half a billion dollars going forward at a sustainable pace? And then could you just remind us too if the Up North portfolio was included in the 3Q figures or if that’s excluded.

Adaire Fox-Martin (Chief Executive Officer & President)

Hi David, thank you for the question. Gross bookings are those bookings that occur within the quarter where we anticipate that we will be able to convert them to revenue within a 90-day window. This was our first milestone past half a billion dollars in annualized gross bookings and didn’t actually represent the full extent of our total sales activity, which, if we include presales, meant that our growth rate year on year was at 38%. We have very strong, disciplined execution.

We have a very strong pipeline and, as I mentioned in my prepared remarks, we have 60% of our Q4 target budget already closed. So the momentum in the business is very strong at this point. As it relates to Up North… Can I just get reminded of the question? Did you catch it, Lydia?

Lydia

Yes, I did. So David, Up North was not part of those statistics. This is not going to be a consolidated entity. We will use the equity method to recognize our share of ownership of Up North, and you will see that in earnings, other income, but no impact in the numbers you asked about.

OPERATOR

Thank you. Our next question comes from Ari Klein with BMO Capital Markets. Your line is open.

Ari Klein (Analyst)

Thanks and good afternoon. Hoping you can provide a little bit more color on the pricing opportunity you’ve talked about. You’ve also previously alluded to potentially shifting cross connect pricing towards more of a consumption-based model. Would that represent an incremental opportunity on top of the renewal pricing? And then, lastly, stabilized recurring revenue growth has generally been in the mid-single digits and was 7% this quarter. With the various pricing levers you have available, what do you think that growth could ultimately look like?

Adaire Fox-Martin (Chief Executive Officer & President)

Okay. Hi Ari, there are three big questions in there, so perhaps Olivier and I will jointly answer them. Let me first refer to pricing, and I’ll probably do this more broadly. I think as we discuss pricing, the most important element for us in any discussion around pricing is the value that we deliver to our customer. So that’s front and center for us. From an environment perspective though, it is fair to say that we are in an exceptionally strong environment, and particularly as it relates to colocation because much of the capex in our industry is focused elsewhere.

There isn’t enough capacity to satisfy the demand that we see in the market. So we believe that we’re at the very early stage of durable pricing strength going forward. There are a few elements that drive this. First off, and let me walk you through them, the first off is new deals. So this is the going rate for a unit of capacity, and as you can see, that was at 12% growth year on year this quarter. As you look at the entry point, that ultimately obviously moves its way into MRR further in the customer lifecycle.

But it does give you an opportunity then to review your installed base through the lens of the price that you have at entry and to look at the spread against the current going rate. We have a very clear view of our available to renew. We have a very large installed base, as you know, and we are proactively activating opportunities to renew at higher rates. This is something that we will be able to enact over the course of the next period of time because often our contracts are shorter in duration than those that exist in the wholesale window.

So it gives us the ability to review those contracts and pricing in shorter time frames. And finally, once you look at our pricing capability in terms of new deals and the opportunity to do a mark-to-market with our installed base, then you can look at the incremental opportunities that we can add on top of our market momentum—incremental opportunities such as the power densities within our footprint and of course our interconnection portfolio. All of these pieces fuel MRR per cab, and all of them contributed to the stabilized yield of 27% cash-on-cash returns that you saw. So just a little bit of overview on our pricing dynamics.

The second part of your question related to interconnection pricing. Interconnection, as you know, is an extremely important differentiator for us. We currently have 2x the number of interconnections to our next largest competitor, and we’ve undertaken an intentional evolution of our interconnection offering where we are looking to enhance our interconnection offering with new products, both of which we launched last quarter: Equinix Fabric and the Equinix Inference Exchange, because this will provide an increasing enabler for enterprises executing against our evolving technology strategy.

So as we look at interconnection, which represents, as you know, 19% of our revenue, we are looking at this through the lens of the ability to look at packaging and pricing as part of our new product portfolio. But I think a great indicator of the trend for interconnection longevity in terms of pricing is our stabilized assets. As Olivier mentioned in his prepared remarks, interconnection shows a 10% growth over the 7% growth in stabilized assets colocation revenue.

I think an indicator of a trend for the broader base within Equinix.

Olivier Leonetti (Chief Financial Officer)

On your second question about the return on the stabilized assets and how this pricing dynamic, which is just the start and positive, will influence our mid-20s cash-on-cash yields. Clearly we are executing well. I’m not going to go into the details of the various levers and we’ll come back to you when these numbers need to change. But clearly the team is doing a great job at maximizing the value of the great assets we have built over the years.

OPERATOR

Thank you. Our next question comes from Michael Rollins with Citi. Your line is open.

Michael Rollins (Analyst)

Thanks and good afternoon. So first, curious if you could share more detail as to what’s been driving down your MRR churn on a quarterly basis and when you think about the guidance that you gave for annual revenue growth over the long term. So the annual rate, I think you set it at 10 to 13%. I’m curious what churn assumption you thought about there. Because if it’s the two to two and a half that you historically use, so two and a quarter at the midpoint, you’ve been averaging like 1.7 to 1.8 last three quarters.

That’s a 50 basis point difference on an annualized basis, 2%. I’m just trying to wonder what that means for your revenue growth opportunity over time. And then secondly, in the prepared comments you referred to 25,000 transactions from a certain cohort of customers. And I think in the past you kind of frame that in deal terms as opposed to transactional terms. And so I’m curious if you could put some context around what makes up a transaction and how does that 25,000 compare historically, just to put that into context in terms of the volume of business that you’re processing. Thanks.

Olivier Leonetti (Chief Financial Officer)

Thanks so much, Mike. So let me address the churn question. In the first instance, we have a number this quarter of 1.7% and that follows on from similar numbers in previous quarters. There are probably a number of contributing factors to this. One, I think, is the execution of our team, getting our arms around our available-to-renew, engaging with our customers early and ensuring that perhaps it isn’t just an opportunity to renew, but an opportunity to look at the negotiated pricing and an opportunity for upsell of other products and services within the Equinix portfolio.

I think the second element, of course, is market conditions. We are in a constrained capacity environment and so customers are less likely to churn out in that environment, in an environment where they perhaps have more multiple choices than are available to them today, particularly given the colo market dynamics. So those two, I think, are two elements. I don’t see either of those two necessarily changing in the short to medium term. We continue for the remainder of this year to look at 2% to 2.5%, and that’s something that will refresh when we refresh our guide in February.

However, as we do look at our install base and we look at the opportunity to mark to market in our install base, it is possible that we may choose to do selective churns, where we may choose to churn out with intention a customer that’s operating at a particular price point and perhaps low interconnection or network density, and churn in a customer that has some of the opposite parameters. And so you may see that number move as a result of some intentional activity on our part as we look at the opportunity for mark-to-market pricing during our renewal process.

Your second question relates to.

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