Equinix's Q3 2025: Contradictions Emerge on Interconnection Growth, xScale Leasing, and AI Magnets

Date of Call: October 29, 2025

Financials Results

• Revenue: $2.32B, up 5% YOY
• Operating Margin: Adjusted EBITDA ~50% of revenues, up 8% YOY

Guidance:

• Full-year 2025 revenue outlook maintained: 7%–8% normalized, constant-currency growth.
• Q4 includes a meaningful MRR step-up (> $60M) and an expanded nonrecurring xScale range; 40% of Q4 bookings already closed.
• Raised 2025 adjusted EBITDA guidance by $21M; adjusted EBITDA margin expected to be 49%–50%.
• Raised 2025 AFFO guidance by $31M; AFFO growth expected 11%–13%; AFFO per share growth expected 8%–10%.
• 2025 CapEx now expected $3.8B–$4.3B, including ~ $290M recurring CapEx.

Business Commentary:

* Revenue and Bookings Growth: - Equinix reported global Q3 revenues of $2.32 billion, with recurring revenue growth of 8% year-over-year on a normalized and constant currency basis. - This growth was supported by record annualized gross bookings of $394 million, a 25% increase year-over-year.

• Profitability Increase:
• Equinix achieved an adjusted EBITDA margin of 50%, with a 12% year-over-year increase in AFFO on a normalized and constant currency basis.

• This improvement was driven by strong operating results and favorable net interest expense.

• Capacity Expansion and Land Acquisitions:

• Equinix closed on significant land acquisitions in key markets, supporting over 900 megawatts of retail and xScale capacity.

• This expansion aligns with the company's strategic move to double capacity by 2029 and is driven by strong demand in high-demand markets.

• Interconnection and Presale Activity:

• Equinix added 7,100 net interconnection connections, with interconnection revenue growing 8% year-on-year to $422 million.
• The company also saw a 40% increase in presale balances, with a cumulative $185 million in annualized gross bookings, indicating strong demand for future capacity.

Sentiment Analysis:

Overall Tone: Positive

• Management: "Equinix delivered a very strong third quarter" and said it is "raising our adjusted EBITDA, AFFO and AFFO per share guidance for the full year." CFO: "Global Q3 revenues were approximately $2.32 billion, up 5% over the same quarter last year" and "AFFO was $965 million, up 12% over the same quarter last year." CEO: "We are excited and optimistic about the future... on track" — all indicate upbeat outlook and confidence.

Q&A:

• Question from Nicholas Del Deo (MoffettNathanson LLC): How strategic are the new cloud on-ramps relative to traditional on-ramps and what are you doing to attract AI magnets like Nebius and Groq?
  Response: Equinix's native cloud on-ramps are market-leading and, combined with a >10,000-enterprise ecosystem, attract AI magnets; sales teams actively cultivate those relationships to ensure magnet representation.

• Question from Aryeh Klein (BMO Capital Markets Equity Research): Is the change to allow sales to sell capacity further out driving presales strength, and how much pre-leasing are you seeing for upcoming capacity in key markets?
  Response: Extending the retail presale window to 12 months enabled a $185M presold balance (40% signed in Q3); presales velocity has increased and activity is spread across high-demand markets like Frankfurt, London and New York.

• Question from Eric Luebchow (Wells Fargo Securities, LLC): Are you seeing firm or improving pricing with presales amid capacity constraints, and how should we think about moving parts for AFFO into 2026?
  Response: Pricing remains firm with no dilution; lower borrowing costs improve financing flexibility, but accelerated builds increase capitalized interest—management is focused on revenue/RFS acceleration and cost control while leaving 2026 guidance for February.

• Question from Jonathan Petersen (Jefferies LLC): Of the ~900 MW land purchases (Amsterdam, Chicago, Johannesburg, London, Toronto), are any sites larger and how will you allocate retail vs xScale?
  Response: New land materially increases developable capacity; London and Chicago are expected to have significant xScale/JV allocation, but megawatt splits are flexible across retail and xScale to maximize value.

• Question from Michael Elias (TD Cowen): For the Chicago (Manuka) campus, will it be split between xScale and retail, and would you reserve xScale solely for hyperscalers or serve large enterprise bank deals there?
  Response: Mega campuses can co-locate xScale and retail; capacity is fungible and Equinix will allocate xScale or retail footprints to large enterprises or hyperscalers based on the best structure and partnership arrangements.

• Question from Michael Rollins (Citigroup Inc.): What demand are you seeing for larger-footprint retail deployments and will those drive pre-leasing; and can you frame the Q4 revenue range and nonrecurring xScale toggle if the large deal slips to 2026?
  Response: Strong large-footprint demand with presales securing contiguous capacity; Q4 midpoint implies a ~$153M step-up from Q3 (roughly $90M nonrecurring), ~2/3 tied to one large potential xScale transaction (240 MW across four 60 MW buildings); range widened to reflect timing risk if it slips to Q1.

• Question from Michael Rollins (Citigroup Inc.): Regional margin differences — Americas saw margin acceleration vs EMEA and APAC; how should investors think about operating leverage regionally?
  Response: Americas benefited from cost control and allocation of corporate SG&A there; EMEA experienced ~-$20M swing from one-offs vs prior year; removing one-offs and seasonal power, underlying profitability is improving across all regions.

• Question from James Schneider (Goldman Sachs): For the 12 xScale projects, how confident are you in power availability/scheduling and any change in power sourcing plans?
  Response: All 12 xScale projects underway have power secured; recent land either has committed power or is in advanced utility negotiations—power is not a constraint for current xScale builds.

• Question from David Guarino (Green Street Advisors, LLC): Is the $394M annualized gross bookings and new presold metric a sustainable run rate or a one-off, and is there a price difference for customers committing 12 months out vs today?
  Response: Annualized gross bookings show consistent growth historically but can be volatile quarter-to-quarter; presales add visibility and can outpace bookings in constrained markets; management says pricing remains firm with no evidence of concessions for 12-month commitments.

• Question from Frank Louthan (Raymond James & Associates, Inc.): What's driving the cross-connect revenue and ARPU uptick—power densities or customer mix—and is the Americas strength replicable elsewhere?
  Response: The increase is driven by customer mix—cloud and technology customers in the Americas—expect similar demand trends to expand into other regions as those customer cohorts proliferate.

• Question from Michael Funk (BofA Securities): Does accelerating builds and capitalizing interest change AFFO outlook from Analyst Day, and can you size the addressable market for distributed AI infrastructure and related solutions?
  Response: Accelerated builds increase capitalized interest (Q3 capitalized ~$27M; Q4 est. $20–30M) but lower borrowing costs help; management is not changing FY AFFO guidance now and will discuss 2026 in February; distributed AI and interconnection are a sizable opportunity driven by latency, data residency, edge processing and model/provider flexibility, with Fabric provisioning and connectivity as core differentiators.

Contradiction Point 1

Interconnection Growth Expectations

It pertains to the company's growth strategy and market expectations, which are crucial for investors and strategic planning.

What is the strategic importance of the new cloud on-ramps and network nodes, and what initiatives is Equinix implementing to attract AI magnets such as Nebius and Groq? - Nicholas Del Deo (MoffettNathanson LLC)

2025Q3: This quarter's results are a result of these activities. Moving forward, we expect continued growth in interconnection as more customers secure network presence for AI workloads. - Adaire Fox-Martin(CEO)

What drove the increase in interconnection adds this quarter, and what should we expect for this metric in the coming quarters? - Nicholas Ralph Del Deo (MoffettNathanson LLC)

2025Q2: We saw strong interconnection growth this quarter, largely due to cloud and AI expansion opportunities with our customers. We saw use cases around our data center interconnect, FCR, our Fabric Cloud Router, and Network Edge being pulled through. - Adaire Fox-Martin(CEO)

Contradiction Point 2

xScale Leasing and Recurring Revenue Growth

This contradiction highlights potential issues in the company's projections for xScale lease performance and its impact on recurring revenue, which are critical for financial planning and investor expectations.

What is the outlook for large footprint retail demand and pre-leasing? Also, what is the flexibility range for xScale revenue recognition? - Michael Rollins (Citigroup Inc., Research Division)

2025Q3: xScale leasing is strong, with 85% of assets pre-leased or leased. Our pipeline is robust and supports a step-up in recurring revenue in Q4. - Adaire Fox-Martin(CEO)

What opportunities exist to improve MRR churn over time, and have there been developments in the company’s analytics that provide new insights? What is the updated outlook for xScale leasing in H2 2024 and beyond into 2026, and how much inventory is available to sell and deliver? - Michael Ian Rollins (Citigroup Inc., Research Division)

2025Q2: xScale leasing is strong, with 80% of assets pre-leased or leased. We have a significant pipeline ahead of us. - Adaire Fox-Martin(CEO)

Contradiction Point 3

Sales Approach and Presales

It involves changes in sales strategies, impacting the company's performance and customer engagement.

How is the recent sales approach change affecting presale activity? - Aryeh Klein(BMO Capital Markets Equity Research)

2025Q3: The sales team can now sell retail capacity up to 12 months ahead, enhancing visibility and comfort for customers. Presales have increased, with 40% of Q4's plan signed in Q3. - Adaire Fox-Martin(CEO)

What is driving the improvement in sales cycles? - Matt Niknam(Deutsche Bank)

2025Q1: Sales productivity improvements are due to qualified pipeline, standardized contracts, and solution bundles, reducing cycle times by 20% and 5% for small and large deals. - Adaire Fox-Martin(CEO)

Contradiction Point 4

AI Magnets and Cloud On-Ramps

It involves the strategic importance of AI magnets and cloud on-ramps, which are key to Equinix's growth and market positioning.

What is the strategic importance of the new cloud on-ramps and network nodes, and how is Equinix attracting AI-focused companies like Nebius and Groq? - Nicholas Del Deo (MoffettNathanson LLC)

2025Q3: Equinix has a market-leading position in native cloud on-ramps, which is important for connectivity. The company also has a strong presence of AI magnets in the ecosystem. - Adaire Fox-Martin(CEO)

How does the growing importance of inference over training in AI impact your 2025 and beyond outlook? - Simon Flannery (Morgan Stanley)

2024Q4: We see a step-change in compute efficiency, which will enable AI transformation to be more feasible. This will drive demand for our business. AI workloads are central to Equinix's strategy. In Q4, 50% of top deals involved high-performance compute and AI workloads. We provide pivotal infrastructure for AI deployment and interconnection. - Adaire Fox-Martin(CEO)

Contradiction Point 5

xScale Revenue Recognition Flexibility

It concerns how the company recognizes revenue from its xScale business, which affects financial reporting and investment decisions.

What is the outlook for large retail demand and pre-leasing? - Michael Rollins(Citigroup Inc., Research Division)

2025Q3: Q4 guidance includes $60 million in recurring additions and $153 million overall, with roughly $90 million from xScale. - Keith Taylor(CFO)

Update on the U.S. xScale joint venture and nonrecurring revenue outlook? - Eric Luebchow(Wells Fargo)

2025Q1: Nonrecurring revenue expected to decrease from $40M to $4M in Q2, allowing core business to shine. - Keith Taylor(CFO)