Equinix hosted an Analyst Day this week, which the former investor relations officers on the OCOLO staff know is a heavy, heavy lift. These events require months of work and coordination across all parts of the hosting organization and result in an absolute treasure trove of information for the Street, shared in a series of straight-from-the-horse’s-mouth business unit head presentations over several hours, plus real-time Q&A. They’re invaluable for the Street to attend and so exhausting for companies to execute that the general consensus going in is: “the view had better be worth the climb.”
Equinix did not disappoint, sharing sweeping strategic initiative underway and their long-term financial implications, views on the current and future state of the industry, and ways management is positioning its businesses advantageously for the long term. We imagine everyone involved is treating themselves to a long weekend!
Luckily, we have Michael Elias, of TD Securities TD Cowen Communications Infrastructure Equity Research Team, to break it all down for us with his usual insightful research.
What’s New
A lot! Equinix management announced several new initiatives underway that they expect to do two things over the next five years: cost a lot of money and deliver significant long-term financial and competitive benefits
“Build Bolder” – a plan for Equinix to double its data center capacity by 2029, the equivalent of building as much capacity in the next five years as it has over the past 27 years. Management estimates this capex of $4-5 billion per year through 2029 (totaling $20-25 billion) is crucial for capturing the “generational demand set associated with AI inference”.
Build Bolder is a two-pronged strategy that aims to:
- Leverage AI as a core component of its design and construction process
- Reimagine its supply chain, power sourcing and land acquisition strategy
“AI-first” tools and initiatives underway designed to increase operational efficiency and shorten sales cycles include:
• Equinix Brain: an end-to-end AI business management tool designed to provide a comprehensive view of various aspects of the business. It includes:
Customer 360: A centralized view of all customer data.
Asset 360: A real-time view of physical infrastructure assets.
Product 360: Intelligence on product performance, usage, pricing, and adoption4. The overall goal of Equinix Brain is to reduce the customer lifecycle time by 50% over the next five years.
•AI-powered Cage Canvas tool: A new co-design platform enables collaborative, real-time cage design between customers, builders, and project managers, with the potential to reduce cage deployment times by up to 50%.
•Secure Cabinet Express: A pre-configured colocation solution significantly reduces the “order-to-availability” time for cabinets from 22 days to just four days. Management noted that this offering already accounted for one-third of new cabinet sales in Q1 2025.
•Digital Twins: Equinix plans to leverage real-time virtual replicas of its physical assets to gain visibility into power/cooling supply and demand, as well as space utilization. This is intended to enable smarter planning and faster provisioning for customers.
•Standardized Modular Designs: The company has shifted to using three standardized modular designs for new site builds to further reduce lead times and streamline the construction process.
•Prioritizing Pre-Integrated Liquid Cooling Systems: This strategy eliminates the need for retrofit upgrades, supporting the accelerated deployment of data center capacity.
These initiatives collectively represent Equinix’s strategic agenda to “run simpler” and utilize AI to drive both top-line acceleration and SG&A efficiencies, ultimately positioning the company for long-term value creation despite near-term “expansion drag” from the significant capex investment.
Financial Implications
This sustained period of multi-billion dollar AI capex will absolutely be a near-term drain on financial results, but for the long-term benefits the Equinix management team laid out, the TD Cowen team believes the investment is well worth it.
Here are the key estimates and forecasts announced:
•Organic Revenue Growth: Management provided long-term organic revenue growth guidance of 7-10% annually for the period from 2025-2029, in line with TD Cowen’s previous expectations.
•EBITDA Margins: Equinix guided for EBITDA margins of 52%+ by 2029, an increase from approximately 49% in 2025, in line with Street expectations of 52-53%.
•Adjusted Funds From Operations (AFFO) Per Share Growth: Long-term AFFO per share growth was guided to 5-9% per year through 2029, below TD Cowen’s prior expectation of 7-10%, largely due to the near-term “expansion drag” from ramping capital expenditure. Management also quantified the “drag” at approximately $7/share in the 2029 period, or about $700 million on 100 million shares.
•Capital Expenditure (Capex): significantly higher long-term capex of $4-5 billion per year through 2029, totaling an estimated $20-25 billion over the period, was higher than TD Cowen’s previewed expectation of approximately $4 billion annually.
•Data Center Capacity Doubling: As part of the “Build Bolder” initiative, Equinix aims to double its data center capacity by 2029. This includes an expectation to deliver +350 MW of capacity in 2027 alone, which is more than twice the total delivered in 2024.
•Dividend Growth: Management expects the dividend to grow at an 8% Compound Annual Growth Rate (CAGR) for the 2025-2029 period.
•Cash-on-Cash Yields: The durability of Equinix’s revenues is projected to continue contributing to approximately 20-30% cash-on-cash yields in major metros.
•Interconnection Growth: Interconnection is expected to continue growing at an approximate 11% CAGR, representing about 19% of Monthly Recurring Revenue (MRR), and acting as an “enhancer” to cash-on-cash yields. The attach rate for Equinix Fabric was ~42% in 1Q25, and management expects this to trend positively and be higher by the end of 2025.
•Debt Cost and Impact: Management plans to use debt capital to finance the “Build Bolder” initiative, expecting its average cost of debt to rise to approximately 4.9% from 3.4% currently due to refinancing $8 billion of current debt and raising an incremental $8 billion in new debt. They anticipate a 27 basis points (bps) impact in 2026 from 2025 debt refinancing.
•xScale Contribution: The projected accretion to AFFO from xScale was increased to 4-5% from the prior 3-5%.
•Customer Lifecycle Time Reduction (Equinix Brain): Through its new “Equinix Brain” AI business management tool, the company plans to reduce the customer lifecycle time by 50% over the next five years.
•Cage Deployment Time Reduction (Cage Canvas): The new AI-powered “Cage Canvas” tool is expected to reduce cage deployment times by up to 50%.
•Secure Cabinet Express Deployment: The “Secure Cabinet Express” product is expected to reduce cabinet “order-to-availability” time from 22 days to just four days. Management noted this offering already accounted for one-third of new cabinet sales in 1Q25.
Management also highlighted their strategic belief in the “generational demand set associated with AI inference” as a secular growth driver for Equinix, necessitating higher capex to support durable growth in this evolving market. It cited the increasing size of enterprise deals, including U.S. banks seeking +100MW AI deals.
TD Cowen’s Take
Michael Elias and team came away from the Analyst Day presentations impressed with the company’s vision and strategic direction. They expressed strong conviction that Equinix is exceptionally well-positioned in the data center space, particularly to capitalize on the emerging “generational demand” for AI inference.
- They believe strongly in the company’s “Right to Win” in AI inference data center demand growth, which is growing on the hyperscale side and will soon translate to the enterprise side as well.
- The team feels Equinix’s “market leading position of cloud on-ramps and the depth of its interconnection ecosystem” are key factors that will enable it to capture the growing AI inference demand.
- The team views Equinix’s ambitious “Build Bolder” initiative as “key to supporting durable growth in an evolving and growing data center market”. In their view, it’s a proactive, strategic move necessary to meet the increasing size of enterprise deals, including U.S. banks seeking +100MW AI deals.
- They also like Equinix’s strong fundamentals, diversity and durability of revenues. Its top 50 customers together make up less than 37% of revenues, and the durability comes through in approximately 20-30% cash-on-cash yields in major metros.
The Bottom Line
TD Cowen maintained a Buy rating on Equinix and believes the recent sell-off caused by near-term earnings dilution resulting from the capex has created an attractive entry point for the stock. Considering it has traded down more than 10% this week to the high 700s, Michael Elias’ $974 price target represents significant upside indeed!
