Global Property CEO Conference. I'm Nick Joseph here with Mike Rollins with Citi Research. Pleased to have with us Equinix and CEO Adaire Fox-Martin. This session is for Citi clients only, and disclosures have been made available at the Corporate Access Desk. To ask a question, you can raise your hand or go to liveqa.com and enter code GPC25 to submit questions. Adaire, I'll turn it over to you to introduce the company and team, provide any opening remarks, tell the audience the top reasons an investor should buy your stock today, and then we'll get into Q&A.
Am I? Yep. Okay, great. Thank you. I couldn't see a green light here. Good afternoon. Thank you so much for having us today. My name is Adaire Fox-Martin, and today marks my nine-month anniversary as CEO of Equinix, and I'm joined by Chip Newcom, who leads our IR team, and between the two of us, we look forward to your questions and to providing some comments on Equinix. Maybe let me start by answering the question, the top reasons why an investor should buy our stock today. First off, we're very excited about the relevance of Equinix for our customers. I think there are a number of aspects that define that relevance. Our global reach is unique. We operate in 74 markets across 35 countries.
We have highly differentiated ecosystems and a full range of product offerings for our customers, which mean that for many of our customers, we have very long-term relationships with them. We're the best manifestation of the interconnected edge, and we provide a very geographically distributed and well-thought-through infrastructure that's in proximity to digital ecosystems that support today's very complex architectures of our customers. Most of our customers today are in multi-cloud hybrid environments, and the Equinix capability enables us to support them on that journey and manage that architecture. This, I think, the underpinning architecture, the underpinning offering of the company bodes very well, not just for current diverse workloads that we're enjoying with our customers today, but also as we look forward to how workloads will manifest themselves in the future with AI underpinning many aspects of the work that our customers will do.
And then finally, as we look to the guidance for 2025, which we provided on our Q4 earnings call, we provided indications of a revenue growth rate of 7%-8%, which is primarily MRR-based, an expanding margin, expanding the margin by 190 basis points, and an AFFO per share growth of 7%-9%. So collectively, as a company, in terms of the opportunity ahead of us, we're very confident about the opportunities that we are pursuing and our potential to capitalize on those on behalf of our shareholders.
Great. Thank you. Adaire, over the last nine months, you've led some changes internally, and I'm curious if you could just share with our group how significant have those changes been? Are there more to come, and what are your expectations in terms of what this delivers to benefit Equinix and shareholders?
You're right. I've had probably a gentle reminder, a silent one about the disclosure statement that I didn't read in the first instance, which is some of what I'm about to talk about today contains forward-looking statements, so please read our SEC filings for more information about factors that could affect these statements. Okay. Now on to the last nine months. Prior to taking on the role of CEO, I had the privilege of being on the Equinix board for four years. So I understood much about the culture, the opportunity, and the strategy of the company from a governance perspective, and I'm very fortunate that my predecessor in the CEO role is now the executive chair of the company. So that gives us a great continuity, a lot of access to the intellectual capital of everything that came before me in the company, and it's a wonderful partnership.
I was very honored to accept the role and recognize that Equinix is an exceptional company that has demonstrated success over the 26 years of its operation, and really, I feel that in many ways, I'm building on the shoulders of giants and on the success that came before my time in role. During the first 100 days of my time with the company, I visited 11 of our locations, met with about 60 customers, and met with our employees in all of those locations in order to understand elements of our business, both from a customer lens, a partner lens, and an employee lens.
At the same time, we also had a very considered and thoughtful process with McKinsey as an outside-in perspective, driving a 12-week sprint to give us some views from our customer base without our business card being in the mix from that feedback, but also some market dynamics and other aspects that their process helped us drive through. As a result of all that input, we put together a strategic approach for the company, which has three main pillars associated with it. The first of those pillars we refer to as Build Bolder. And this pillar is a pillar that looks at our overarching build strategy, design, construction, and all the way through to operations. Within Equinix, we have an xScale business, which is a business focused on the hyperscale community, and we have our very rich retail colo business.
Build Bolder is something that looks across both aspects of our business because it speaks to the totality of the product continuum that we are able to offer, from hyperscale wholesale to large footprint to retail specifications for our customers. There are a number of nuances under Build Bolder that are about looking at how we bring capacity to market so that we can pursue the center of demand that we are at right now. That's the first strategic pillar. The second strategic pillar is called Solve Smarter. And this is looking at the lived experience of our customers and the range of services that we offer in Equinix.
We have a whole range of services over and above the provision of space power and just data center services, physical services in the data center, a range of services that enable us to interconnect our customers, that enable our customers to on-ramp to cloud environments. Today, we have 224 unique native cloud on-ramps across our ecosystem, so Solve Smarter is really a process where we are looking at what kind of services could we enhance the customer experience with that may potentially open new revenue lines for us as a company, and then the third pillar of our strategy is called Serve Better.
This is really understanding how we engage with customers, how our go-to-market engine is structured, how do we remove some friction and so on out of our go-to-market engine in order to ensure that we streamline the activity from lead to booking and then from booking to turning the booking into billable revenue in the context of MRR for our customers. So those are the three main pillars. They are underpinned by Run Simpler, a foundation stone of the strategy that is looking at all aspects of our business in order to ensure that we have operational efficiency and effectiveness in everything that we do. There's a lot there. Not everything is of the same level of importance for 2025. So we've identified in our 2025 operational goals the two or three things that we will drive under each area to enable us to demonstrate progress.
It's very much our hope. We have Analyst Day later this year in June, and it's very much our hope that we will be able to demonstrate some early proof points from this strategy at Analyst Day in June.
When you joined, I'm trying to remember one of the calls, the early calls you were on, you talked about a hockey stick that was coming in terms of revenue growth and earnings. I was wondering if you can give an update on where we are with that.
Yeah. I think when I joined first, it was in the Q2 earnings call, and we were looking at how our booking momentum was moving towards the second half of the year. I think in Q3 and both in Q4, there were record gross bookings. In fact, Q4 was the largest quarter ever in the history of Equinix. Typically in a year phase, the hockey stick piece comes at the end of the year, and I think the team delivered that as far as the record bookings are concerned.
When you go from bookings to revenues and earnings, when do you think that kicks in, the bookings that you got?
Yeah, so the journey from bookings to MRR that gets represented externally is a very important journey both for us and our customers. We are expecting to see, and that's part of our guide that we provided for 2025. You will see that in Q1, there is an uptick in MRR revenue in Q1 of 2025, and we are anticipating that you will continue to see that acceleration of MRR revenue throughout 2025, which is what underpins the guide that we have provided.
And the guide overall is kind of consistent with the earnings that you guys have generated for a number of years. If anything, it's a little light relative to what you've done historically. So I think about hockey stick being something that's better than what we've had historically, and this is something which is either in line or below. And is there any reason to expect anything different? I mean, I would think a hockey stick would lead to a better outcome.
Yeah. I guess for me, the process was looking at the bookings journey that we were on and the pipeline that we were building, which is the precursor to anything that comes out from a revenue perspective, and I think the guide that we have provided this year really speaks to MRR with NRR staying flat, and we had a large proportion of NRR in 2024's numbers, so with NRR staying flat this year, the MRR growth is an indicator of underpinning growth for Equinix.
Thank you.
Adaire, maybe taking a step back just on broader demand, can you talk about the demand and the growth that you're seeing for the core workloads that you've experienced for many years in the business, and also talk about the opportunities from inference, and what about that provides Equinix an opportunity to gain revenue and returns from that?
I think that we're very fortunate that the workload base that we manage for our customers is a very broad-based workload base, and that this means that we are able to provide a wide range of differentiating services for our customers. Certainly, the demand that we're seeing in the market is absolutely very voracious in terms of the services that we offer. And we are working very closely with our sales team to ensure that we are able to capitalize on that demand by working through a process that we call demand shaping. So I think everybody will be aware that in some of our Tier 1 metros, we have some capacity constraints today. And we are looking to release some capacity into those Tier 1 metros during the course of 2025.
But as we work with our customers to demand shape, it is about understanding the business process that that workload is driving for the customer by starting with the application discussion, then moving through the application discussion to the workload discussion, and then working to look at landing the right workload in the right location for that customer. And that perhaps is one of the reasons why you've seen an uptick in some of our Tier 2 performance during the course of last year. When I look across 2024, we did over 16,000 deals during the course of that year. That's booking-related deals. And I think that speaks to the velocity and volume of the demand.
And specifically, as it might relate to AI workloads and how they are manifesting themselves in our environment, when we looked at the top 25 deals that we closed during the course of Q4 and deeply analyzed the workloads that were inside those top 25 deals, we could see that 50% of those deals were AI or high-performance compute-related. So we are beginning to see those type of workloads formulate into the work that we're delivering on behalf of our customers.
And so related to AI, during the cloud phase and cloud expansion, one of the things that Equinix captured were on-ramps to the cloud. Is there a similar situation happening for AI where firms that are specializing in offering AI services to customers are talking to you about setting up on-ramps and going after customers? And can you talk about those opportunities and the magnetism that that creates for your business model?
Yeah. So there are a number of companies that are operating in the AI ecosystem, offering as-a-service paradigms around different types of processing for customers to access. Many of those companies are working in with Equinix for a number of reasons. One, to enable us, one, because of the 10,000 enterprise customers that we have in our portfolio, it provides access to those customers for these companies. So I think that's a very tangible value for them. It's also a tangible value for us because it allows us to look at potential legitimate go-to-market opportunities with those companies. And secondly, then to look at how they grow their own networking capability and presence using Equinix as the opportunity to do that. So there's some very interesting discussions.
I think there's a potential that many of these companies could become new, almost magnets for us, looking at the kind of AI services that they're offering, and then the other companies that could spin around those to provide those services in a holistic way to a customer. So we're very excited about the tech service providers that are engaging with us in order to place their infrastructure into our environment.
Do you believe there's been a structural reduction in need for large-scale learning and hyperscale just following DeepSeek?
Sorry, could you repeat the question?
I guess the question is just on, is there a potential that there's been a structural reduction in the need for large-scale learning and hyperscale? I think the question is just after DeepSeek.
Okay. When I consider the DeepSeek opportunity and the recent announcements from DeepSeek, it really is a substantiation of the ongoing innovation that we are seeing in this space. And in fact, for us, the opportunity to democratize AI and to reduce the cost of AI proof of concepts and AI workloads is, I think, a very positive indicator. We are across a broad base of customers. Our wholesale business is predominantly in xScale, where we serve the hyperscalers through our xScale motion. And then in our retail side, we have our enterprise customers who have deep interconnections and connectivity to the clouds via our retail facilities. So when you look at the opportunity then that lower cost means, today you see at the top end of the enterprise space, very large companies doing multiple proof of concepts in order to see which one will really deliver core business value.
Sometimes it can be a case that there's a thousand flowers in the field, but only three or four potentially will bloom. Large-scale companies can do that investment across numerous proof of concepts at any point in time. If three or four fall into production and have a significant benefit, then that can pay for the totality of all of them. Companies that are lower down in the segmentation or companies that are lower down in terms of just turnover size of revenue don't have the same affordability. I think anything that introduces that kind of affordability will enable the opportunity to broaden for all of us.
Just to come back to your comments around some of the changes that you've been making, two things that stood out to me were in terms of the go-to-market for bookings. So one is you described that you're selling, kind of pre-selling into your retail more than you've done in the past, sooner than you've done. And the second thing is you're now more open as a company to larger footprints within your data centers. Can you talk about the significance of each of those, and is that an opportunity for a further acceleration of your pipeline and bookings opportunity as you look forward?
Yeah. So in terms of our retail business and our serve better motion, it really is about putting the tools in the hands of our sales force to give them the visibility as to where we have things like contiguous capacity in our data center environments. That kind of visibility has been extremely helpful in helping our teams do that demand shaping exercise and have a value-based discussion with our customers. And I think always in the past, Equinix has had a right workload, right location type of strategy, and probably more so now than ever, that is extremely important. In terms of large footprint, we're certainly seeing that from our enterprise customers. Oh, sorry, I'll answer the pre-sale question first, then I'll come to large footprint.
Certainly, from an enterprise perspective, over the course of Q3 and Q4, we had some pre-sale activity, which is different to pre-lease, which we defined just on the xScale side. So pre-sale is a customer wanting to ensure capacity in a particular location or as a particular new location or phase comes online, wanting to ensure that they will have access to that contiguous capacity. So they have pre-saled with us, essentially signed a transaction to enable that to occur. We don't tend to recognize that revenue until it's within, or to declare that revenue until it's within a window of the implementation timeframe for that customer. So that did happen during Q3 and Q4. In terms of large footprint, certainly from enterprise customers, there is an ask, an increase in terms of the capacity that they are looking to secure from us.
Again, I think that the teams working closely with them and ensuring that we land those workloads in the right location is important. We don't always have that kind of contiguous capacity of that scale in our Tier 1s, but often that is not a necessary precursor for some of those customers.
In terms of xScale, how are you thinking about the strategy going forward there in terms of your ownership of the assets and where that fits in the selling strategy for Equinix?
Yeah, so xScale is a joint venture structure. We operate largely off balance sheet with xScale. Today, we have what we refer to as xScale One, which is our presence in EMEA and APAC, and our second JV is in the North America Theater of Operation, which we announced in October last year and will be funded up to $15 billion. The EMEA and APAC ones, approximately $8 billion. In terms of our xScale One, we have an 85% pre-lease on all of those facilities and continue to evolve our service there to our JV partners. Equinix receives fees from the JV, which is some of the NRR revenue that we saw last year. Equinix receives fees from the JVs for a series of services around sales and marketing, around the management of the facilities, and around aspects of the design and construction of the facility.
We are obviously at a situation where we have some stabilized assets in our xScale in EMEA, which is exciting. And so part of the discussion that we'll be having with our JV partners going forward is how we move these into monetization. And so it's probably too early to call what kind of vectors would be in that dialogue yet, but that is an interesting journey that is ahead of us. And we have, in our site in Atlanta, just begun to move some dirt so that we're beginning the process of assembling the campus that we are building there. So this will continue to be an important way that we address the hyperscale training opportunity that we see.
Today, it's primarily five major customers that operate through xScale, but there's potentially another 10 that we've identified in terms of the services of xScale that would be appropriate for us to begin considering in those footprints.
So if there's any questions from the room, please raise your hand or hit the button on your microphone. We have several minutes left. And just to give you a little preview of topics, I think we'll hit upon competition. We'll hit upon the next question we'll ask on optimization. And then, of course, if there's any questions from the room, we welcome them. We'll start with optimization. So Equinix has talked about the optimization from certain customers over the last year or so affecting the MRR growth during 2024. Curious, where are you on this optimization? And should 2025 look like a more normal Equinix year in terms of kind of a combination of cabinet adds and MRR per cabinet, whereas last year it was more weighted, I think, to the MRR per cabinet side of the equation?
Yeah. Look, I believe that optimization is an ongoing part of any company's use of infrastructure and technical infrastructure. And we are no exception to that. And as customers become certainly more sophisticated in their understanding of their own architecture and their use of clouds, then I think we will continue to see a level of optimization, and we welcome it because it means that we're maximizing the value that customers enjoy from being located at Equinix. In terms of how that relates into churn that ultimately impacts the MRR number, the guide that we've provided for 2025 is in the same range that we provided for previous years, so between 2 to 2.5. The interesting element in terms of looking at the data here is that we counted as a churn if a single line item or product is optimized by a customer.
In fact, sometimes when I look at the data, customers that have undertaken that task have actually grown their revenue with us. So it's an interesting phenomenon for us to unpack, but one that we are certainly very much focused on in terms of understanding how we can best participate in this process and ensure that our customers have best value from Equinix. So I don't see that optimization is something that would never be part of the Equinix landscape going forward. I think for us, it will be important that we look to how we actively and proactively manage that with customers, and that's a part and parcel of what we are doing. The second element of your question was around.
Just in terms of the volume side of the equation, so when you look at the P x Q math for service revenue growth and normalize 7%-8%, should this year look a little more normal in terms of being a combination of positive cabinet adds and MRR per cabinet growth, maybe relative to some quarters last year where you didn't have those cabinet adds?
Yeah. I think the backlog that we have built, the fact that we have doubled the size of cabs ready to be implemented, and the underpinning guidance that we provided, those elements underpin that guidance for 2025. So you should expect to see that uptick coming, as we mentioned already, in the second half in MRR.
Great. And on the competition side, are you seeing any change in the competitive landscape in terms of whether it's for the cloud on-ramps, the AI on-ramps, or just the enterprise customers that you're targeting or those that you have? Any notable changes or evolution in the competitive landscape?
No. I think that many of the new entrants to the market have a very specific wholesale focus as opposed to retail. So as it relates to the retail side, no additional competitive pressures that we see in the market.
You have an analyst day coming up in June.
Yes.
Any previews you'd like to leave our group with today in terms of the topics that people should be looking forward to discussing with you and the company?
Yes, well, first of all, we hope that you will join us. We very much look forward to welcoming you to our analyst day. We would like to use analyst day as the opportunity to double-click on elements of our strategy, to highlight some early proof points of the strategy in execution, to give our perspective on the market and how we see the market moving over the next period of time, to provide, as a result of that, the long-term guidance. We're updating that plan in preparation for analyst day in June, and then also to have the opportunity to introduce you to some of our key customers who are using our facilities to deliver their own business outcomes for their customers, and that's always an interesting narrative to understand how Equinix is being deployed and serviced to our customers.
Great. In our last minute before we get to the rapid fires, just curious for a quick update on your interconnection business. What are you seeing in terms of interconnection densities and how your customers are using the products to stay more connected with different elements and ecosystems within your portfolio?
Yeah. I mean, I truly believe this is one of the differentiating aspects of the Equinix landscape. We saw really great interconnect adds during Q4. Over 6,000 new interconnections were added to our environment in Q4. We now have a total of 482,000 interconnections. Revenue on interconnections stepped up 9%. And today, interconnections represents approximately 19% of our MRR. So it's a very key part of our portfolio, I think a very key element of differentiation for our customers. And something that when we look at our Solve Smarter pillar, one of the aspects that we've asked our team to consider is how do we take this core focus of Equinix and render some of the services within it easy to consume in a multi-cloud, hybrid, AI-oriented world. And look forward to sharing some of their early thoughts on that with you in June.
Great. We have our two rapid-fire questions to end the session. What will Same-Store N OI Growth be for the data center sector overall next year in 2026?
For data center, we see it in the range of 3%-5%, given that there are some advantageous pricing situations in the market.
Then will there be more or fewer or the same number of public data center companies a year from now?
I'm going to go with the same.
Great. Thank you very much.
Thank you.