EQUINIX INC Q4 2025 earnings call

Good afternoon and welcome to our fourth quarter conference call. Before 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 and 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-K filed on February 11, 2026, 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 in today's press release on the Equinix Investor page at 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. With us today are Adaire Fox-Martin, CEO and President, and Keith Taylor, Chief Financial Officer. At this time, I'll turn the call over to Adaire.

Thanks so much, Phillip. Hello everyone and a warm welcome to our call today. I'll start by saying, on a personal level, how deeply pleased I am with our performance in 2025 and particularly in Q4. Demand for our solutions has never been higher, and our teams have stepped up exceptionally well to capitalize on it. To our employees around the world, I'd like to say a huge thank you for all you are doing to achieve our goals. I also want to thank our customers and partners for the trust they have placed in Equinix as we intensified our investment in growth, investment that is already paying off. Our bookings have accelerated dramatically, our recurring revenue growth rate continues to climb, and we are managing our spend with great discipline.

All of these factors are combining to fuel an expansion pipeline and growth in FFO per share materially ahead of expectations. Given our momentum exiting 2025, our confidence in our 2026 plan has grown. This is reflected in both our revenue and our AFFO per share outlook. Our performance and our outlook demonstrate two things. The first is that Equinix is connecting the fastest-growing segments of technology infrastructure, and the value of our platform is increasing with every connection. The second is that our execution continues to improve. This winning combination delivers superior customer outcomes and stronger shareholder returns. Not only are we on the right track, we're moving far faster along it. Now, our momentum is clear across several key metrics. Monthly recurring revenue, the most powerful driver of long-term value creation, grew 10% in Q4 and 8% for the full-year on a normalized and constant currency basis.

For bookings, the leading indicator for revenue performance, the story is even stronger. We delivered annualized gross bookings of $1.6 billion in 2025, up 27% year-over-year. Our Q4 bookings were $474 million, up 42% year-over-year and 20% from Q3, well ahead of our plan. We delivered record capacity to meet growing demand, including 23,250 cabinets in our retail footprint and more than 90 MW in our xScale business in 2025. We delivered more than 30% of this retail capacity ahead of schedule, which we believe will accelerate our growth in 2026 and beyond. Now, Keith will go deeper into our metrics shortly, including recommendations on how to model the Hampton transaction.

As you saw in our release, the expected timing of this transaction shifted from Q4 to Q1, which, as we have shared in the past, simply reflects the fluid nature of xScale lease signings. Before I turn the call over to Keith, I'd like to provide some additional perspective on why our business is performing so well. For starters, we are building on the strength of our fundamentally differentiated value proposition. Our decision to double down on the digital infrastructure and connectivity requirements of enterprise customers is fueling our success, particularly as they implement AI across their operations. In Q4, approximately 60% of our largest deals were driven by AI workloads. That's up from approximately 50% earlier this year, a trend line that we believe will continue as we are really only at the beginning of this journey.

Equinix is the neutral ground where enterprise infrastructure converges, and we provide the essential layer of connectivity that makes it all work at scale to unlock real business value. This is a long-term tailwind for our business, particularly as AI inferencing expands across industries. With market-leading native cloud on-ramps, the largest global footprint across the most critical markets, and the broadest enterprise customer base, we deliver what AI inference demands: network diversity, cloud proximity, AI-ready interconnection, and low latency. These are structural advantages we have built over decades, and we believe they will continue to set us apart. In 2025, we completed over 17,200 transactions, up 6% year-over-year, with over 6,100 unique customers. Our Q4 transaction volume was the highest ever, at over 4,500 deals with more than 3,400 unique customers.

We saw an uptick in volumes for all workload sizes, from single cabinet requirements up to our largest cage configurations, and more than 60% of our existing customers added new services last year. Now, let me share some recent customer wins and use cases that really showcase what's driving this demand. Salesforce chose Equinix to create a private multi-cloud networking layer for the engine inside their data and AI foundation. This is our largest global Fabric Cloud Router sale to date. By deploying Equinix Fabric Cloud Router across 14 countries and 21 metros, we are enabling private network connectivity between Salesforce's presence in AWS, Azure, and other cloud service providers. Alembic, an AI-powered marketing analytics platform, selected Equinix for the scale and consistency of our global operations and the richness of our interconnection ecosystem.

We are working with Alembic as they deploy the NVIDIA DGX SuperPOD with NVIDIA Grace Blackwell systems to expand their addressable market through distributed AI. Bigmate, a leader in AI-powered workplace safety and operational intelligence, chose us because Equinix Fabric securely connects their edge devices, cloud providers, and customer networks. This enables them to deliver real-time, AI-driven quality control for industries ranging from food processing to manufacturing. Leading quantitative trading firm, Hudson River Trading, selected Equinix because our global footprint and our advanced cooling solutions enable them to achieve the latency and the density requirements they need to power their next-gen AI trading workloads. Fortune 500 multinational Honeywell Corporation expanded its relationship with Equinix because of the secure, flexible solutions and global fabric connectivity we provide, including for key metros such as Shanghai, Tokyo, and London.

This is the first of many projects driving the integration of internal AI applications and the wider transformation at Honeywell. These are just some of the use cases underpinning our momentum. Our progress is a direct result of the changes we have made through our Start Better, Sell Smarter, and Build Bolder initiatives. Starting with Start Better, customers continued to secure both near-term and long-term capacity across our global platform. Our $474 million in annualized gross bookings in Q4 were supported by an incremental pre-sales balance of $170 million, with more than $60 million occurring in the quarter. Larger footprint requirements from enterprises and service providers contributed to this performance. Our pipeline is strong, and we have already booked approximately 45% of our Q1 2026 target and signed an additional $100 million plus of pre-sales as of today, already our largest pre-sales quarter ever.

As we accelerate growth, we are committed to a disciplined pricing strategy that's commensurate with both the strong and durable demand patterns we see and the differentiated value our solutions provide. This translates into our strong cash-on-cash return profile and the premium yields we secure. We continue to underwrite our newest projects with these principles in mind. With Sell Smarter, we are helping customers connect and simplify their infrastructure. Interconnection revenue grew 9% year-over-year on a normalized and constant currency basis. We added 7,800 net interconnections in the quarter, including our adjustments. We also crossed an extraordinary milestone in Q4, surpassing half a million interconnections worldwide. To put this into context, that's more than double our nearest competitor. As AI amplifies the need for massive real-time data movement, Equinix is delivering the connectivity infrastructure that enterprises depend on the most.

As part of our Build Bolder initiative, the work we are doing across our global development portfolio is strengthening our competitive advantage. In Q4, we delivered more than 12,000 cabinets to our retail business across key metros. Our development engine remains exceptionally active, with 52 major projects underway across 35 markets, including nine xScale projects. Since October, we have added 10 new expansion projects. We also closed on a number of strategic land acquisitions last year, adding approximately 1 GW to our powered land under control balance. This positions us well to meet long-term demand from both enterprise and hyperscale customers. Our xScale business achieved a key milestone in recent weeks. In January, we contributed our Hampton asset to the Americas JV, an important first step towards deploying $15 billion of capital across major metros in the U.S.

The Hampton facility will support approximately 240 MW of IT capacity when fully built out. The signing of the lease for half of this facility to a hyperscale customer is expected in Q1, and we expect the site to be fully leased later this year. In addition, we have established a healthy leasing pipeline, demonstrating the value of our xScale strategy. Of the approximate 3 GW of capacity that can be developed, close to 1 GW is currently earmarked for our xScale business. Further, our land acquisition pipeline continues to grow as we maintain our focus on major metro expansion opportunities where we are confident of significant long-term demand. As such, we expect xScale will continue to contribute to NRR over the next several years as we execute our strategy. Overall, we're winning where it matters most by connecting the infrastructure that powers the AI buildout happening across industries.

We are laser-focused on extending our category leadership through disciplined execution that drives healthy revenue growth, margin expansion, and superior shareholder returns. I'll now turn it over to Keith to take a closer look at the numbers behind the quarter and our outlook.

Thanks, Adaire, and a very good afternoon to everyone. First and foremost, I'll start by briefly building on Adaire's comments. Simply, it was an outstanding close to 2025. From my perspective, Equinix delivered its best quarter ever, by far closing the last quarter of the year with over $470 million of annualized gross bookings and more than $60 million of pre-sales activity, well ahead of our expectations and certainly any prior quarter. The magnitude of our quarterly activity, both across a substantial number of diverse deals but also with over 3,400 customers, underscores that our strategy is working and meeting the opportunity in front of us. Also, I'd say that it's our retail business that's the standout, delivering record bookings across each of our small, medium, and large size of deal categories.

Alongside our strong sales execution, the teams continue to operate the business with great focus and discipline, and we're only getting started. This created better-than-expected margins. We raised our capital more efficiently than planned and invested or utilized the cash more effectively, creating better-than-planned cash flows. Suffice it to say, our performance is creating momentum in the business to drive attractive recurring revenue growth and the scaling of healthy AFFO per share performance. Now, I'll cover some of the highlights for the quarter as depicted on slide seven. Note, all growth rates in this section are on a normalized and constant currency basis. First, as we indicated last quarter, our Q4 guide assumed the execution of a large xScale lease for two of the four buildings on the Hampton campus. As Adaire noted, this transaction is now expected to close in the first quarter.

We also had some one-time planned benefits, which will not repeat themselves in Q1. That being said, our fundamental underlying performance was meaningfully better than our expectations from top to bottom. Please refer to slide 15 that bridges our quarterly revenues from Q4 2025 to Q1 2026. Now, let me move specifically to revenues. Q4 revenues were $2.4 billion, up 7% over the same quarter last year, fueled by continued strength in our monthly recurring revenues, which was up 10% over last year and, as you likely noted, a steady quarterly improvement throughout 2025. Q4 revenues net of our FX hedges included an $8 million currency headwind when compared to our prior guidance rates. Global Q4 MRR churn was 2.2%, lower than planned. And for the full-year, our average quarterly MRR churn was 2.4%.

Looking forward, our teams remain highly focused on reducing MRR churn, which includes the development of AI predictive tools to help identify opportunities to eliminate or defer any MRR churn. Global Q4 Adjusted EBITDA was $1.2 billion, or approximately 49% of revenues, up 15% over the same quarter last year. Q4 Adjusted EBITDA net of our FX hedges included a $4 million FX headwind when compared to our prior guidance rates. Our 2025 margin improvements reflect our continued focus on delivering higher operating leverage across the business while also investing in growth. As it relates to 2026, we expect to continue to deliver improved Adjusted EBITDA margins while also absorbing both accelerated and increased expansion drag, the byproduct from our growth investments. Global Q4 FFO was $877 million, or up 13% over the same quarter last year, including the seasonally higher recurring CapEx spend.

Q4 FFO included a $2 million FX headwind when compared to our prior guidance rates. Our non-financial metrics continue to demonstrate strong momentum across our core or key metrics of net interconnection additions, net new cabinets billing, and MRR per cabinet pricing. Our net interconnection additions increased by 7,800, including both physical and virtual connections, and also include our adjustments. As Adaire highlighted, we've now surpassed the 500,000 interconnection milestone across our ecosystem, an unmatched competitive advantage which has been curated over 25 years of history. Turning to our cabinets billing, we added 4,300 net cabinets billing in the quarter, including cabinets from our MainOne portfolio. Our underlying net cabinets billing increased by the highest level in three years, driven by strong bookings performance across each of our three regions.

Our backlog of cabinets, sold but not yet installed, stands at a record given the bookings performance, especially in the second half of 2025. And finally, we continue to drive attractive MRR per cabinet yields, stepping up $65 quarter-over-quarter on a normalized and constant currency basis, driven by very favorable pricing backdrops, increasing power densities, and strong interconnection attach rates. Turning to our capital structure, please refer to slide 10. As of year-end, our balance sheet increased to approximately $40 billion, including cash and short-term investments, totaling about $3.2 billion. Our net leverage was 3.8x our annualized Adjusted EBITDA. During the quarter, we issued $1.8 billion of senior notes at an effective rate of about 3.2%. Throughout 2025, our diversified capital raising program allowed us to raise debt at very attractive rates, which helped us optimize our 2025 net interest expense.

Looking at 2026, we plan to continue to raise debt in lower-cost locations, either directly or synthetically, including Canada, Singapore, and Europe. Now, looking at our capital expenditures for the quarter, please refer to slide 11. Capital expenditures were approximately $1.4 billion, including our planned seasonally higher recurring CapEx of about $140 million. We opened 16 major projects across 14 markets since our last earnings call, adding important retail capacity to several of our key undersupplied metros. And we announced 10 new projects, which will be added to our global portfolio over the next few years. Revenues from owned assets are 70% of our recurring revenues. Our capital investments delivered strong returns, as shown on slide 12. Related to our now 187 stabilized assets, revenues increased by 6% year-over-year on a constant currency basis.

These stabilized assets are collectively 82% utilized and generated a 27% cash-on-cash return on the gross PP&E invested on a constant currency basis. Now, given our strong underlying Q4 results, our 2026 outlook is expected to be meaningfully ahead of our expectations that we shared with you at our June 2025 Analyst Day. Our strong pricing discipline, coupled with our best-in-class capital allocation efforts, should allow us to generate industry-leading durable cash flows with attractive cash yields, thereby delivering revenue growth and long-term value for our shareholders. Please refer to slides 13 through 17 of our summary of 2026 guidance and bridges. Do note, all growth rates are on a normalized and constant currency basis. Starting with revenues, for the full-year 2026, we expect total revenues to grow between 9%-10%, which includes a modest 40 basis points attributed to the NRR from the xScale lease timing.

We expect our monthly recurring revenues to grow 8%-10%, driven by strong 2025 bookings performance, including pre-sales momentum. MRR churn is anticipated to remain comfortably within our targeted range of 2%-2.5% per quarter. We expect 2026 Adjusted EBITDA margins to be approximately 51%, an expected 200 basis point improvement over 2025, reflecting anticipated revenue growth and focused expense management. 2026 AFFO is expected to grow 9%-11% compared to the previous year. AFFO per share is expected to grow 8%-10%, which, after adjusting for 100 basis points of xScale lease timing, is 300 basis points higher at midpoint relative to our prior expectations from past summer. 2026 CapEx is anticipated to range between $3.7 billion-$4.2 billion, including about $280 million of recurring CapEx spend.

We have not included any on-balance sheet xScale spend, as we do expect to be reimbursed for these costs as we transfer these assets into the xScale JVs. And finally, we expect our quarterly cash dividend to increase by 10% over 2025 on a per-share basis. As a result, our total 2026 cash dividends paid will approximate $2 billion. So let me stop here. I'll turn the call back to Adaire.

Thanks very much, Keith. As this is my first opportunity to address all of you since Keith's retirement announcement, I wanted to take a moment to acknowledge his tremendous impact on Equinix over the past 27 years. His leadership has been integral to our success and has helped us lay the foundation for our future. I am particularly grateful for Keith's partnership since I joined the company, and I look forward to his continued support as a special advisor over the next year. Our process for selecting Keith's successor is well underway, and we look forward to updating you when we have news to share. Before we turn to questions, I want to leave you with a final thought. Equinix is at the center of a historic, multi-year infrastructure investment cycle. To deploy AI at scale, enterprises need to connect and manage increasingly complex and distributed technology ecosystems.

Equinix is the neutral connector that unlocks business value for our customers. It is what we do best. It is where we have continued to focus, and our focus is paying off. We were built for this moment. But execution is everything, and we will continue to prioritize doing the most important things exceptionally well so that we delight our customers whilst delivering structurally higher returns and AFFO per share growth for our shareholders. That's exactly what we did last quarter, and it's what you should expect from us going forward. With that, let's open the line for questions.