Q3 2024 Earnings Summary
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +7% | Increased from approximately $2.06B in Q2 2023 to $2.20B in Q2 2024, driven by IBX data center expansions, strong customer demand, and non-recurring services provided to JVs. This reflects ongoing organic growth despite a more moderate increase than Q2 2023. |
Interconnection | +9% | Grew from roughly $352M in Q2 2023 to $384M in Q2 2024, supported by higher gross adds and favorable pricing. Continued grooming activity and network consolidation slightly tempered net adds, but underlying demand remained strong. |
Other | +21% | Rose from about $31M in Q2 2023 to $37M in Q2 2024, influenced by leasing and hedging gains as well as foreign exchange fluctuations. These factors, which were less favorable in the prior period, contributed to the notable YoY rise. |
Asia-Pacific | +14% | Increased from around $439M in Q2 2023 to $500M in Q2 2024, largely due to IBX expansions, non-recurring JV revenues, and lower utility costs in key markets. This region benefited from strong demand in Singapore and Japan. |
EBIT | +12% | Improved from about $380M in Q2 2023 to $425M in Q2 2024, as revenue gains outpaced the rise in operating expenses. Lower utility expenses in Asia-Pacific and one-time benefits (e.g., asset sales) also contributed to higher EBIT. |
Net Income | +7% | Increased from approximately $277M in Q2 2023 to $296M in Q2 2024, reflecting greater operating income and a reduced effective tax rate. While rising interest expense posed headwinds, cost controls and gains on asset sales helped drive net income growth. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue Growth | FY 2024 | 7% to 8% | 7% to 8% | no change |
Adjusted EBITDA | FY 2024 | Raised by $15 million | Raised by $10 million | raised |
Adjusted EBITDA margin | FY 2024 | No prior guidance | 47% | no prior guidance |
AFFO | FY 2024 | Raised by $15 million, 11%-13% YoY | Raised by $18 million, 11%-13% YoY | raised |
AFFO per share | FY 2024 | 9%-11% | 9%-10% | lowered |
CapEx | FY 2024 | $2.8B - $3.1B | $2.8B - $3.1B | no change |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue Growth | Q3 2024 | 7% to 8% YoY growth | 6.8% YoY growth (from US$2,061.65In Q3 2023 to US$2,201In Q3 2024) | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
xScale expansions and pre-leasing | Consistently highlighted across Q2, Q1, and Q4 2023, with strong pre-leasing (over 300MW to 385MW deployed), new joint ventures, and expansions in multiple regions. | Aggressive expansion with plans to nearly triple xScale investment to US$15B JV, contributing assets like the 240MW Atlanta campus. 92% of operational and under-construction capacity now pre-leased. | Continued strong expansions |
Record gross bookings and strong pipeline | Previous calls (Q2, Q1, Q4 2023) also reported record or near-record gross bookings, robust pipeline depth, and high deal volumes. | Record gross bookings and a healthy forward-looking pipeline, with net MW sold in the core business up 60% QoQ. Presale activity de-risks future quarters. | Still robust |
Capacity constraints | Q2, Q1, and Q4 2023 calls also noted constrained markets (e.g., New York, Singapore, EMEA) and efforts to manage churn and add capacity. | Demand outstrips supply, especially in the Americas. Equinix leverages capacity-constrained markets to command higher pricing, adding 3,100 net billable cabinets globally in Q3. | Remains a consistent challenge |
AI workloads demand | Consistent growth in AI demand across Q2, Q1, and Q4 2023, with hyperscalers driving short-term training needs and enterprises accelerating AI adoption. | Strong AI-related demand across hyperscalers, service providers, and enterprises. Examples include shipping/logistics AI workloads and medical image analysis. xScale positioned as a force multiplier. | Growing significantly |
High capital expenditure needs | High CapEx consistently discussed in Q2, Q1, and Q4 2023. CapEx ranged from ~US$2.8B to US$3.1B annually, supporting global expansions and xScale projects. | CapEx of US$724M in Q3, expecting US$2.8B–3.1B for 2024. Building fewer, larger campuses to achieve scale. Funding xScale expansions via a US$15B JV. | Consistently high investment |
Elevated churn | Q2, Q1, and Q4 2023 calls also mentioned churn around 2%–2.5%, impacted by factors like StackPath liquidation and footprint optimizations. | MRR churn lower than planned due to timing shifts, but expected to settle in the 2%–2.5% range. | Still in expected range |
SEC and DOJ investigations | Mentioned in Q2 2024 (company cooperating with both agencies) and Q1 2024 (no restatements required); not mentioned in Q4 2023. | The documents do not mention any SEC or DOJ investigations in the Q3 2024 call. | No current mention |
Shift toward higher power density | Q2, Q1, and Q4 2023 calls highlighted increasingly dense deployments (e.g., 5.9kW in Q2), with AI training needs accelerating higher power demands. | Cabinets booked at ~6.2kW vs. churned cabinets at ~4kW, driving higher MRR per cabinet. Equinix adjusts metrics to reflect varying density. | Increasing emphasis |
Interconnection growth and pricing | Q2, Q1, and Q4 2023 calls reported steady interconnection growth, favorable pricing trends, and record gross interconnection additions. | Interconnection revenue up ~10% YoY, with strong cross-connect pricing. Interconnection now 19% of recurring revenue. | Continued growth |
Digital Services (Equinix Metal) performance | Discussed in Q1 and Q4 2023 with some momentum (e.g., integrations with Fabric, channel partner wins). Not specifically covered in Q2. | Relatively flat quarter-over-quarter, contributing ~1.25% of revenue. Seen as an important ecosystem driver, though not yet a major revenue source. | Stable |
Delays in new operational metrics | In Q1 2024, Equinix retained existing metrics (MRR per cabinet, billable cabinets) and decided against introducing new operational metrics. No mention in Q2 or Q4. | No new updates on additional metrics in Q3 2024. | No new mention |
Improving AFFO outlook | Similar upward revisions in Q2 (up US$15M) and Q1 (up US$25M), reflecting strong operating performance. Q4 2023 also cited 9%–12% growth. | AFFO guidance raised by US$18M, now growing 11%–13% YoY, with AFFO per share up 9%–10%. | Incrementally positive |
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Revenue Growth Outlook
Q: How will revenue growth trend heading into 2025?
A: Equinix expects strong revenue growth heading into 2025, driven by record gross bookings and a solid bookings backlog. In Q3, despite some persistent headwinds, they saw incredible improvement in their bookings trajectory due to robust demand and precise execution by their sales teams. They focused on demand shaping, landing megawatts into non-Tier 1 metros, which were 80% up quarter-on-quarter. They are confident that these factors, along with presale activities that derisk future quarters, position them well for continued growth. Pricing continues to be robust, and they aim to deliver another great quarter in Q4 for a strong exit into 2025. -
xScale Joint Venture
Q: When will the new xScale capacity come online?
A: Equinix is excited about the new xScale joint venture with CPP and GIC, which allows them to serve hyperscale customers' needs. They expect to begin deploying capacity as soon as the transaction closes, starting with the Atlanta campus, which will be moved into the joint venture. They anticipate a 12 to 18-month cycle to introduce this capacity and are working to bring it online as quickly as possible. Orders for long lead items have already been placed, and negotiations with power providers are underway, positioning them to deliver value much sooner than 2029. -
xScale Revenue Contribution
Q: How is xScale contributing to revenue and AFFO now?
A: While xScale currently represents about 1.25% of revenues and has been relatively flat quarter-over-quarter, Equinix expects it to be a significant contributor to future growth. They've sold into xScale 1.0 with a $700 million revenue run rate and over $6 billion in contract value. They believe that as deployments come online, xScale will deliver meaningful contributions to cash flow and AFFO, particularly given the new price points and yields from these investments. They anticipate seeing value accelerate through 2025 into 2026. , -
Pricing Trends
Q: Has pricing improved each quarter as supply tightens?
A: Pricing remains robust across all operations, especially in the Americas market where demand outstrips supply. Equinix continues to command price premiums in capacity-constrained environments and is able to support positive churn by replacing workloads with higher-value workloads utilizing the same space and power. They are landing megawatts into non-Tier 1 metros at premium prices, with megawatts in these metros 80% up quarter-on-quarter. -
Cash Usage and Leverage
Q: How will you use your cash and manage leverage?
A: Equinix ended the quarter with $3.2 billion in cash and short-term investments. They will use $1 billion to pay down debt in November, and after funding capital plans, acquisitions, and dividends, they expect to end the year with around $1.5 billion in cash. They have significant capital needs for future growth opportunities, including the xScale 2.0 initiative, and need cash to fund growth, pay dividends, and scale the business. Despite this, they maintain a net leverage of 3.5x, providing strategic flexibility without affecting credit ratings. -
Cabinet Growth Momentum
Q: Can cabinet growth continue to accelerate?
A: Equinix is confident that the momentum in cabinet additions will remain strong into Q4 and early 2025. In Q3, they added 3,100 net billable cabinets, driven by strong bookings, lower churn, and capacity opening up in key metros. Despite increasing power density, which allows them to sell higher-capacity cabinets (from 4-kilowatt to 6.2-kilowatt), they believe that based on the backlog of what's been sold but not yet installed, cabinet growth will remain solid. -
Cabinet Equivalent Adjustments
Q: What are the adjustments to cabinet disclosure?
A: Equinix has introduced a cabinet equivalent metric to account for increasing power densities in customer deployments. As customers consume more power per cabinet, they adjust the available capacity to reflect this, which can impact net utilization figures. They price to yield on a kilowatt basis, so higher power densities increase revenue per cabinet. This adjustment helps optimize assets and reflects changes in power utilization. , , -
Strategic Shift to Larger Campuses
Q: What are the benefits of focusing on large campuses?
A: Equinix is shifting its strategic focus to building fewer, larger campuses to achieve economies of scale, secure necessary power, and deliver capacity more efficiently to customers. This approach enables them to offer the entire spectrum of their product continuum to customers ranging from hyperscalers to enterprises, and to accelerate builds and phases into earlier time frames. It augments their strategy around design and construction, enabling continued growth. -
Demand and Supply Dynamics
Q: What's driving capacity additions in D.C. and the Americas?
A: Equinix is adding significant capacity in the D.C. market and the Americas because demand outstrips supply, particularly in North America. They are looking forward to releasing this capacity into the market, where they can serve customer needs and command a price premium in a robust pricing environment. This aligns with their shift to larger campuses and meeting customer demands in high-demand markets. -
Digital Services Outlook
Q: How are Metal and Network Edge progressing?
A: Equinix continues to see success with its digital services portfolio, particularly with products like Fabric and Network Edge. Fabric has achieved over a $250 million annual revenue run rate with a 40% attach rate, and they see opportunities to increase this rate. Network Edge has over 450 customers; while it's not yet a meaningful revenue contributor, it drives ecosystem engagement and is evolving. For Metal, it represents about 1.25% of revenues and has been relatively flat quarter-over-quarter. They are focusing on enhancing customer experience and improving digital interactions. , -
Interconnection Revenue Growth
Q: What's driving interconnection revenue growth?
A: Interconnection revenues have increased with a 10% year-over-year growth rate. The average price point per cross-connect is moving up, reflecting increased density and pricing. The contribution of interconnection revenues relative to the total revenue base has been increasing, influenced by factors like increased density and a robust pricing environment.