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F500-2021-461-Equinix

The internet and data company is currently the largest data center colocation provider, providing private companies and public organizations with internet and data services.

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Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Equinix is a digital infrastructure company, empowering digital leaders to accelerate innovation and scale with agility. By harnessing Equinix’s trusted platform, organizations can interconnect foundational infrastructure at software speed—assisting in the launch of digital services, delivering exceptional experiences, and driving greater value, all while advancing sustainability goals. Equinix powers this transformation through the world’s largest and most interconnected global data center network, spanning 270 data centers across six continents. With a vibrant ecosystem of more than 10,000 customers, Equinix connects businesses directly to the partners and providers they need to succeed in the digital age.

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Equinix (EQIX): Company Profile, Stock Price, News, Rankings

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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.

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 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 Adaire Fox-Martin, CEO and President, Olivier Leonetti, CFO, and Phillip Konieczny, SVP of Finance. At this time, I'll turn the call over to Adaire.

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 will start with demand.

It is strong, it is broad-based, and it is 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 do not 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 is 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 atNorth transaction. Including atNorth, AFFO per share was up 18%. In this environment of growing demand and constrained supply, pricing is a top focus. There is no question this is becoming a more meaningful lever for us, and we expect that trend 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 have 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 from 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 One, 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. We are entering beta with a broad range of customers ahead of general availability early next year. 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 kind of solutions will help us stay ahead of what our customers and partners need and highlight just a few examples of these types of needs we are 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.

I will turn to that next. We have 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 are well on our way to filling future capacity, with 15% of retail capacity coming online in 2027 already pre-sold. 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 atNorth 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 a megawatt sits matters. A megawatt in a major interconnection hub is worth more than one elsewhere. That is 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 do not 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 is 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 is how we have always done business, and it is why we are 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. 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 rating, 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, creates an engine of compounding growth and value creation.

That is 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 is a big reason we are confident in the road ahead. Olivier will walk you through more detail on our performance, balance sheet, and outlook. Olivier, over to you.

Thank you, Adaire. Our strong third quarter performance reflects our differentiated market position and ability to support the diverse and evolving set of technology requirements. Through unmatched infrastructure, interconnection, and ecosystem, we are 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. AFFO per share increased 12% year-over-year on a normalized basis. Including the atNorth closing, AFFO per share increased 18% year-over-year.

Our non-financial 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 kilowatt per cabinet and in at an average density of 7 kilowatt per cabinet, reflecting rising densities from AI workloads.

We added 6,900 net interconnections in the quarter, and we increased net cabinet billing by 5,700 in the quarter, while our backlog sold but not yet installed reached a record level. Slide 10 detailed 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 yields, 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. T

urning 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 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. 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 focus aspects of our financial position. Per our long-term outlook, we will 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%-11% and total revenue growth of 12%-13%.

For the full year, we are 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%-11% growth year-over-year. Adjusted EBITDA by $70 million to a margin of approximately 51%. AFFO by $90 million, including a $31 million contribution from atNorth. AFFO per share of $0.92 to a range of 11%-12% growth year-over-year.

Excluding real estate acquisitions and xScale, we continue to expect total capital expenditures of $5 billion-$6 billion. As Adaire noted, a significant proportion of our planned capacity addition for the remainder of 2026 and 2027 is already committed through bookings and pre-sales, 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.

Thanks, Olivier. I will 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 are 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 is the foundation of long-term value creation, and it is why we are confident in our direction. With that, let us open the line for questions.

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. Press star one to be added to the queue. Our first question comes from David Guarino with Green Street. Your line is open.

Hey, thanks. Question on the gross bookings number, since that is still a new metric we are getting used to. Any additional detail is helpful. 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? Could you just remind us, too, if the atNorth portfolio was included in the 3Q figures or if that is excluded?

Okay. Hi, David. Thank you for the question. Annualized 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 did not represent actually the full range of our total sales activity, which, if we include pre-sales, 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. The momentum in the business is very strong at this point. As it relates to atNorth, can I just get reminded of the question, unless did you catch it, Olivier?

Yeah, I did. David, atNorth 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 atNorth, and you will see that in the earnings, other incomes. But no impact in the numbers we have you had these questions for.

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

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? Lastly, stabilized recurring revenue growth has generally been in the mid-single digits and was 7% this quarter. With the various pricing leverage you have available, what do you think that growth could ultimately look like?

Okay. Hi, Ari. There are three big questions in there. 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.

First off is new deals. So this is the going rate for a unit of capacity. 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 life cycle.

But it does give you an opportunity then to review your install 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 install 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. It gives us the ability to review those contracts and pricing in shorter time frames.

Finally, once you look at our pricing capability in terms of new deals, the opportunity to do a mark-to-market with our install 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 cap, and all of them contribute to the stabilized yield of 27% cash-on-cash returns that you saw. 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 intention 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 One and the Equinix Inference Exchange.

This will provide an increasing enabler for enterprises executing against their evolving technology strategy. 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.

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 co-lo revenue. I think an indicator of a trend for the broader base within Equinix.

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 20 cash-on-cash yields. Clearly, we are executing well. I'm not going to go to the details of the various levers. We'll come back to you when these numbers needs 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.

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

Thanks, and good afternoon. First, curious if you could share more detail as to what's been driving down your MRR churn on a quarterly basis. When you think about the guidance that you gave for annual revenue growth over the long term, the annual rate, I think you set it at 10%-13%. I'm curious what churn assumption you thought about there, because if it's the 2% to 2.5% that you historically used, so 2.25% at the midpoint, you've been averaging like 1.7% to 1.8% last three quarters.

That's a 50 basis point difference, or on an annualized basis, 2%. I'm just trying to wonder what that means for your revenue growth opportunity over time. Secondly, in the prepared comments, you referred to 25,000 transactions from a certain cohort of customers.

I think in the past that you kind of framed that in deal terms as opposed to transactional terms. 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.

Yeah. Thanks so much, Mike. 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, 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 co-lo market dynamics. 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%-2.5%, and that's something that we'll 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. 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 related to the number of transactions and the 25K number that we mentioned. We have actually mentioned this in previous earnings.

This is primarily the transactions that run through our portal. Transactions that are self-served by customers, they might tend to be extensions to existing facilities. It might be a couple of additional cross-connects or something where you don't really want to deploy the cost of sale on providing that service through to a customer.

The portal process is an important aspect of our go-to-market motion, it extends our reach, manages our cost of sales, and allows customers to self-serve in a very simplistic way in order to increase their footprint at Equinix as appropriate.

Thank you. Our next question comes from Eric Luebchow with Wells Fargo. Your line is open.

Thanks for taking the question. I know it's only been one quarter since you updated the long-term guidance range, but just thinking through the strong bookings that you had in the third quarter, and it sounds like you're off to a very good start in Q4. The ramping capacity deliveries, but then just coupling that with changing interest rates up a lot since you last reported. How that all informs how we should think about the long-term guide, the lower half versus the upper half as we look forward into 2027 versus the latter part of the guide. Thank you.

Thanks so much, Eric. Thank you for commenting that it's only been 90 days since we updated our outlook. Look, at a high level, we are actualizing exceptionally well against our expectations. Demand is strong. You can see this in the record sales activity, in the lower churn, and in the revenue performance.

We have a very healthy pricing environment with new deal pricing up 12%. Expenses are very well controlled and I think with more to come over the next few years. We're delivering capacity ahead of schedule and at consistently strong returns, and this is a testament to the very hard work of our GDC teams globally. The team remains highly focused on delivering the critical capacity that we need in order to support our customers' growth and cross our portfolio. We don't really see this as a demand question.

It's really an execution opportunity against a complex and dynamic environment. In our outlook, we had assumed some higher levels of rates because rates have moved higher. We believe that we have some real cost of capital advantages. I guess all in all, we're pretty confident about our long-term guide.

Thank you. Our next question comes from Michael Funk with Bank of America. Your line is open.

Yeah, great. Thank you for the questions today. Adaire, earlier, I think you mentioned you have a number of projects in progress, of course, across various areas. Can you comment on if any development delays that you're seeing with those projects and particularly where those delays exist? Then maybe second, if I could, on the margin expansion, showing good progress this year, can you walk us through opportunity for further margin expansion and leverage you can pull?

Okay. Thank you so much for the question. I will take the project question, and perhaps Olivier will comment for you on the margin expansion. I guess there is a number of concerns in the market more broadly around a few factors that impact our segment.

Factors such as power availability, community sentiment, and regulation, all three converging on our industry simultaneously. I think there are a few factors here that are extremely important to understand about Equinix's ability to navigate those three sets of very different challenges, and of course, the concerns that you voice are very valid concerns. We have been operating and building data centers for three decades, so we are not a new entrant to this market.

That means that we have a track record of collaboration, of transparency, of early engagement, of stewardship, all of the things that matter to the communities that we operate in, and all of the things that we engage directly with communities on. We have a very differentiated pipeline when it looks at our builds. First of all, our build profile is quite different.

We are building between 40 to 60 megawatts on average and underpinning everyday core critical workloads with that. As I mentioned, we do have three gigawatts of developable capacity, but we only announce when we have been through some external hurdles. In other words, when we know that we have cleared permitting schedules, when we have energized that land, and so on. We have a very diversified portfolio and pipeline. This quarter alone, we have 48 builds across 32 cities.

This means that we can manage opportunity and we can manage challenge, moving one project forward to perhaps supplement another that might have slowed down. I also think it is important to understand that we are not doing very many greenfield developments where we are breaking soil on greenfield in the first instance.

Most of our developments are in industrial zones. Often it is the fifth building on a campus where there may already be five and people are very familiar with us. That kind of mitigates a little some of the sentiments that other larger builders are potential feeling. It does not mean that we are immune to all of the things that are happening in the industry. For example, we had a project underway that we were looking at in Dubai, and given what is happening in the region at a macro level, we delayed that project.

But again, because we run a portfolio, we were able to supplement other projects in. It also does not mean that we do not experience some delays as it relates to power. But typically, with the utilities, because we are asking for a much smaller footprint than others, we have more certainty about that power delivery. All in all, we feel really confident given the different way that we are executing against our capacity, even against the backdrop that we are not tone-deaf to. We are very confident about our ability to deliver the capacity that our growth objectives need. Olivier, did you want to comment on that?

Yeah. To comment on the profitability. Clearly, our team is executing very well on multiple levels. So we are operationalizing our game plan and the elements of our 2029 guide very well. A few statistics, and Michael, I know you know those, but a reminder, we expect to increase the EBITDA margin by 2 points in 2026 relative to last year.

And we said we would end up the year at about 51%, and we said we will be over 53% or over by 2029. Now, your questions about the levers. Multiple pricing, and we spend a lot of time on this call to describe how well we are doing today in term of new deal pricing, renewal, and upsell. SG&A is also a key lever.

You can read that in the P&L today, the progress we are making at Equinix, functionalization, standardization, automation are the levers we will use then. Last but not least, our team and our operating team is managing cost to build data centers very well as well despite the environment. So we feel good about how we are operationalizing margin improvement, Michael.

Thank you. Our next question comes from Nick Del Deo with MoffettNathanson. Your line is open.

Hi. Thanks for taking my question. Adaire, you seem very excited about Equinix Fabric One and the Inference Exchange. I was wondering if you could talk a little bit about the degree to which those products stem from Equinix trying to anticipate where the market is heading and trying to get in front of those trends versus responding to customers saying that these are solutions we need. Anything regarding the degree to which you think they might help revenue growth over the coming years would be interesting, too. Thank you.

Thanks so very much. Thanks very much, Nick. Yes, you're right. I am very excited about the capabilities that we're providing to customers here with these new products. Elements of this is really trying to get ahead of some of the challenges that we think our customers will need to navigate as they look to agentify large proportions of their business.

Of course, we don't do this in absentia of customer feedback. We have very active customer advisory boards and get a lot of input from them on some of the real-world challenges that you're facing. For us, Fabric One is really about enhancing the platform. It will allow networking to occur in minutes. What used to take weeks to put together with a whole variety of different items that you had to go and separately procure can now be done in minutes.

Think of it almost like as the agentification of this function. It's like the easy button for networking customers. They're going to identify where their data is, where they want it to go, and any additional parameters. Then in the background, it will execute the complexity of the network or deliver that, automate that through AI automation. We think that this is going to be a significant help for customers who are looking to enable their own inference and agentic strategies.

We were delighted to have both AWS and Google Cloud involved with us at Horizon as our integration partners, and we're working to ensure that more clouds join soon and continue expanding it across the ecosystem because it is a true point of multi-cloud, multi-model, multi-process interconnection and differentiation. With the Inference Exchange, this is a partnership with NVIDIA. NVIDIA will provide the compute.

We provide the space, power, interconnection, the ecosystem. Together AI is the first inferencing platform in. They provide the inferencing layer. In their inferencing layer, there is access to over 200 open models. This will enable our customers in a sea of ambiguity because there are a lot of architectural decisions that are being made now, but there's a whole range of changes that are happening at accelerated pace in terms of the technology.

So this type of environment with access to 200 open models allows our customers to avoid lock-in and to be able to change their services in a very flexible way. So these, I think, are two additional unique magnets that are drawing customers into our ecosystem. The official launch is next year.

We will be entering beta for both of these products over the course of this quarter, in fact, in the next few days with a number of customers for both of these. Then I think once we've come out of that process and gone into GA, then we will have defined pricing and packaging, and we'll be able to share what that might look like going forward in terms of impact on our longer-term guide.

Thank you. Our next question comes from John Petersen with Jefferies. Your line is open.

Oh, great. Thank you. Congrats on a good quarter. I wanted to ask, with all the disruption in the capital markets right now, there's a lot of new entrants that are struggling in the project financing market. Obviously, Equinix is insulated from that with your investment-grade balance sheet. I guess given that backdrop, do you view Equinix as potentially being a consolidator in this environment, maybe particularly with your xScale business?

We have a strong balance sheet. We're going to put our balance sheet mainly to fund the exciting growth we have in front of us, and I said that in my prepared remarks. We'd be able to double the capacity while increasing our leverage only moderately. It's at 4.1%. We would be opportunistic if good opportunities are facing us. That's where we leave it for now. But clearly we are in a strong position to manage what is in front of us on that front too.

Yeah. Just one thing I would add with regards to being opportunistic, exactly as Olivier said, I think the clear focus and where we are seeing a lot of the momentum is on the retail side of the business. With regards to where we see those opportunities, I think that would be more the orientation if those opportunities presented themselves versus on the xScale side.

Equinix (EQIX) Q3 2026 Earnings Call Transcript

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