Equinix, Inc. Common Stock REIT Q2 2026 Earnings Call

Good afternoon, and welcome to the Equinix second quarter earnings conference call. All participant lines will be able to listen only until we open for questions. 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 second 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 identify in today's press release and 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 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. Good afternoon to you all. The AI-driven infrastructure cycle continues to accelerate, and it's playing directly to our strengths. Demand for neutral, interconnected, sovereign infrastructure is compounding across our business. Our global scale, differentiated portfolio, and unmatched ecosystems are converting that demand into durable, profitable growth. You see this clearly in our Q2 results. Monthly recurring revenue growth accelerated to 11% year-over-year on a normalized and constant currency basis. This marks our third straight quarter of double-digit MRR growth with strong profit performance. Annualized gross bookings grew 23%, our second highest volume on record. Total sales activity, inclusive of annualized gross bookings and pre-sales, grew over 30%, and we continue to see a record backlog.

We added 9,700 net interconnections, our most ever. AFFO per share grew 18% on a normalized and constant currency basis, a direct result of the disciplined execution by our teams around the world. Given the strength of our performance as well as our bookings and pre-sales momentum, we are raising our full year guidance and long-term outlook. For 2026, we now expect revenue growth of 11%-12% and AFFO per share growth of 10%-12%. This is the largest single guidance raise in the history of our company, reflecting broad-based durable demand and strong execution across our business. We continue to accelerate our capacity expansion to meet this growing demand. In fact, we will double the number of cabinets we deliver in the second half of the year. As a result, we now expect 2026 CapEx to range between $5 billion-$6 billion.

Looking further out, we expect to deliver top and bottom-line growth well ahead of the outlook we provided last year. Through 2029, we expect total revenue growth in the 10%-13% range annually, with AFFO per share growing 9%-12% during the same period. To capture the robust demand in front of us, we plan to invest $5 billion-$7 billion in CapEx annually through 2029. These are high conviction investments that we believe will deliver attractive returns whilst enabling the outcomes our customers need. We fully expect the new capital we're deploying to deliver the mid-20% yield you have grown accustomed to. Olivier will provide a more detailed view of our outlook shortly. Our revised outlook reflects more than a strong quarter.

It shows what a focused team executing the right strategy can deliver. We're doing it in a market that's materially stronger than it was a year ago. As the market has evolved, the nature of the demand has given us greater conviction in our plan. A significant proportion of this demand comes from the world's largest enterprises modernizing their on-prem infrastructure that was never built for today's broad-based distributed workloads. The remainder comes from net new AI native workloads and service providers powering them. In both cases, the majority are already Equinix customers. They increasingly need solutions we are uniquely positioned to deliver because of our consistent focus on this target market. All around the world, customers are confronting the same reality. Their networking, cloud, and AI workloads are growing more distributed, complex and demanding. They need infrastructure built for a new era.

Their workloads don't live in one place. They run across clouds, models, and geographies simultaneously in real-time. That's something compute alone can't solve. It requires connectivity at the intersection of everything. That point of intersection is Equinix. We have been at the center of every major shift in enterprise technology over the past 30 years. We were the neutral ground where the internet scaled. We were the neutral platform that made multi-cloud real. As inference and agentic AI unleash extraordinary capabilities alongside new layers of complexity, we are the neutral exchange where customers can run, connect, and orchestrate it all. This kind of connectivity has never been more important. No one has built what we have built. Our ecosystem is approximately twice the size of the next largest provider. As we curate the emerging AI ecosystem, our competitive advantage is growing.

Eight of the top 10 model providers, as well as eight of the top 10 neo clouds, are already running their key networking workloads on Equinix today. That kind of ecosystem density creates a flywheel of growth and value creation. Our infrastructure attracts interconnection-rich workloads. Interconnection expands the ecosystem. A more expansive ecosystem attracts more of everything, our momentum continues to build. Let me share some recent customer examples that bring our momentum to life. Leading AI cloud infrastructure provider OrionVM selected Equinix to power its fully managed private agentic AI bundle, helping enterprises deploy and scale sovereign agentic AI with a clear path to measurable ROI. Built on our secure, neutral infrastructure, the bundle supports private AI deployments, heterogeneous compute, and autonomous AI capabilities. Through OrionVM's collaboration with Tenstorrent, customers gain greater choice and flexibility at the AI accelerator layer.

SCX.ai, Australia's sovereign AI infrastructure provider, partnered with Equinix to build the country's first sovereign AI inferencing node, leveraging our Sydney operations. Equinix enables a faster, more governed path to integrating AI into core operations with a scalable foundation for expansion across Asia Pacific. Raymond James, one of the leading financial services firms, selected Equinix to augment their on-premise models to our multi-cloud infrastructure. Our ability to enable low latency connectivity to their customers' clouds and SaaS providers, as well as the strength of our overall financial services industry ecosystem, were key factors in their decision to grow their business using Equinix. We are working with Verizon to deliver enhanced enterprise connectivity by combining their adaptive network fabric with Equinix's neutral interconnection hubs. This integration via APIs allows for near real-time provisioning.

Our unmatched metro density, global scale, and advanced automation capabilities help customers like Verizon lower execution risk and accelerate service delivery. These examples are enabled by our progress against our strategic pillars. Starting with Start Better, we delivered annualized growth bookings of $424 million, up 23% year-over-year, a notable acceleration from Q1. In addition, we delivered approximately $110 million of pre-selling activity. Collectively, that's over 30% growth in total sales activity in the quarter. We have a robust pipeline entering the back half of the year, we've already closed over 45% of our bookings target for Q3. Our pre-selling motion continues to show very encouraging trends as we have now sold approximately 30% of our remaining 2026 retail capacity expansion. Secure Cabinet Express, our standardized business-ready colocation offering, is continuing to gain traction, with cabinet orders up more than 30% year-over-year.

It's a great example of how we're simplifying the customer buying experience to accelerate growth. On Solve Smarter, we are turning the demands of enterprise AI into products customers can deploy today. Most enterprises know what they want to build. The infrastructure to support it at scale is the challenge. Our expanded collaboration with Cisco and NVIDIA tackles this head on by bringing standardized AI factory blueprints and automation across our global IBX network. Through our new partnership with Presidio, customers can test and validate before they scale. That's how we help enterprises move faster with greater certainty. Data sovereignty is a challenge for enterprises and an opportunity for Equinix. Most networks were built for performance, not compliance. Our new Fabric Geo Zones offering was built for both. Traffic either flows along compliant paths or it is blocked.

Sovereignty is no longer a configuration, it is a property of the network itself. Fabric Geo Zones is in preview with approximately 80 enterprises around the world. These are two examples of our customer-focused product roadmap, we're just getting started. This week, we welcomed Chris Audie to Equinix as our Chief Product Officer. He brings extensive experience to the role, most recently as HashiCorp's Chief Product and Technology Officer for infrastructure and AI. His strong background spanning product, software, and infrastructure will help us accelerate and expand our solution portfolio. We also named Bruce Owen, a 16-year Equinix veteran with deep experience across our business, as EVP Global Markets, overseeing our three regions. Chris and Bruce strengthen our leadership team at exactly the right moment. Turning to Build Boulder, our teams continue to execute at a high level.

Our acceleration of more than 7,000 cabinets from 2027 into Q4 2026 reflects our confidence in our ability to deliver, as well as our commitment to bring capacity online faster to meet growing demand. This quarter, we announced significant new projects in Chicago, Istanbul, and Johor, with more expected throughout the remainder of the year. We now have 52 major projects underway across 33 markets. I also want to take a moment to emphasize something that matters deeply to us as we expand. In the communities where we build and operate, we're not a visitor. We are a neighbor. That distinction has defined our approach for nearly 30 years as we have built the essential infrastructure that underpins the everyday experiences and connections people depend upon. Across all of our markets, we engage early and transparently.

We listen and adapt to local needs, we invest for the long term because we are there to stay. That's how we build trust. It's what makes communities stronger over time. It's why we have been able to consistently execute our projects on time and at scale. This quarter, we published our U.S. Community Principles. They reflect the standards that have long guided our approach and that we hold ourselves to. This includes funding energy and grid infrastructure costs directly, investing in renewable energy and water use efficiency, and creating meaningful opportunities for the people around us, from construction and skilled trades jobs, to pathways for veterans, to programs that build the next generation of technical talent.

Based on our longtime leadership in these areas, I was in Washington, D.C. last week to support the Ratepayer Protection Pledge, our commitment to being a good neighbor extends to every community we're part of around the world. Let me close by saying Q2 was an exceptionally strong quarter and reflects a business that is hitting its stride. We have been deliberate about our strategy, focused in our execution, and disciplined in where we invest. As the market evolves and expands, our efforts are paying off, our decision to raise our guidance and put more capital to work reflects our confidence going forward. I'll now turn it over to Olivier to take you through the financials in detail.

Thank you, Adaire. Our unique positioning and strong execution are evident in our performance and raised outlook through 2029. We're driving momentum across our business with demand strength in every vertical, product, and channel. Looking at Q2 results on slide seven of our earnings presentation with growth rates discussed on a normalized and constant currency basis. Recurring revenues increased 11% year-over-year, reflecting the underlying strength of our business and record bookings converted into revenue. Total revenues increased 16% year-over-year. As expected, we closed 134 megawatts of xScale leases, including Hampton, which contributed approximately $120 million in non-recurring fees. Our adjusted EBITDA margin was 53%, up 300 basis points year-over-year. This is a result of continued cost discipline, scaling our operating leverage, and our xScale leasing fees. Excluding xScale leasing fees, our adjusted EBITDA margin was up approximately 150 basis points year-over-year.

AFFO per share increased 18% year-over-year. Our non-financial metrics also continue to demonstrate momentum and our strategy in action. We added a record 9,700 net interconnections. We added 4,200 net cabinet billings, and our backlog sold but not yet installed is at a record level. Churn was 1.8%, primarily due to our renewal process execution and some delayed churn. We expect to be near the lower end of our typical 2-2.5 range for the back half of the year. On slide 10, you see that our capital investments deliver very strong returns. Our 194 stabilized assets are collectively 82% utilized and generated a 27% cash-on-cash yields on growth PP&E. We continue to achieve these upside returns on assets we have delivered in recent years, reflecting our focus on offering differentiated infrastructure and services to our customers.

On slide 11, total capital expenditures for the quarter were about $1.6 billion, approximately 90% of which was invested in capacity expansion. Since the last earnings call, we opened new projects in Madrid, Milan, and Silicon Valley. Turning to our capital structure on slide 12. We have approximately $7.7 billion of available liquidity, including our recently upsized revolving credit facility, and our net leverage was 3.6 times annualized adjusted EBITDA. We continue to execute on our access to lower cost capital around the world to fund our growth. Please refer to slides 14-18 for an updated view of our 2026 guidance with all growth rates on a normalized and constant currency basis. Based on the robust environment and the team execution, we're raising 2026 guidance for the second consecutive quarter. The raise reflects our recent outperformance and a stronger outlook for the rest of the year.

For the third quarter, we anticipate continuing strength, including MRR growth of 9%-11% year-over-year, total revenue growth of 10%-12% year-over-year, and an adjusted EBITDA margin of 51%. For the full year, with dollar amounts discussed prior to FS adjustments, we're raising total revenue guidance by $100 million, improving our expected growth range to 11%-12%. We expect MRR growth to be around 10% at the high end of our prior range. We're raising adjusted EBITDA guidance by $62 million, resulting in an adjusted EBITDA margin of approximately 51%, a 200 basis point improvement over last year. We're raising AFFO guidance by approximately $50 million, driving an increase in our expected AFFO per share growth range to 10%-12%.

Excluding real estate acquisition and xScale, we expect total capital expenditures to be $5 billion-$6 billion as we accelerate capacity expansion into the year. As Adaire mentioned, a significant portion of our planned capacity additions for the remainder of 2026 are already committed through bookings and pre-sales, providing increased visibility into future growth and returns. Turning to our long-term outlook update. We are clearly in a stronger environment and the team is executing very well. We have been closely analyzing the market opportunity to calibrate where we stand and where we are headed. Through this, we have gained even stronger conviction in our strategy, positioning and trajectory. With AI as an accelerant, we expect demand to remain robust as customers modernize their technology architectures and increasingly orchestrate their strategies on our platform.

Scaling our business will continue to be a focus, driving revenues, controlling expenses, and enhancing our margins. Our competitive advantages drive returns on development that are unmatched. Recognizing this strength, we have developed a demand-driven capacity expansion plan that accelerates delivery timeline, enables deployment flexibility in response to demand signals, minimizes earnings drag, and maximizes our long-term growth profile. Demand is clearly exceeding the assumptions in our prior long-term outlook. Bookings, pre-sales, backlog, and pricing are strong, and we are uniquely positioned to meet the durable demand by deploying capital over the next few years. We expect $5 billion-$7 billion of capital expenditures annually from 2027 to 2029, with the vast majority focused on capacity expansion delivered into a target market where our value proposition is increasingly differentiated. More than 80% of this expansion will be our top 25 major global metros.

The result will be a higher growth portfolio built over 30 years that is uniquely fit to serve the new technology era. As always, our balance sheet and diversified capital program are critical differentiators. In combination with significant retained cash flow, we'll continue to access lower cost sources of capital to fund our robust growth opportunity. Referring to slide 19, we expect the following for 2027 through 2029. Total revenue growth ranging from 10%-13% per year, beginning the period at the low end of this range and accelerating as the benefit of our capacity expansion plan builds. Adjusted EBITDA margin to reach 53% or higher by 2029. AFFO per share growth in the 9%-12% range per year. Capital expenditures in the $5 billion-$7 billion range per year, excluding real estate acquisitions and xScale. Dividend growth to approximate AFFO per share growth.

Utilizing our balance sheet, we will achieve this with only a moderate leverage increase, allowing us to maintain our current and critically important investment-grade credit ratings. In conclusion, demand is stronger and more durable. The team is executing, our confidence in future growth has increased, and we are accelerating capacity expansion to capture the opportunity in front of us. I now turn the call back over to Adaire.

Thanks, Olivier. The first half of 2026 has been a strong one. It has set the stage for something bigger. The demand signals are clear. Our strategy is working. The investments we are making today are designed to drive sustainable long-term growth well above our prior expectations. We will maintain our relentless focus on disciplined execution that solves the challenges our customers face and creates value for our shareholders. Our team stands ready to capture the opportunities ahead. With that, let's open the line for questions.

Thank you. We will now begin the Q&A session. We would like to ask analysts to limit their questions to one question. If you would like to ask a second question, please reenter the queue. Again, press star one to be added to the queue. Our first question comes from Eric Luebchow with Wells Fargo. Your line is open. Great.

Thanks for taking the question. Adaire, I just wanted to get your view on the long-term guidance raise. Obviously, a huge change from last year, so maybe you could just talk through high level, what you're seeing in the market that's given you the degree of confidence to raise CapEx this much. As we think about the forward growth mechanism for revenue of 10%-13%, I think previously you had talked more about it being more based on MRR per cabinet growth than installed or billable cabinets. Has that changed at all based on the CapEx increase and based on the pipeline that you talked about in your remarks? Thank you. Thanks so much for the question, Eric.

Let me maybe start with the view from this year to last. I think that we have seen definitely acceleration in the AI infrastructure cycle, as I mentioned in my prepared remarks. That plays directly to the strength of Equinix. We're uniquely positioned, I believe, to enable our customers and our partners to execute their AI strategies, particularly as they shift to inferencing. We're pretty rapidly seeing customers become much more sophisticated in how they are pursuing their AI requirements. I think it's fair to say that broadly, we have a broad depth and breadth of customer demand across our portfolio, so AI is an accelerant to the ongoing digitization activities of our customers. In Q2, we saw that the vast majority of our largest deals were driven by AI workloads, similar to what we've seen in the previous quarters.

We also spoke about the execution of our team, how our team has performed exceptionally well. I think if I look at the difference between this time last year, execution is essentially better across the board. Sales activity, how we're operating, margins and cash flows, capacity expansion, how we're financing our growth. I mentioned externally the market dynamics are changing to move inference ahead of perhaps where we initially scheduled or intended that it would be at, and that's much stronger than everything we saw a year ago. We've been very thoughtful. We've gone back and looked at everything, including the shape of our customer demand, including the optimization of things like our expenses, our CapEx, and our finance plans. Our revised outlook, I think, reflects more than a strong quarter. It reflects a market opportunity that has materially improved over the past 12 months.

This has been a huge collective effort, and I'd like to just take a moment to thank our team for all of the work that they've done in this year.

One additional point that it's important, Eric, we put that in our prepared remarks. Most of deployment of the capital, 80% of it, will be on our top 25 metros. Markets that we understand well, where we have a competitive advantage, where demand is higher than supply. We have already today a strong ecosystem with the utility providers, with the global contractors, with the community. We feel today as comfortable as it could be about this updated long-term guidance.

The next question comes from Ari Klein with BMO Capital Markets. Your line is open. Thanks, good afternoon.

Adaire, with AI strategies being implemented, are you seeing any changes in underlying deal metrics or compositions? Are different markets more in demand? What about deal sizes and interconnection attach rates, especially with the strong net adds this quarter? Thank you. Thank you. Thanks, Ari, for the question.

I think we're definitely seeing some changes in terms of deal structures. Certainly, the density of our deals is moving upwards as customers seek to secure the capacity that they need for their energy and their compute future. That's absolutely one change that we're seeing in the deal mix. As far as interconnection is concerned, as you can see from our prepared remarks, we had a very strong interconnection quarter, adding over 9,700 net adds, and interconnection revenue growing at around 9%. As customers come onto our platform in the first instance, then we see our interconnection revenue increase as that progresses. I think even in the face of increasing footprint sizes from our customers, our pricing has remained very firm, and we are managing to secure the yields that you have come to see from Equinix over the past.

I would say, Ari, to add, Adaire covered that in a prepared remark. The complexity of the ecosystem we are serving is increasing more than ever before. Cloud providers, neo cloud, enterprise AI model, all of this trend is playing to Equinix strength.

Thank you. The next question comes from Matt Niknam with Truist. Your line is open. Hey, thanks so much for taking the question.

Congrats on the quarter. Maybe related on interconnects. Maybe, Adaire, if you can speak to where you're seeing some of this increased demand coming from, and if in fact you have a product that is in such high demand, how do you think about the opportunity for maybe incremental pricing actions on interconnects, over the longer term? Thanks. Thanks. Thanks for your remarks, Matt, appreciate that.

Just reiterating again, you saw the demand reflected in the adds to our interconnection franchise. I think this is one of the unique value propositions of Equinix. One of the things that continues to differentiate us as a company. We have, of course, added capabilities to our interconnection portfolio through our Fabric product suite. Most recently, the Fabric Geo Zones, which support sovereignty requirements. I think in last quarter, I mentioned that 20 customers were in preview with this product, and we already have 80 in preview this quarter with our products. Fabric intelligence providing additional capabilities of observability and management for our customers.

I think that there is the opportunity here to really look at the compelling value proposition that Equinix offers, and then the opportunity to elevate that value proposition for our customers through some of these Fabric offerings. It's one of the jobs that Chris will have on day one, which today is actually his day one as he gets started as our Chief Product Officer. We can see some very significant growth rates in FCR, for example, our Cloud Router, 170% up year-on-year in bookings there. Some of that's driven through non-colo customers, which is also an interesting proposition for us. This, I think, is an exciting area for us to continue to mine.

Thank you. The next question comes from Frank Louthan with Raymond James. Your line is open. Great.

Thank you. When we're looking at the new guide and kind of going forward, what's the right level to think of the normal for non-recurring revenue and the long-term guidance as a percentage of total revenue? How should we think about that with the new guidance level you set? Thanks. You should assume the traditional 5% of total revenue.

That would be a good modeling assumption.

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

Good afternoon. Within the new guidance for revenue, can you share how each of the three geographic regions are progressing, how they should grow each relative to the total portfolio? As you invest more in the business, is your expectation that revenue growth within this range should be similar in each year? Do you see it accelerating? How does the higher investment levels come through the P&L as you look over the next three-plus years? Thanks. Thanks, Mike. I'll take the first part, and Olivier perhaps will take the second part of the question.

I think one of the benefits that we have as Equinix is the diversification of our customer base and of our portfolio. We have no concentration risk in terms of how our revenue is deployed across both our regions, the industries that we serve, and the product groups and cohorts that we manage. As you can see from the page eight of the deck that accompanied earnings, we had a very strong performance in the Americas as it related to revenue performance. Even if we normalize for Hampton inside that performance for the NRR transaction that concluded in Q2, we still have low teens model double-digit growth in our Americas portfolio. We had an amazing quarter in APAC, and I think that's beginning to pick up for us.

A lot of tremendous activity from the teams there in terms of bringing new customers into the Equinix portfolio. EMEA continues to form exceptionally well, notwithstanding that two of our main metros in EMEA, Frankfurt and Amsterdam, are highly constrained metros. This balance, I think, is an important aspect of the overall portfolio that we manage. I think we will continue to see this kind of growth in the Americas, given that much of the AI activity and company base exists here in the first instance. As we move across the different regions, we can see that rapidly following in APAC, for example, with local vendors moving into the Southeast Asia market in particular.

With EMEA, it might have a different feel on it in that our growth portfolio may be underpinned by the offers that we have around sovereignty, which are particularly relevant to EMEA customers and clients. I would say a strong balance following what you see already in the regional performance. Olivier, just on that breakdown.

Yes. If you look, Michael, at the range of growth per year, we expect the growth to be higher at the end of the planning period by 2029. This is going to be a byproduct of our CapEx deployment. You should expect FFO to follow the revenue growth. You could have a bit of volatility due to the lumpiness of NRR in a particular year, but that would be the overall trajectory. Another comment also, we think it's important in term of CapEx deployment. At stabilization, which is about three to four years post RFS, we expect to deliver the traditional 25% cash on cash returns that we have mentioned now for a number of quarters and years.

Thank you. The next question comes from Jonathan Atkin with RBC. Your line is open. Jonathan?

Can you hit your mute button?

Thank you. I'm interested, looking at the forward guidance in the contribution of things like renewal spreads to the upside guidance on a multi-year basis. As we think about the CapEx plan going forward, what are the financing tools available to you, and how do you think about leverage? Thanks. Okay. Thanks for the question, Jonathan.

Look, let me take the first part of the question, then I'll pass the second on the opportunities to raise and fund this to Olivier. If we look at the P&Q side of the equation, if I look at the P side, I can absolutely see healthy and very firm pricing. You see that reflected in the revenue growth that we have posted. On the Q side, our teams are focused on delivering critical capacity and accelerating that delivery and doing this against this growing demand backdrop. From a pricing perspective, our per kilowatt pricing is highly attractive because of the superior value that we're delivering to our customers. Our net pricing actions were strong in Q2, and they continue to trend very favorably.

However, we recognize that we are in a demand and supply continuum that is absolutely in our favor, we definitely see meaningful mark-to-market opportunity over the time period of our long range guide. This is probably particularly true when we think about highly constrained markets such as those that I've mentioned already and adding a couple of U.S. ones like Ashburn to that picture. This is something that the team are consciously looking at as we look at bringing on additional capacity in our top 25 metros.

Going back to your debt question, Jonathan, our balance sheet is a strategic differentiator. We want to keep it this way. Keeping investment grade rating is really a core pillar to our capital structure strategy. We would expect to fund the growth through two levers. One, retain cash flow. As you know, we have a payout ratio in the 50% range, so we will have a sizable retained cash flow, and the rest of the financing will be done through debt. We are today looking to use the lever which will have the most favorable cost of capital. If you were to look at, as a result of this leverage, which was part of your question, we would expect leverage to increase by about a term between now and the end of the planning period. To finalize, the blended cost of capital should increase by about 150 basis points.

Again, blended, Jonathan. Thank you.

The next question comes from Nick Del Deo with MoffettNathanson. Your line is open. Hi, thanks for taking my question.

Can you talk about the steps you're taking from an operational and risk management perspective to ensure that you can effectively deploy as much CapEx as you're budgeting over the next few years, and can adjust if realized demand doesn't match your forecast for some reason? When you look out to 2029, do you think the capacity that you'll have online will largely match demand, or you think you'll still be short supply relative to what customers desire? Thank you. That's a great question.

Thank you. I guess as we look out to 2029, our job is to be very thoughtful about how we deploy our CapEx, how we deploy it in order for highest value, how we deploy it in those metros where we know we will have maximal opportunity to maximize our returns. Metros that, of course, we're familiar with because we operate in those metros today, understand the customer landscape, the customer layout, and so on. As we look forward, we're striking, I think, the balance between the opportunity and the managing of our CapEx profile as a company. When we look to the opportunities to accelerate, if we saw more opportunity ahead of us, certainly I think we've given some demonstrated proof of that already. In 2025, we were able to accelerate 20% of our retail footprint into 2026.

In our cabinet projections for Q4 of this year, you can see that we're almost tripling the number of cabinets that we will have available at that timeframe, bringing additional into that Q4 footprint. The team have the opportunity to accelerate. There's some demonstrated proof of doing that. We look at market dynamics, I guess, in a very thoughtful way and perhaps through a lens that others don't, because we're fairly unique in the market in terms of our target focus customer base. It is a multifaceted look. We've developed somewhat, I think, of a proprietary model to enable us to really understand the demand that sits in front of us, a combination of external measures and our internal pipeline relationship with customers, and the fact that we plan alongside them.

We think with this long-term guide, we've got a very good balance of meeting the demand that sits in the market, meeting the capacity requirements of our customers, and managing in a prudent, mature way.

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

Thank you for the question. Questions around the development spending that you laid out this evening and in broader context of a lot of the larger amounts we've seen across the space for others also developing large scale. What gives you confidence to increase development spending in current environment, that the durability of supply and demand is going to stick?

I'll tackle that question. Thank you very much for the question, Michael. First off, when you look at it from a performance point of view, over the past four quarters, and particularly since this time last year, we've seen some tremendous performance from our team around our total sales activity, very firm pricing, and churn heading downwards. Equinix in the market is unique in many respects on our focus. We are focused on the enterprise sector, and we believe in the long term that the enterprise sector will be the beneficiaries of AI technology, and that on a broad basis they will continue their path to digitization. Many things that we're seeing in the market now play directly to our strengths.

Our focus is driven by the unique value proposition that we offer our customers, the very dense, interconnected environment, ecosystems that are present in our environment already, our global footprint, our presence in metros. Many of the market requirements and opportunities are playing to some of those fundamental strengths that differentiate Equinix. We've been very thoughtful about how we've looked at this opportunity and the durability of this opportunity, the durability of this demand, which we believe is persistent. I mentioned in passing in previous answer to the question that we've looked at this through the lens of a proprietary demand model that we've built out, because there is no one who's really looking at this segment, at the market, at the level of detail and the level of execution and the level of engagement that we are here at Equinix.

When we look at it through a number of external lenses, there are a few things that are very strong facts. First of all, we're still very early in enterprise AI, and colo is a durable model. As things still settle, who's going to be the dominant player, all of these things play out. We're still very early, and we're a very durable end state for customers who are having to make decisions today. Secondly, networking demand is also very durable, and it is increasing. AI requirements are additive to these connectivity budgets. We can see this in rising spend points around networking requirements of our customers. In addition to those two pieces, you have enterprise IT budgets, which are healthy and actually firming. You have enterprise server demand, which notwithstanding price changes there, is actually accelerating.

We look at the backlog of competitors in the OEM segment to understand what their backlog looks like. Data center silicon is accelerating in both volume and price. A whole series of factors that allow us to be very confident in the durability of the demand that we see based on some of those external factors, coupled with our own pipeline, our relationship with our customers that has us planning alongside them in a very long-term way. Of course, I guess the demonstrated proof of our team to execute against that opportunity as they have been over the past four quarters.

Another one, Michael, we did also bottom-up approach to this planning exercise. Again, 80%+ of our CapEx will be deployed, I know we keep repeating this, but we think it's important, in only 25 metros where we understand the ecosystem very well, we have a differentiated value proposition, and our relationship with utilities, community, and general contractors is unique. We think we have bottom-up, top-down approach, which give us a fair amount of confidence on this trajectory.

Thank you. The next question comes from Michael Elias with TD Cowen. Your line is open. Great.

Thanks for taking the question. I want to build on that point in terms of the bottom-ups approach. We talk a lot about the demand, but it'd be great to talk a bit about the supply side. Recognizing that a lot of this incremental capacity is going to come in those top 25 markets, which are also the most power-constrained. How should we think about the percentage of the incremental capacity supported by this CapEx, where there's an explicit ESA with a utility and you have visibility into that power? And then also if you could give us color into the visibility that you have on the MEP that you would need and as part of that, the skilled labor, to deliver the incremental capacity. Any color there would be helpful. Thank you. All right. Thanks very much, Michael.

It's a really comprehensive question. Quite a bit to it. Let me unpack it a little. Today we have 3 gigawatts of land under control. We're building about 700 megawatts of that right now. We are not speculative land developers or land purchasers. Of those 3 gigawatts, we're either certain of our power in that it is contracted or that we have a high degree of confidence that that power will be contracted, a very high degree of confidence that power will be contracted. One of the things that we're very cognizant of is when we announce. We tend to announce new projects when we've been through some internal gating, and that gating relates to elements like the power and energization of that plot of land and also permitting.

That is one of the reasons why our projects proceed on time and to scale. To the broader point around the supply chain, in general, we have a very strong procurement team who look at this very thoughtfully in a very considered way, as well as very significant and, in some cases, full 360-degree relationships with our main suppliers. We have, as Olivier has already mentioned, the benefit of a very strong balance sheet, which has meant that we have been able, where appropriate, to secure our M&E by pre-purchasing elements of the equipment that we need for our data centers. Across our design footprint, our design is fungible, so that gives us the opportunity to move equipment around the entirety of our footprint.

We're feeling very comfortable about where we are on the supply chain dynamics as it relates to the M&E and the other equipment that comes into our data center environment. I would also say that in the markets where we build, and particularly in the North America market, we have a very deep and long-standing relationship with the GCs here. That is something that has stand us in good stead, as they often have choice about where they will deploy their own capabilities and skills. We're feeling very confident on the supply side that we have managed all of the risks that we are aware of to the best of our ability, putting to work a combination of relationships, process, operation, and our balance sheet where necessary.

A final statistic, Michael. A typical data center we will build is about 60 megawatts. Very different than the one gigawatt developed by other players in those markets. Much more manageable. Thank you.

The next question comes from Michael Ng with Goldman Sachs. Your line is open. Hi.

Good afternoon. Thanks for the question. I was wondering if you could talk about the $5 billion-$7 billion annual CapEx plan in terms of IT capacity. I think over three years at $11 million per megawatt, that would translate to about 1.6 gigawatts out of the three gigawatts of developable capacity. Is that a reasonable way to think about it from an IT capacity perspective? How are you thinking about refilling the land bank? At the end of the three years, will we have three gigawatts or more, or will it get worked down? Thank you. Yeah. By the end of the planning period, we will have about two gigawatts still available, and this additional CapEx will use about 0.3 gigawatts of power.

Thank you. The next question comes from Cameron McVey with Morgan Stanley. Your line is open. Hi.

Thank you. I was curious if you're seeing evidence in your leasing pipeline that open weight models are driving incremental private AI or enterprise inference deployments. Secondly, Olivier, now that you've had a few months in the CFO role, curious how you're framing the capital allocation opportunity and what the key priorities might be for you. To that point, are there any updates on how we should think about the puts and takes of margin expansion over the next few years? Thanks. Absolutely. In term of capital allocation, the company has been very prudent.

We're not going to change this in term of leverage, I mentioned that earlier. We are serving exciting markets. We have a different value proposition. We believe we can get an exciting return from this deployment of capital. We'll invest mainly internally. If you look at the margin, I'm glad you're asking the question. We are targeting a 53% plus EBITDA margin, which would be driven by three factors. One that Adaire has mentioned extensively, which is pricing. Demand is over supply, pricing will be a lever. Cost of revenue improvement and SG&A scaling will be also two other levers. Let me give you a few colors on this. We are a functionalized organization, all the elements of the value chain at Equinix are functionalized, and functionalization drive standardization.

Allows us also to automate AI, our processes. We believe that that will drive margin expansion, and this improvement of the various functions will impact go-to-market operations and also all the support functions.

Thanks, Olivier. Maybe let me conclude the answer to the question around the kind of use cases that we're seeing today in our enterprise customer base. Actually, there's 4 distinct type of AI use cases that we're seeing today. The first I'm going to call stack, which is where enterprises are running open models but on private AI infrastructure. They're doing that to cut down their token cost. That's a use case that speaks well to the AI-ready data centers of Equinix, the connectivity that we have to clouds, the partnership with our OEM vendors, and so on. The second use case that we see is sovereign. This is where companies are deploying sovereign AI stacks for data residency and compliance reasons.

We're very attractive for that for customers because we have a presence in 36 countries, and our Fabric capability allows our customers to geo-fence the traffic into a particular country. The third use case that we're seeing from customers is a batch use case. This is where they're deploying centers of excellence like AI factories for model training, but also for batch inferencing at Equinix. A lot of this is driven by our opportunity to provide liquid cooling in our facilities. The fourth use case that we see from our customers is a latency sensitive one, where the inference stack needs to be present in a metro for latency and also to reduce costs around data backhaul. Those are the 4 main use cases that we're seeing.

A stack use case, a sovereign use case, a batch use case, and a latency sensitive one today in our data centers.

Thank you. That is all the time we have. I will turn it back to Ryan.

Thanks, Julie. Juan, thank you all for joining us today. We look forward to talking to many of you in the coming days and coming weeks. Take care. Goodbye. Thank you for your participation.

Participants, you may disconnect at this time.