Equinix Sees AI, Tight Capacity Fueling Growth in Dallas and Beyond

Key Points

• Equinix raised its long-term outlook, targeting annual revenue growth of 10% to 13% and AFFO-per-share growth of 9% to 12%, supported by durable customer demand, limited new supply and barriers to entry.
• Capacity optimization is a top priority as customers seek increasingly dense deployments of 40 kilowatts to more than 60 kilowatts per cabinet. Equinix is upgrading existing facilities, expanding in core markets and designing new sites for technologies such as liquid cooling.
• AI is increasing demand for interconnection and distributed infrastructure; Equinix recorded a quarterly record of 9,700 net interconnections. Dallas remains a particularly important growth market, while Chicago and Silicon Valley continue to support financial-services and enterprise demand.

Equinix NASDAQ: EQIX executives said customer conversations, tight capacity conditions and continued demand for interconnected digital infrastructure supported the company’s recently increased long-term growth outlook, while highlighting Dallas, Chicago and Silicon Valley as important markets in its U.S. West region.

The company is targeting annual revenue growth of 10% to 13% and adjusted funds from operations, or AFFO, per-share growth of 9% to 12%, according to comments made during an investor discussion. Guy Danskine, Equinix’s Managing Director of West Americas, said the company has spent significant time discussing the durability of demand with customers.

“The more of those conversations we’ve had, the more conviction we’ve had just around our forward-looking guidance,” Danskine said.

Ryan Burke, Equinix’s Vice President of Investor Relations, said the company’s focus on core markets, critical workloads, colocation and enterprise customers distinguishes it from the broader data-center industry. He cited operational barriers to entry and limits on new supply, as well as the company’s long operating history and internal analytics, as factors supporting its outlook.

New Regional Structure Focuses on Asset Returns

Danskine, who previously led Equinix’s Australian business for six years and earlier managed several hyperscale customer relationships in the U.S., said his West Americas position is a newly created role. The region includes Texas, Illinois, California and other western U.S. markets.

Equinix introduced the regional-management approach in the U.S. to add discipline around sub-regional assets, returns on invested capital, asset optimization and risk mitigation, he said. His priorities include unlocking capacity in existing facilities, pursuing expansions in established markets, evaluating new markets and considering broader regional opportunities, including potential mergers and acquisitions.

Capacity remains the company’s top operational priority, Danskine said. Equinix is looking for ways to recover and optimize available space and power in existing assets, including through equipment refresh cycles. Replacing end-of-life equipment such as power distribution units and computer room air handler units can improve efficiency or capacity and enable higher power density, he said.

New facilities are also being designed to accommodate technologies such as liquid cooling, allowing customers to deploy higher-density systems. Danskine said customers in next-generation builds are seeking cabinet densities of 40 kilowatts to more than 60 kilowatts, which changes how sites must be designed.

Dallas Remains a Key Market

Danskine said investors should view Equinix’s Texas exposure primarily through the lens of Dallas rather than West Texas, where data-center development has received heightened attention. Equinix’s activities in Dallas are centered around its Infomart asset, acquired roughly seven or eight years ago, and the company wants expansions to remain close to that facility because of the economics associated with proximity.

He said a number of Equinix assets, including planned expansions, fall below a 75-megawatt threshold discussed by Texas state officials. The company remains “incredibly bullish” on Dallas, which Danskine called one of Equinix’s leading global markets. He pointed to the market’s interconnected infrastructure, land under control, relatively better power availability, financial-services activity and business environment.

Chicago is also a major market, particularly for financial-services customers, while Silicon Valley remains important despite higher construction and energy costs. Danskine said some customers continue to require a Silicon Valley presence because of proximity to customers, employees and investors.

Customer location requirements vary by workload, he said. High-frequency trading firms in Chicago may need to remain in the downtown area, for example, while back-office workloads can be located farther away, such as in Minooka. Equinix is expanding in the Chicago metro with a hybrid xScale campus in Minooka and expects enterprise demand to extend across the market.

Interconnection Opportunity Expands With AI

Burke said Equinix added 9,700 net interconnections in the latest quarter, which was described during the discussion as a company record. He said demand reflects both traditional customer workloads and an accelerator layer associated with the early stages of artificial-intelligence adoption.

Interconnection demand often follows the deployment of space and power, Burke said, and customers increasingly require distributed workloads, data and network connectivity. Danskine added that network density is forming around neocloud providers and large language model ecosystems as those companies shift their focus from securing compute capacity to distributing that compute to users.

Equinix is also expanding managed solutions that help customers enable infrastructure within its facilities. Danskine said the company is being intentional about attracting targeted customers in each metro, including network components of neocloud customer deployments. He characterized the focus as being on inferencing and the networking layers rather than AI training workloads.

Power, Supply Chain and Talent Remain Areas of Focus

Burke said Equinix has approximately 3 gigawatts of land and power secured or near secured. He said the company generally has a high degree of certainty around projects included in its reported development pipeline.

Danskine said Equinix’s announced power requirements are largely under control and that its relationships with utilities benefit from the company’s 20- to 25-year presence in many markets. Unlike developers seeking very large amounts of power immediately, Equinix can provide utilities with more predictable demand schedules, he said.

Looking ahead, Danskine identified supply-chain complexity and a shortage of qualified data-center workers as key issues being closely managed. The company is working with communities and educational institutions to increase awareness of data-center careers and broaden the available talent pool, he said.

About Equinix (NASDAQ:EQIX)

Equinix, Inc is a global provider of digital infrastructure and interconnection services, specializing in carrier-neutral data centers and colocation. The company operates a platform that enables enterprises, cloud and network service providers, and content companies to colocate IT infrastructure, interconnect directly with partners and providers, and access cloud on-ramps and network services in a secure, low-latency environment.

Equinix's offerings include traditional colocation space and power, cross-connects and meet-me rooms, and a suite of connectivity and on-demand services designed for hybrid multicloud architectures.

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