Equinix Kicks Off 2019 With a Solid Quarter and Raises Guidance

Equinix (EQIX +1.80%) reported first-quarter 2019 results after the market close on Wednesday. 

Shares have returned 30.9% in 2019 through the regular trading session on Wednesday, outperforming the S&P 500's 17.4% return.

Here's how the quarter worked out for the data center operator -- which is organized as a real estate investment trust (REIT) -- and its investors.

Equinix's results: The raw numbers

Data source: Equinix. *Adjusted funds from operations (AFFO) is a closely watched metric for companies organized as real estate investment trusts, or REITs. It's akin to "earnings" for REITs. 

For context (though long-term investors shouldn't give too much importance to Wall Street's near-term estimates), analysts were looking for AFFO per share of $5.60 on revenue of $1.35 billion. So Equinix beat both consensus estimates.

Image source: Equinix. The SP2 data center in Sao Paulo, Brazil. 

What happened with Equinix in the quarter? 

• Recurring revenue, consisting primarily of colocation, interconnection, and managed services revenue, rose 10.8% over the year-ago period to $1.275 billion. Nonrecurring revenue increased 35.5% to $88.4 million.
• Key customer wins and expansions included Hutchison 3G UK Limited, SpaceX, and Tencent Holdings.
• The company "completed the most recent phase of Equinix Cloud Exchange Fabric (ECX Fabric) to enable customers to interconnect their global businesses at the digital edge through connections across and between all three regions," according to the earnings release.
• Equinix "continued the growth of its indirect selling initiatives, with channel sales delivering more than 20% of the bookings for the quarter. This accounted for half of the new logos [customers] acquired in the quarter, driven by accelerated success in selling with key cloud and technology partners, including Cisco, [Alphabet's] Google, Microsoft and Oracle. Additional channel wins in Q1 came from AT&T and Anixter, an Equinix referral partner." 

What management had to say

Here's what Equinix CEO Charles Meyers had to say in the earnings release:

Equinix had a strong start to the year, delivering our best ever Q1 operating results including our largest ever quarter-over-quarter revenue step-up and our second-highest net bookings. Our bookings spanned more than 3,000 customers, with cross-border bookings up substantially [year over year]. We processed over 4,000 deals in the quarter, highlighting the diversity and high-volume nature of the Equinix retail colocation business. With our unmatched global reach, the industry's most comprehensive interconnection platform, an unparalleled track record of service excellence and an expanding portfolio of edge services, we remain confident in our ability to deliver superior value for our customers, allowing us to build on and extend our market leadership.

Looking ahead

Equinix kicked off 2019 with a solid quarter.

The company issued guidance for second-quarter 2019 revenue and increased its previously issued full-year 2019 revenue and AFFO outlook, due largely to better-than-expected business performance thus far in the year.

Data source: Equinix. 

In 2019, the company expects AFFO per share in the range of $22.37 to $22.73, an increase of 8% to 10% (8% to 9% on a normalized and constant currency basis) over 2018. This includes the dilutive effect from Equinix's $1.2 billion follow-on equity raise in March.

Going into the earnings release, analysts were projecting second-quarter revenue of $1.37 billion and full-year 2019 revenue of $5.56 billion.