Equinix Earnings: Revenue Inches Up, AFFO Edges Down, Guidance Raised

Image source: Equinix.

Equinix (EQIX 0.90%) reported third-quarter 2016 results after the market closed on Wednesday. Here's how the quarter worked out for the data center operator and global interconnection specialist and its investors.

Equinix's key quarterly numbers

YOY = year over year. Data source: Equinix.

Adjusted funds from operations (AFFO) includes $19.0 million of integration costs for acquisitions. (AFFO is a closely watched metric for companies organized as real estate investment trusts (REITs), as it's a driver of payouts to shareholders. It's calculated by taking net income and adding back items such as depreciation and amortization.)

Equinix beat its revenue guidance of $915 million to $921 million, while its adjusted EBITDA of $420 million came in at the low end of its outlook range of $419 million to $425 million. The company doesn't provide quarterly AFFO guidance.

Long-term investors shouldn't give too much credence to analysts' estimates, as Wall Street is focused on the short term. That said, they can be helpful to know as, together with forward guidance, they often help explain market reactions. Analysts were expecting AFFO of $3.85 per share on revenue of $919.83 million, so Equinix beat both expectations. 

What happened with Equinix in the quarter? 

• Of the total revenue, $39.7 million was generated from Bit-isle, a European data center operator acquired in November of last year, and $107.3 million from Telecity, a European data center operator acquired in February.
• Recurring revenue, consisting primarily of colocation, interconnection, and managed services, was $877.5 million, a 3% increase over the year-ago period. Non-recurring revenue was $47.2 million.
• Continued expansion of the scale and reach of its global platform with 18 previously announced projects underway. Moreover, on Wednesday, it announced the following: new expansions in Dallas, Dublin, Frankfurt, Helsinki, and Zurich totaling more than $100 million of capital expenditures and the purchase of property adjacent to its Chicago area location that will be used to expand its Elk Grove campus -- a key location for cloud and financial customers.
• Added 10 Fortune 500 customers. Its customers now include nearly one-third of the Fortune 500 and a quarter of Global 2000 companies.
• The financial services vertical achieved record bookings.
• The cloud and IT services vertical recorded its second best quarterly bookings, with expansions from several companies, including Amazon.com and Cisco Systems.
• Momentum continues for the company as a strategic partner for the submarine cable industry with its selection as the U.S. cable landing station for the Monet Submarine Cable System, which is owned by Algar Telecom, Angola Cables, Antel, and Alphabet's Google. This project links North and South America from points in Miami and Sao Paulo, Brazil. 

What management had to say

CEO Steve Smith highlighted in the press release that Equinix is benefiting, and should continue to benefit, from companies transitioning en masse to cloud computing:  

We had a great third quarter, delivering record bookings with double-digit growth in the cloud, financial and enterprise segments. We continue to see growth in Fortune 500 new customers as multi-national enterprises rearchitect to a cloud-delivered infrastructure to optimize performance. We remain focused on scaling and refining our go-to-market engine, directed at capturing this significant shift to the cloud, and delivering continued profitable growth. 

Looking ahead 

Equinix provided Q4 guidance and edged up its full-year 2016 outlook due to what it characterized as its "strong operational performance" -- year-over-year operating income increased 12% -- in the third quarter.

The company expects Q4 revenue in the range of $940 million to $946 million, or a normalized and constant currency growth rate of 2.4% quarter over quarter. It doesn't provide quarterly AFFO guidance.

FY 2016 guidance

Data source: Equinix.