Good afternoon, welcome to today's 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've identified in today's press release and those identified in our filings with the SEC, including our most recent Form 10-K, filed February 17th, 2023. 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 Equinix's policy not to comment on its financial guidance during the quarter unless it's done through an explicit public disclosure. We will provide non-GAAP measures on today's conference call.
We provide a reconciliation of those measures to the most directly comparable GAAP measures and a list of the reasons why the company uses these measures in today's press release on the Equinix Investor Relations page at www.equinix.com. We've 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 current available information. With us today are Charles Meyers, Equinix's CEO and President, and Keith Taylor, Chief Financial Officer. Following our prepared remarks, we'll be taking questions from sell side analysts.
In the interest of wrapping this call up in one hour, we'd like to ask these analysts to limit any follow-on questions to one. At this time, I'll turn the call over to Charles.
Thank you, Chip. Good afternoon. Welcome to our first quarter earnings call. We had a strong start to the year, delivering quarterly revenues right at $2 billion, with adjusted EBITDA and AFFO above the top end of our expectations. Despite a challenging macro environment, customers remain committed to their digital transformation journeys, driving 4,000 deals in the quarter across more than 3,000 customers, highlighting the scale and diversity of our go-to-market engine and the broad-based demand that continues to propel the business. We continue to see enterprises and service providers build out their IT infrastructure on Platform Equinix, and that infrastructure is more distributed, more cloud connected, and more hybrid than ever before.
While some customers are appropriately cautious about the timing of their investments given macro conditions, Equinix continues to be a critical partner in their efforts to advance hybrid architectures, unlock digital performance gains, and optimize cloud and network spend. As a result, our deal win rates remain steady compared to historical trends, and we continue to see a robust pricing environment across all three regions. Turning to power, we're very pleased with how the organization has navigated a volatile energy market, and we remain in a strong position, significantly mitigating the impacts of this volatility for our business and for our customers. As previously discussed, we raised pricing in January to more than 7,000 customers across 16 countries, generating approximately $90 million of incremental revenue in the quarter, fully offsetting the impact of higher power costs.
Thanks to timely and transparent communications, concessions and disputes are low. Our days of sales outstanding remain in line with historical trends. On the sustainability front, we are committed to responsible growth and continue to advance our bold future-first sustainability agenda. Sustainability is increasingly becoming a board-level issue. Gartner estimates that by 2026, 75% of organizations will seek to increase business with IT vendors that have demonstrable sustainability goals and timelines and will seek to replace those who don't. We recently published our Eighth Annual CSR Report. In 2022, we extended our industry leadership with 96% renewable energy coverage, making our fifth consecutive year with over 90% coverage. We're also progressing well on our science-based targets, with a 23% reduction in operational emissions across Scope one and Scope two from our 2019 baseline.
Additionally, Equinix continues to evolve its power procurement portfolio to increase the quality of its renewable energy purchases. This year, we signed new long-term power purchase agreements for solar projects in Spain, totaling 345 MW of capacity, bringing Equinix's contracted renewable energy PPA portfolio to 715 MW globally once fully operational. Looking forward, where feasible, we'll continue to prioritize projects that create new sources of clean energy directly in the grids where we operate and support a healthy, renewable energy coverage mix. Turning to our results as depicted on slide three, revenues for Q1 were $2 billion, up 16% year-over-year, driven by strong recurring revenue growth. Adjusted EBITDA was up 18% year-over-year, and AFFO was better than our expectations due to strong operating performance. These growth rates are all on a normalized and constant currency basis.
Our unmatched scale and reach continues to differentiate our data center services portfolio, and the tremendous strength of our balance sheet positions us to sustain our investment in new capacity to support a robust demand environment. We currently have 50 major projects underway across 37 metros in 25 countries, including 10 xScale projects that will deliver more than 90 MW of capacity once opened. This quarter, we added new data center builds in Lagos, Frankfurt, and Rio de Janeiro. Revenues from multi-region and three-region customers increased 1% quarter-over-quarter to an impressive 76% and 65% respectively. Key multi-region wins in the quarter included a Fortune 500 manufacturing conglomerate, expanding its performance hub deployments across all three regions to assist with business unit divestiture, and a cloud-native, zero-trust cybersecurity company using Equinix Metal to expand its business across all three regions.
Our platform remains the logical point of nexus for hybrid and multi-cloud deployments, and hyperscalers continue to look to Equinix as a critical infrastructure provider and a valued go-to-market partner. This quarter, we won five new cloud on-ramps across Melbourne, Mumbai, Muscat, Tokyo, and Warsaw, as we continue to enjoy a strong leadership position in multi-cloud connectivity compared to our closest competitors. We're also seeing the unique breadth of our product portfolio across retail colo, interconnection services, xScale, and digital services resonate strongly with customers as they embrace rapidly emerging opportunities in AI. We've closed several key AI wins over the past few quarters and are seeing a growing pipeline of new opportunities directly and with key partners for both training and inference use cases that benefit from the unique performance characteristics and multi-cloud proximity of our platform. In our xScale portfolio, we continue to see strong overall demand.
In Q1, we pre-leased our entire Frankfurt 16 asset, representing 14 MW of capacity, taking us to over 70% leased or pre-leased across our nearly 260 MW of operational and announced xScale facilities. We have a strong funnel of additional xScale opportunities in the coming quarters. Enterprise to cloud wins this quarter included a leading consumer products company leveraging Equinix's robust ecosystems for their private multi-cloud connectivity needs. The Hearst Corporation, a diversified media company, deploying on Platform Equinix to execute its cloud-first strategy, including the deployment of Network Edge for their network aggregation. Turning to our industry-leading interconnection business, we now have over 452,000 total interconnections on our platform. In Q1, interconnection revenue stepped up 12% year-over-year on a normalized and constant currency basis, and we added an incremental 5,300 interconnections for the quarter.
We saw some continued grooming activity and consolidation into higher bandwidth VCs on Fabric, both moderated from the prior quarter. While gross adds remain strong, pricing is firm, the diversity of our customer interconnection continues to expand. As global data volumes continue to accelerate, Internet Exchange saw peak traffic up 3% quarter-over-quarter and 26% year-over-year to greater than 30 terabits per second for the first time. As enterprises continue to embrace hybrid and multi-cloud as their architecture of choice, they are increasingly seeking the security, performance, and convenience of Equinix Fabric to connect to their choice of cloud and IT services across the broader digital ecosystem. One example is Cisco, whose multiple edge delivered services now rank among the leading end destinations on Fabric.
Customer wins included CAIXA, Brazil's federal financial services company, partnering with Equinix to accelerate its business by optimizing and securing its network core via Fabric. We also continue to enhance our platform with our digital services portfolio and saw strong new user growth for our Equinix Metal offering as we cultivate product-led growth. Wins this quarter included a Japanese video game company utilizing Equinix Metal in all three regions to support a new product launch, and Restack, an Australian SaaS integrator and managed services provider, utilizing Equinix Fabric and our Edge services to optimize their solution offerings. Our channel program delivered another strong quarter, accounting for roughly 35% of bookings and 60% of new logos.
Wins were across a wide range of industry verticals and digital at first use cases with strong engagement across the hyperscalers and continued momentum with partners like AT&T, Dell, Cisco, HPE, Orange Business, and Zenlayer. Key wins included a digital modernization win with Entel, our largest local partner in Chile, on behalf of Empresa Nacional del Petróleo, a Chilean oil and gas company. Entel is delivering a fully managed SD-WAN solution based upon Cisco technology while leveraging Equinix data center and interconnection services, demonstrating how local partners can help deliver value to clients in new Equinix markets. Let me turn the call over to Keith and cover the results for the quarter.
Thanks, Charles. Good afternoon to everyone. As highlighted by Charles, we had an outstanding start to the year. As you can see from our financial results, the team delivered on multiple fronts in the quarter. We had record net bookings, including power price increases. Excluding those power price increases, our net bookings performance was solid, the result of again, net positive pricing actions across each of our regions on lower MRR churn. Global MRR per cabinet yield increased by $124 per cabinet on an as-reported basis, or about $27 per cabinet, adjusting for power price increases and other one-offs. As we highlighted on the last earnings call, we completed our efforts to strengthen our balance sheet, raising both debt and equity in the quarter and remaining well-funded to meet our future growth expectations.
As you would expect, despite the continued strength of our business, we remain highly focused on the broader market dynamics. As we've stated before, during periods of disruption, Equinix thrives given our high quality and diverse set of customers who view Equinix as a mission-critical partner to place their ecosystem-driven digital infrastructure, whether it be a cloud on-ramp, a networking node, a cable landing station, or a trading platform. Do remember, 90% of our quarterly bookings come from those existing customers as they expand their current environment or maybe move to more markets or simply buy more services. Our strong liquidity position, low dividend to FFO payout ratio, and reduced debt leverage allows us to continue to invest, to extend our product portfolio and expand our global footprint, in both cases, driving top line growth.
Simply put, we're in a strong, fully funded financial position, allowing us to meet all of our capital needs while maintaining the strategic and operational flexibility we need to grow and scale the business. Let me cover the highlights from the quarter. Know that all comments in this section are on a normalized and constant currency basis. As depicted on slide four, our global Q1 revenues were $1.998 billion, up 16% over the same quarter last year and above the top end of our guidance range due to strong recurring revenues and the timing of xScale non-recurring fees. As we've noted before, non-recurring revenues, particularly those revenues attributed to our xScale business and custom installation works, are inherently lumpy.
Given the momentum we're seeing in our xScale business across all three regions, non-recurring revenues could fluctuate meaningfully over the next three quarters of the year. Q1 revenues, net of our FX hedges, included a $2 million tailwind when compared to our prior guidance rates due to a weaker US dollar in the quarter. Global Q1 adjusted EBITDA was $944 million, or 47% of our revenues, up 18% over the same quarter last year, and again, above the top end of our guidance range due to strong operating performance, including flat quarter-over-quarter SG&A spend. As expected, Q1 adjusted EBITDA benefited from lower seasonal power consumption and favorable energy hedge rates, which will reset higher starting in Q2 as anticipated, resulting in increased net utility spend over the next three quarters of the year.
Q1 adjusted EBITDA, net of our FX hedges, included a $2 million FX benefit when compared to our prior guidance rates and $5 million of integration costs. Global Q1 FFO was $802 million, above our expectations due to strong business performance, including lower net interest expense and income taxes. As expected, we had seasonally lower recurring CapEx spend consistent with prior years. Q1 FFO included a $2 million FX benefit when compared to our prior guidance rates. Global Q1 MRR churn was 2%, a continued reflection of our disciplined sales strategy. For the full year, we expect MRR churn to average at the low end of 2%-2.5% of our quarterly range. Turning to our regional highlights, whose full results are covered on slides five through seven.
On a year-over-year normalized basis, EMEA was our fastest-growing region at 28% due to our significant power increases. Excluding the benefit attributed to those power price increases, EMEA growth was 14%. Our APAC and Americas region growth rates were 15% and 9% respectively. The Americas region had another solid quarter with strong performance from our public sector team and continued favorable pricing trends. We saw strong momentum in our Chicago, Culpeper, Seattle metros and our Brazilian business. Our EMEA business delivered a great quarter, successfully executing on our power price increase program while also seeing lower than expected MRR churn. In the quarter, we saw booking strength in our Amsterdam, Dublin and Manchester metros. Finally, the Asia Pacific region had a solid quarter led by our Mumbai, Tokyo and Singapore markets, with strong new logo additions and firm pricing.
Now, while Singapore remains capacity-constrained, as part of our IBX optimization efforts, we continue to proactively negotiate with certain customers with larger deployments to recover capacity, which we anticipate can be backfilled at much higher rates, although it could affect our in-quarter MRR churn and net cabinets billing metric. Now looking at the capital structure, please refer to slide eight. Our balance sheet increased to approximately $31.3 billion, including an unrestricted cash balance of $2.6 billion. Our cash balance increased quarter-over-quarter due to strong operating cash flow, while we also raised approximately JPY 580 million of yen-denominated debt and closed out the prior year's forward sales from our ATM program. Our net leverage remains low at 3.4x our adjusted EBITDA, with 96% of our outstanding debt being fixed with no near-term maturities.
Given the global nature of our business, we continue to look to raise additional debt capital in reduced rate countries where we intend to expand, creating both incremental debt capital to fund our growth and placing natural hedges into these markets. Turning to slide nine, for the quarter, capital expenditures were $530 million, including seasonally low recurring CapEx of $22 million. Since our last earnings call, we opened four retail projects in Frankfurt, Paris, Singapore and Sydney. We also purchased land for development in Calgary and Madrid. Revenues from owned assets were 63% of our recurring revenues for the quarter. Our capital investments delivered strong returns, as shown on slide 10. Our now 171 stabilized assets increased revenues by 11% year-over-year on a constant currency basis.
Taking out the benefit attributed to power price increases, stabilized assets increased 7% year-over-year. Consistent with prior years, in Q1, we completed the annual refresh of our IBX categorization exercise. Our stabilized asset count increased by a net 13 IBXs. Now, stabilized assets are collectively 85% utilized and generate a 27% cash-on-cash return on the gross PP&E invested. Finally, please refer to slides 11 through 15 for our updated summary of 2023 guidance and bridges. Do note all growth rates are on a normalized and constant currency basis. For the full year, we're raising our revenue guidance by $30 million and adjusted EBITDA guidance by $20 million, primarily due to favorable FX rates and lower integration costs.
This guidance implies a revenue growth rate of 14%-15% inclusive of power price increases or 9%-10% excluding the power cost pass through, and adjusted EBITDA margins of 45% excluding integration costs. We now expect to incur $33 million of integration costs in 2023. We're raising 2023 AFFO guidance by $44 million to now grow between 10%- 13% compared to the previous year. AFFO per share is now expected to grow 8%-11%. 2023 CapEx is expected to range between $2.7 billion- $2.9 billion, including approximately $150 million of on-balance sheet xScale spend, which we expect to be reimbursed as we transfer assets into the JVs, about $205 million of recurring CapEx spend. Let me stop here.
I'm gonna turn the call back to Charles.
Thanks, Keith. In closing, we had a solid start to the year. While we remain vigilant to the challenges in the broader macro economy, our Q1 results were strong and our outlook remains positive with the overall demand for digital transformation fueling our conviction around the long-term secular drivers of our business. We look forward to our upcoming Analyst Day in June, where we will further outline the significant opportunity ahead and discuss our strongly differentiated position in capturing this opportunity as we enable our customers to access all the right places, partners, and possibilities. We also look forward to diving more deeply into our evolving platform capabilities, our industry-leading go-to-market engine, and sharing expectations of how all of this will translate into durable and differentiated value creation for our investors, our customers, and the communities in which we operate.
Let me stop there and open it up for questions.
Thank you. If you would like to ask a question, please unmute your phone, press star one and record your first and last name and company when prompted. Our first caller is Matt Niknam with Deutsche Bank. You may go ahead.
Hey, guys. Thanks for taking the questions. Just two quick ones if I could. First, on bookings trends, can you comment at all in terms of linearity and whether you saw any, you know, potential slowdowns owing to some of the macro choppiness that really picked up in March? We've heard maybe similar theme from some others across tech. Just second one on cap allocation, specifically just related to potential inorganic opportunities. Just wondering what you're seeing in terms of opportunities both domestically and abroad, and whether seller expectations have become more reasonable, just in the context of leverage now sitting just shy of 3.5 turns. Thanks.
Thanks, Matt. Yeah, look, I think overall, as we said in the script, I think we continue to feel good about the demand level. I think definitely customers are feeling, you know, tighter budgets, looking to stretch their dollars, but I think their commitment to digital is strong. I think how they're using us in terms of looking to capture savings in a variety of areas, and again, long-term digital transformation commitments are driving pretty solid activity levels. I think with the overall, you know, we did about 4,000 deals in the quarter of 3,000 customers, very much in line with kind of what we've done in prior quarters. Linearity was pretty good.
We probably saw a few more deals slip into the following quarter than we would have in previous quarters. Then on sales cycle, just to give you more of a concrete data point to hang your hat on, we usually see about 45%, I'm sorry, about 40% of our deals extend beyond a 90-day sales cycle. That rose in this last quarter to about 45%. A little bit of an increase, but not particularly material. As we saw a little bit of slippage, actually our linearity in Q2 is already looking pretty good. We started with a little bit richer funnel, and so we're off to a good start in Q2.
Again, I think that clearly you're feeling a little bit of caution in the macro market. Overall, I think in terms of what people are, you know, to how they're thinking about digital, how they're thinking about Equinix in that context, we continue to see a pretty good overall environment. Relative to your second question on capital allocation, look, our balance sheet, you know, thanks to our team's efforts, is in a really good place. As I've said in a number of settings, you know, I, you know, I do think there are gonna be opportunities for us, both organic and inorganic. You know, we're starting to see, I think, some softening in multiples.
I think that's likely to, you know, continue depending on kind of overall, you know, sort of, recessionary sort of, dynamics and that kind of thing. We'll, you know, we'll keep an eye on that. I do think as a market leader and, you know, we've got a long track record of being able to unlock value from M&A, and we're definitely positioned to do that if the right things come along. I do think we probably expect some capital allocation towards that. I think our balance sheet puts us in a really good position. Keith, anything to add there?
Yeah, Matt, if I could just maybe add a couple quick points to what Charles said. The other part about the, you know, the leverage being a little bit lower than we typically run at is part just because of the money that we raised and, you know, the opportunity that we sort of went for us to go into the market and draw on some, you know, particularly on the debt capital in Japan, you know, that put more cash on our balance sheet. That cash is gonna get consumed. One of the things I wanted, certainly you and the rest of the listeners to walk away with is that we do have the cash, we have the flexibility, both operationally and structurally, but we're gonna consume the cash.
In many ways, we're paying today for when we're fully funded, you know, for all that we see, but you look forward in time and say, "Well, what are we gonna do in 2024 and what are we gonna do in 2025?" You're already, or we're already thinking ahead, and hence my comments that we wanna continue to raise capital 'cause we know our dividend, you know, our dividend's gonna grow. We know we're gonna continue to spend capital and the like. We wanna have that flexibility that Charles sort of alludes to when, you know, when things shake themselves free. If it makes sense for us, then we would certainly strike. You need a good, strong balance sheet.
All that said, at the end of the day, you know, we're gonna consume the cash, we're gonna consume it into our growth cycles. You know, again, I just think we all like the flexibility and the liquidity we have as a company, and we can, and we can use that to our fullest advantage going forward.
That's great. Thank you both.
Thanks, Matt.
Our next caller is John Atkin with RBC. You may go ahead.
Thanks. Got a couple questions. One on, slide 10, where you have the stabilized growth, 11% top line. I think that's a record, and I just wanted to get a sense as to what was driving that. And then another metrics question, just the, America's cabinet equivalents actually was down sequentially in MRR just a bit. In APAC and in EMEA, the cabinet billing number didn't grow at all. The footnote referenced timing of installs and churn. I wonder if you can kind of drill down on that a bit. Thanks.
Yeah. Great question, John. On stabilized growth, obviously incredible results, you know, fueled obviously in part by PPI on the power price increase. 11% is definitely really high. If you take out the effects of power price increase, that still takes you down to about 7%, really attractive. And if you take out the new stabilized assets, which are obviously less mature and probably growing faster than others, would take it down to about 5% from the previous sort of portfolio of stabilized assets. That's still at the high end of the 3%-5% that we've been talking about.
This is pretty typical of the dynamic, as you very well know, when you add in sort of a new set of stabilized assets, it sort of sawtooth the growth a little bit up. Then as you, as you increase utilization and sort of tap out that growth, it might tend to sort of come back down a little bit. Then ROIC goes a little bit in the opposite direction. It's sort of impaired by the fact that these are less mature, but then I think would tend to rise back. Overall, feel really good about stabilized assets. I think they're a reflection of the strength of the business model. Billable cabs, yeah, for sure, definitely you know, good solid quarter in Americas.
APAC is coming off a really strong quarter last quarter and so was flat this one. EMEA actually had sort of no meaningful adds the last two quarters. I know that creates a little sort of mental dissonance for people to see two quarters without billable cabs. I think it's important to remember that really the dynamics of the business are such. You know, in EMEA, actually, if you look at a 8-quarter, 12-quarter trend, we've actually had a lot of strength there in terms of cabinet adds.
You get into a situation where essentially you start seeing high utilization rates in certain markets, therefore you're probably gonna see a little less large footprint, then you actually start a sort of a cycle of looking for good churn, you know, to try to make room. That kinda can lead to some flat spots, I think, from billable cabs. We've always encouraged people to really look at a longer term trend. We clearly will grow, can, will, and need to grow billable cabs across all three regions. With the size of the development pipeline that we have, that will happen. Let me give you a just a data point on, you know, Europe.
One of the things, this happened in Europe, and it gives, you know, I think it's something to sort of hang your hat on and really reinforce why we talk so much about our strategy and maintaining discipline in our strategy. 'Cause we could turn ourselves into cabinet slingers, and that's really not what we want. If you look at Europe, we actually had a churn this quarter in a market that is very tight, of about 440 cabs. You know, that was a, it was a pretty low dense implementation from a power density standpoint and not really well interconnected. We were getting a cabinet yield there well below our average.
When we go to resell that, we will likely resell that in significantly more small to mid-size deals than sort of one big footprint. When you, when you look at what's likely to happen there, we're probably gonna increase the revenue and therefore the yield per cabinet. When you get more interconnection, higher power density, and a higher price point, we'll probably increase the revenue from those 440 cabs 50%, you know, from that capacity when all is said and done. you know, the significant growth with no billable, essentially zero increase in billable cabs and no incremental CapEx.
You know, this is why when, you know, you hear us talk constantly about right customer, right application, right asset, and that's more than just a sort of a clever, you know, thing for the earnings call. That's, that's a way of life here in terms of how we drive our sales team, and I think that gives you a kind of a good reflection. You will see the billable cab growth, but I think right now you're seeing, you know, good, healthy growth across those because I think we're playing every lever, power density, price point, interconnection, and I think it's really driving health in the business.
If I can follow up on AI, you mentioned some wins there and, what are we seeing in terms of rough sizes? Are they, do they tend to be very cross-connect rich or more density rich or how would you kind of qualify or characterize the AI demand you're seeing so far?
Yeah, I think it's a little early to tell, but we have seen, you know, it's interesting 'cause ChatGPT has created a media frenzy around AI, but the reality is we've seen AI-related opportunities in our pipeline for the last several years. For those that are familiar with the story and out on the Investor Circuit with us, you've heard me talk about that. I think that most typically it is people thinking about how to use their data and where to place their data. What we're seeing is actually a trend towards people saying, we wanna take our data and place it sort of intercloud. We wanna have control of that data, we wanna intersect it with other data sources, and we wanna be able to move it into and out of, you know, clouds as appropriate for these things.
We have seen some large training, you know, model training opportunities. Those are partially economically driven. Just it's actually cheaper to do on sort of dedicated hardware if you have, you know, sort of a sustained commitment to doing AI training. We've seen some of those. Inference deals, which I think are gonna be a bit more interconnected, are where people are actually deploying, you know, AI inference use cases that are, you know. I think where we're gonna be uniquely well suited is when insights are both, one, when data sets are dynamic, and they're updated frequently, and they're taking in a lot of new data, and secondly, where insights are real-time and mission-critical.
I think, you know, that really doesn't sort of fit the profile of the way current large language models like ChatGPT are being used. We do think that, you know, what's gonna happen is people are gonna build vertically oriented, sort of, AI use cases on top of foundational models that are gonna be sort of cloud-centric. I think that, you know, we're gonna be well suited to responding to some of those opportunities. I think it's gonna be a mix. I actually think, some of the training stuff, John, is gonna be, you know, more suited to our xScale portfolio. I think some of the inference stuff is probably gonna land, you know, in the retail portfolio at the digital edge.
That's sort of the current dynamic, but early days, but I think an exciting incremental opportunity, and we're gonna talk a little bit more about that at Analyst Day.
Thank you.
Our next caller is Nick Del Deo with MoffettNathanson. You may go ahead.
Hi. Thanks for taking my questions. You know, first, Keith, I thought some of your comments about Singapore and the opportunities to better monetize that space were pretty interesting. I mean, is the plan to just move those customers across this across the strait to Johor or some other market, or are they gonna be let go? You know, how impactful do you think this might be over time, and when might it hit your results? You know, are there other markets where this might come into play, or is Singapore kind of a unique situation?
Well, you know, it dovetails nicely into what, you know, Charles was really talking about in the European theater, where you have a tight market, you make some decisions about looking to optimize the environment. With that, sometimes customers move out some of the large deployments. As it relates specifically to Singapore, my reference was no different really than what, again, what Charles is talking about. We do see an opportunity. There happens to be a larger installation related to a customer. You know, maybe it does move to a different market for us and that would be fine. You know, the real focus is getting capacity in the Singapore market, getting a price uplift.
Again, going back to what Charles talked about, you know, we're sort of leaving you with the breadcrumbs that we see something that we're looking at right now that is gonna be upsized. Of course, when we do that, it has an impact on the net cabinets billing, and of course, it has an impact on our churn metric. I maintain, though, our churn is gonna be at the lower end of our range for the year. I'm not worried about that. This billing net billing cabinet metric is the one that we're always sort of looking at. Causes us a little bit of discomfort because we know we're doing the right thing for the business, and yet it presents itself maybe a little bit unfairly to us.
The bottom line is that that's an initiative that we would embark upon. Singapore is not the only market. Any place that we see that opportunity, and again, I refer back to Charles's comment, where we can get an uplift, an optimization of the asset. We don't have to put more capital work, and you're driving value into the equation. That's just a real good outcome for us. If we can do that in places we are tight and there is the demand, we'll make sure that we do it.
Yeah, Nick, I'd offer a little bit more color in that saying we have a few rare examples where I think we have footprints that probably would've been better suited to xScale facilities had we had them at the time that we took them.
That now we are sort of saying, hey, that we really need that capacity for, to, you know, to fuel the retail footprint. Obviously, in Singapore, where there's a broader sort of capacity, you know, constraint concern, it's really critical that we, you know, recapture those. But there are other, you know, there are, you know, other markets where I think we see, you know, some of that opportunity and other markets in which you know, some of these, capacity constraints might come into play. It's also one of the reasons why I think we have to continue to lean in on sustainability.
The connection between those things is, I think, for us to make sure that we're gonna be in line to get the power allocations needed, the permits needed, et cetera, to continue to drive capacity in markets where jurisdictions are quite reasonably looking at how to manage their energy needs. I think it's gonna be important that we are able to say, hey, we're the responsible party to partner with, you know, to continue to, you know, be a digital leader, but be that in a really a responsible way. A lot of sort of interconnections between those various thoughts and threads.
That's great. That's great. Thanks for that color. You know, Charles, can I ask one on interconnection? You talked a bit how ads came back in Q1 versus Q4, still below trend, though.
Yeah.
Can you share any updated expectations regarding when we should see that grooming dynamic abate and get ads back to more normal levels?
Absolutely. Yeah, as you noted, there's a few, you know, note on the last call and in the script, there's a few factors at play on interconnection. Overall, one thing I'd say is traffic levels continue to be really attractive. You're seeing that in exchange. You're seeing that in terms of, you know, in Fabric, overall provision capacity. It's a little tougher for us to tell on physical cross connects exactly how much traffic is flowing 'cause we don't, you know, we don't like the electronics on those things. But it's fair to say that I think what you're seeing is a trend towards significantly higher speeds, you know, to support higher and higher traffic. By the way, I think AI is gonna only add fuel to that fire. You know, gross adds have been strong.
That's one of the things that we really look at is say how many gross adds are there, and I think that's a primary indicator of health, and those have been very much in line with the fourth quarter averages. There is some grooming activity. As I said last quarter, we thought that would moderate. It did moderate to some degree, but was still there at an elevated level. I do think people are gonna run out of low-hanging fruit on that one. I think that we'll eventually see, you know, more moderation there, and that'll help the net adds further. I think this trend towards higher speeds, though, is a more sustained trend. I think we're just gonna have to look at, you know, kinda how, where things settle out.
We've seen this in the past where traffic is sorta catching up to provision capacity a little bit. But I, again, I think the long-term trend here is very high degrees of traffic flow, higher degrees of interconnection. The diversity we're seeing in the interconnection port system and ecosystem is increasingly rich, so more A to ZN, you know, sort of unique connections. Overall, just the strength is good. 12% revenue growth, a little lighter on the unit side. I do think we'll see some more moderation of the grooming per se, but I do think that that'll be offset, you know, that we'll still see a little bit more in terms of fewer higher speed circuits. We'll just continue to track that.
You know, I give you the punchline here. Interconnection is well north of a billion-dollar business for us, growing at 12% at very, very attractive returns on capital. I think that the opportunity for us to continue to sorta, you know, lean into that and grow that business, particularly as we grow fabric and as we think about what the bigger cloud networking opportunity looks like and what our role in it is, continues to be a big part of the Equinix story.
All right. That's great. Thanks, guys.
Our next caller is Simon Flannery with Morgan Stanley. You may go ahead.
Great. Thank you very much. Good evening. I wonder if you could talk a little bit more about pricing outside of the power price increases. We certainly heard a lot on the hyperscale side of prices firming, you referenced some of the capacity constraints in the market. What are you seeing both in xScale and also just in your core business around the opportunities to continue to take price both on new business and on renewals? Maybe a little bit on Metal, both in terms of customer adoption and in terms of your continuing to roll out the product across your footprint. Thanks.
Lots in there. Let me try to hit them all. Yeah, pricing definitely firm. Obviously, PPIs have gotten a lot of airtime, but I think perhaps the even more important trend is our ability to sort of sustain pricing power on the broader portfolio of service offerings. We have elevated, you know, our costs on space, power, and interconnection from a list price perspective across all our markets. I think you're gonna see that continuing to sort of roll into the business. xScale pricing has definitely firmed and across the world. I think we're seeing, you know, attractive price points and good solid cash and cash returns on the projects that we're underwriting.
As we said, we've got a very high degree pre-leasing there. Again, we've raised pricing both on the retail side, space, power, and on the interconnection units. We have. Then you have the escalators, and we are, escalators are also going up. In some cases, we're doing CPI or other index-based escalators but then more broadly, if we're doing fixed escalators, they are much higher than they have been in the past. I think we're seeing all of that roll through as a clear dynamic in the business in terms of. You're seeing it show up in MRR per cap, right?
You know, I mean, we gave you a headline stat there in Keith's script about how MRR per cab is increasing. Yes, a big chunk of it due to PPI, but even absent that, I think our yield per cab, which is an absolutely critical metric for us, continues to rise. Then on metal, we talked about a couple of really nice wins. We are really cultivating, you know, early users in what is more of a product-led growth motion that's probably a little bit more typical of SaaS providers. We're cutting our teeth on that, to be candid, but we're getting the hang of it.
We are seeing, you know, some uptake from developers and from sort of digitally native service providers. We're also seeing some pretty big opportunities in our funnel about more traditional service providers or large enterprises, looking to, you know, reduce the pain of managing the technology life cycle, and Metal really helps with that. We'll probably talk more about that at the Analyst Day as well. You know, continue to feel good about the underlying drivers of that business and kinda why we did that acquisition in the first place.
Thanks a lot.
Our next caller is David Barden with Bank of America. You may go ahead.
Hey, guys. Thanks so much for taking the questions.
Keith, I just wanna make sure, you know, we're all, we all have the right jumping off point. Thank you for the waterfall for the 2Q EBITDA guide. I just wanna kinda understand, you know, the combination of forces of the kinda impact of the roll off of the hedges and the kind of increased usage as they kinda merge together to kinda create this $43 million kind of move down at the midpoint. Assuming that that's the right jumping off point, you know, that these hedges are the right levels for the rest of the year, it implies about a $14 million sequential EBITDA growth in 3Q or 4Q to get to the midpoint of the full year guide.
Could you talk a little bit about, you know, what the drivers of that will look like? Is it gonna be kind of a steady cost structure with pretty much volume and price being the drivers at the margin? Any color there would be super helpful. Thank you.
Sure. Well, thanks, David, and thanks for sort of laying it out there. you know, I think first, if you start on the revenue line and, you know, you look at sort of the quarter-over-quarter movement, the first thing you notice is that it's not an overly substantial increase quarter-over-quarter coming off such a big number from Q1 relative to Q4 last quarter. One of the things that you'll appreciate and it was hence it was built into my comments in my script, non-recurring revenue is moving around quite a bit. Right now we're making the underlying assumption that it's, you know, it's not hitting in any specific quarter.
What you're seeing is a meaningful step down in non-recurring revenue between Q1 and Q2. That's the first thing. You feel that in many different ways, but you certainly do feel it on the EBITDA line as well. The second thing is sort of attached to that is xScale is we are, as Charles alluded to in his script, we sold out one complete asset in Frankfurt, and we are very active in some across all three regions of the world, and we anticipate a lot more xScale activity. You'll see that play itself out into the year or throughout the rest of the year. Right now, our NRR trends about 5% of revenue.
For the year, I think it's probably gonna be roughly 5% of revenue, but the range is gonna be somewhere between 4.2% and about 7% between the next three quarters. We don't know exactly where, so we haven't really guided as well as we maybe would want to, given the set of circumstances. The last piece I'd just say, look, there's elements of conservatism built into our model here for obvious reasons. Again, we're trying to be very prudent about what we look at. We know what we did for the first quarter. We're running a little bit ahead. That was, you know, again, associated with xScale, the xScale fees.
you know, as we look forward, we really just wanted to, at this stage of the game, give you the FX and then, and then continue to look at what's going on in the business. As it relates specifically to the power and the power costs, again, no surprise, we've been very thoughtful about our, you know, power dynamics for this year and the power price increases. We had to factor in and look exactly what was the cost gonna be for the year, including when do the hedges roll off and when does some others start and what's going on in the regulatory or the regulated environment. There's some other markets that, you know, we are going to be putting price increases through effective May 1st, and that's Hong Kong and Tokyo.
Looking at all of that more specifically, you know, our hedge, our costs are going up. You're gonna feel that throughout the rest of the year. It's baked into the guide already. It was baked into the original guide, so this isn't a change, a shift. What you should see is really EBITDA profitability continue to increase throughout the rest of the year. Again, I think we've got the making of a really good plan here, but we're gonna, we're sort of holding firm on what we, what we shared with you when we started the year, knowing that, you know, one other thing that's really working in our favor is currency.
Again, we get a little bit of currency, but, we're all sort of reading the same thing. If you look at what the US dollar could do anywhere between, you know, now and the next 12 months, some are calling for a 5% depreciation, some are calling as high as a 15% depreciation of the US dollar, 60% of our revenues reside outside of the U.S.. You don't have to go very far to figure out what is the implication of that. If 60% of our revenues move 5% or 15% before taking into consideration the hedges, you have a really substantial move on top line and on bottom line, and that drives a lot of value on a per share basis.
Hopefully that gives you sort of a full look at all the things we're thinking about and, trying to share with you. You know, at this point, we felt really comfortable just sort of holding firm on our, on our guide and just giving you a little bit of FX and some operating performance coming out of Q1.
Yeah. Maybe David, a little bit of a more color is that, you know, I think I will tell you that we are also focused on every element of the business model. You know, if you look at the revenue line, you say P x Q, feel very good about P, continue to feel good about Q, and we're gonna continue to work the heck out of that. You know, I would say that, you know, at the next sort of click down on cost of goods, we're continuing to drive efficiency, sort of projects across the business to try to improve, you know, cost of goods and gross margin. When you look down further, I also think just given the broader environment, we're gonna continue to be diligent on spend.
You know, we did spend, we opened up the wallet a bit to make sure we could add some more headcount, and we're trying to bring them up to productivity as quickly as possible. You saw a flat SG&A spend quarter-over-quarter, and we're gonna continue to, you know, be very disciplined about that as well. You know, we're gonna work every element of the model and, you know, continue to, you know, do what we need to do to try to deliver the long-term performance.
Thank you both so much. It's really great.
Our next caller is Michael Elias with TD Cowen. You may go ahead.
Great. Thanks for taking the questions. You know, just first you talked about, you know, organic and inorganic opportunities. Just wondering if you could give us a sense of the markets that you're prioritizing or perhaps regions that you're prioritizing from that perspective. Also, you know, there were some press reports out earlier today suggesting that Equinix is exploring the sale of its Hong Kong data center assets. You know, maybe without commenting on that specifically, just at a high level, you know, do you view capital recycling this year as a likely option? Thanks.
Yeah. Why don't we, I'll take the first one, and then Keith can comment on the, on the second one there relative to Hong Kong. You know, on M&A, as I said, I do think there's opportunities for us. We've talked about where some of those, you know, markets might be. I think Southeast Asia is gonna continue to be an area of opportunity, we believe, over time, and there are several key markets there that I think we've got our eyes on. We've actually done a couple of organic projects already in Indonesia and Malaysia, and we're gonna continue to stay, you know, sort of eyes very wide open in terms of opportunities for us in that in that area.
India, we've announced a new build in Chennai, but I do think there's a lot of opportunity in India, and I think that could be a combination over time of organic and inorganic. I think that, I think one of the things that we have not done a lot of or we haven't done any of it yet, but I think that could be on radar is thinking about opportunities from an xScale perspective in partnership, you know, with our partners. All of those probably represent some level of opportunity for us, in an M&A. I think as we look at some of the dynamics and opportunities in the market, including AI, I think, you know, that could be, those could be all very relevant for us.
So that's the first question, and then I'll kick it over to Keith and he can talk a bit about the this capital recycling question.
Thanks, Charles. Michael, I'll say a few things. First and foremost, we typically are not a recycler of assets. I think you have to step back, and we've said this actually in one of the analyst days, I think it was, might've been the last one, where basically we're a platform, and all assets are very important to the platform. In particular, Hong Kong is a very important asset to us and something that is important to our platform. We don't think about the business as selling assets, but we do also think about innovative ways to allow us to scale and grow the business.
An example of that is our Jakarta business where we recently entered into a partnership with a, with a large conglomerate so that we go into that market in tandem. It just, it's a, it's an innovative way to actually to raise capital. Overall, you know, we're not in the business of selling assets, but we're always looking across our portfolio and trying to figure out how to optimize the capital structure, and I think that sort of best reflects, you know, our view that the platform, the Equinix platform is critically important to all the different assets that we have in our portfolio.
Great. Thanks for the color.
Our next caller is Michael Rollins with Citi. You may go ahead.
Thanks. Hi. Couple questions. You know, first, I realize it's still somewhat early in the year, but as you're looking forward and trying to manage power costs, what's your sense of where these power price increases or maybe future decreases are heading from what you see across the market portfolio for 2024? Just secondly, as we take a step back and the market tries to contemplate the forward growth opportunity for Equinix, is it helpful to consider the company's position on three vectors, the percentage coverage of core global markets, the percentage penetration of key customer cohorts, and where the wallet level is, especially when you break out past the top 50 customers? Is that something that you can give us a bit of an update on today?
Sure. I'll start, and Keith can jump in here. Obviously very hard for us to predict anything on power. I would say that I would expect, in general, more volatility rather than less, right? You know, I think we're living in a volatile world. I think there's a lot of still dynamics at play, in terms that could impact, you know, power pricing, broadly speaking. You know, and now the good news is that I think that, again, we've...
This opportunity for us over the last, you know, almost year to really educate our customers about how we go about energy procurement and what it means and how it dampens volatility and why that's good for them and why it gives them budget predictability, et cetera, are all things that I think have been really good for us. Obviously, you look at, you know, in sort of deregulated markets, where we can hedge, we're gonna dampen that volatility out. And again, we don't know. There definitely have been markets where they have come down in price over the last several months. Recognize that customers were enjoying a very different price point than what with the spot was at, in sort of the latter part of 2022 and early 2023.
They were really, that was a huge benefit to them. Now some markets have moderated substantially. Some people predict that they will continue to moderate further. I think others predict, particularly in Europe, that, you know, unless we get some sort of resolution to the conflict in Ukraine, that, you know, we likely have more volatility. Even, you know, I think the fact that an energy transformation is underway in Europe under any circumstance that is gonna be, you know, decade long, multi-decade long in nature, I'd expect more volatility rather than less. I think our approach to, you know, the market and how we've approached hedging, et cetera, you know, provides real benefits.
We're, you know, we'll continue to sort of monitor that. I do think in some cases we're seeing, you know, some benefits in terms of, you know, power prices being a little lower than we expected in some places. We are gonna have some of the hedges roll off in Q2, and we talked about that in the script, so you're gonna see some elevation there. You know, that shouldn't be a surprise in the quarter. I definitely think it's gonna continue to be, you know, a volatile volatile overall market. Before I go to the other question, you want to add anything on power?
The only other thing I would add, Michael, to Charles's comment. The other aspect of it is operationally, we are highly focused on running the business more efficiently. We're very renewable and sustainable, sustainability focused. As a business, we want to continue to make sure we drive down the overall cost of the business. That's gonna be an important aspect on a go-forward basis. Charles also made, you know, the comments in his prepared remarks around PPAs and, you know, the, our desire to go into contractual arrangement with whether it's wind or solar developers and create capacity for the market. you know, we see that as a bigger part of our business going forward as well.
I think it sort of, it tamps down the you know, some of the volatility 'cause it's predictable over an extended period of time, at least those arrangements are. Overall, it's the combination of all those things and our commitment to 100% renewable, just as that's a critical aspect of our energy strategy as well.
Yeah. Mike, on the other one, you know, I think, I don't wanna steal any of my thunder for Analyst Day, but I would say that I think, you know, we've always talked about multiple revenue or multiple growth drivers and levers in our business. Geographic expansion is one of those, so covering more markets. You know, what's a core market? You know, that evolves and changes over time. Obviously, we continue to get a huge chunk of our bookings and profits from these sorta scaled markets. What you see is markets start to break into that group, you know, and they mature to a certain level, and I think we're gonna continue to see that dynamic. The nature of distributed infrastructure continues to drive that.
You're seeing hyperscalers expand their edge, or their presence, in their, both their edge and their core. You know, we wanna be a partner to them in that. I think you'll expect us, you know, you should expect us to see continued investment to align with that. You know, where the digital edge is continuing to evolve. I do think, you know, our commitment is to continue to be that best manifestation. I think we're gonna continue to, you know, see geographic expansion as a, as a driver.
Then in terms of, you know, wallet share, I think it's, you know, one, we are, we're sort of a, you know, we're an underlying provider to these companies as they scale their infrastructure, and I think that is allowing us to, you know, play in a very significant way, but then, you know, also capturing net new markets. I think if you look at service providers, for example, the number of service providers and the life cycle from a small service provider to a scaled service provider is changing in this sort of more cloud-centric world. I think we're gonna continue to have opportunities against both, you know, new market expansion, product line extension, and new customer growth. All of those things, I think are gonna be drivers of growth for us over time.
Thanks.
Our next caller is Brett Feldman with Goldman Sachs. You may go ahead.
Thanks for taking the question. You know, Keith, it was good to hear in your comments your expectation that you're gonna continue to see full year churn towards the low end of the range that you targeted. I think to a casual observer, that would sound very surprising, right? 'Cause it's a sort of a broadly difficult macro environment. You know, we hear about slowdown in spending on cloud, obviously, you pushed through some pretty significant price increases recently. I was hoping you can maybe elaborate on what gives you confidence that you're gonna continue to see low churn. Then just maybe remind us, when you do see churn, what is driving it? Has that shifted at all from what you've historically seen? Thanks.
First and foremost, it's a great question, and our confidence really, you know, comes from the fact that the team does a deep analysis into our customers. I know it's surprise to you when you look at our top 10 customers. Again, it's not on the charts, but top 10 customers represent about 18% of our revenues. The top 50 represent about 37%, 38% of our revenues. We have a really long tail, and so we have great visibility into, particularly into our larger customers and what they're doing. That's the first thing. The second thing is, it's critical infrastructure. It's not to suggest that companies don't struggle financially or there's consolidation, or they choose to bifurcate their, you know, their infrastructure or even just choose to do something completely different.
Overall, when the majority of our growth comes from the install base, and we're continuing to deliver, you know, very high-quality assets, you know, with a very high operational standard around the world, we just tend not to suffer the same level of churn that we had previously. And, you know, from my point of view, you know, it's the deep analysis that the team's done and the visibility into what we see going forward that gives us confidence that, you know, that we're not gonna see any meaningful churn beyond what we've guided to. And Brett, the other thing, the last thing I would just say that if there's visibility to something that comes in size, we're gonna telegraph it anyway.
There's just no indication that that exists, and it goes back to what is the customer fundamentally doing inside our business, and can it grow and scale? That's what we're seeing, is those customers continue to buy more services, enter into new services. Then as we introduce new, you know, service offerings, I think it's just an enhancement or even a limiter to the amount of churn that we're gonna experience as a company 'cause we provide alternatives, so we're not a one-trick pony. That's what gives you, I guess, the overall sense, and let me leave it there.
Thank you.
Charles, would you add anything or?
No, I mean, I think we're in terms of character of the churn, I think there's a certain amount of ours that is more frictional churn associated with, you know, people evolving their footprints, how they're serving end customers. That's particularly true in network providers and some other service provider types. You know, I think that, I think you are seeing, you are gonna continue to see some level of cloud migration. Workloads that are well-adapted to the cloud ought to go there. You know, I keep, you know, sort of reiterating that, you know? So I think we see some level of that. Most typically, that is in the context of sort of an evolution towards a long-term hybrid multi-cloud architecture state that really plays to our strengths.
You know, last comment I would make is that, you know, that we keep, we always say this regarding churn, the best defense against churn is getting the right opportunities to begin with. Sales discipline and executing, you know, as I've talked about earlier and in the script, that's really central to, you know, sort of maintaining that churn. I think our teams have done a great job on that. Interestingly, I guess the last category I'd give you, when we do M&A, you find that there's often sort of a churn tail that comes from that because people underwrite to a different sort of an approach.
You know, you saw that in Verizon, and you look at the, we now are reaping the other side of that as we've sort of managed through that. I'll tell you that, you know, that transaction, you know, is looking super attractive, right? You know? I think you see some of that comes on the back end of M&A transactions. That's a, sort of a third category.
Thank you, everyone. This concludes our Q1 Earnings Call.
Goodbye. This concludes today's conference. Thank you for participating. You may disconnect.