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Date
Oct. 29, 2025, 5:30 p.m. ET
Call participants
Chief Executive Officer and President — Adair Fox-Martin
Chief Financial Officer — Keith Taylor
Head of Investor Relations — Philip Kanezny
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Takeaways
Revenue -- $2.32 billion, representing a 5% increase in fiscal Q3 2025 (period ended Sept. 30, 2025).
MRR growth -- Monthly recurring revenue grew 8% year over year on a normalized and constant currency basis in fiscal Q3 2025.
Annualized gross bookings -- Achieved $394 million in annualized gross bookings (non-GAAP) in fiscal Q3 2025, up 25% year over year and 14% sequentially from fiscal Q2, reflecting broad customer and geographic diversity.
Pre-sold annualized gross bookings -- $185 million of annualized pre-sold gross bookings, with over 40% signed in fiscal Q3 2025, to be recognized as bookings beyond the next ninety days.
Interconnection revenue -- Reached $422 million, up 8% year over year on a normalized and constant currency basis in fiscal Q3 2025, driven in part by a 57% increase in fabric bookings.
Adjusted EBITDA -- $1.15 billion in adjusted EBITDA in fiscal Q3 2025, equating to approximately 50% of revenues and marking an 8% increase.
Adjusted funds from operations (AFFO) -- AFFO (non-GAAP) was $965 million in fiscal Q3 2025, growing 12% and exceeding internal expectations.
MRR churn -- Decreased to 2.3% in fiscal Q3 2025, with fiscal Q4 2025 expected within the 2%-2.5% range.
Net leverage -- Stood at 3.6x annualized adjusted EBITDA at the end of fiscal Q3 2025.
Green bonds -- $500 million (Singapore denominated) issued at a 2.9% rate, with total outstanding approximately $9.5 billion and $7 billion of net proceeds allocated to eligible green projects in fiscal Q3 2025.
Capital expenditures -- $1.14 billion in fiscal Q3 2025, including $64 million recurring CapEx.
Capacity growth -- Recent land acquisitions in five metros expanded developer capacity to approximately three gigawatts, nearly 50% higher than last quarter.
Projects underway -- 58 major builds globally, including 12 XScale projects, with 20% of retail capacity accelerated versus initial schedules as of fiscal Q3 2025.
Cabinets billing -- Increased by 2,500 in fiscal Q3 2025, supported primarily by Americas region sales.
MRR per cabinet yield -- Rose by $41 quarter over quarter on a normalized and constant currency basis in fiscal Q3 2025, attributed to higher densities, strong interconnection, and firm pricing.
Retail expansion -- Over 75% of retail expansion is targeted in major metros, while more than 90% of expansion CapEx is on owned land or long-term ground leases.
Stabilized assets utilization -- 180 stabilized assets are 82% utilized, delivering a 26% cash-on-cash return on gross PPE invested as of fiscal Q3 2025.
Guidance updates -- 2025 adjusted EBITDA guidance (non-GAAP) raised by $21 million, AFFO guidance (non-GAAP) increased by $31 million, and AFFO per share growth (non-GAAP) is now projected at 8%-10%.
Full-year revenue guidance -- Maintained at 7%-8% normalized and constant currency growth for the full fiscal year 2025.
Capital structure -- Cash and short-term investments totaled $2.9 billion; $1.2 billion of senior notes were repaid in fiscal Q3 2025.
Product development -- Launched distributed AI infrastructure solution, including novel networking backbone and fabric intelligence software.
Summary
Equinix (EQIX 2.25%) demonstrated accelerating momentum with record annualized gross bookings of $394 million and strong pre-sales activity of $185 million (non-GAAP) in fiscal Q3 2025, signaling robust customer demand and a diversified revenue base. Management emphasized the successful execution of its Build Bolder strategy by acquiring land in key metros, expanding total developer capacity to approximately three gigawatts as of fiscal Q3 2025, and advancing 58 major projects, including 12 XScale builds. The company reported firm pricing with MRR per cabinet yield rising, maintained its revenue guidance for the full fiscal year 2025, and raised both adjusted EBITDA and AFFO (non-GAAP) projections, indicating confidence in operational and capital allocation discipline.
CEO Fox-Martin said, "we are advancing our build boulder strategic move where our intent is to double capacity by 2029," affirming the company's long-term expansion trajectory.
Interconnection products posted a net add of 7,100 connections in fiscal Q3 2025, with total physical and virtual connections exceeding 499,000, and two new native cloud on-ramps added.
North American joint venture advanced with the closing of Chicagoland acquisition, contributing significantly to XScale in 2026.
CFO Taylor stated, "Our expected quarter over quarter MRR step up is greater than $60 million," referring to fiscal Q4 2025. This reflects anticipated sequential revenue acceleration into the next quarter.
Customer wins across sectors included Hyundai Motor Group, ING, and Nytori, highlighting Equinix's appeal in automotive, financial services, and retail verticals.
Financing flexibility was showcased by the ability to issue green bonds at low rates and maintain a net leverage ratio of 3.6x as of fiscal Q3 2025, enabling continued capital investment.
Power for all actively developing 12 XScale projects is secured as of fiscal Q3 2025, and recent land purchases are either fully committed or in advanced negotiations for power commitments.
Non-recurring revenue in fiscal Q3 2025 moderated sequentially, largely due to lower ex-scale fees, with management highlighting that timing for large deals could shift between fiscal Q4 2025 and Q1 2026.
Fox-Martin confirmed the absence of price dilution in new contracts, stating, "We're certainly not seeing any dilution in our pricing. Very firm."
Industry glossary
XScale: Equinix's hyperscale data center initiative targeting large cloud and enterprise customers requiring high-capacity deployments.
MRR: Monthly recurring revenue; a key performance metric for recurring contracted revenue streams.
Gross bookings: The annualized aggregate contract value of deals signed in a given period, prior to contract start and revenue recognition.
Fabric: Equinix's on-demand, software-defined interconnection service enabling connectivity between customers, clouds, and networks.
Full Conference Call Transcript
Philip Kanezny: We get started, I would like to remind everyone that some of the statements that we will be making today are forward-looking in nature and involve risks and uncertainties. Actual results may vary significantly from those statements, may be affected by the risks we identified in today's press release as well as those identified in our filings with the SEC including our most recent Form 10-Ks filed on 02/12/2025 and our most recent Form 10-Q. 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 not to comment on its 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 and a list of the reasons why the company uses them in today's press release on the Equinix Investor Relations page www.equinix.com. We have made available on the IR page of our website a presentation designed to accompany this discussion along with certain supplemental financial information and other data.
We would also like to remind you that we post important information about Equinix on the IR page from time to time and encourage you to check our website regularly for the most currently available information. With us today are Adair Fox Martin, CEO and President, and Keith Taylor, Chief Financial Officer. Following our prepared remarks, we will be taking questions from sell-side analysts. At this time, turn the call over to Adair.
Adair Fox-Martin: Thank you, Philip. Hello everyone and a very warm welcome to our Q3 2025 earnings call. Equinix delivered a very strong third quarter. A performance that continues to demonstrate our ability to rapidly invest in significant expansion whilst growing our top line and improving profitability. This performance was underpinned by three highlights. First, top line growth. We are seeing continued revenue acceleration delivering MRR growth of 8% year over year on a normalized and constant currency basis. Further, we also achieved record annualized gross bookings of $394 million, a meaningful 25% increase year over year and up 14% over Q2. Importantly, this accelerated growth comes from a highly diversified set of customers across geographies, industries, and segments.
Keith Taylor: Second, profitability.
Adair Fox-Martin: We again delivered strong adjusted EBITDA margins for the quarter. And AFFO was up 12% year over year on a normalized and constant currency basis. This was better than expected and reflects strong flow through of our operating results, favorable net interest expense, and timing of recurring CapEx spend. As a result, we are raising our adjusted EBITDA, AFFO, and AFFO per share guidance for the full year. Third, expansion. Given the strong demand backdrop, we are advancing our build boulder strategic move where our intent is to double capacity by 2029. We have recently closed on substantial land acquisitions in our Greater Amsterdam, Chicago, Johannesburg, London, and Toronto metros. Will support over 900 megawatts of retail and scale capacity.
These results indicate that our strategy is gaining even more traction. And resonating with our customers as we continue to deliver differentiated infrastructure products and levels of service. On the topic of customer resonance, we achieved significant momentum in Q3. Closing over 4,400 deals with more than 3,400 customers. This volume reflects continued demand for a wide variety of latency-sensitive AI and non-AI workloads, supporting significantly increased data residency and sovereignty requirements, and delivering seamless connectivity to distributed data sources. Our rich ecosystems continue to proliferate across a variety of sectors. Including key verticals such as automotive, financial services, networks as well as cloud and AI service providers. Hyundai Motor Group for example runs its proprietary HCloud platform at Equinix.
Using Equinix Fabric, Hyundai connects to multiple cloud providers in Asia Pacific, The U.S., and EMEA. This enhances customer experience and improves service quality for over 10 million Hyundai connected car subscribers worldwide. Zetaris, an AI data lakehouse platform provider, relocated its AI workloads to Equinix. Using Equinix's distributed AI infrastructure, Zetaris is helping its customers develop AgenTeq AI and other AI applications six times faster and at a third of the cost. ING is making a strategic shift by migrating its core banking infrastructure in Germany to Equinix. Showcasing our ability to help customers meet strict regulatory standards and requirements.
Nytori, the largest furniture and home furnishing chain in Japan with over 1,000 stores across Asia and The U.S., partners with Equinix to connect its Osaka and Tokyo operations with low latency to Oracle Cloud. This helps them simplify their network for future expansion and supports Nytori's growth objectives of tripling their branches worldwide. In addition, we saw continued momentum with key AI-related magnets and enterprises including Ally Bank, Bristol Myers Squibb, Nebios, and Grok amongst others. As I've shared in previous earnings calls, our strategy comprises three strategic moves orchestrated across the business to accelerate our expansion, innovation, and profitable top-line growth. We continue to deliver strong results and see accelerating momentum against each.
The first strategic move is Serve Better. As evidenced by our recent customer wins, Serve Better is rooted in delivering value to customers at every stage of their engagement with us. Customers are increasingly looking to secure both their immediate and their long-term infrastructure requirements. This robust demand profile resulted in our record $394 million of annualized gross bookings in Q3. For clarity, this annualized gross bookings number represents the bookings we expect to start generating revenue within the next ninety days. Additionally, we have a pre-sold balance totaling $185 million of annualized gross bookings. This pre-sold cumulative balance will start generating revenue beyond ninety days. As of yesterday, we have closed more than 40% of our Q4 bookings plan.
We have ample pipeline to achieve our Q4 bookings targets and to build momentum heading into 2026. Our second strategic move, Solve Smarter, is focused on simplifying the consumption of our solutions and extending the value of our leading interconnection capabilities. Our interconnection products had an exceptional quarter. We added 7,100 net physical and virtual connections in Q3, bringing our total to more than 499,000. Interconnection revenue grew 8% year over year on a normalized and constant currency basis to $422 million driven partially by a 57% year-over-year increase in our fabric bookings in Q3. We also added two new native cloud on-ramps in Barcelona and Dubai. Adding to our market-leading share of native private cloud on-ramps.
These results highlight the critical importance of low latency and proximity to end users, and our ability to deliver it as both enterprises and service providers manage their distributed architectures. In September, we unveiled our distributed AI infrastructure solution. This includes a new AI-ready networking backbone and fabric intelligence software designed to support enterprise inferencing workloads. We showcased these capabilities at our first AI Summit, together with key partners and industry leaders including NVIDIA, Dell, Grok, HPE, Adobe, Zayo, Zoom, and WWT. Our customers and partners provided use cases to highlight how Equinix is uniquely positioned to comprehensively deliver on their demands and requirements at the enterprise level. And finally, Build Bolder.
Through Build Bolder, we are both accelerating and innovating the delivery of around the world and securing our future through strategic land acquisitions. As mentioned earlier, we are excited to announce that we have recently closed on land acquisitions in several high-demand markets to serve customer demand across both our retail and ex-scale businesses. This brings our total developer capacity to approximately three gigawatts. A nearly 50% increase from last quarter. These are the latest steps towards doubling our available capacity in the next five years. Since our last earnings call, we added seven new projects including our Dallas 12 development, which is expected to deliver roughly 3,700 cabinets or approximately 67 megawatts of capacity to this key metro.
We now have 58 major projects underway globally including 12 XScale projects. 20% of our retail capacity has been considerably accelerated from the initial delivery date. We also opened our 77th Market in Chennai, India as we continue to invest in this fast-growing region. More than 75% of our retail expansion is in major metros. And more than 90% of our expansion CapEx is on owned land or where we have long-term grand leases. Our stabilized cash-on-cash return expectations for these retail expansions are approximately 25% which is consistent with our existing portfolio. Our North American JV continues to show exciting progress with the closing of our Chicagoland acquisition.
Which we anticipate will be contributed in large part to our XScale business in 2026. In addition, we are in late-stage negotiations for the lease of the entire capacity at our Hampton campus with potential XScale customers. The overall demand picture for our XScale business remains robust as key players continue to seek capacity in major metros aligning with our X Scout strategy. As our results show, we are consistently delivering on the immediate needs of our customers and the expectations of the market. Whilst expanding our saleable capacity in anticipation of even greater sustained long-term demand. And we are doing this very profitably. We have been built for this opportunity and we will continue to build for it.
Let me now turn it over to Keith to share more on the quarter and our Q4 outlook.
Keith Taylor: Thanks Adair, and good afternoon to everyone. Further to Adair's remarks, the business delivered a very strong third quarter which immediately translated into solid financial and non-financial results. Nearly every key metric was at or better than expected. Our sales team has delivered record annualized gross bookings across our diversified customer base, resulting in very healthy net bookings in Q3. To further demonstrate the strong momentum in the business, Adair highlighted that we now have $185 million of annualized pre-sales which will be recorded as bookings in future quarters. Over 40% of the current pre-sales balance was signed in Q3. As customers increasingly look to secure their future growth within our ecosystems.
We continue to deliver accretive value to the bottom line with AFFO well ahead of our expectations for the quarter. So our strong performance in Q3 coupled with our strategic efforts to continue to secure land for future growth in our major metros is setting the stage for 2026 and beyond. And given our balance sheet is a strategic differentiator, it provides us with the flexibility to invest into a robust demand backdrop and the financial capacity to secure our future energy needs. Finally, our relentless focus on best-in-class capital allocation for our investors while delivering durable long-term value remains a key priority for us as we execute against our Build Bolder initiatives.
As it relates to our non-financial metrics, they continue to demonstrate positive momentum across nearly all dimensions, including net interconnection additions, provision VC capacity pricing, volume of transactions, and cabinets billing. We added a healthy 7,100 net interconnection adds in the quarter supported by cloud and enterprise connectivity. Cabinet's billing stepped up 2,500 cabinets led by strength in the Americas region. With our record Q3 gross bookings performance, we expect our cabinets billing metric to continue to be strong in Q4.
Our global MRR per cabinet yield stepped up $41 quarter over quarter on a normalized and constant currency basis primarily due to increasing densities, strong interconnection, and firm pricing across each of our regions, consistent with the broader supply-demand dynamics in the marketplace. As Adair highlighted, we continue to make great progress with our Build Bolder strategy. Our recent land purchases will support more than 900 megawatts of incremental capacity across our full product continuum once built out meaningfully increasing the capacity to be developed across our portfolio. The capacity to be developed now stands at three gigawatts positioning Equinix to serve the expanding market opportunity across hybrid and multi-cloud, and AI.
Our investments remain focused on either enhancing our strong existing ecosystems or laying the foundation for both current and future AI inferencing solutions. Which will be built on top of our highly differentiated platform. Now let me cover the highlights for the quarter as depicted on Slide seven. Do note that all growth rates in this section are on a normalized and constant currency basis.
Keith Taylor: Global Q3 revenues were approximately $2.32 billion, up 5% over the same quarter last year. Our recurring revenue growth stepped up 8% which is underpinned by the continued bookings momentum of the business. As expected, our non-recurring revenues moderated sequentially, largely due to lower ex-scale fees. Q3 revenues net of our FX hedges, included a $9 million FX headwind when compared to our prior guidance rates. Global Q3 adjusted EBITDA was $1.15 billion or approximately 50% of revenues, up 8% over the same quarter last year. Q3 adjusted EBITDA, net of our FX hedges, included a $4 million FX headwind when compared to our prior guidance rates.
Global Q3 AFFO was $965 million up 12% over the same quarter last year, and meaningfully above our expectations due to strong operating performance, disciplined balance sheet management, and timing of recurring CapEx spend. Q3 AFFO included a $2 million FX impact when compared to our prior guidance rates. As expected, global MRR churn in Q3 stepped down to 2.3% and we expect Q4 MR churn to be within our 2% to 2.5% quarterly guidance range. And now looking at our capital structure. Please refer to Slide 10. Our balance sheet was approximately $38 billion which included cash and short-term investments totaling $2.9 billion.
Our cash and short term stepped down from elevated levels in Q2 as our capital and real estate investments stepped up and we repaid $1.2 billion of senior notes. Our net leverage was 3.6 times our annualized adjusted EBITDA. During the quarter, we issued U.S. Dollar equivalent $500 million in Singapore denominated green notes at a rate of 2.9%. We also published our green bond allocation and impact report in September. Equinix has now issued approximately $9.5 billion in green bonds with $7 billion in net proceeds allocated to eligible green projects. Turning to slide 11 for the quarter. Capital expenditures were approximately $1.14 billion including recurring CapEx of $64 million.
We opened eight major projects across seven markets since our last earnings call, adding retail capacity in key metros including in London, Miami, Montreal, and Washington DC. We opened two new data centers, one in Chennai, India the other in Monterrey, Mexico. Revenues from owned assets are 69% of our recurring revenues. Now moving to slide 12. Our capital investments continue to generate strong returns. Our now 180 stabilized assets increased revenues by 4% year over year on a constant currency basis and are collectively 82% utilized and generate a 26% cash on cash return on the gross PPE invested. And finally, please refer to slide 13 through 17 for an updated summary of 2025 guidance and bridges.
Do note all growth rates are on a normalized and constant currency basis. For the full year, we're maintaining our underlying revenue outlook with a 7% to 8% normalized and constant currency growth rate. Our expected quarter over quarter MRR step up is greater than $60 million a significant year over year increase highlighting the underlying momentum in the business and gives us the confidence as we look into 2026. And as we previewed in July, our Q4 revenue guidance also includes a meaningful step up in nonrecurring fees attributable to the XScale business. As Adair mentioned, our discussions with potential ExScale customers are in their advanced stages.
But as with transactions of this size and complexity, the timing of contracting can be fluid. Hence the expanded revenue guidance range. Given our strong profitability in Q3, we're raising our underlying 2025 adjusted EBITDA guidance by another $21 million. Adjusted EBITDA margins are expected to range between 49-50% for the full year. We're also raising our underlying 2025 AFFO guidance by another $31 million. AFFO is expected to grow between 11-13% while AFFO per share growth is expected to range between 8-10% compared to the previous year. And finally, 2025 CapEx is now expected to range between $3.8 and $4.3 billion including approximately $290 million of recurring CapEx spend. So I'm going to stop here.
I will turn the call back to Adair.
Adair Fox-Martin: Thanks very much, Keith. So in closing, we remain excited and optimistic about the future. And our differentiated and durable market position. We are focused on executing against our Q4 expectations and building our momentum for 2026. We are very much on track on both accounts. Our intent is to continue to build on the outcomes that defined this quarter greater capacity, increased revenue, and improved profitability. And accelerate them as our strategy achieves even greater traction. We were built for this moment. And I am confident we will continue to make the very most of this opportunity. In regards to both long-term growth and long-term value creation for our shareholders.
So I'll stop here and open it up to questions.
Operator: Thank you. We will now begin the question and answer session. We would like to ask analysts to limit their questions to one. Our first question comes from Nick Del Deo from MoffettNathanson. Please go ahead.
Nick Del Deo: Hi. Thanks for taking my question. You have a very strong position with cloud on-ramps. That's obviously helped to point a lot of enterprise business over time. You've been starting to land some neo cloud on-ramps and network nodes. Adair, I think you mentioned Nebius and Brock in your prepared remarks. Guess how strategic do you think these deployments will be relative to some of the more traditional cloud on-ramps? And what are you doing to attract to actively attract AI magnets like these?
Adair Fox-Martin: Yes. Thank you very much for the question. Yes, you're right. We have a market-leading position in native cloud on-ramps, which is I think a very important part of the connectivity narrative that we have for our customers and we're in a position to add two additional on-ramps. This quarter to our installed base. We also, as you mentioned, have a very strong presence in terms of AI magnets sitting inside the Equinix ecosystem. Companies that I mentioned in my prepared remarks there like Zetaris, Lyceum who is a GPU as a service provider in Germany, Block Grok with the Q, OutRider, Nebios, CoreWeave, to name about a few.
Many of the many of these Neo Clouds are using Equinix as a point of connectivity and a point of presence. And I suspect there's an element of attraction in terms of our 10,000 plus enterprise customers who are also making use of Neo Clouds for data storage and for connectivity. So our team, particularly our team in The Americas focuses on this aspect of our customer cohort. And manages and engages those relationships appropriately in order to ensure that we have the right magnet representation in our ecosystem going forward.
Nick Del Deo: Okay. Thank you.
Operator: Next, we'll go to the line of Ari Klein from BMO Capital Markets. Please go ahead.
Ari Klein: Thank you. On the strength in presale activity, think you changed your approach with sales not that long ago. To enable them to sell capacity further out from delivery. Is that some of what you're seeing helping to drive the strength there? And then maybe on a related basis, there's a lot of capacity that's set to come online in some of your most important markets. How much pre-leasing activity you're seeing for those? Thank you.
Keith Taylor: Ari, do you mind, you broke up there just when you asked the question. Yes. You repeat that please?
Ari Klein: Yes, sure. Sorry. Just on the strength in pre-fit pre-sale activity, I think not that long ago you changed the approach enabling your sales force. To sell capacity further out from delivery. Is that some of what you're seeing helping to drive the strength there? And then just on a related basis, there's a lot of capacity set to come online in some of your most important markets. How much pre-leasing activity are you seeing for those? Thank you.
Adair Fox-Martin: Okay. Thanks very much for the question. And for the repeat, I think that you saw in Q2 in addition to the annualized gross bookings of the $394 million that the team delivered. We also shared the cumulative total pre-sold balance of $185 million of annualized gross bookings, which will be recognized in future quarters. This pre-sales motion is a relatively newer motion for our core retail business. And we have recently extended the window for our sales team to be able to sell retail capacity ahead of delivery for the next twelve months. Previous to that, it was a three to six-month window.
And this pre-sales opportunity is something that gives our sales team critical capacity to sell into and it actually is a degree of comfort for our customers because it enables our customers to know where their deployments will be placed when they need them. And I think in the overall macro environment with demand continuing to outpace supply, we actually have seen the velocity of pre-sales increase over the course of 2025 through to Q3. I think Keith mentioned in his remarks that 40% of our total pre-sold balance was signed in 2025. So providing these two elements, I think provides greater visibility and to our investor community.
That being said, when we look at the pre-sales activity, it's fairly evenly spread across the capacity that is coming online. We certainly have seen very significant activity around locations like Frankfurt, London, and others where capacity is in short supply, New York, etcetera. Yes, so definitely seeing the uptick in this, which is why we decided to share that data point with you.
Keith Taylor: Nare, maybe I'll just add one other comment on to what Adair said. Think it's also important to realize that part of the reason that we've sort of entered into another sales motion as Adair refers to is the fact that you've got a supply and demand environment that has shifted. And we're chasing right now we're chasing demand. We were trying as hard as we can to bring new supply into the business.
So we want to make sure that our sales organization has the ability to have that visibility at the same time having Ralph and his organization Global Design and Construction accelerate as fast as they can some of the builds that were out there to a quarter or potentially two quarters sooner than we originally had planned. So it's the combination of basically demand-rich environment and also as chasing the ability to deliver capacity into the market fast as we can that really allowed us to enter into the sort of pre-sale arrangement.
And so as Adair said, combination of the $39,400,000,185 million dollars it just gives you a real sense of how much momentum there is in the business relative to where we were not only two quarters ago, but certainly last year.
Adair Fox-Martin: The one other remark that I think it's important just to reiterate. The presale relates to our retail footprint. So not to the entirety of our business. When we look at our ex-scale business, that of course is we're looking at throughout through the lens of pre-leasing. So pre-sale is entirely within the retail business. Thanks, Arty.
Ari Klein: Thanks for the color. Thank you.
Operator: Next we'll go to the line of Eric Lupchow from Wells Fargo. Please go ahead. Great. I appreciate you guys taking the question.
Eric Luebchow: Just wanted to touch on what you're seeing in kind of the pricing environment today. You said you're doing more pre-sales. Are you seeing firm pricing or improving pricing just based on some of the capacity strains? Constraints we see in the market? And you know, maybe just if I could squeeze one more in, you know, I know you guys have kind of pre-guided to about a 5% AFFO growth rate next year. I know there's a lot of moving parts as we think into next year, but obviously interest rates financing costs looking a little better than you guided to.
So any thoughts to some of the moving parts as we kind of roll our models forward to 2026? Thank you.
Adair Fox-Martin: Okay. Maybe I'll take the second piece. First and then, make some comments on the on the remarks. I beg your pardon on your questions around pricing. So I guess as we look ahead into 2020 we're certainly focused on our execution in Q4. So revenue is a very prime focus for us ensuring that and we have a very strong exit from Q4. We're certainly feeling very confident about the demand that we're seeing. And I guess our pre-sale and our Q3 gross bookings is evidence of that demand. Keith also mentioned the ability of our amazing design and construction team to be able to accelerate forward RFS states.
We are monitoring and forecasting RFS with the same intensity that we do for revenue. And we did see a 20% acceleration on the 58 projects that we have underway. So the first I guess two elements of our 2026 color is this focus on revenue, this focus on RFS acceleration date. We will also continue to focus on cost. And how we are operating the business from an efficiency and effectiveness perspective. In order to ensure that we're delivering a very strong operating performance. And I think you can already see some very positive trends there as it relates to that.
And then of course there is the capital model and the astute management of our capital and our CapEx requirements, Keith you may want to comment on? Yes.
Keith Taylor: And so Eric, it relates to the balance sheet, one thing in addition to all the good news that sort of Adair was sharing with you there, the other part of the story that is slightly different than where we were at our Analyst Day is that a rate of the cost to borrow normally presently, but as you look forward is lower today than it was. So that's a positive news. Add on to that, our ability to raise capital in this environment across different markets and really get fairly effective low cost to borrow.
And as we look forward, we're probably going to continue to as I mentioned maybe in some of the last calls continue to look at markets like Canada Europe, whether it's synthetic or otherwise. We're going to raise more capital and so continue to drive down our cost to borrow. The other thing I would say is we have the ability again, run the business on a global basis as you understand. And so when we repatriate the capital into The United States, we get a higher return on that capital.
And so the ability to manage our balance sheet really effectively as well as the cost line that goes through the P and L is we're quite effective at that. And maybe the last part I would say is, as we've started to increase our construction in progress, no surprise to you, we're continuing to look at how we capitalize the interest expense associated with those construction initiatives, whether it's the pre-buy or it's the development of land. And you can see that over not only this quarter, but as we look forward, we'll spend more and more on land, on powered land so we'll continue to capitalize interest into those projects appropriately. Appropriate with the business.
Adair Fox-Martin: All right. And maybe let me just come back on the pricing question. We're certainly not seeing any dilution in our pricing. Very firm.
Eric Luebchow: Great. Thank you.
Operator: Our next question goes to the line of Jon Petersen from Jefferies. Please go ahead.
Jon Petersen: Great. Thank you. You talked about the 900 megawatts of land acquisitions that you did in Amsterdam, Chicago. Johannesburg, London, Toronto. You give us just some more details on if any one or two of those sites are particularly larger than the others? And where you might be expecting to build ex scale versus retail within those markets on that new land? Thank you. Okay.
Adair Fox-Martin: Yes. Thank you very much. Were very excited about those land acquisitions. We believe they are very meaningful and associated closely with the metros where we have a lot of demand from our customers. So as you know, these recent land acquisitions have really brought our land under control. To a very significant level. Enabling us to actually since last quarter to increase land or to under control to nearly by nearly 50%. In terms of how we view the various different elements of the portfolio here, In alignment with the long-term capital investments that we detailed at Analyst Day, we do plan to double our overall capacity both inclusive of retail and ex scale by 2029.
And whilst we're not providing a very specific breakdown of the anticipated megawatt delivery between retail and ex scale, within these recent land acquisitions we do anticipate that a significant proportion of London and Chicago land purchases will be earmarked for ExCal business and will be contributed to the JV for which we will be compensated. And I think our global design and construction teams also remain highly focused on delivering critical capacity across the portfolio. And so to some extent, the split of megawatts between retail and xScale is somewhat fungible. Because of the full project continuum that Equinix offers across traditional retail, larger footprint retail and X scale.
And so really we're looking to maximize the value based on the opportunity that we see for each of those land acquisitions.
Jon Petersen: Thank you very much.
Operator: Next we'll go to the line of Michael Elias from TD Securities. Please go ahead.
Michael Elias: Great. Thanks for taking the questions. I'm going to see if I can press my luck here. I was looking at the municipal filings for the Manuka campus site. And from what I found in the minutes for the meeting, I think there was a talk about a split for that Chicago site, some of it being for X scale. Some of it being for retail. I'm just wondering if there's kind of any direction you could give us in terms of what your leading is for that campus retail versus xScale? And then also as part of that, just curious, you talked about signing a bank deal in this quarter.
We're seeing some large bank deals out in the market. I'm curious of XScale, you're still thinking about reserving that for hyperscale customers or maybe you'd be willing to take on some large enterprise customers. Within that space? Thank you.
Adair Fox-Martin: All right. So two questions, let me address them. One at a time. So certainly, the concept of a mega campus considers the possibility of jointly co-locating X scale with retail on a single campus. And that is certainly something that we are actively reviewing and considering as we plan out our mega campuses. And something that I think would be a value add to all the participants whether they are participants in the XScale ecosystem or in the broader Equinix ecosystem. As it relates to transactions with banks, certainly it was interesting to see financial services as a very dominant sector in our Q3 results.
And emerging requirements for example in theaters of operation like EMEA where the DORA regulation is requiring a different level of resilience financial services organizations. This is also something that's helping to augment the demand that we're seeing in the Financial Services segment. Certainly, we believe that our capacity is somewhat fungible across our ex scale and retail footprint. And if there was an opportunity to service a large footprint through an ex scale capacity that was available, then we would certainly work with our partners to ensure that would be something that we could consider for that customer.
Keith Taylor: And Mike, I'll add on just one other thing. You made a reference to Manuco, which obviously is many hundreds of megawatts of capacity in that market, As Adair alluded to, we look at the test fits and understand what is the best structure for both the partnership and for the retail business. Because quite overly want a certain amount of capacity to come into the retail portfolio because it we need that capacity in some of these larger markets. And so we're going to continue to look at that.
The team as part of any of these large campus type builds will look to see how to bifurcate land so that a portion stays in the ex scale structure and then a portion of it can be owned by Equinix directly. But again, I'd just say appropriately you could appreciate that there is some of these larger markets and Adair alluded to London and Chicago, but the other one that's out there is Amsterdam. Which is in the Greater Amsterdam area and something that we really are putting a lot of attention to. Hopefully that gives you a little bit more color on the large size opportunities that are in front of us.
Michael Elias: Really appreciate it. Thank you.
Operator: Next we'll go to the line of Michael Rollins from Citi. Please go ahead.
Michael Rollins: Thanks and good afternoon. So couple of questions. First, with respect to Adair, you just referenced the larger footprint retail And from the Analyst Day, that was one of the incremental uses of capital and investment for Equinix. So curious what you're seeing on that front in terms of demand? And are those the types of deployments that you should also see some significant pre-leasing as you get closer to bringing them online commercially. And then just one clarification, Keith, you mentioned the width of the revenue guidance. I think this year, for 4Q, it's $120 million versus $40 million when you were coming into the fourth quarter of 2024.
And just kind of curious, if you could frame the nonrecurring revenue toggle of what if all of that opportunity for ExScale bookings gets pushed into 2026, versus maybe being able to get all of what you'd like to see in the 2025? Thanks.
Adair Fox-Martin: Shall I go first? Yes. Thanks, Mike. So as it relates to large footprint, we actually had a very healthy mix in our Q3 revenue mix of large footprint deals, but also a very, very healthy retail and interconnection up in the quarter. As it relates to the applicability of large footprint to the pre-sale sales motion. Certainly we're seeing customers who require capacity that is contiguous as part of that pre-sale sales process because that's one way of securing that contiguous capacity long term particularly in high demand markets. And then
Keith Taylor: the second question, which is we really highlighted on 15 of the earnings deck and I know some of you might not have seen the deck yet, but we sort of give a breakdown, a bridge on sort of what's happening in clearly there is a meaningful step up in revenue between Q3 and Q4. And you can see that at 7% and that also translates into revenue sorry EBITDA profit. 7% quarter over quarter growth Embedded in that in the prepared remarks, sort of noted that $60 million plus will come from recurring, again a very steep increase from where we historically have been.
A recurring basis and is very reflective of the comments that Dudair made on the strength of our booking activity. And how quickly that turns into sort of a billing line. And so that deal that sort of the $60 million as part of it But going from sort of the normalized Q3 to midpoint of Q4, it's $153 million step up. So it tells you that there's roughly $90 million nonrecurring Of that I would say roughly one third of it is traditional non-recurring activity. Two thirds is this large potential transaction that we have been working on for months.
And so part of the reason we expanded the range quite simply is that we have a certain assumption that's based in the fourth quarter here. We want to live within the guidance range that we're guiding you to. Our intention is and we are highly confident that we can close this transaction in this quarter. But we wanted to give you the range on what would happen if it didn't close this quarter and it closed Q1, which is not our intention. So again, I think it's just an appropriate way to manage again, the large non-recurring activity. I might leave you with one other thought Again, Adair sort of alluded to it already.
As we work with great confidence with again potential party to this transaction. It is for the full build It is for potentially the full build out and that's two forty megawatts. Those two forty megawatts are split into four buildings 60 megawatts each. Embedded in this number is roughly half of that. So you can get a sense that to the extent that we do the entire transaction, sort of puts us in a different part of the range than where we typically try and run at midpoint or better. So hopefully that gives you the color that you need.
And because it was a complex response we probably are happy to ask let you ask a follow-up question if you need to.
Michael Rollins: That was super helpful. Color. So Keith, thank you so much. But since you've given me the extra question, I have to take advantage of it. So I'm just curious, one of the things I was looking at was when I look at the Slide seven actually, eight and nine, and I'm looking at the regional performance, I'm looking at the normalized constant currency type of growth rates in each region. Relative to the EBITDA and trying to think about margins. What's happening in the segments where it looked like margins accelerated significantly in The Americas, You had less EBITDA growth in EMEA and kind of middle of the pack in APAC.
Is there anything unique about this quarter in terms of the way investors should be thinking about operating leverage or just continuing to expand margins as revenue grows in each of these regions?
Keith Taylor: Thanks for the question Mike. I think one is a very fair question and one that we certainly want to talk about. As Adair alluded to earlier in her comments, in addition to driving the top line growth, which you're seeing, obviously, magnitude of increase in our annualized gross bookings, In addition to that you can throw on the presale. The business is performing really well. But we are actively going after the costs. And the thing that's unique about The Americas remember we break our business into three segments.
And embedded in The Americas, business is basically all the corporate SG and A, which of course is a lot of a lot of the SG and A line that sits on our financials. And so by attacking the cost line, you're seeing a lot of benefit coming into The Americas region for those reasons. The second thing I'll talk about is you've got some one-offs. And like anything when you have ex scale and you have and particularly last year in EMEA, some transactions in the ex scale space that didn't repeat themselves until the profitability shifts between the years.
But I would say that just fundamentally there was one-offs in EMEA this quarter to the tune of roughly $10 million. And if you compare it to the same quarter last year, there was a $10 million benefit in the quarter. And so you have a $20 million swing. And that has a big enough move in the EMEA business to cause some movement around the margin line. But fundamentally, can see when you look at APAC, you look at Americas, and ultimately when you take out sort of the seasonal aspects of power costs and some of the one-offs from ex scale, the fundamental business, the profitability is increased increasing in all three regions of the world.
And that's something that again And DARE has been pushing us on across the market. And also the corporate functions to make sure that we're as judicious as possible with our spend. Thanks and thanks for the extra question today.
Operator: Next we'll go to the line of Jim Schneider from Goldman Sachs. Please go ahead.
Jim Schneider: Good evening. Thanks for taking my question. A little bit of a left field question. Given the 12 scale projects you're working on, maybe give us a sense about your level of confidence of power availability and scheduling for those additional projects. I'm assuming you feel relatively confident but maybe can you give us a sense of the timeframe for planning those? And then any changes you're seeing in terms of your anticipated use of power whether it's grid power or other alternative sources for those? Thank you.
Adair Fox-Martin: Yes. All right. Thank you. There's a lot to unpack in that question because I think there's a lot to unpack in the power and energy around the data center space. And there's no doubt that this is a complex area and the complexity is certainly growing by the day. I think Equinix has a number of significant benefits here when it comes to navigating power as a constraint in the industry.
First of all, your twenty-seven-year history which has a very clear profile of how we use power how we minimize and optimize our use of energy, and also the relationships that we've developed over that period of time with all of the utilities who provide us service and partner with us from the grid. And this is something I think that's held us in good stead as we are looking at this issue holistically across the business.
I think the second thing that we can see is that there is a change in terms of the customer supplier dynamics between the data center and large NG users and the utilities overall in that in many cases for many of these land acquisitions, there is a contract that you enter into in order to secure the load ramp that you have identified for this acquisition and that often requires a CapEx investment in order to secure that power commitment. I think as Keith mentioned earlier, we're extremely fortunate to have a very, very strong balance sheet and to be able to meet those requirements in a very in a differentiated way.
When we look at the land acquisitions that we've made recently for the land that's under our control, either the power for these lands is either already fully committed or in very advanced stages of discussions with the power providers because as I'm sure you know that we're not in the business of speculatively buying land. As it relates to our 12 ex scale projects and that are underway, All of our current 12 projects all have power secured. So power is not a constraint on the 12 X scale under development scenarios. I hope that gives you a picture of where we are in terms of the 12 excal projects, but also the broader power continuum.
Jim Schneider: Yes. Thank you.
Operator: Next we'll go to the line of David Guarino from Green State. Please go ahead.
David Guarino: Thanks. Question on the annualized gross bookings and now the new pre-sold gross bookings. Admittedly still trying to wrap my head around what a normal run rate each quarter should look like. So was this a one-off quarter or is this the normal run rate we should expect going forward? And then similarly on that comment, Adair, just to clarify the comment you made earlier, there is no price difference for customers committing to capacity twelve months out versus committing today. Is that correct?
Adair Fox-Martin: Maybe the first part of your question, I'll try to address. Look, think when you look at our bookings history and of course this is a relatively new measure that we revealed on Analyst Day for the first time and we did provide a little historical perspective when we provided that number on Analyst Day. You can see that it is a relatively consistent growth story across the annualized gross bookings measure. But in fairness, it is also a measure that could be quite volatile depending on how a particular quarter would play out.
I think as it relates to our position as we move into Q4 and executing now as we are on Q4, already 40% of our Q4 budget and target is already a closed at this point of the quarter. And the pipeline that we have as it relates to Q4 is a very strong pipeline. And so our standard conversion rates applied against that pipeline would lead us to believe that we will meet our Q4 budget. So I think for the period of time that we have shown this data, you can see a relative degree of consistency in terms of growth over quarter over quarter.
But I would make the point that bookings can be inherently volatile and therefore it's not possible to predict that bookings themselves will always be up and to the right even though we believe that the underpinning demand in the market and the momentum in the market is up and to the right.
Keith Taylor: And David, maybe just one sort of add on to Adair's comment. To the extent that we don't have capacity in certain markets and as we talk about there's presale isn't in that number that three ninety four so the extent that we say we run out of capacity in a given sort of highly sought after market, you might see a scenario where pre-sale activity moves. So as Adair said, you can have some volatility and we used to have more seasonal volatility. But because of the supply-demand dynamics, I think that's very different today. But that also presents a scenario where you could have maybe more pre-sale than you would have basically annualized gross bookings.
And there's going to be these trade-offs. And again, don't can't give you a number right now, but I think to the extent that we see things happening, we're going to guide you to it. And we'll say, hey, we're out of capacity in these five markets. We anticipate more pre-sales and we would say annualized gross bookings, which turn into revenues much sooner. Than a pre-sale item.
David Guarino: That's helpful. Thank you.
Operator: Next we'll go to the line of Frank Louthan from Raymond James. Please go ahead.
Frank Garrett Louthan: Great. Thank you. So, talk to us about the uptick in the cross-connect revenue and the ARPU there. What's driving that? Is that more power densities or customer mix? And is that strength you're seeing in The Americas replicable in other markets and other areas of the world? Is that sort of a is that where you're going see the lead there in The Americas? Thanks.
Adair Fox-Martin: Yes. Thank you. Certainly, The Americas is the leader in terms of the demand that we're seeing for our interconnection portfolio and we added 7,100 physical and virtual interconnects. And as a result of that, our interconnection revenue grew 8% year on year. The cohort of customers, you can see the technology and infrastructure providers, the clouds being the ones who are driving that demand. Primarily in The Americas business. And I guess as we start to see those organizations and segments proliferate into other markets, we will see that continue to evolve and grow in other theaters of operation. But you're quite correct in your assumption that this was largely driven by our Americas business this year?
This quarter rather.
Frank Garrett Louthan: And was it power densities or customer mix or what sort driving that?
Adair Fox-Martin: Customer mix. Customer mix.
Frank Garrett Louthan: Great. All right. Thank you very much.
Adair Fox-Martin: Thank you.
Operator: And for our final question, we'll go to the line of Michael Funk from Bank of America. Please go ahead.
Michael Funk: Yes. Thank you for the question. So first for you Keith, I heard the comment on the call about accelerating some of the builds and also your comment about capitalizing some of that expense. But does any of that change your thought or outlook on level of AF AFFO or the shape of AFFO growth that you laid at our Analyst Day? And then second, for you, Adair, putting your tech hat back on. As you think about distributed AI infrastructure solution, other emerging solutions at Equinix, can you size the addressable market for us for those and how you think about it?
Keith Taylor: Yes. Why don't I take the first question then we'll pass it back to Adair. Survive, as I said in my sort of in to one of the earlier questions, the company has had the ability to raise capital at a lower rate than originally planned, even though the majority were going to do a lot of refinancing in 2026, 2027 and 2028. The underlying assumptions have changed as well. And I would offset, I don't want to take this as an opportunity to shift guide. On as we'll spend time in February on what we're going to do for 2026. But it's fair to say that our cost to borrow is lower.
We're getting good return on the cash that's sitting on the balance sheet. And we are capitalizing a little bit more largely because we have more construction in progress. And as a result, should expect capitalized interest increase a little bit. To give you a perspective in Q3, Q2, we capitalized roughly $14 million if I got my numbers right, 14 million. In Q3, we capitalized 27 million. And then in Q4, the number will be somewhere between 20 million and $30 million of capitalized interest. And so that's a little bit higher than what it was before. That we're spending faster, we're accelerating faster.
Again, we really ask Ralph, Daraj and the teams to really build as fast as they can. And so with the acceleration of the capital spend, you would see more capitalized interest go into the balance sheet.
Adair Fox-Martin: As it relates to the product portfolio, certainly, you can see this increase in our interconnection revenue up to $422 million in the quarter. And a very specific focus on fabric. With a 57% year over year increase and actually continuing to provision at record levels. We're now up to 110 terabits in terms of fabric provisioning. I think all of this speaks to the connectivity narrative and opportunity that Equinix represents and the range of services that Equinix can provide to customers who are considering AI and non-AI orientated workloads.
The connectivity of the company is certainly the secret sauce and I do feel that there are opportunities for us to look at potential for this aspect of our product portfolio. But I would say that connectivity is not just the only dimension around which people are considering Equinix when they look at solving for deploying inferencing and inferencing based workloads at Equinix. Latency is one dimension, but there are others around model provider flexibility, around edge processing so that you're reducing the cost of bringing data back to the center. Around data residency and compliance, so that sensitive data is being processed in situ. And also around intellectual property protection.
And all of these elements are considerations around the platform that is platform Equinix, our customers consider workload deployment and workload placement with us. I think this represents a very viable opportunity for us to continue to evolve and grow.
Michael Funk: Great. Thank you everybody for joining the call. Go ahead. Yes. Thanks, everybody, for joining the call. Have a great afternoon, everybody.
Adair Fox-Martin: Goodbye.
Operator: Thank you all for participating in the Equinix third quarter earnings conference call. That concludes today's conference. Please disconnect at this time and have a great rest of your day.