Equinix, Inc. (EQIX) Earnings Call Transcript & Summary

Welcome, everybody, to our session. I'm John Atkin with RBC and I lead the investment research effort in communications infrastructure, Pleased to have the CFO of Equinix, Olivier Leonetti joining us. Welcome.

Thank you. Nice to meet all of you or see all of some of you.

So a couple of closures in the seats. And I guess I'm just kind of interested in what are some of the your assessment in terms of what you've inherited and kind of the initiatives going forward and the playbook that you're executing against? Any kind of midyear update as we head into the fourth quarter.

We said it before, the CEO has said that this is our moment. If you look at today, the drive for AI and Ference, what you need is latency, you need a global presence in its sovereignty, you need mutuality, the dance network of players in your data centers. You need amazing interconnection solutions and our company is able to offer all that significantly more than what is present in the market. So this is our moment, actually, the team under sold the value proposition of the company. We are very excited. You saw we raised our guide lately 3 points more growth on top line and bottom line and the best is to come.

Great. So let's maybe dive into demand and AI and non-AI demand drivers. What does the pipeline look like today compared to before you started a year ago, let's say, any trends to go out?

So in Q2, we announced total sales velocity saw of about 30%. The demand is strong. And today, we could, but it's not a smart thing to do, have a higher order book and we discussed that all this morning, we don't want to do that because we want to nurture the best ecosystem for long-term value for the assets we deploy. So demand is strong, and we are not going -- we are pushing back on some level of demands to push a diverse set of customers being present on our platform. So very strong.

And maybe just dive into kind of the comp drivers, cloud connectivity, AI training, AI inference, traditional enterprise any kind of quick bullet points on where you're seeing particular strength or expect growth going forward?

So the strength is impacting many of our customer set. So enterprise cloud providers, at language model, all of them are interested by joining our network. That the key theme behind this is the need to do agenetic AI, and I go back to what I discussed earlier, agentic AI, you need what we offer, and that's what people -- that's why people want to join now. The other question is on this AI agented trend, -- all of you are as informed as I am, we are just at the very start of this. We believe that in the next 3 years, AI gentic will be 50% of the AI demand -- and we think that AI gentic in the next 3 years would be 30% to 40% on the data center activity. So we're just at the start and the start is driving the demand we're having in Equinix.

On the cross connect side, you put up quite strong numbers in the forward quarter and to what do you attribute that?

To the same theme, right, whether would you join us, don't join us to have access to compute. You join us to have access to an ecosystem of participants. You want to be free to move from one AI model to another. You want to be free to move from one cloud provider to another. You joined the network for that. You want to have an open infrastructure in a new world, that's what we offer. And that translate into very strong interconnection business. And again, we think that more is to come. We have announced about a month ago in offering. It's called Fabric 1, which allows our participant to connect to actors in the ecosystem in seconds, when before used to take about a month to connect. So it's a connection deal, and that's why people join our network.

The thing that the business has seen historically as you go from that next quantum of optronics to bigger pipes and this is for cross connects inside the data center. There's been circuit grooming and a little bit of churn. And maybe give us your thoughts on whether you're contemplating more of a usage base. And so that's usage based, in fact, and sometimes usage can increase with elctronics, the fiscal cross-connect could can actually go the other way. But if you pivot the pricing model, what are the kind of your thoughts on avoiding that through usage-based types of pricing mechanisms.

We discussed about how we're going to price to now, and it's a number in. You can't to us to have access to price power ecosystem and then interconnection. It's abundant offering -- so it's very difficult to dissociate interconnection from the rest of the business. Now there are certain number of things we know though that drive interconnection revenue faster than the base that we know. But I will leave it there. We are going through a few models in terms of pricing. But we think those offerings will be priced higher than the prior 1 because we offer more value.

As we think about open source models, open weight models, there's been a lot of developments on that in just the last 6 weeks or so during the summer. And just philosophically, if -- is that a development that you see affecting your business one way or the other, whether it's frontier models or open source, open weight.

Do you change yes? And what is the logic behind it, right? If you're close, you establish a relationship and this relationship is going to last. That's the close model. Open more than you want to be open because you want to have choices. If you want to have choices, you want to interconnect more. If you want to interconnect more, you want to be in a place where you have a rich ecosystem and the habit to connect easily with the participants. So our plan is better for Equinix, no question. And the trend is going to open for all the reasons language model is better 1 week but the second week, right? You want to be able to change your geopolitical dimensions, right, geopolitical drive sovereign to and to be able to not load and it's an open model, and that's a better thing for our company.

I want to hit on Power and Grid your typical new build is 50 megawatts under the Build Boulder program. And how do you navigate utility cues when competing against a gig or even gigawatt scale projects for the same transmission infrastructure. .

Yes. And I feel bad about answering this question because it could look like we have turned death, right? So to deploy data centers at accelerated speed. So when you look at the price in our country in the U.S. or in Europe, a lot of sentiment data centers. They are not impacting us that match. Why is this? One, to your point, data centers, which are much smaller. Two, we have those data centers in communities that unknown to us and in communities that gen now, right? So 2 they know us, demand knows us, the general contractors know us. So we are able today because of this connection, we have been able to establish with the community and to know our footprint and the group footprint, we have been able today to deploy capital an accelerated rate. Let me give you 2 numbers to finish on the point. In year, we deploy 40% our than we anticipated at the start of the year, 40%. And in 2026, we deliver twice the power we delivered in 2025. Why because of what I've explained?

I guess I'm interested in kind of supply chain and challenges that you're encountering, I think you are successfully overcoming many of them and bucking the trend by delivering faster rather than slower under some of these initiatives. But given especially your prior year pre Equinix thoughts on construction design and ultimately delivery to capacity and how you see that changing.

Yes. So I spent a bit of inside baseball here with the in how is a head operations. He has been running this part of the business for 2 decades, right, at Equinix, and ask the question, -- why is it this way? He said we have long term, the same theme, long-term relationship with general contractor and power management players. When in place an order, you have certainty. When we say we start construction at that site, we have certainty. And we have also placed long-term orders with those players. So today, we have been able to navigate this part of the equation very well as well.