Equinix Sees AI Driving Data Center Demand, Interconnection Growth

Key Points

• AI is accelerating Equinix’s data center demand, with enterprises moving toward larger, higher-power deployments and greater need for high-density, low-latency infrastructure.
• Equinix’s interconnection business grew 9%, supported by increasingly complex AI networks connecting data, cloud platforms, models and end users. New offerings include Fabric One and Inference Exchange.
• Management expects 9%–12% annual adjusted funds from operations per-share growth through 2029, with development projects generating mid-20% cash yields and demand diversified across customers and workloads.

Equinix NASDAQ: EQIX sees enterprise adoption of artificial intelligence accelerating demand for higher-density data center capacity, interconnection services and latency-sensitive infrastructure, executives said during a Barclays conference discussion.

Arquelle Shaw, Equinix’s President of the Americas, said she oversees growth strategy across the region from Canada through Chile and Argentina, including corporate development, business development and growth from investments. Shaw previously spent about six years as the company’s senior vice president of sales for the Americas.

Shaw said Equinix has evolved its go-to-market model to serve customer segments differently, ranging from small businesses served through channel partners to large global enterprises supported by dedicated teams. The company has “almost 11,000 customers,” she said, distinguishing its customer base from that of other data center operators.

AI is raising capacity and density requirements

Enterprise customers have been increasing the size of their capacity requirements and deploying workloads that consume more power, Shaw said. She described a shift from 250 kVA deals once being considered large to megawatt-scale deployments becoming more common.

While AI-focused companies and hyperscalers moved quickly to adopt the technology, Shaw said enterprises were initially more cautious. In prior discussions, many enterprise customers were still considering an AI strategy or dealing with “Shadow AI” usage within their organizations. This year, she said, those same customers have been more heavily engaged in developing and implementing AI strategies.

“We’re quite bullish on what we’re seeing in terms of the future,” Shaw said, adding that Equinix is considering how to expand responsibly to keep pace with demand.

AI is also increasing the importance of low-latency connectivity, according to Shaw. Not all AI workloads have the same latency requirements, she said, but applications requiring immediate responses are becoming more prevalent. Equinix designs its metro campuses to place workloads according to their latency needs, including in different International Business Exchange, or IBX, facilities.

Interconnection demand and new AI products

Shaw said AI is making enterprise networking more complex because data, computing resources and AI models can reside in multiple locations. That dynamic requires more connections and greater flexibility than traditional point-to-point networking arrangements.

Equinix’s interconnection business grew 9% this year, Shaw said. She described the service as increasingly essential for customers that need to retrieve and move data among cloud platforms, models, computing infrastructure and end users.

The company recently introduced Fabric One and Inference Exchange. Shaw characterized Fabric One as a connectivity offering designed to simplify how customers connect across locations, including situations involving data sovereignty requirements. She described Inference Exchange as helping customers more easily use data needed to support their businesses.

Equinix has a longstanding relationship with NVIDIA, Shaw said, and its work with NVIDIA and Together AI has expanded from facilitating infrastructure access to helping customers use inference capabilities and data across different locations.

Ryan Burke, Equinix’s vice president of investor relations, said data sovereignty is built into the company’s network layer, which he said can reduce complexity compared with managing sovereignty requirements on an application-by-application basis.

Shaw said Equinix has more than 522,000 interconnections globally and cited its ecosystem density as a competitive advantage. The company’s facilities bring together cloud providers, network service providers, customers and other participants, creating what she called “magnetism” for additional business.

Development, cooling and xScale

Equinix is adapting new data center designs for higher-density AI workloads. Shaw pointed to the company’s announced DA12 facility, which she said is expected to deliver about 67 megawatts and densities of roughly 18 kVA per cabinet.

The company is considering environmental impacts, including cooling and water use, as it develops higher-density facilities, she said. Equinix is generally building optionality for liquid cooling into newer properties rather than broadly retrofitting older buildings.

Burke said Equinix already has liquid cooling in more than 100 properties. He said equipment can be deployed within a customer cage and later removed and used elsewhere when customer needs change.

Regarding its xScale offering, Shaw said Equinix does not build gigawatt-scale data centers for AI training. Instead, xScale is intended to bring cloud providers closer to the company’s dense metro ecosystems, allowing clouds to connect with enterprise customers and allowing customers to connect with clouds. Shaw said the Hampton and Minooka projects are currently on track, without providing further expansion details.

Returns and long-term outlook

Executives said community opposition to data center development has become a meaningful industry consideration. Shaw said Equinix works with community leaders before acquiring land or expanding and seeks to address concerns about power costs, grid investment, workforce development and community impacts. She said the company has not experienced the development delays seen elsewhere, though it remains sensitive to the issue.

Burke said Equinix expects to continue generating mid-20% cash yields on development projects, supported by its approach to curating the mix of customer types and workloads within each facility. He said properties generally take two to three years to lease up to Equinix’s level of stabilization.

The company’s long-term outlook calls for 9% to 12% annual adjusted funds from operations per-share growth through 2029. Burke said the company’s previous high end of its outlook is now the low end of its updated range, reflecting demand strength and execution. He cited improving same-store revenue growth, capacity expansion and diversified demand across customers, workloads, products and services.

Shaw added that no single customer represents more than about 2.5% of Equinix’s portfolio, a diversification factor she said can limit the impact of shifts in a particular customer type or product category.

About Equinix (NASDAQ:EQIX)

Equinix, Inc is a global digital infrastructure company that operates data centers and provides interconnection and cloud connectivity services. Its facilities, known as International Business Exchange (IBX) data centers, enable businesses, cloud providers, network operators, financial institutions and other organizations to securely house technology infrastructure and exchange data.

The company's Platform Equinix services include colocation, private and public cloud connectivity, network interconnection, managed infrastructure and digital services.

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