Equinix Stock

Welcome, everybody, to our 2:00 session. I'm Jon Atkin with RBC, and I lead the investment research efforts in communications infrastructure. Pleased to have the CFO of Equinix, Olivier Leonetti, joining us. Welcome.

Thank you. Nice to meet all of you or see some of you.

So, you're a couple of days in the seat. And I guess I'm just, kind of, interested in what are some of the -- your assessment in terms of what you've inherited and, kind of, the initiatives going forward and the playbook that you're executing against? Any, kind of, midyear update as we head into the fourth quarter?

Yes. We said it before, the CEO has said it, this is our moment. If you look at today, the drive for AI inference, what you need is low latency, you need a global presence. You need sovereignty, you need neutrality. You need a dense network of players in your data centers. You need amazing interconnection solutions. And our company is able to offer all of that significantly more than what is present in the market. So, this is our moment. Actually, the team undersold the value proposition of the company. We are very excited. You saw we raised our guide lately, 3 points more growth on top line and bottom line. And we believe the best is to come.

Great. So, let's maybe dive into demand and AI and non-AI demand drivers. What does the pipeline look like today compared to before you started a year ago, let's say -- any trends to call out?

So, in Q2, we announced total sales velocity of about 30%. The demand is strong. And today, we could, but it's not the smart thing to do, have a higher order book and we discussed that all this morning. We don't want to do that because we want to nurture the best ecosystem for long-term value for the assets we deploy. So, demand is strong, and we are not going -- we are pushing back on some level of demand to push a diverse set of customers being present on our platform. So, very strong.

And maybe dive into, kind of, the cloud drivers, cloud connectivity, AI training, AI inference, traditional enterprise. Any, kind of, quick bullet points on where you're seeing particular strength or expect growth going forward?

So, the strength is impacting many of our customer set. So, enterprise, cloud, cloud providers, large language model, all of them interested by joining our network. But the key theme behind this is the need to do Agentic AI. And I go back to what I discussed earlier, Agentic AI, you need what we offer. And that's what people -- that's why people want to join. The other question is on this AI agentic trend, all of you are as informed as I am, we are just at the very start of this. We believe that in the next 3 years, AI Agentic will be 50% of the AI demand. And we think that AI Agentic in the next 3 years will be 30% to 40% of the data center activity. So, we're just at the start, and this start is driving the demand we're having at Equinix.

On the cross-connect side, you put up quite strong numbers in the last quarter and to what do you attribute that?

To the same theme, right? Why would you join us? You don't join us to have access to compute. You join us to have access to an ecosystem of participants. You want to be free to move from one AI model to another. You want to be free to move from one cloud provider to another. You join the network for that. You want to have an open infrastructure in a new world. That's what we offer. And that translates into very strong interconnection business. And again, we think that more is to come. We have announced about a month ago a new offering. It's called Fabric One, which allows our participants to connect to actors in the ecosystem in seconds when before it used to take about a month to connect. So, interconnection, and that's why people join our network.

The thing that the business has seen historically is as you go from that next quantum of optronics to bigger pipes, and this is for cross-connects inside the data center, there's been circuit grooming and a little bit of churn. And maybe give us your thoughts on whether you're contemplating more of a usage-based -- and so that's usage-based, in fact, and sometimes usage can increase. But with optronics, the physical cross-connect count could actually go the other way. But if you pivot the pricing model, what are, kind of, your thoughts on avoiding that through usage-based types of pricing mechanism?

We haven't discussed about how we need to price and it's a bundled offering. You come to us to have access to space, power, ecosystem and then interconnection. It's a bundled offering. So, it's very difficult to disassociate interconnection from the rest of the business. Now, there are certain number of things we know though that drive interconnection revenue faster than the base that we know. But I will leave it there. We are going through a few models in terms of pricing, but we think those offerings will be priced higher than the prior 1 because we offer more value.

As we think about open source models, open weight models, there's been a lot of developments on that in just the last 6 weeks or so during the summer. And just philosophically, if -- is that a development that you see affecting your business one way or the other, whether it's frontier models or open source, open weight?

The answer is yes. And what is the logic behind it, right? If you are closed, you establish a relationship and this relationship is going to last. That's the closed model. In an open model, you want to be open because you want to have choices. If you want to have choices, you want to interconnect more. If you want to interconnect more, you want to be in the place where you have a rich ecosystem and the ability to connect easily with the participants. So, open is better for Equinix, no question. And the trend is going to open for all the reasons you know. Large language model is better 1 week, better the second week, right? You want to be able to change. You have geopolitical dimensions, right, geopolitics drive sovereignty and to be able to manage your load and that's an open model, and that's a better thing for our company.

I want to hit on power and grid. Your typical new build is 50 megawatts under the Build Bolder program. And how do you navigate utility queues when competing against gig or even gigawatt-scale projects for the same transmission infrastructure?

Yes. And I feel bad about answering this question because it could look like we are tone-deaf, right? So, we have to deploy data centers at an accelerated speed. So, when you look at the press in our country in the U.S. or in Europe, a lot of sentiment against data centers. They are not impacting us that much. Why is this? 1, to your point, data centers, which are much smaller. 2, we have those data centers in communities that are known to us and in communities that agent know, right?

So utility, they know us. The mayor knows us. The general contractors know us. So, we are able today because of this connection we have been able to establish with the community and our footprint and the good footprint, we have been able today to deploy capital at an accelerated rate.

Let me give you 2 numbers to finish on the point. This year, we deploy 40% more power than we anticipated at the start of the year, 40%. And in 2026, we deliver twice the power we delivered in 2025. Why? Because what I've explained...

I guess I'm interested in, kind of, the supply chain and challenges that you're encountering. I think you're successfully overcoming many of them and bucking the trend by delivering faster rather than slower under some of these initiatives. But given especially your prior tenure pre-Equinix, thoughts on the construction design and ultimately delivery of capacity and how you see that changing?

Yes. So, I spent a bit of inside baseball here with dinner. Raouf is our Head of Operations. He has been running this part of the business for 2 decades, right, at Equinix. And ask the question, why is it this way? He said we have long-term -- the same team, long-term relationship with general contractors and power management players. When you place an order, they have certainty. When we say we start construction at that site, we have certainty. And we have also placed long-term orders with those players. So today, we have been able to navigate this part of the equation very well as well.

Maybe just go across regions because you do report regional metrics, APAC, EMEA, Americas, and any, kind of, highlights to point out in terms of what's driven your growth year-to-date and then opportunities that you see going forward?

This is a market participant in our system will have -- will be present in 60% of the cases in a global network, right? So, people join us to have access to a global reach. Today, we see the U.S. growing a bit faster than the rest of the world, not because demand is lower, but because also it's managing the P&L, the best economics in the U.S. and also us having more access to space and power here. But the demand is strong in the 3 regions with a small benefit to the U.S.

So, M&A has been somewhat muted, but there's, kind of, -- in the Nordics, there's atNorth. But what -- how do you see the pipeline? And then how do you see growth across regions in some of your either recently entered or recently acquired markets?

Yes. So, a bit of numbers, deploy between now and the end of 2029, 1 gigawatt of power. And after that, we'll have 2 gigawatts of land and power available to us. So, what I'm saying is that we have access to land and power today to really support the growth, number 1. Point number 2, to do the acquisition of land and power on an opportunistic basis, atNorth was one of them. But you can guess where is the other position we are going to invest M&A in technology.

We have done that much in our history. We want to acquire assets, technology asset tuck-ins, not large to complement our interconnection offering and more to come on this. We want to spend time on M&A in that space.

If there's questions, by the way, make yourself visible. I think we'll have some time. xScale, so off-balance sheet, you're using financial partners across multiple regions. And what's the growth path going forward? And anything around M&A on that side as well?

Yes. So, xScale is part of the algorithm. We want to manage our portfolio for maximum return, right? The maximum return today for Equinix is to do what we know how to do best, which is retail, colo, small footprint, rich ecosystem and very high return. We're going to focus on this. If you look at xScale, it's an interesting part of the portfolio, now starting to be a crowded portfolio. You have many players. The footprint is different. You sell kilowatts. So, it's low economics. xScale is part of the portfolio, retail is the focus.

And then I guess I'm just interested back in your core business, how you see the demand pipeline, how resilient is it to economic disruption, perhaps hyperscale CapEx sees some slowing at some point. I don't see it personally. But what are some of the risk factors to be mindful of or things that you're monitoring to assess the resiliency of your -- of the growth in your core business?

So, just spending a bit more time on the likelihood of the scenario, right? You said that there was no indication that there is a slowdown, right? CapEx hyperscaler, neocloud this year is 80% higher than the prior year. And we see no sign of demand slowing down or investment slowing down. And again, I go back, AI inference is at the start, and it's where we play, right? So, slowdown, not yet. Likely, I don't think it is. But again, then which part of the market will slow down. Is it large language model training centers slowing down? Or is it inference? It's likely to be training versus inference. We have a flexible P&L. We can delay CapEx. Our leverage is relatively low. So, the debt burden is low in terms of -- if we were to have adverse market events. We should be able to react better than other players because of ability to move CapEx and ability to have low debt and ability to manage OpEx as well. But again, no sign of that scenario today.

So, finally, maybe just a 2-parter. One is on capital allocation and balance sheet and, kind of, financing tools that you have at your disposal to finance the development pipeline. And then the growth algorithm around earnings, you gave, kind of, a multiyear guide, as you referenced, and there's a lot of drivers around operating efficiency. There's top-line growth. There's equity issuance, refinancing. So, a difficult question to answer in 2 minutes, but...

I'll try to do that, right? So, again, we increased our growth profile to 2029 by 3 points on the top line and bottom line. I want to clarify this. We had interesting conversations earlier this morning. None of that is due to the additional CapEx we said we would deploy. This additional CapEx is going to have an impact on the P&L of the organization as of 2029. If anything, this additional CapEx is a drag because you build the site, site takes you 2 years, you fill it, it takes 3 years.

So, before we have full power of the economics of the site, you have a drag. So, despite the drag, we have been able to generate better economics, right? So, the demand drivers are strong. That would be one. How are we going to finance the growth? We prefer debt. We have a low debt leverage today, 3.5% on a net basis. We have room to increase it. We want to be investment-grade, of course, and we think we can do that and support the growth. So, we're not looking at issuing equity. We don't think we need to do that. That's not a great return source of financing. Now, vehicles, those are looking at innovative vehicles to finance the growth. We do that as well. If we do that, and we see that for colo retail balance sheet if we do that.

Let's call for questions. We do have one.

[indiscernible] Like where does inference take place?

No. I didn't. Honest?

Inference.

Yes.

Like where does it take place? Is it in your data centers or is it in the cloud?

So, I don't understand what the question is. Could you clarify? Yes, go back. Yes. Yes, clarify...

Like, you have the inference and then you have the different models and then the inference has to get to decide which models. So, I guess I'm wondering, like, where is the...

The orchestration going on is, yes.

Where exactly does it sit?

It will happen really more in our data centers. Orchestration will come in our data centers. And you see our data centers today increasing the power density to manage those edge compute offerings. If you want to do that for economic reasons, latency reasons. Today -- and by the way, you see today in the workload, and we use cabinets as a unit of measure. You see that the power deployed by cabinet is increasing -- has increased like 60% in the recent past. And if you go to some of the data centers you have at Equinix, some of them have the latest technology with very powerful racks to do exactly what you said.

Great. That was the last question. Appreciate you taking the time.

Thank you very much. Thank you. Have a good day.

[indiscernible] Research at Bank of America. Happy once again to be part of the REIT conference. It's funny. I topped in the presentation this morning with Ken Kaplan from Blackstone and seeing the entire conversation with data center development. And I joked with some investors earlier that a year ago, nobody wanted to talk data centers. And now it seems he's taken over the entire conference and really happy to have Equinix here with us again this year, who, as you know, one of the earliest, most established developers in data centers. So thank you both for being here.

Happy to be here.

So we have Stu, who is the SVP of Global Real Estate and then his colleague as well heads up the Americas, and they both have like quick intros.

Stu Thompson, I've been at Equinix for 15 years, mostly in real estate and corporate development roles. Before Global Real Estate, I ran our corporate development team in EMEA and before that in the Americas.

Great. I'm Arquelle Shaw, I'm the President of the Americas. And prior to that, I was responsible for running Americas sales for the last 6 years.

About 7 years, right?

7 years in total.

That's great. Thank you both. So I mentioned the heightened investor interest earlier. And Equinix recently reported they expect to invest what $5 billion to $7 billion annually from '27 through '29, excluding M&A. So you've expanded your development portfolio budget significantly. And so I'm curious to know from your perspective, what changed within Equinix to support that level of higher development activity? And what's changed in your view of the industry to also support that?

Yes. I mean we're just a very customer-centric organization. And all of that is really because of the demand signals. Folks like Arquelle before this ran Americas and did such an amazing job. Our go-to-market team is super, super strong. Obviously, there's a lot of market tailwinds behind our back as well, sort of guiding that. But again, it's really just strong performance. And we pulled forward some of our builds that maybe we had 1 or 2 more 2 more phases to go, but we pulled them forward to match that demand. And then we've significantly increased our portfolio of powder land sort of match demand. And that's why you see that $5 billion to $7 billion, right? And a lot of that's going to like our core markets, right? Like most of that capital is going to markets where we have existing ecosystems. We've got great visibility into customer demand there and really just leveraging what we've been doing for the last 30 years.

And then part of that same question, maybe to you, Arquelle, and you also do. But there are 2 pieces or questions that I hear from investors. Going back to, number one, what gives you confidence in developing at that scale? So what signals are you seeing from clients, conversations you're having?

And then the development deliverable, right, ability to deliver on time and on budget. And the pieces of that today that worry investors are, number one, labor availability, right? Second, power delivery. And then the third, I think, increasing an intention is the political pushback with the elections coming in November, and I think [indiscernible] control candidates now officially opposed to some degree to data center development in their states. So in that very broad lens, why do you have confidence spending that much and the ability to actually execute on developments?

Yes, the key is that point is like to some degree. And I'll let Arquelle address some of the demand. But look, there's -- our customers have really been very transparent with us, and we work very closely with them to make sure that we're matching the demand that they need to continue digital transformation to really roll out those important applications that they've got that are critical to their businesses. And so we feel like we've got a very, very good window into demand where I think some of the providers might not. So for example, Mike, we've got 11,000 customers, right, 500,000 cross connects. That gives us a very, very good insight to what's actually happening on the ground when it comes to this whole digital transformation in [indiscernible]. But I don't know, Arquelle, from a...

Having led the sales organization for 6 years, I think what you said is accurate. There's just so much growth that we're seeing in the customers as they think about a bit of an evolution we've been on for years now in terms of moving from a single cloud to hybrid multi-cloud, digital transformation, the growth that we've seen in the economy has been significant and is driving a lot of that for our customers.

I think we also -- we don't do anything that's speculative. We don't say this could be an interesting market. We have power available. We don't have any customers, but let's give it a shot and let's see if we can direct customers there. We build -- invest and build where the customers are, where we know we have market opportunity. And a lot of that is driven by what our customers are asking us for. So almost 11,000 customers with very, very significant Fortune 500, Fortune 100, Fortune 1000 in there who are driving where they need to have that capacity.

And so for us, we've been partners with these customers for such a long time, and we've built relationships where we've become trusted advisers. So we're working with them in terms of investing. We've made decisions to make these investments in core metros where we see the greatest amount of growth for us. And that's how we have confidence in what we're seeing.

Great point. Let me just address the other question, Mike, that you had about the political environment.

You know how I avoided that.

Yes, [indiscernible]. Look, it's definitely an issue. I mean, I was telling a few of the groups that we've met with sharing today. No one really knew what I did before. I was like tell them data centers and they look at me confused. it's Internet infrastructure, I try to come out a different way. Everyone knows what the data center is today or at least they think they know what a data center is today, right? And I think that's -- there's a lot of misinformation out there, et cetera, et cetera.

Look, we -- fortunately, we've got 30 years of a track record of doing what we said we would do, right, relative to the communities that we're in, relative to the power providers that have trusted us with that critical capacity. And so we're leveraging that experience to make sure that we've got a healthy pipeline of development going forward. Is it an issue? For sure.

I mean we -- and by the way, I'm going to tell you a strategy, which is nothing new for us. But before we ever put a shovel on the ground, we are in that community, talking to local authorities, talking to the community and talking to the power providers to make sure that we've got a strong relationship. We know what the community needs and that we are being a good partner. really like we've set up really local infrastructure businesses where we've got local managing directors who speak the language, who have really good ties to the community and are really running critical applications inside of our 4 walls, right? That community of those businesses, a lot of government agencies, et cetera. We're not just cranking out massive data centers with 1 or 2 customers in it. There's really, really critical applications that are running people's critical apps that help them live their daily lives.

That said, my world spend about 90% on corporate development. And now I would say it's easily 60% to 70% on politics and being involved in our strategy, or public policy strategy and meeting with elected officials. And so we recognize that right now in the current environment, really making sure that we're invested in working with elected officials, constituents, power companies, the different stakeholders that tie into that is really important.

I mean the industry as a whole, Mike, really needs to do a better job of telling the story. Again, I think there is a lot of misinformation out there. We need to do a much, much better job of getting our story out there. And we fully recognize that. And we've got a really good strategy of doing that, both on the ground in the communities we work in and nationally.

To this point, the implication of interpreting that the industry needs to slow?

Yes. We...

[indiscernible] go ahead.

Yes, I can give my view as well.

I mean look, a lot of what is getting discussed over the weekend over the past couple of days is some of these leading-edge models, right, that they've got some real concerns about. There's still a lot of AI models that our customers are using that are incredibly powerful that can really be leveraged by these institutions to transform the way that they need to transform. And look, you heard that conversation sort of migrate over the last few days. Saturday, it was we need to slow down Monday, Tuesday, it was, okay, we'll welcome regulation, right? And so -- and I think that's probably where that conversation really goes. But for us, we don't see that impacting our business at all.

Because strategically from a -- you're a massive player, notwithstanding the premise to the original question of $5 billion to $7 billion for the next 7 years. Theoretically, if new development was de minimis, on balance has a large global footprint. Would that be a good thing or a bad thing for Equinix?

Which...

You're operating -- I mean, you've got thousands of leases coming due or in negotiation on. Leasing spreads being even more positive. Lower cap rates on in-place capacity. Obviously, lower growth rate, less development...

Less external growth, but higher internal growth. Same-store NOI will be higher.

Yes. On balance, is it good or bad?

I mean cash flow. I think I understand the question. I think on balance is good. We are competing incredibly well. I mean we have a retail business. Our average length of our agreements are 3 years, not like every 10, 15, 20, right? So we have -- we continue to see upward pricing pressure is not the right word, but opportunity. Does that answer the question?

Historically, you guys what, 27% returns or so on development. On the $5 billion to $7 billion stabilized return, what are you targeting?

Low 20s.

Low 20s. So that means on $6 billion, you're going to get stabilized NOI at what point?

I'm not quick enough to do the math in my head. But yes, I mean, we're targeting 20-plus cash-on-cash returns on that investment.

How do costs and interest rates impact that?

[indiscernible] question. I mean, look, we're certainly impacted by interest rates, right? I mean there's no question about that. The good thing is we've got -- we're a big global company. We've got relatively sizable businesses in low interest rate markets where we can -- obviously, we can't get too far ahead of our skis raising capital in some of those markets relative to the cash flow that we have. But we've got a very, very good team that -- and I think we've got one of the best balance sheets in the industry. So it certainly does impact us, but I think we've got a great strategy around that.

Yes. We've got relative advantages on both fronts and more. Obviously, the updated outlook that we gave didn't necessarily assume current pricing on debt. And then when you're deploying capital into these mid-20% returns, obviously, it's helpful to be able to weather this type of pressure. And we're we're operating our business and building it for the medium to long term. But what's the typical half-life to stabilization?

I think we've announced like 2 to 3 years of stabilizing asset.

Okay. So within 2 to 3 years, getting another $1.2 billion of NOI. That's pretty good. Yes. Well, in terms of capacity delivery at least, right, we'll almost double the size of our portfolio, right? So we'll deliver more over the next 3 to 4 years or about as much over the next 3 to 4 years as we have in past '27, real growth.

Given the rapid development in technology and everything, has there been a big change [indiscernible].

I think -- I mean the [indiscernible] is becoming more and more resilient, I would say. But I don't think we changed our guidance.

Yes. No Maintenance CapEx is sort of low single-digit percentage of revenues, which I think is lower than a lot of people would think it would be. The reality is that a lot of our older properties are maybe more relevant today than they have been in a while, partly because they serve lower power densities, which serve things like networking. And all the new stuff that's happening with technology, technology sort of straightway, but also AI depends on the networking that is housed in those old data centers. So not too many products out there, not too many real estate types where you can say that your older stuff is still very relevant today.

[indiscernible] kind of CapEx is not included in maintenance CapEx, like you got update servers and I don't know who pays for that, but...

It's our customers that update their own equipment. We are just providing the space, power and security. Yes. Let me just add one more thing on that question. We own a lot of our real estate and our assets. And so where we have redevelopment opportunities to increase the yield on a piece of real estate, we will do that from time to time as well. So that's a real competitive advantage for us.

The 20% target, is that based on market rent today?

Yes, that's our current underwriting.

You mentioned there's a lot of misinformation out there. You're right in the [indiscernible].

I've certainly read some stories about that. Look, I do think people have real -- like real concerns for sure. I think if you look at some of the data coming out of social media, there's no doubt there are other actors kind of banning the range, but there are real concerns. I mean -- and look, we're not going to shy away from them, like we're happy to do our development upfront in the community, be forward about like what we're building and what kind of value we're bringing to these communities, just like we've always done like we've done partnership programs with local universities for a long time. We heated the pool for the Paris Olympics, the swimming pool for Paris Olympics. We've done a lot of things, I think, to really differentiate us in the community. So yes, I think some of the concerns are real, for sure.

On this return question and CapEx question, the obsolescence of the depreciation of the techniques of your building is pretty substantial because about 30% to 40% of your building is everything but IT but everything real estate. I'm always trying to figure out how do we think about the low percentage of CapEx. But meanwhile, your depreciation of this 30% to 40% of the overall value of the building is over 20 years or 25 years. How should we make the reconciliation between low CapEx but high depreciation on the other side?

:p id="E28" name="Stuart Thompson" type="E" />

Feels like Ryan's question?

I mean it goes back to what you just said, which is we build the building, we build the shell, we provide the interconnection and the power. And therefore, the depreciation structure and the CapEx structure are very different than other property types, but also different than if we own the actual hardware that was in the building.

I mean I think like some of our equipment is like 40-year life as long as you're maintaining it well, which we do, it can last for quite a long time. And where we have to update it, we update it.

Can we skip to power?

I just see more -- 2 more. Sorry, I -- Look, I think one of the ways that you can see this coming out in like real-world data is not only in our maintenance CapEx, CapEx, which we disclosed. But look at our performance. I mean, Five9, you can't operate to that level of uptime with shotty equipment. You just can't do it. So you can look at that data point as well to see, okay, how well is Equinix doing on a performance basis operating the chips they're operating?

No, no, please. So I mentioned really briefly, but -- so BofA forecast about 100 gigawatt shortfall and power deliver over the next 4 or 5 years relative to power demand in North America alone, right, talk to customers about this as well. So Stu, how are you derisking that? How is Equinix derisking that? And how much contracted power does Equinix have relative to the $5 billion to $7 billion development spend?

Yes. So what we disclosed is we've got -- we own and control 3 gigawatts of design and power today, roughly 600 megawatts of that is under current development, some sort of development, whether that's earthwork all the way to vertical construction and finishing it, and we should have about 1 gigawatt under production by the beginning of next year. And so we're not -- you guys may have heard the term [indiscernible] before. We're not in the business of announcing projects before we have control.

You're in queue to be in queue to get power by...

[indiscernible].

The balance, like, let's say, beginning of '27, we have a gigawatt under production. The remaining 2, we feel very, very good about, right? We have very good line of sight into the power permits for that capacity.

Okay. Can we shift, I guess, more away from maybe some of the risks or hurdles that are being talked about to the opportunities for growth? And I think shift from model building AI inference, something we all talk about a lot. And that kind of goes back to the risk of Anthropic and OpenAI and what their credit rating is, but you're not playing there. You're not building data centers in frontier markets, retail colocation for the most part. So the idea is that you would benefit more from AI inference as enterprises begin to deploy that. And we forecast inference going from, say, 25% demand to 45% in the next 2 years. Are you seeing proof points and having conversations that support that forecast? And can you talk about how much of the demand that you have been reporting on bookings or other metrics has been AI interference related versus more traditional.

Yes. I'll start and pass it to you. If you had asked me this question a year ago, it would be a different answer. We were talking -- we've talked about this in a couple of other meetings. A little over a year ago, we had a client advisory board, and I posed the question to the customers, and we're talking big financial customers and Fortune 500. And I asked them where they are on that journey in their AI journey. And 95% of them in the room said, we haven't started. We thought about it. There was one who was a tech company that was on that journey. And we met with them again a year later. I asked the same question and every single one of them is -- has started. They're in different places.

I would say one comment that was made was training wheels, but they absolutely have been forced into the accelerated implementation of an AI strategy. And an AI strategy is it's not just the infrastructure. It's an entirely -- an entire shift in a business operating model in some cases for a company. So it's a multiyear change that's happening. So now you ask me that question, and I don't know that I have an opinion on the exact number, but we are absolutely seeing an increase from our customers in terms of what they're buying. We had seen the majority of our business still from a perspective is non-AI related. Customers have been on that multi-cloud journey. They are building out digital infrastructure. Now they're building out that digital infrastructure to accommodate AI. And we're starting to see them utilize AI much more, the inference component of it.

And we're still doing business with those AI participants as well, right? I mean I think Neoclouds, I think everyone is concerned about creditworthiness of Neoclouds. Look, Neoclouds are a very important part of the AI ecosystem. They tend to be pretty magnetic for our other customers, right? They want to be close to them and get that inferencing out to the eyeballs, which is best done at Equinix, highly interconnected data centers. And so it's still -- it's an important vertical for us. But that said, it's only like 1.5% of our revenues, I think, today. So it's not like we've overlevered or over rotated to that vertical.

And are you projecting greater cross-connect density over time as well if you have more AI inference? Because I mean, in theory, that require a lot more cross-connects.

Yes, no doubt. I mean companies have their data in many different places.

So presumably returns go higher than even the 20% plus over time if you get higher cross-connect growth.

That's an historic metric, that 20% [indiscernible] Yes, that's what we're currently underwriting to right now.

And then...

I think the great way to think about it is that there is some upside in interconnection.

I think we also think we are very bullish on our interconnection product and feel that not only because we have these incredibly dense ecosystems where you have so many customers that live within it, along with their -- the many -- the providers, the clouds, the network service providers, et cetera, but we have over 522,000 interconnections globally. And we start to see with -- to your point, on inference, that creates a much greater demand for interconnection as you have data residing in different places that ultimately needs to get placed where the user is.

It needs to talk to one...

It needs to talk to one another to have any sort of value.

[indiscernible].

Exactly.

So customers can access their data.

Yes, exactly. And so we think that we are in this very unique position based on our scope and the customers that we have to see significant growth come out of it kind of as Adaire would say, our CEO would say, we were built for this moment. So we see that continue to increase. And we look at that as an incredibly important potential driver more so than space and power in the future if you think about it.

Much higher margin. And Al, you're in the front line of customer discussions, negotiations. And what I hear from large hyperscalers in the model is that negotiating power has really shifted to the developer, right, given the tight supply market, things like a sign end of lease and absorbing more of the cost increase, not your model. But same dynamic, are you seeing a shift in negotiation, whether it allows you to put different provisions in the contract you weren't able to before, change in duration, escalators? Is there any change in those negotiations or contracts given the environment?

I think, no, we're not -- we haven't started to see that shift yet. Again, I think it also depends on where you are in the customer segmentation, right? So if you are a very key service provider at the high end of the market, we're going to have a different conversation with you, and we're going to have different contracting terms with you than we are with a midsized customer. I don't know if you're seeing anything [indiscernible].

We've focused on a lot of volume. You've seen our volume increases, as Ryan mentioned in some of our conversations earlier. And we're looking at at the exact level what we're going to do about pricing -- but for sure, there are market dynamics that would be in our favor from a pricing perspective.

It's kind of same line of thought. I mean, I think like 30% of your cabinets were presold quarter, right? So you were preselling a lot. Does the supply-demand dynamic shift your strategy to preselling, meaning an inflationary environment, maybe you resell less because you have a higher rate in the future, they shift your approach to that?

One, it helps us figure out what that demand looks like. Like Arquelle mentioned, we're not just -- we are building data centers, but we're not just doing it without any customer data. We're doing it with a lot of customer data based on, again, 11,000-plus customers, and we've been in these markets for a very long time. But preselling allows us to get even a better window into what that demand shaping should look like. We're not going to presell an entire data center out to 2 or 3 customers or even 10 customers because we do want to do a mix of that to make sure that we're optimizing the cash-on-cash return for our shareholders.

When we build a data center, we actually -- as the shovels go on the ground, talk about, we've actually built into the business case which customers we're going to put in there and not necessarily customer by name, but a small, medium and large foot we call a large customer that's like a mega plus customer. And that's built so that we can get that rate of return on that asset. So when we then build it and then fill it, we are very careful.

We look at asset management very closely to make sure that, one, we're addressing that we've got the right mix of customers to give us that rate of return. Two, the ecosystem is so critically important that we're going to actually -- that we've had conversations with customers about we're going to place you somewhere else that's going to meet your needs, but not there because in this ecosystem, we need this set of customers because that's the value that our other customers are asking for. So we manage all of that through asset management. And it becomes really important in terms of when you're looking at how much you're going to presell, that's also understood because we first of all, we're not going to, as you said, sell out an entire data center to one large footprint or a couple of large footprints because it would rule in the model that we have to have the rate of return.

The gravitational pool of having those core anchor tenants.

Exactly. But we also look at -- we want to save some of that because there's opportunity associated with that as well. So it goes into the model.

And Stu, kind of back kind of talking the maintenance CapEx a little bit, different direction, though. The power density with AI, presumably the same thing with AI inference. Can you talk about how your data centers are future-proof if they are right? The power density you can support and what is required to upgrade the data center to support AI?

Yes. Look, we have a very large portfolio of assets anywhere from pretty low density assets that are highly interconnected that are basically network, just network nodes, right, that don't require a ton of power density to some of our newest assets, Arquelle is reminding me like.

Those are more of a [indiscernible].

We really are sort of the core sticky pieces of the public Internet in a lot of ways, right? And that does not need a ton of density. And then you get all the way up to some of these big AI workloads that might require a lot. Arquelle is reminding me of one of our latest builds in the U.S. is up to 18 kW per cabinet, right? And that's the average, right? So we're pre plumbing all of our data centers for...

That would have been maybe 5 or 10...

I mean when I joined the company, it was like 3 and before, we were like, oh, it's crazy. [indiscernible].

And it accelerated very quickly in a short time.

Yes, the delta between 5, 6 [indiscernible] in the last 6 or 7 years, and now we're up to 18 and growing. But a lot of times, we are also like leaving some generator spots as well, so we can even increase the density above that, making sure that we've contracted enough power that we can stay with that growth, again, pre-plumbing the data center for liquid cooling to [indiscernible], all of that stuff. Look, we -- again, it's not easy for us to like just say, okay, it's going to be 40 kW rack for the single customer because that's the spec and that's the chips that they're bringing in to deploy. We have to have our ops team [indiscernible] in sometimes hundreds of customers into these very large data centers. And so it's a real technical challenge for them, but one that we do very, very well. Our stabilization rates, I think, across the portfolio are like 88%, something like that stabilized. So we do a really good job to win those spaces up.

Okay. That's great color. And, I want to come back to just sales and support in general. And I think perception from the outside with Equinix has been superior for so long that maybe focus as much on sales and support as competitors because customers felt they had to be an Equinix facility. might be wrong, that perception. And our perception is the priority of Adaire has been to rework and improve sales and support maybe to address that perception that sales and support maybe didn't match some of the competitors. I guess the real question is, what have you done in the last 12 months to change sales and support and to improve that function?

Okay. Well, I think what -- so I think that we are -- have been on a journey for a number of years in terms of refining our go-to-market and making sure that we've got the right teams aligned around the right segments, which was really the focus over probably the last 4 or 5 years. to assure that we've got the right team. We've got channel partners who we work in conjunction with and making sure that we're selling the assets that we want to. So there's been a huge effort on not only selling our space and power and interconnection, but also in building out the ecosystem and creating that. So that doesn't just happen on its own either. We have a team that actually focused our business development team that's focused on making sure that we're bringing the right partners into those ecosystems to serve our customers.

Where it's gone now is as we continue to refine that go-to-market strategy, it's moving into a more, I think, tight verticalization model. So we continue the segmentation, continue to -- and the reason segmentation is important is, one, how you serve the customer. So you're at the high end, a significant customer at the high end of that, what we call a pyramid. They have a higher touch from us. They have -- there's a greater set of resources around them. They're more complex. They're typically global in nature. So you're going to resource them differently.

As you go down market, you don't need that level of touch points with them. And you're going to have different ways of serving them that might be serviced through channel. It might be serviced through a team that has -- because the sale is a shorter sales cycle, it moves faster. It's less complex. The refinement that's happening now is to actually take us into a verticalization. So we have these ecosystems -- we've had a network service provider vertical for many years, same thing with financial services.

But to really refine that and say which verticals are driving the most revenue for us are the biggest impact to our business that are going to be the biggest users of AI, for example, in inference and to create verticalization, which enables people, someone to use financial services as an example.

When you've got a team of people, whether that's your frontline salesperson, your technical resource that's doing your design work, your marketing organization, your product team, and they understand the nuances of financial services and what's happening, they're going to be able to better serve you versus an account team that has financial services, manufacturing, gaming and public sector and really isn't -- doesn't have deep knowledge to be able to become a trusted adviser to that customer. And that's the next piece of what's happening from a go-market perspective.

Also from a sales perspective -- or servicing perspective, our servicing model was one that was focused more on responsiveness to the customer, responding when the customer needed us. And so the service model is changing so that we're providing services based on what customers are asking for. Not every customer needs certain levels of service.

And also what's the -- there are certain sectors where you might actually charge for some of the additional services that customers are asking for from a support perspective. You're also looking at there is -- there are a team of people that are having a relationship with a customer on an ongoing basis for the life cycle of a contract, there's an incredible amount of opportunity there for them to work with that customer to upsell, to renew contracts to reduce churn. So really utilizing all of the individuals who touch a customer in a more proactive way with a clear role definition that supports increased customer service, but also revenue acceleration.

That was a great answer and a very quick 35 minutes, guys. Stu, Arquelle, thank you so much. Thank you all for coming out.

Thank you.

Thank you.

All right. Good morning, everyone. I'm Brendan Lynch. I cover REIT here at Barclays. Very happy to be with the Equinix team, Arquelle Shaw and Ryan Burke.

Arquelle, you have been the President of the Americas for just over about a year now. Maybe you could tell us a little bit about your responsibilities and maybe about your prior responsibilities as SVP of Sales in the Americas.

Sure. Thank you. And it's a pleasure to be here today, and thank you for having us. So in my capacity as the President, I am responsible for our growth strategy in the Americas. And the Americas for us is everything from Canada all the way down to Chile and Argentina. And I have responsibility for corporate development, I have responsibility for our business development and then also the growth that comes from those investments that we're making. Prior to that, I ran sales for the Americas as SVP of Sales. I did that for about 6 years. So I think that brought a unique lens to where I see things from as the President now.

Great. I think you've kind of led the change in the go-to-market strategy in your prior role at the firm. Maybe you could talk a little bit about the changes that you wanted to see and how you executed on that.

Yes. So I came into the company. We've been such an incredible story of growth over our 28-plus years. And when I came in about 7 years ago, it will actually be officially 7 years at the end of this month. We were doing exceptionally well, and we needed more. And so we had been approaching the enterprise space very effectively. We're starting to see -- there was a journey to the cloud. There was starting to be a conversation around repatriation potentially.

And we also wanted to significantly increase revenue growth. And so what I went about doing when I came in is putting together probably a more structured approach against the segments that we had. Rather than treating every customer equally, we have small and medium-sized customers and large customers. We had verticalization that was important in terms of stronger -- we play very well in the financial services, for example, so making sure that we had the right focus around that. But it was really bringing a consistent focus around how we managed the go-to-market strategy against the different customers that we had, so we could really differentiate.

One of the things that we saw was the fact that we had so many Fortune 500, Fortune 100, Fortune 1000 customers, but we had a small bit of their business. And so really understanding the role. I think people -- 7 years ago, people thought of data centers as box and didn't know very much about what happened in that box. And we have such a different value proposition in terms of an ecosystem that lives in that. So working with our customers around the digital transformation that they were going through and aligning our sales organization so they could have effectively go after that opportunity in the market. And it proved to be quite good in terms of the growth rate that we saw coming off of that and bookings growth.

I think the whole world is getting an education and data centers over the past couple of years.

Yes, definitely, definitely.

In terms of the kind of the go-to-market strategy, certainly, the data center market has evolved over the last 2 to 3 years. How should we think about your kind of positioning the sales force and your go-to-market strategy now? And is it continuing to evolve as we see kind of AI enterprise and AI inferencing demand start to ramp?

Yes, absolutely. So we have a new CRO, he's not new anymore. I think he can officially be called tenured. He's been here over a year at Shane Paladin. And he is -- has introduced, again, a go-to-market strategy that's evolved with what's happening in the marketplace, which is important for any sales organization to do. And so what we're seeing is the differentiation in terms of where the opportunity is and the different ways in terms of how customers are served. We have almost 11,000 customers, which is really different from any other data center operator.

And those customers are not all served the same way. And we have very small and we have very large customers and everything in between. And so being able to effectively serve those customers in a way that allows us to move as quickly as is necessary to capture the opportunity, but to do it in a way that is meaningful for that segment is important. So for example, in the small-sized business, we use many more partners, and we have a robust channel organization, whereas you go upmarket and you start to look at some of the very large enterprises that we have, and they have very dedicated bigger teams that support them on a global basis and then everything in between. So that's how we align.

Great. Maybe you talk about enterprise demand, how customers' capacity requirements are evolving as AI adoption accelerates and what you're seeing on the ground?

Yes. Well, it's definitely evolving. And what I would say is we've seen this over the last few years just in terms of the increased size of capacity that they need. So the workloads that they're placing with us in our data centers and across the industry are drawing more power. They require greater density. And so we're seeing that shift. So whereas a 250 kVA deal was a large deal for us, a megawatt is kind of a going thing now.

And that's a big shift. It's occurred over a number of years. But what we're also seeing is AI has really taken off. Enterprise is a little bit slower in that. And I think there's reasons for that. The enterprises are the businesses that have to make the investment in infrastructure and all of the changes that AI might be driving. And so I think that up until last year, I was just sharing this in one of the meetings we were in, customers were -- if you talk to an AI company or you talk to a hyperscaler, they were all in on what was happening with AI. When you talk to enterprise customers, we asked the question of, are you -- what's your AI strategy? And the majority in the room had -- we were contemplating it, but had not embarked on developing a strategy. They were dealing with what we call shadow AI shops where there were people using AI, but they still didn't feel -- they still hadn't stepped into actually driving a strategy. This year, when we met with that same group of customers, they all were heavily invested in building that strategy and implementing a strategy. And that's reflected in what we see customers doing with us and the work that they're doing, trying to understand the growth patterns that they have.

Customers commonly think of Equinix as the go-to location for latency-sensitive workloads. Maybe you could elaborate on what element of demand is coming from those latency-sensitive workloads versus maybe some other types of AI workloads that might not be as latency sensitive.

Sure. So I think -- Ryan, if you want to jump in here at any point. So I think what we're seeing, first of all, is the latency sensitivity has always been a factor in workloads. And AI is potentially driving a greater need for latency sensitivity. We're still looking at that because there are some -- what we're seeing from what customers are telling us is not all AI workloads are the same, just like any other workload, if not -- they're all different as well. And so what we're finding is that the customers -- when we build -- it's probably important to do this. When we build a data center, it's typically within what we call a metro. It's a campus of data centers. And we are very thoughtful about where we place the workloads in that data center depending on the latency that's required.

And so in nontraditional and before AI, you think about financial services, high-frequency traders where the latency is so incredibly important. What you start to see with AI is the response time on more and more applications is really important. So if you're ordering an Uber, you can tell, right, within seconds if you haven't gotten a response on your phone. And AI is driving more and more of that need for instant response rates on that. And that's driving latency sensitivity associated with that. We also build our data centers in the sense that, again, as I said, it's almost like concentric circles where the high sensitivity around latency gets placed in a certain part -- certain IBXs and where it's not necessary, we'll work with the customer to place those in different areas.

I think that's an interesting example of Uber because for a lot of people, it's hard to envision what's the latency sensitive, why it's important when you can, in some ways, get low latency from across the country. But I believe every time we order an Uber, there are 300 workloads that are involved with making sure that, that journey goes successfully and getting those all timed right and with super low latency is part of the reason that it works the way that it does.

Yes, that's an incredibly good point because the complexity of what takes place to make that happen is something that most people don't know about.

Sure. You recently introduced some new products, Fabric One and Inference Exchange. How do these enhance your current product suite?

Yes. I think that they are 2 products that actually enhance the product suite by helping us move with the needs of AI. So I like to -- I think of it as Fabric as the connection and the exchange as what's operating. When you mentioned that it takes 300 different activities to occur, that's what Inference Exchange helps us do. It helps us to actually make it simpler for the customer to make the data use the data that they need in order to drive the business. So they don't have to think about that.

And the connection, the Fabric makes it easier for customers to connect. So we know where they need to connect to, how they need to connect, whether it needs to stay in one location because of sovereignty or the data can move to another location, all of that, but they don't need to think about it. We do the work behind the scenes for them.

Great. On that point of sovereignty, I think that's a growing consideration in kind of workload placements. How are you guys thinking about that internally at Equinix?

Yes. It's a good one because I feel like we were kind of built for sovereignty because we've always worked with that in terms of understanding that we're in countries where throughout the world as the largest data center. And we work in countries where sovereignty has always been important. And so we have the ability because our -- we operate within the countries, we understand that there is data that needs to stay within the country and then there's data that can leave the country. And so we are able to help facilitate that for our customers and acknowledge that there's some data that's going to stay, and we can afford that we provide that to them. And then the data that needs to traverse and can leave, we help facilitate that for them as well with our interconnection.

Is there anything you want to add to that one?

Just today, given the rise of sovereignty needs, having sovereignty built into the network layer for us is a huge, huge draw of customers, right? It's very different, very much more automated and much less complex than having to deal with it on an app-by-app basis or a software basis. So we're sort of naturally sovereign, and that's been one of the many selling points to our customers today.

Great. You've had a relationship with NVIDIA for years. Maybe you could talk a bit about how some of these new products that you've rolled out, specifically Inference Exchange is different, which is also a partnership with NVIDIA is different from kind of past iterations of the relationship that you've had.

Yes, I'll take that one. Yes. So we've had a long-standing relationship with NVIDIA. And I think the way I would think about it is when we first started working with them, it was really about the infrastructure that customers needed. And so facilitating access to that infrastructure. As it has evolved and our customers are now looking at how do they use inference and how do you get inference to the customer, that -- our relationship with NVIDIA has changed as well. And introducing this product was an important part of that journey in terms of working with NVIDIA and also Together AI to build out how we can actually facilitate the customer using the data, right?

Not just you've got the infrastructure, but how do I actually do to get the data so I can now use it coming off of the different places that, that data comes from. And we facilitate that. And that's how that has evolved for the -- with the relationship with NVIDIA. And I assume it's going to continue to evolve that way as we think about how customers are using.

Good partner to have. Maybe you can talk a little bit about your pricing strategy and if you anticipate that, that would continue to evolve with different partnerships.

Yes. That's a big question, a broad question. Is there a particular part of that, just in terms of the particular product or in relation to everything?

I think with Fabric One, if I'm not mistaken, there was a suggestion that it's going to be more outcome-based pricing. Maybe just if you could clarify what that means.

Yes. Well, I think part of that ties to simplicity for our customers. So when you simplify instead of having to price out a multitude of components and navigate that from a pricing perspective that can provide one price based on the outcome that the customer is looking for, we simplify it for the customer. And then for us, it also makes it more manageable for us in terms of expectations on what we're building. We anticipate that what's going to happen with interconnection is that it's going to continue to grow. It's one of our fastest-growing products at 9% this year. And so we feel that as customers -- it becomes essential for customers using AI to retrieve their data from many different places, whether it's a model or it's compute in order to get it to where it needs the workload needs to be in order to utilize it, that interconnection becomes greater in importance to the overall [indiscernible] customers and making it easier to deliver becomes the most important part.

Maybe touch on that the connection component. How is AI adoption driving increased demand for interconnection? I think there's a thesis out there that historically, your customers would have had an interconnection with maybe some of the fiber providers and 1 or 2 of the hyperscalers, but now with OpenAI, Anthropic, et cetera, all in the mix, is that driving, I guess, increased interconnection density?

Yes, very much so. So in the past, when data lives kind of in one place, maybe 2 places. And your interconnections, you would see were typically point-to-point. With AI, it's driving a greater need to retrieve data and move data to many different places. So data doesn't live in one place anymore, right? It can live in a cloud. It can -- the model might be in one place, your compute might be in another place, and then you need to ultimately get the data over to an end user. And that's far more complicated than it used to be and requires more interconnections than were required in the past, and they need to operate more flexibly as well. And so we are seeing that this is driving 2 things.

One, a significant increase, which I think is why we're seeing that growth in our interconnection product, but increase in interconnection and the flexibility of that interconnection, but it's also creating a lens on networking that maybe hadn't been in the industry for quite a long time. And 2 years ago, 3 years ago, you'd be in the room talking to people about networking and you don't even go to university to learn about networking anymore. And now with AI, it has had a kind of a rebirth in terms of the critical element of running a platform is that networking that you create. So yes, we see it as being an absolutely important element of driving AI or utilizing AI and driving a platform that helps a customer to use that.

Maybe you can talk specifically about Equinix's competitive advantages in interconnection relative to some of the other options that might be available in the market.

Yes. So besides the products that we have and the reliability that we have, we have over 522,000 interconnections globally. We also have the largest number of data centers globally as well. Is it 282 at this point, I think we're at changes. But that gives us a level of density that is unparalleled. And there are other companies that absolutely have interconnections, but we have this density of interconnections that is unparalleled.

When you combine that, so that's good. But what really differentiates us is the fact that they're connected to ecosystems. And we've been building ecosystems for almost 30 years. So -- and it takes a long time to build a really viable, rich, dense ecosystem. And so that's what we've done, and that's where we have focused in our major metros in terms of making sure that we've attracted the right customers, whether it's clouds or network service providers, the customers who actually live there, the right neoclouds, making those connections is critically important. And that's what -- it creates a magnetism and customers come to us and say, I want to be in that ecosystem because half of my supply chain lives there or I've got an important customer base that's there. And so we've shown and proven that it creates this magnetism that draws more business in that's very, very important. And so I think the 2 are important, not one or the other alone, that interconnectivity to that ecosystem is what's most critical.

One of the elements that's kind of newer to your ecosystem is the xScale offering. How should we think about the value proposition of your xScale assets relative to maybe some of the single-tenant assets that might be available through other developers?

Yes. So we don't build gigawatt data centers to perform training. That's not what we do, and that's not what hyperscale -- or that's not what our xScale product is. But what we do know is that the clouds want to be close to where those ecosystems live. And those ecosystems sit in large densely populated communities. So you're not going to build a gigawatt data center in a large densely populated community, but you want to get closer to it. And that's what xScale's purpose is, is to bring those clouds closer in so that they can connect into those ecosystems and the customers that are there and so that our customers have a way to connect into the cloud.

I believe you have about half of the Hamptons campus still available. You also got the Minooka site. Maybe you could talk about those 2 assets or 2 locations and perhaps where else in the Americas, you're considering expanding xScale next?

Sure. Well, those are the 2 right now that we're looking at in terms of -- and they're on track. We're excited about them. And we're -- I don't know if there's a whole lot else that we've shared publicly other than that they're on track and progressing well on plan.

That's good xScale growth for '28, '29 for those investment-grade hyperscale customers.

Excellent. Maybe I'll open it up to the room if there's any questions here. Happy to relay them. I can keep going.

Maybe on the topic of development, how is Equinix adapting facilities and your design to meet the operating standards of some of these higher power density workloads that you're seeing through AI?

Yes, I'd be glad to do that. So we do this, and we've got probably a real estate guy in the room as well, who does this every day as part of his job and livelihood. So we're always thinking about this. And I think let me back up for a moment and talk a little bit about the metros that we exist in kind of the campuses that we build. We have assets that have been there for many years.

And then we have new assets we're continually growing. And so as we think about what we're building and we think about what's needed in those metros, we're constantly assessing existing workloads, the new workloads that are coming in. We have a degree of churn that happens in those metros as well and where we're placing customers to best meet their needs. And so when we think about what we're building to in -- with AI workloads, it's absolutely creating a need for us to build at a larger scale with higher density. And we -- and so when we think about, for example, I think it's DA12 that we've announced that we're building, we're going to be delivering, I think, about 67 megawatts, and it's going to have a density of about 18 kVA per cabinet. That's outside of -- not outside, but it's -- that's denser than we've ever gone, and we're very comfortable with that, but that's what's required. And so we'll continue to think about that. And as we think about our designs, how we're evolving that to address the needs of AI and how we can do that.

I think what's also really important because it's come up in lots of other conversations we've had today, how do we do that in a responsible way as well because we have environmental impacts that we have to be conscious of in terms of how we cool things, the amount of water that we use, et cetera. And so keeping a lens on that while also making sure that what we're building accommodates the needs of what AI is driving. I don't think that we sometimes I get the question of, well, what is that going to look like? And do you have a lens on that? I don't think that we're -- that we are building to say this is what AI is going to demand.

I don't think anybody can say that right now. I think it's too unknown. But I think we're comfortable with the fact that we have a history of evolving how we build, how we're thoughtful and in the -- we're responsibly looking at what's happening and changing and how we change our builds to accommodate that for our customers. And so I think we're -- we feel well positioned for what AI is going to bring forward and what we're going to have to build to support the AI in the future over the next, say, 5 years.

I think it's an interesting dynamic for Equinix in that you're basically planning on doubling the size of the company over the next 5 years, which would be all the most modern assets. So even as AI requirements evolve, your starting point of where you might need to alter a facility is much more progressive than having to retrofit an asset from 20-plus years ago. And even some of your assets from 20-plus years ago are the most valuable ones in the portfolio because of the ecosystem density that you discussed earlier.

Exactly. Exactly. It's -- and it's -- I think it's an important differentiator for us, and it's also important in terms of how that ties into how we think about those metros and how we continue to build them. And also, the conversations that we have with our customers are probably different. They're not coming to us saying, I just need space and power. They're coming to us and they're talking about this is what we're doing in our business. This is the next initiative that we might be rolling out or we're -- we're having much more business-led conversations with our customers in terms of what they're trying to accomplish and then working with them on how we design where they end up being placed and what they're going to utilize.

How should we think about either the requirement or the option to retrofit older assets for liquid cooling and any other next-generation AI type deployments?

In terms of retrofitting them, I think -- so to your point, we have existing assets that are -- that we utilize with the cooling that we've had in place. When we think about new builds, we think about liquid cooling. So we're less prone to retrofitting a building for liquid cooling, and we're anticipating where we need liquid cooling in the portfolio and building to that. And so that's -- I would say that's how we're handling it. We're not going back and retrofitting a bunch of buildings for liquid cooling.

We've got liquid cooling in 100-plus properties right now, and Adaire, our CEO, likens it to like a NASCAR pit crew in the sense that customer wants liquid cooling, they'll pay for it. They can come in, put it into what they need in terms of the cage, they'll use it, they'll pay for it. They no longer need it. We can pull it out of that cage and deploy it elsewhere.

So it's surprisingly nimble relative to what some people think the retrofit need might be. But it all goes back to the idea that when you take the new properties that we're building and the old properties that we have in place, we think what we have is a portfolio that's well set to serve enterprise need for the future. There are many products or real estate types where what you built 25 years ago is still very relevant today, but that's very much the case for us. So we're building to what we believe is core enterprise demand just leg in the way, but also AI oriented.

Yes. And I think what's also really important is building in that optionality in our new builds is really important because what we saw when we started looking and the industry was looking at liquid cooling is that I think there was an anticipation that customers, they're going to buy AI and they're going to need liquid cooling. We did not see that uptick on AI in the enterprise space.

And so you had AI companies that were very excited and growth was incredible. But over the last year, you didn't see -- or I would say, 3 years, you saw a lot of customers looking at AI, the enterprise customer looking at AI from afar, but not actually leaning into it. And so what we've seen over the last year is this acceleration in enterprises stepping into AI and needing to really grapple with what's our AI strategy and how are we using AI. And so when we -- originally, you would see a build happen with liquid cooling and it would sit there with nobody -- the customer and say, it's really expensive, too, right?

Because it is more expensive. And they say, okay, maybe I don't need liquid cooling. Now it's a requirement. And so I think we've been really thoughtful in creating that optionality and flexibility in our build so that we're not stuck with liquid cooling that we're not utilizing, and we've paid for the infrastructure to build it. Instead, it's there now and available as needed.

A journey for base AI analytics [indiscernible]. One of the things that you mentioned was kind of building responsibly. Maybe you could talk a little bit about the impact of growing community opposition to development and how that is affecting your pipeline?

Yes, absolutely. So community sentiment and backlash is a real thing. And so let me back up a little bit. We've actually -- as I mentioned probably 10 times up here, sorry, but we've been in the industry almost 30 years. And our -- where we're located, we've been in those communities for 15, 20-plus years, 30 years in some cases. And so we have a reputation within the industry and within the communities of -- that people can point out and say, "Oh, you've been a good operator. We understand who you are." That said, the issues -- the growth in the data center industry is real and it has happened. There have been bad actors in the industry. And what the communities are pushing back on are, in some cases, very real issues.

Now some of what they're pushing back on are things that they're hearing in social media or on the news and not all of it is back and not all of it is real, but it certainly has picked up steam. Our position on it is that, first of all, we always listen to the community, and we get that they're concerned about rate increases. They're concerned about what it's going to do to their community, does it really bring jobs in. And so we're actually able to point at the fact that we've always paid for our usage. We've always invested and we invest heavily in work in partnership with the power companies to build out the grid that's needed for us. We've done a lot with workplace development, workforce development as well as community development.

Before we even acquire a piece of land or think about expanding, we'll sit with the community leaders and talk to them about what we're thinking about doing because we need to have an understanding agreement, right, that we can serve what their needs are and we can build what we need to build. Our sustainability projects are always like how we build a data center directly correlates to regulations that the communities have or what they're asking for. So I think for us, it's -- we need to get that story out more. I just did a probably 4 or 5 months ago now, but issued a document around our community principles, which we've been doing for almost 30 years, but we haven't really had a need to talk about it. It's just in the values of how we are as a company. It's part of our principles as a company. And so we've done some advertising on that and putting it out there and are trying to get that message out. I think it is from a -- is it holding up our development?

I would say that our data centers are smaller than the big -- we're not building big gigawatt data centers. And we have worked extensively with communities that we're in right now where we do have specific builds happening. And so we see less -- we see an ask of work with us and help us to get that message out so that the elected officials that actually said yes and the community leaders will say, we want you to come out and meet with the community and do town halls with us, which we're happy to do. We just did an extensive one in Minooka that was really well received, talking about what the project is and working with the community. But we do a lot of that. And I think that's very important. And that -- and so therefore, we have not seen some of the delays or issues that have come up. But I think it's something that we're very sensitive. It is a real thing going on. And I think continuing to get out what's fact and what's fiction is going to be important. And I think also using fact about what specifically data centers have done is an important message for people to hear.

Sure. As interesting just in the industry, how we've gone from ribbon-cutting ceremonies at data centers a few years ago to a pretty strong opposition. But to your point, a lot of it is based on misinformation and just having a communication apparatus to kind of spread the word.

Yes. One of the things that a lot of people don't realize is what actually lives in a data center, in an Equinix data center. And so when we start to talk to them about the fact that 911 runs through the data center, that the local hospital and all of the things that a doctor might be looking at to transmit your X-rays to another doctor across town, the emergency services, the information that's going from an ambulance who's got a patient who's coding to the hospital so that when they arrive at the hospital, that patient -- the vital statistics are there, how it runs through a data center. So when you start to talk about that, it brings to life what happens in an Equinix data center.

Maybe when we think about development, you guys are clearly undertaking a very large development program now. How should we think about the outlook for development yields given the rising costs and constraints on supply?

Sure. Well, we think that we are a very responsible, thoughtful builder with our strategy. And so while we -- you see costs going up, first of all, we think that we -- the way that we build and how we build always has a lens to doing it so that we maintain strong returns on that investment. We also are seeing continued growth in customer demand and what's happening there. And so we feel that our build is keeping pace with as demand accelerates and our builds accelerate, we feel that we're managing that well. And it's still have no problem in the returns that we expect from what we're building.

We think we'll continue to achieve the mid-20% cash on cash yields that we have historically. That's driven by competitive advantages sort of across everything involved with delivering and operating properties. But at the core of it is just the individual mosaic in each data center, right? So like if you just pretend and you had a bird's eye view of each data center, you're looking down on it and think about a bunch of colored tiles. And those colored tiles represent different workloads and customer types. It's really curating that ecosystem, curating that mosaic that drives our ability to achieve the outsized yield. So we'll continue to be very focused on that. And therein lies the lease-up period that we do have, it takes 2 to 3 years to lease our properties up to Equinix level of stabilization, but Equinix level of stabilization is at that higher mid-20% return.

Yes. If I might take a minute also to elaborate on the Mosaic. When we build a data center, before we build, when we anticipate the size and scope of it, we think about who are the customers that are going to be in there. And we think about it in terms of retail customers, so small and medium-sized deals, customers and large customers. We think about large footprint that goes in there. And that all plays out in terms of the returns on that asset. And so we build accordingly and then we sell accordingly.

So you'll never have an asset where we say we should have 60% should be retail customers who have a higher yield. And all of a sudden, we've got 2 big customers come in and they want to buy out the data center. We'll never do that because that would so dramatically change the returns on that asset. And so that's a really, really important aspect of how we drive those returns is how we fill that asset. And that's all correlated then to market opportunity.

Maybe we'll do one more topic here on guidance. When we think about your guidance through 2029, which is now for 9% to 12% annual AFFO per share growth, how should we think about the contribution from the various components, be it cabinet volume growth, cabinet pricing, interconnection momentum or anything else that you want to throw in the mix? How should we think about that growth algorithm?

Why don't I take the first part and then you can add all the little details that you want to around that one. So I mean, the growth is -- we're very confident about what we're seeing. I think what we also are seeing is when we think about the growth that we've seen over even the last 3 to 4 years, which has been significant for our company. And then you see what's happened in the last year just in terms of kind of when I spoke about the enterprise maybe now coming into that AI period and we start to see even greater growth happening, I think we're quite bullish on what we're seeing in terms of the future, and that's how we're thinking about what we're building and how do we keep pace with that in a responsible way. Do you want to add in on here?

Yes. And just hopefully, what you're all hearing from us is just that there's broad strength across our business, whether it's customer type, whether it's workload type, whether it's each individual product and service. So that's number one. Number two is we updated our long-term outlook, which is through 2029 after having just given one about 1.5 years ago. And what was our old high end is now our new low end, and that's because of a mix of demand strength, which frankly came on faster than the company anticipated, but also the team's execution as well.

But as you think about it just from a simplistic perspective, you can see our same-store pool sort of migrating from mid-single into high-digit revenue growth. And then so you can expect the capacity expansion will do the rest. We're mindful that we're a very differentiated company within the sector -- data center space. We're core -- focused on core workloads, core metros, colocation. We have a good feel of supply and demand conditions in our core addressable market. So we feel good about the execution over the next few years.

I think the last piece is we're very diversified across the customer base. So there's no single customer that has over about 2.5% of the portfolio, and that's significant. So when you see shifts happening, and we've seen this over the years in the history of our company, when you see shifts happening, it has -- it does not have the impact on us that it might have on another company that's heavily invested in one customer type or one particular product.

Diversification is always important.

Yes.

Let's leave it there. Thank you very much.

Thank you. We appreciate that we're here. Thank you.

Thank you everyone.

So good afternoon, everyone, and welcome to TD Cowen's 12th Annual Communications Infrastructure Summit. Again, Michael Elias, covering comms for TD Cowen. For this session, we have Equinix. And from Equinix, we have their EVP of Global Operations, Raouf Abdel, who's back here with us for the second straight year, which makes me very happy.

This is structured as a fireside chat. We have just under 30 minutes because I've gotten a little carried away with the prior sessions. We got questions prepared, but I will do my best, if you're okay with it, to open it up to the audience. And I see some people in the audience who may have questions. So I'll just throw that out there.

There might even be some hecklers out there.

Yes. I think you could say there may be some hecklers.

Not tomatoes, none of that stuff. [indiscernible] behave.

But Raouf, it's a pleasure having. Thank you so much for coming back.

Thank you for having me again. It's always a privilege and an honor to be at the conference and to spend some time with you and this group.

Awesome. Thank you. Well, let's kick things off.

Do you mind if I do my obligatory disclosure statement?

Yes, at [indiscernible] you have to do your obligatory. Yes, that's right. You go ahead.

So for those of you that are not in a public company setting, you don't have to deal with this, but at Equinix, we do. So some of what I'll talk about today contains forward-looking statements. Please read our SEC filings for more information about factors that could affect these statements. Other than that, let's let it rip buddy.

All right. Let's do it. So let's kick things off. For those of you who weren't here with us last year, can you give us a sense for, one, your role, but more specifically, given the evolution in the industry, how is your role evolving over the last year? And I'm sure it's evolved a bunch. Over to you.

Yes. So think about my role as sort of the development end-to-end cycle of building our data centers from real estate to energy to design, build, the procurement aspects of that. And then ultimately, when we do build the data center, it's the operate side of it. So that whole life cycle of the data center. And I've taken on a couple of additional pieces of that to really try and bring it together and weave it together as one continuous sort of responsibility.

And the short answer to your question, but I'm happy to elaborate is that our world has gotten a lot harder. Every dimension around what I like to sort of use the term resources. And those resources come in sort of multiple dimensions. You've got people resources, you've got manufacturing, you've got real estate and you've got energy, which is the one that gets a lot of attention.

But where to go, where to build, community sentiment, the backyard sort of dynamic that we see playing out, definitely putting some stresses and strains on the whole ecosystem of building data centers these days. Nothing I'm sure most of the crowd doesn't already fully experience or appreciate if you're out building data centers.

That's right. One of the things that I think building on your point about complexity, right? We had the second quarter earnings call come out with new CapEx kind of guidance multiyear plan for building. So at a time where things are already complex and challenging to build, the rate at which you're going to build is going to increase further, awesome, right?

As we think about you delivering on this plan, a few things. One is, can you just help translate for us like what does this mean in terms of $5 billion to $7 billion? What does that mean in terms of number of projects that you got to manage, megawatts that -- or gigawatts that you're going to bring online as part of that, how the supply chain itself really needs to expand in order to accommodate Equinix delivering on that plan?

Yes. As you can imagine, Michael, we didn't sort of -- from a standing start plan to increase the CapEx, we've been for a couple of years now, sort of gliding into a very different throughput in terms of the amount of capacity and the volume of projects that we were going to manage. And we did. And we talked about this last year. We've also increased the size of every single project.

But as you know and maybe some in the crowd do, we've announced 52-some-odd projects that are in flight that have been publicly announced across 33 markets across the globe. But behind those is another 50 that are in planning, development stage, securing either the land or the power or the supply chain that's required in order to hit these kinds of numbers. So we've been planning this for a couple of years, and so the output is a result of those years of planning.

And back to your earlier question, the duration to plan is actually extending now. So we're planning today what we're going to deliver in '28. That's the way to think about it, right, '28 and '29. And so all of our land banking, power banking, prebuy on the manufacturing side is all for future delivery, right? And what we're delivering this year, we sort of put on a path 2, 3 years ago.

One thing that I'm curious about is, I think you've talked about a 3 gigawatt land bank, I believe. Is that the right number?

Maybe a little overstated, but we're in the multi-gigawatt sort of land bank.

The reason I bring this up is Tag on an earlier session from QTS, he made the point that about what the historical motion for delivering a data center look like, right? You buy the land, you sit on it for a few years and then you go to the utility and say, "Hey, can I have the power, there's a ramp." And then from there, right, and I see you shaking your head already.

What I want to get a sense of is I appreciate the data centers that you're building now are bigger. I think 60 megawatts somewhere around there is going to be -- is the standard block size. But when you think about the land parcels that you have in your bank, is -- what's the right way to think about securing power? Is it that, hey, when we bought the land, we had an ESA with a long-term ramp that gives us visibility into the power? Like -- or because 60 megawatts isn't like hundreds of megawatt scale, you can still go to the utility and be able to get the power that you need in a reasonable time frame. Just help me understand how much visibility and certainty you have into the power that sits within your land bank, if you will.

Yes. So one of the changes, again, that we made 2-plus years ago is the sort of flipping of the -- you don't go buy land and then secure power. You go look for where there's land and then you look for power -- or excuse me, land to support that power. And so we won't take down land if there isn't some line of sight to that power because what -- you can't sort of just tell the utility, bring me 200, 300 megawatts of power to this location anymore. You have to be much more thoughtful and planful around, okay, we see there's an opportunity to connect at a high transmission line over here to build a substation, you have spare capacity. You're having the utility conversation as the first step before you're thinking about the land. And we do that in combination now.

It used to be -- you're absolutely right. And as mentioned earlier, it used to be you could take down land and just put a request in the utility and they would show up at some point. If you apply that methodology now, it could be 8 years before you get that power because it requires upgrades, it requires infrastructure, it requires a connection. We're trying to pick locations that simplify to the extent possible. None of it is easy, but to the extent possible where that transmission connection happens, where we can build a substation. For the most part, generation is the tertiary issue. It's really distribution and transmission that's the bottlenecks. And so trying to simplify those 2 dimensions with where you pick land has been our strategy.

When you think about -- here's something I think about. I think you said that, what, 80% of the CapEx is going to go into the top 25 markets or something to that effect.

Yes, that's correct.

When I think of the top 25 markets, right, they are big data center markets kind of for a reason, there's critical mass and density, but there are also a bunch of operators. There also tends to be a correlation between the largest market and the biggest amounts of power constraints, right? Northern Virginia, a huge market, very constrained in terms of power. You can say the same thing for Silicon Valley and so on, right?

So that's kind of the direction I'm taking this is like I want to understand, since you -- so much of this is going into the newer market or into these established markets where you have a deep ecosystem, do you feel confident that, hey, power is not the thing that is going to gate our ability to deliver this capacity and as such, the constraints it somewhere else or some power is something that we need to keep in the back of our heads. And then after that, we can kind of pivot away.

Yes. I mean, absolutely, there's not a day I'm going to lose sight of the power complexities and the fact that we have to manage around it. And you're right, those are some of the most constrained markets. But again, remember, there's a multiyear planning horizon for us. One of the differences maybe from an Equinix versus others is some of our growth and expansion is phases and add-ons to properties and sites where we had a power bank or a power plan that was in motion. We're adding the third building or the fourth building. Take Ashburn as an example. We're building in Ashburn today because those are projects that have been on the docket for years.

But look, power complexity, power challenge has not gone away for anybody that's in the data center space anytime soon. And you have to think about all dimensions. And I would say, honestly, the key is planning. You got to have a long-term horizon. One of the things that is going to enable us to continue to deliver capacity is our ability to move projects in and out and pick which ones are on a trajectory to actually deliver because the energy is going to arrive. And so we -- 100 projects in the portfolio to work with. I talked about the 50 that we're very confident in delivering. The 50 behind them, which ones we pick is going to be a function of which ones are going to get energy.

That's a fair point. That's a fair point. One build on this. When we were on stage last year, you said something -- we're talking about this, like it's how it's hard to accelerate the build cycle for capacity, right? Then I get on the earnings call and I hear, what did I hear? 7,000 cabinets got pulled forward. And the first thing I thought is how did Raouf pulled -- how did you pull that off, right? So when I think about like the mechanics of accelerating that kind of capacity, how does one pull it off? I'm looking at you for this.

Like the short answer is really hard work and maniacal focus. But peeling that back a little bit, so it doesn't sound patronizing. It's One of the things we really learned is that because of our dependency on capacity, right, it's a much tighter linkage now between capacity delivery and bookings. In fact, I'm sure you noted on the earnings report, our presales are higher than they've ever been. And so not only once we have it built, do we sell it quickly, before we even have it completed, we're preselling it, right? So that relationship between when we build and develop and when we sell it is tightening and demand in many markets is insatiable.

So we got less latitude for slippage. And so there's just a higher focus there. And one of the things that we've really learned is that traditional project management would be a little bit more relaxed about managing float in the early part of the project. And you would sort of let it build up to the back end. And if you run into a problem late in the project, then you're going to be late. And so what we've really tried to do is make sure that the project doesn't consume float in the early part of the project. And if you do that and you don't run into issues late in the project, then you deliver early, if that sort of linkage makes sense.

No, it does.

And so again, we didn't deliver every project early, but because of the portfolio we have of 50-plus projects and then some, some percentage we were able to deliver early because of tighter management of risk and float and supply chain management, every risk dimension of project management.

Yes. I don't -- I want to build on something you said, but I also want to be careful not to put words in your mouth. So one of the things that I think through is that we saw for Equinix very big bookings in the fourth quarter of last year, right? It also corresponded from my vantage point with 12,000 cabinets delivering incrementally, right? To your point, we know where vacancy rates are in the market, and we know that we need new supply. So obviously, there's going to be a big focus on adding incremental capacity. You're preselling the capacity that's coming online later this year and then into next year, which will ultimately convert to bookings.

The way -- what I'm curious about is like -- now that you've pulled these cabinets forward, is there from the 2028 perspective, the ability to pull forward so that you can kind of create that smooth acceleration of where we can get to the point where we're delivering 14,000, 15,000 cabinets a quarter and putting up big bookings, from your seat as the one delivering the cabinets, do you see that as possible? Or would you caution me, hey, Mike, there are some things in the supply chain you need to be aware of that don't get too carried away and don't get over your skis.

Yes. No. Again, I think we feel confident that we're going to glide into those levels because we have the plans in place, we have the land banks in place. We have reasonable certainty around energy. There's always risk and there's potential delays, but we don't foresee those to be so exaggerated that we're not going to be able to deliver those. And so our goal, my goal, my organization's goal is to continue to look at every opportunity to move up as long as we play within the capital envelope that we have available to us and that we've committed to the market.

So within those levers, those parameters -- and honestly, if we see demand continuing to increase even further, we'll look at whether further acceleration makes sense from a planning and a capital utilization standpoint. But of course, we would guide to that.

Of course. Okay. Sticking along this topic, one thing I think about is, as I think about Equinix and its position in the market, right, first-mover advantage in terms of the carrier-neutral data center model. But we've obviously seen data center designs evolve over time, right? We don't build 2N anymore. We build N+1. And for some of these AI lab deployments, we're building N, right?

When you think of the broader portfolio, what do you think -- or how do you think about the requisite investment that is required to future-proof some of the data centers that have been in your portfolio for 10, 20 years? Or is it just, hey, we're going to run them for cash, like there's going to be a bill, somebody who is going to use them and it doesn't need as much investment as you would think. How should I think about that from a portfolio standpoint?

Yes. I would say there's 2 sort of points to tease out here. First is we look to put the workload in a place where it belongs. And not everything is super high density. And if it is, we put that in our newer builds. Again, we have 280 data centers today before all the capacity we're talking about. The second point I'd make is keep in mind the draw in our existing sites isn't like at 100%. And so if we have a churnout event at one of our sites, our ability to add somebody new at a higher density is very viable because we have headroom of unused cooling, electrical or energy supply and the space.

And so as we churn out invariably, we're putting somebody in at a higher density. And we're able to do that within some bounds and some limitation. It isn't -- look, we're not putting 40, 50 kW a cab in a site that's 20 years old. That's not realistic, right? But can we put 10, 15? Absolutely. We've also retrofit a bunch of our older data centers with liquid cooling so that in those locations -- in that scenario I'm describing, not only can we go higher density, we could apply liquid cooling as well. And that can be direct to chip or that can be liquid to air.

So we're managing the fleet for what's appropriate for every site's capability. We put workload where it makes the most sense. And of course, as we plan into the future, everything is liquid cool ready. We're building to higher density specs. And I think the thing that is maybe a little misunderstood is that all the numbers we throw around tend to be individual cabinets and peaks, not averages. And there's plenty of cabinets inside a data center that actually consume very little power because it's the cabling connections and the various other parts that make a data center work. And so yes, there are 40, 50, 70 kW cabinets, but there are also 4 and 5, right, or 0.

And so one of our latest builds is 18 kW average, which means we can do 50, 60, 70 or we can do 10, 15 as well. And what's different about modern age data centers is that the cooling is much more homogenous and the concern around hotspots because we don't use raised flooring anymore and the concern about -- you can't put concentrated heat sources in one location. That's where data centers have really evolved. You basically have an envelope, call it, a room or a pod that can absorb so much heat, put the heat anywhere you want. That room and the way we design the infrastructure can take it any which way you put it. You can put it all together, you can distribute it. Whereas before, you had to be super careful, I'm going to have a very distributed heat load. And so that's definitely one of the advantages of modern day data centers.

So with the architecture that you're building for the newer data centers, keep me honest here, I remember the dynamic about hotspots and you having to manage to that. Now it is that, hey, we can -- with the cooling architecture, we can configure this however you want. The gating constraint is going to be power within the data center. Like you said, I have an envelope. This -- you want to draw 300 kW a rack, great. Awesome. You want to do 50, fine. At the end of the day, it's how much power can I get you. That's really the constraint.

The cooling has got to match. It's a one-for-one match. So if you're delivering 5 megawatts to a pod, well, you got to -- you have 5 megawatts of cooling.

Yes, of course.

And so that has to match. And so your heat discharge has to be proportional. But yes, generally speaking, what you said is right.

Okay. Now one of the things -- so just for context, I come from industrial engineering background and one of the things they beat into...

I didn't know that.

Yes, that's it. And it's funny as they really beat into you is that you can't remove the bottleneck from a system, all you can do is shift it.

Yes, it's the weakest link in the chain.

That's exactly. Or if you're a process guy Herbie, right? Where is the Herbie in the supply chain. Now when you think about your process to deliver, right, where are you seeing the central bottleneck? Is there a central bottleneck? Or is it different across different markets? Like what is the thing that you find is the gating factor to you being able to move faster from a supply chain standpoint?

We've talked about some of it, but the 2 things I would draw out are energy, but I feel like we've talked about that enough. The second, I would say, is trade labor, on-the-ground trade labor. Electricians in many locations are very constrained. There's not enough of them. When you look at what's happening in the Greater Chicago metro area, as an example, there is 15 gigawatt -- we'll see if it all goes through or not because every other day, we hear about a project being pulled, but there's 15 gigawatts of planned on the docket expansions with another 15 that's at least marketed to be planned. So there's just not enough of electricians.

And again, one of the advantages we have is we've got very long-standing relationships with both GCs as well as electrical contractors that trust our ability to move forward with projects, build projects and they know that they can count on the relationship with Equinix, but that's definitely a challenge. I mean the industry is saturating -- we can get to operators here in a minute. But in terms of the build side, is saturating the key trades that are required to build a data center, electricians and plumbers probably being the most acute.

That's great. Along those lines, one of the things I find interesting when I have conversations with different operators is the differential in build cost. You remember there was a time where hyperscale was cheaper per megawatt to build relative to retail. Now it feels like that has flipped, right? And I'd be curious your thoughts on that because I see that smile. So from your vantage point, how do you think about for the incremental capacity you're going to be delivering? How do you think about the build cost on a per megawatt basis? And as part of that, how has that evolved in the last year? Has it stayed pretty constant kind of given what you're trying to deliver?

I laugh because I've been dealing with this question and this dynamic for my entire time at Equinix. And I don't know if you know this, but I have a construction background. that's the roots I came through. And if you're in the construction world, you know that your cost is a function of what you build and where you build. And so to articulate that a little further, building a high-rise building in Japan or in Tokyo is different than building a warehouse looking building in a field in Atlanta or the suburbs of Atlanta. And so there's actually a really wide range of what cost to build is.

And I think it's one of the most misunderstood dimensions around data centers because it's easy to conflate, confuse what do you include, what do you not include? Do you include all the supporting infrastructure? Do you include land? Do you include getting the energy now, which costs you big money now that it didn't use to, cost us tens of millions of dollars to deliver power to a site now. It just cost us nothing. Is that included? Do you include fiber? Do you include any internal capital? There's a lot of things that go into it. And the range is actually really broad. Just to throw out indicative range, it's anywhere from 10,000 to 20,000, depending on where you are and what project you're talking about. So that's backdrop and context.

What I would say is that in these highly competitive and highly -- locations where there's a lot of build going on, we're definitely seeing some inflation. So cost is going up to some degree. We haven't seen it as much, and it's definitely moderated on the manufacturing side of the equation. But I would say back to whenever you have supply-demand imbalance, electricians are making $150 an hour these days. I'm not kidding you. It's like doctor wages now.

And so that's driving some inflation on the cost, which is, at the same time, is forcing people to think through what work do you do on-site? How much do you prefabricate, how much do you do off-site so that you minimize on-site labor to offset that a little bit. But that's the continuous challenge that all of us have been dealing with for a decade plus, but it's at its heightened sort of peak right now.

Well, with that, the clock hit 0. So it's always...

We rambled that long?

Yes, we did it.

We didn't take any potshots yet.

No, I thought it'd be best if we didn't.

No?

But thank you so much, Raouf, for being here. Really appreciate it.

Pleasure.

Thank you.

All right. Good morning, everybody. You're here to listen to Equinix. My name is Brandon Nispel. We have Ryan Burke, who's Head of Investor Relations; and Guy Danskine, who's the Managing Director of Americas West at Equinix. Guys, thanks for being here.

My pleasure, thank you.

Thank you.

Ryan, I'm going to turn it over to you for your safe harbor.

Yes. As many of you know, we'll talk about forward-looking statements with this next 25 minutes. So as always, give our SEC filings to look for factors around those statements.

That was excellent. Well, Guy, we haven't had a chance to speak before, and I haven't heard you speak publicly. So why don't you just give investors your background and your role at Equinix?

Yes. Good morning, everybody. So yes, Guy Danskine, Managing Director for our U.S. West region. It's a new role at Equinix. Prior to this, I was leading our Australian business, so I was Managing Director there for the last 6 years. And then before that, I was back in the U.S. leading a couple of our hyperscale relationships.

And the role is new in the U.S. and we've had it around the rest of the world for a long time. We had kind of country managers in place. But we've introduced it into the U.S. to introduce even more discipline and thinking around the assets that we have within a subregion, the return on invested capital that we're getting from there, a little bit more scrutiny around asset optimization, how we think about risk mitigation. And so just those are the kind of factors that we just want a little bit more focus on.

Got it. I want to start maybe just going back to earnings a couple of weeks ago. Equinix just raised their long-term guidance. You guys are now guiding investors to 10% to 13% annual revenue growth and 9% to 12% AFFO per share growth. Can you help us understand what informed your view that this is the right range in terms of long-term growth rates?

Yes. I'll lead off and then Ryan can jump in. But yes, I mean, we've spent a lot of time with our customers looking at the demand that we're all seeing and you're hearing about that really thinking deeply and talking to those customers about the durability and how robust that demand is. And the more of those conversations we've had, the more conviction we've had just around our forward-looking guidance. So I think that's what you saw come through in the print.

And we feel like we have a pretty good feel for demand and supply conditions in our target market. And one of the big differentiators for us is that we are focused on core markets, critical workloads, colocation, enterprise serving. And that's very different than sort of the broader spectrum of the data center space. There's decent barriers to entry, both from an operational perspective and from a new supply perspective. So we've done a lot of work there. As you imagine, we've been around 30 years. So there's a lot of good proprietary analytics and data that we can put to use in terms of forming our outlooks.

Can you unpack that maybe a little bit? Help us understand like actually what went into this analysis? And Guy, from a regional perspective, how did you contribute to sort of the buildup of what you guys are going to be doing over the next couple of years?

Yes. Yes. So the West region for U.S., just so folks in the room here know, that includes Texas, includes Illinois. So a couple of our very large markets in Chicago and Dallas. And so really thinking from a bottoms-up and both top-down perspective. And the important thing to note is in this demand that we're seeing, yes, there are some neo-clouds and some of the AI folks coming through in that, but a lot of it is also just our core Enterprise business. And meeting with those enterprises and just talking to them about their kind of outlook over the next 3 to 5 years, and that really goes back to that conviction I was talking about that there's some banks, there's some enterprise out there in the Midwest that are really looking to commit long term to us. And we feel like we've taken what was good visibility for the company historically and made it even more clear.

Okay. And Guy, as you think about the Americas West region, your responsibilities, how would you sort of characterize your sort of strategic priorities or your operational responsibilities over the next couple of years?

Yes. Yes. So I've got a -- it's quite a broad region, right? So as I said before, we've got Texas, Illinois in there all the way to the Pacific. You got California. Very, very different markets with some very different opportunities and challenges. I mean, no surprise to anybody in this room or online that capacity is the #1 priority for us right now. And so unlocking capacity that we have in existing assets, how we think about strategic expansion in existing markets, how we're evaluating new markets within my purview. So it's all on the table.

But even to the sense of -- we've got capacity coming back to us for whatever reason, an asset, how can we optimize that from an infrastructure point of view to unlock some additional power or space, whatever it may be. So all the way through to the individual in a data center asset level right the way through to M&A and how we're thinking about the broader region.

Okay. One of the things I wanted to ask you specifically about Texas because I think Texas is in the headlines for obvious reasons with the governor recently putting sort of a halt on new data center expansion. But we've seen a lot of demand in sort of West Texas. How do you think about sort of Texas as a market for you going forward?

Yes. So for Equinix, I would think about it more like Dallas, not Texas, okay? So all the stuff that's happening out in West Texas, there's a ton of attention and scrutiny on that and not without some good reason. Don't think about Equinix in that context. We have an incredible asset in the Infomart in Dallas that we acquired 7 or 8 years ago now. Everything we're doing in that market, we want to be proximate to that asset because it drives just fundamentally stronger economics given the proximity to that site. And so for Equinix, think about it in terms of Dallas, not so much the broader Texas region.

The other thing I would add is that some of what the Governor has communicated over the last week, we've obviously been very close to that. A number of our assets sit underneath that threshold, including our expansion. So we remain incredibly bullish on Dallas as one of our top markets globally. And the scrutiny that's coming from the government, we welcome that. We're working very closely with them, as you'd imagine.

So one of the things you alluded to, and you manage a lot of like very highly interconnected facilities. One of the things we've noticed is cabinet densities are rising. So how do you sort of manage utilization within these facilities and balance sort of higher density workloads and sort of fitting the right customer in the right location?

Yes, it's a big game of Tetris sometimes. But one of the things I just alluded to there previously, existing assets, we can drive up the density capability of those assets. So when you come to end-of-life equipment, think power distribution units or [ cryo ] units, so they have got a 10- to 15-year refresh cycle. So we have an opportunity through natural refresh to look at next-generation equipment and say, okay, that equipment is now either twice as efficient or twice as capable or maybe half the form factor. So there's ways that we can drive efficiencies into older facilities that can then give us a greater power density. So I'd say that's the first thing. Our second thing is that as we're building out our current facilities across the world, we are building them to be able to adopt two new technologies like liquid cooling so that customers can show up plug and play and they're away.

And I'd chime in just that each data center in each market in each region are really a mosaic of customers and workloads. And I think that's one of the differentiators that we've created over time, right. We achieved mid-20% yields on our developments, which is high relative to the market for sure. And a big part of that is just getting the mosaic right property-in and property-out. And so we're very much focusing on the medium and the long term today, even though demand has come on so strong for the industry.

As you think about sort of selling space and power, there's obviously more value-added services that you guys can sell. How do you think about the value-added interconnection service manager services within your sort of footprint?

Yes. Look, interconnection continues to be a major differentiator for Equinix and one that I would venture is underestimated. So it's -- when you think about the capacity constraint that is in the market, we have the ability to go to our customer base and start talking to them about their -- basically their entire global network. And so that gives our sales team a second string to talk to customers about and also enables them that when we do face constraints, we have additional things to talk to our customers about.

We're also growing our Managed Solutions business, so to kind of help customers enable some of the infrastructure they bring into our facilities. So that's a major differentiator for us. And then simply put, the sites where we have -- or the metros, I should say, where we have that density of interconnection, the economics are just far stronger. And so it's always an area of focus for us.

Okay. And I guess as I'm thinking about it, when you guys are expanding within a region, as you expand, how do you think about sort of the interconnection between those facilities? Is that going to be a pretty meaningful driver of sort of incremental interconnection growth?

Within a metro?

Within a metro.

Yes, yes. it's key to how we think about it. So we have -- we're expanding in the Chicago metro down to Minooka, and that's a hybrid xScale campus. And so the connectivity of how we think about bringing that back to the downtown Chicago market is critical. Our customers that are going to grow there, we are expecting some significant enterprise pull-through. And so you've got this piece where you really we're talking to the customers about their individual workloads. So what will work for you, bank XYZ? What will work for you in Minooka? What would you prefer to stay closer in, say, Elk Grove? And then what do you need to retain in the downtown area. And so we've got this ability to address all three categories of workloads within a market within the One Equinix.

You also had responsibilities for managing sort of the Australia region. You recently moved to leading the West Coast. How do you see sort of similarities, differences between those markets right now?

Yes. Well, they're both very large regions, a lot of ground to cover, a lot of flying. But look, the demand in the U.S. is just completely -- it's exponential compared to anywhere else. I'd also say that in Australia, we've -- fairly similar here. We've got a very strong interconnection franchise, and there's been some others who have really just grown on the back of a couple of hyperscalers, and so that the demand density is probably more focused in that market around a handful of companies, whereas in the U.S., I think that the demand is spread across many more customers.

Okay. I wanted to ask what -- within sort of the West Americas, obviously, you have all of California, Silicon Valley, you have Chicago and Dallas, which metros are seeing the most demand today?

Yes. So no particular order. As I just talked about, Dallas, that is a market that we are incredibly bullish on. Just the fundamentals there, just -- we've got a highly interconnected asset in the Infomart. We have several plots of land under control. Power is obviously -- I want to say in abundance, but it's far better than some other markets. And so -- and just the way the Dallas market is shaping up, you're seeing financial services coming to that market. And so it's just a very strong pro-business environment, which we like.

Over to Chicago, the stronger financial services, and then Silicon Valley is an interesting one because it's an expensive market, candidly, for us in terms of build and energy. But we have some customers there that if they want to be there, they really want to be there. And if you think about the spectrum of Silicon Valley start-ups, but some of the new organizations that are popping up, they -- and I was surprised by this when I started in this role, but they are really wanting us to continue to grow in that market. And so just between those three, you've got three very different characteristics. You've got three very different governments, how they're thinking about things and different priorities and then you layer on L.A., Seattle, Colorado, there's a lot going on.

That's something that I want to ask you about how flexible are customers being in terms of their deployments? Are they location agnostic between regions? Or do they have to be in a Silicon Valley if they want to be in Silicon Valley?

It depends on the workload. And so if I think about Silicon Valley, we've got some customers that want a showcase, right? And they want that showcase to be in San Jose, so it's close to their customers, their team and potentially investors. And so they really want that proximity.

And then you go to other companies, L.A. actually has some characteristics around media and content. There's a strong subsea component there. And so it really depends on the workload. The one thing I would say is that customers are learning they've got to be -- they need to be a little bit more fungible in their requirements because the capacity is exactly where they want it, when they want it. It's not just given the constraints, it may not be there. And that's kind of forcing them to be a little bit more flexible.

Can you talk more specifically about like those type of workloads that would require something that's closer to the market that they desire versus something that's further away?

Yes, sure. I mean if you look at Chicago, we have a number of high-frequency trading firms who are there. They absolutely have to be in that downtown area. However, their back-office that can live out in a place like Minooka. And so -- and we work very, very closely with customers and trying to -- try to help them understand that not everything needs to be in the one place and by bifurcating those workloads, they can -- ultimately, it can be better for them economically, and it enables us to put the right workload in the right location.

If we switch gears a little bit, Equinix added, I think it was 9,700 net interconnections this last quarter. I think it was a new record for the company. Obviously, on the tails of AI really taking off. What -- how would you sort of characterize what's driving that new level of interconnection net adds?

Yes, absolutely. So we've talked about it being a core differentiator and a core component of our business. It is becoming even more relevant as sort of demand takes shape in new and different forms. A lot of the demand that we've seen from an interconnect perspective actually relates back to what Guy mentioned, which is it's being driven by not only sort of the traditional customer base, but also by more traditional workloads with sort of a layer, maybe an accelerator layer on top of that driven by the early innings of AI demand. So we think the outlook for interconnect is strong. We're already seeing strength. There typically tends to be a bit of a lag between deployment of space and power and the interconnect associated with those. So we think the outlook is certainly favorable and customers increasingly need distributed workloads and data. They need interconnection, and we have more to offer there than anybody else in the industry.

Could I just add on to that as well. The other thing that we're seeing is kind of similar to what we saw with cloud, that there is a density forming from a network perspective around, say, neo-clouds, around, say, LLMs. And the focus for -- some of those have gone from where is the compute that I can get access to now how do I distribute that compute to my customers, my users, et cetera.

And the fact is a ton of that networking is going to happen in and around Equinix. And so we're kind of seeing this coalescence of density just forming in some of the interconnection markets that we've got a natural advantage in.

Do you think the Neo clouds and the LLM providers, do you think they require sort of a structurally different level of interconnections versus what we saw in the past cloud cycle?

Potentially. Potentially, the agentic side of things is interesting. That's going to -- again, I think people underestimate the network lift and complexity that's required to really deliver agentic at scale. But a lot of that will also happen inside just a physical cage or inside a physical data center. It's not like it needs to move around the metro. So I think it's wait and see, but there's no doubt that AI is going to drive a ton of interconnection.

Speaking of AI, obviously, Equinix is very much known for more retail colocation. How do you think about the balance of investment between hyperscale campuses and more of these highly interconnected campuses within the broader capital spending into the bucket?

Yes. So I think and what we've communicated is that we really like our core target market, right, which is a colocation focus. No doubt, we have a moat there, which leads to competitive advantages across essentially everything that we do. There are barriers to entry, as I mentioned, both from an operational perspective and from a new supply perspective. And I also mentioned the mid-20% returns that we achieve in our development, right? So we're developing at high yields, but we have a very good understanding of the risk profile in terms of the capital that we're being deploying. So we'll take that risk return profile, all day long.

So another thing that you guys have called out, I think, is a high number of sort of neo-cloud customers. How do you make sure that you're attracting those customers into your campuses and making sure that they have sort of what they need so you can drive interconnection?

Yes. We're very thoughtful about that. So we have a list of customers that we want to pursue in every metro, and that's one of the things that I kind of oversee because in every metro, it might be a little bit different. Who you want to attract to L.A., may be different to who you want to attract into Dallas. There's going to be a lot of overlap for sure. And so we're very thoughtful about ensuring that we can attract the network component at a minimum of those customers into our facilities. And to be clear, this isn't the training side of things. This is from inferencing forward in the stack. And -- but that is something like we did with cloud, like we did with financial services that we're very intentional about cultivating.

Got it. And I will say we have about 5 minutes left. If anybody has any questions, I'll ask them in a second.

But I want to ask you about power. Obviously, you guys need a lot of power in terms of what you guys are going to develop from a facility standpoint in the next couple of years. Where are you seeing the tightness in terms of power availability? Is there a specific geography that you guys think is tighter or looser from a development standpoint?

I'm going start with my region and then kick it over to Ryan. Look, so the power that we've announced, we have largely under control. And so, not so much worried about that. The other thing I would call out is that a lot of the sites that we're talking about, so take, for example, Dallas, we're looking at a 60-megawatt build there. The threshold that the government have released is 75-megawatts. And so a lot of our builds are still very large, but they're not in this kind of hyper campus piece that I think people are most concerned about. These are also markets that we've been present in for 25 plus years. And so for us, it's really just a continued expansion of our core business. It's not like there's a ton of AI all of a sudden happening inside the Infomart. It's going to be happening in other locations, but the actual inferencing and the networking components of it are coming through Equinix.

Yes. And the only thing I'd add is that we've talked about having 3-gigawatts of land and power essentially secured, meaning it's either signed and secured or it's maybe a page flip away from being signed and secured. We're very -- well we've always been very thoughtful about how we do that, how we go about that. And we're also thoughtful about how we communicate that to the market in the sense that most of what you see in our reporting from a pipeline perspective, we have a pretty good degree of certainty around it getting executed.

When you think about like the data centers that you're going to be building today and in the future versus what you had in the past, how do those differ between those sort of different generations?

The main difference is around the power density. So what customers are now showing up for in our next-generation builds is they're wanting densities of 40 kilowatts to 60 kilowatts plus per cabinet. And so that fundamentally changes how we think about designing the site. The other piece would be liquid cooling, it's not going to be, be all and end all. 5 years from now, but the fact is it's going to be taking up a larger percentage of our sites. And so we're building now with that thinking in mind.

And a lot of what's playing out from a demand perspective, AI and otherwise depends on actually some of the stuff, some of the workloads and the networking that exist in the older facilities. So what we're doing is trying to take advantage of a multiyear period here where we can develop new properties and come out of that period with a full portfolio from the older properties to the newer properties that's fully set up to serve demand into the longer term.

And how are sort of the utilities responding to sort of your guys' demand? Like are they being more responsive to the loads that you guys are requesting?

We've got great relationships with the utilities. Again, we've been operating with them in partnership for 20, 25 years in many cases. The other thing is that the -- our business model is quite predictable, right? And so we're able to show up in a market and say, "Hey, we're going to need 60 megawatts of demand. We think we're going to need it over this period of time". And you can kind of partner with the utilities like that. We're operating on similar time horizon. We're not showing up in the market saying, "Hey, I need 300-megawatts tomorrow". And I think that's what's really causing the congestion in the system, not so much the Equinix side. And so we've got very good relationships across the board with those guys.

Okay. Have we got any questions in the audience? I'd probably go one more. As you take on this new role, obviously, the demand environment is very strong. You guys have a plan that you've outlined. What risk factors do you see? And what keeps you up at night?

Yes. I'd say probably two things. Supply chain is something that we manage about as best we can. And I feel very good about where we sit there. However, there's a lot of people wanting a lot of the same things. And so that is something that we manage incredibly closely and generally feel good about it, but there's a lot of complexity that goes with that.

The other piece that, I wouldn't say keeps me up at night, but from a people perspective, a ton of these things are being built. There's not enough folks. And so we spend a lot of time being very intentional, thinking about even from middle school onwards, the communities that we're going into or operating from, how do we educate folks about what a career in data centers look like? How do you progress that through high school into potentially vocational colleges to increase the talent pool that we have because at the moment, it's very constrained. And so that's something we put a lot of energy behind.

On community engagement. Well, guys, thank you very much for being here, Guy and Ryan. I appreciate your time. Thank you.

Thank you.

Thanks, everyone.

Good afternoon, and welcome to the Equinix Second Quarter Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you object, please disconnect at this time.

I will now turn the call over to Ryan Burke, Vice President of Investor Relations. You may begin.

Good afternoon, and welcome to our second quarter conference call. Before we get started, I want to remind you that some of the statements that we make today are forward-looking in nature and involve certain risks and uncertainties. Actual results may vary significantly from those statements and may be affected by the risks we identify in today's press release and in our filings with the SEC.

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 our policy to not comment on our financial guidance during the quarter unless it is done through an explicit public disclosure.

On today's conference call, we will provide non-GAAP measures. We provide a reconciliation of those measures to the most directly comparable GAAP measures in today's press release on the Equinix Investor Relations page at www.equinix.com. We have made available on our website a presentation that we will refer to, along with certain supplemental financial information and other data.

With us today are Adaire Fox-Martin, CEO and President; Olivier Leonetti, CFO; and Phillip Konieczny, SVP of Finance. At this time, I'll turn the call over to Adaire.

Thank you, Ryan. Good afternoon to you all. The AI-driven infrastructure cycle continues to accelerate, and it's name directly to our strength. Demand for neutral interconnected sovereign infrastructure is compounding across our business and our global scale, differentiated portfolio and unmatched ecosystem are converting that demand into durable profitable growth. You see this clearly in our Q2 results. Monthly recurring revenue growth accelerated to 11% year-over-year on a normalized and constant currency basis. This marks our third straight quarter of double-digit MRR growth with strong profit performance.

Annualized gross bookings grew 23%, our second highest volume on record. Total sales activity, inclusive of annualized gross bookings and presales grew over 30%, and we continue to see a record backlog. We added 9,700 net interconnections our most ever and AFFO per share grew 18% on a normalized and constant currency basis. A direct result of the disciplined execution by our teams around the world.

Given the strength of our performance as well as our bookings and presales momentum, we are raising our full year guidance and long-term outlook. For 2026, we now expect revenue growth of 11% to 12% and AFFO per share growth of 10% to 12%. This is the largest single guidance raise in the history of our company, reflecting broad-based durable demand and strong execution across our business. We continue to accelerate our capacity expansion to meet this growing demand. In fact, we will double the number of cabinets we deliver in the second half of the year.

As a result, we now expect 2026 CapEx to range between $5 billion to $6 billion. Looking further out, we expect to deliver top and bottom line growth well ahead of the outlook we provided last year. Through 2029, we expect total revenue growth in the 10% to 13% range annually, with AFFO per share growing 9% to 12% during the same period. To capture the robust demand in front of us, we plan to invest $5 billion to $7 billion in CapEx annually through 2029. These are high conviction investments that we believe will deliver attractive returns whilst enabling the outcomes our customers need. And we fully expect the new capital we're deploying to deliver the mid-20% yields you have grown accustomed to.

Olivier will provide a more detailed view of our outlook shortly. Our revised outlook reflects more than a strong quarter. It shows what a focused team executing the right strategy can deliver. And we're doing it in a market that's materially stronger than it was a year ago. As the market has evolved, the nature of the demand has given us greater conviction in our plan. A significant proportion of this demand comes from the world's largest enterprises, modernizing their on-prem infrastructure that was never built for today's broad-based distributed workloads. The remainder comes from net new AI native workloads and service providers powering them.

In both cases, the majority are already Equinix customers, and they increasingly need solutions, we are uniquely positioned to deliver because of our consistent focus on this target market. All around the world, customers are confronting the same reality. Their networking, cloud and AI workloads are growing more distributed, complex and demanding, and they need infrastructure built for a new era. Their workloads don't live in 1 place. They run across clouds, models and geographies simultaneously in real time. That's something compute alone cancel. It requires connectivity at the intersection of everything.

That point of intersection is Equinix. We have been at the center of every major shift in enterprise technology over the past 30 years. We were the neutral ground where the Internet scaled. We were the neutral platform that made multi-cloud real. And now as inference and Agenetic AI unlish extraordinary capabilities alongside new layers of complexity, we are the neutral exchange where customers can run, connect and orchestrate at all. This kind of connectivity has never been more important. and no 1 has built what we have built.

Our ecosystem is approximately twice the size of the next largest provider. Now as we curate the emerging AI ecosystem, our competitive advantage is growing. 8 of the top 10 model providers as well as 8 of the top 10 Neo clouds are already running their key networking workloads on Equinix today. That kind of ecosystem density creates a flywheel of growth and value creation. Our infrastructure attracts interconnection-rich workloads. Interconnection expands the ecosystem a more expansive ecosystem attracts more of everything and our momentum continues to build.

Let me share some recent customer examples that bring our momentum to life. Leading AI cloud infrastructure provider, Orion VM selected Equinix to power its fully managed private agentic AI bundle. helping enterprises deploy and scale sovereign Agentic AI with a clear path to measurable ROI. Built on our secure neutral infrastructure, the bundle supports private AI deployments, heterogeneous compute and autonomous AI capabilities. And through Orion VM's collaboration with Tens Torrent, customers gain greater choice and flexibility at the AI accelerator layer.

FCX AI, Australia's sovereign AI infrastructure provider, partnered with Equinix to build the country's first sovereign AI inferencing node leveraging our Sydney operations. Equinix enables a faster, more governed path to integrating AI into core operations with a scalable foundation for expansion across Asia Pacific. Raymond James, 1 of the leading financial services firm selected Equinix to augment their on-premise models to our multi-cloud infrastructure.

Our ability to enable low latency connectivity to their customers, cloud and SaaS providers as well as the strength of our overall financial services industry ecosystem were key factors in their decision to grow their business using Equinix. And we are working with Verizon to deliver enhanced enterprise connectivity by combining their adaptive network fabric with Equinix' neutral interconnection hubs. This integration via APIs allows for near real-time provisioning. Our unmatched metro density global scale and advanced automation capabilities help customers like Verizon, lower execution risk and accelerate service delivery.

These examples are enabled by our progress against our strategic pillars. Starting with SAR better, we delivered annualized gross bookings of $424 million, up 23% year-over-year and notable acceleration from Q1. In addition, we delivered approximately $110 million of preselling activity. Collectively, that's over a 30% growth in total sales activity in the quarter. We have a robust pipeline entering the back half of the year and we've already closed over 45% of our bookings target for Q3.

Our preselling motion continues to show very encouraging trends. as we have now sold approximately 30% of our remaining 2026 retail capacity expansion. Secure Cabinet Express our standardized business-ready colocation offering is continuing to gain traction with carbonate orders up more than 30% year-over-year. It's a great example of how we're simplifying the customer buying experience to accelerate growth.

Also smarter, we are turning the demands of enterprise AI into products customers can deploy today. Most enterprises know what they want to build. The infrastructure to support that scale is the challenge. Our expanded collaboration with Cisco and NVIDIA tackles this head on by bringing standardized AI factory blueprint and automation across our global IBX network. And through our new partnership with Presidio, customers can test and validate before they scale. That's how we help enterprises move faster with greater certainty.

Data sovereignty is a challenge for enterprises and an opportunity for Equinix. Most networks were built for performance, not compliance. Our new fabric geo zones offering was built for both. Traffic either flows along compliant path or it is blocked. Sovereignty is no longer a configuration. It is a property of the network itself. Fabric geo zones is in preview with approximately 80 enterprises around the world. These are 2 examples of our customer-focused product road map, and we're just getting started.

This week, we welcomed Chris Audi to Equinix as our Chief Product Officer. He brings extensive experience to the role, most recently as HashiCorp Chief Product and Technology Officer for Infrastructure and AI. His strong background spanning product software and infrastructure will help us accelerate and expand our solution portfolio.

We also named Bruce Own, a 16-year Equinix veteran with deep experience across our business as EVP Global markets, overseeing our 3 regions. Chris and Bruce strengthened our leadership team at exactly the right moment.

Turning to Bill Boulder, our teams continue to execute at a high level. our acceleration of more than 7,000 cabinets from 2027 into Q4 2026, reflects our confidence in our ability to deliver as well as our commitment to bring capacity online faster to meet growing demand. This quarter, we announced significant new projects in Chicago, Istanbul and Johor. with more expected throughout the remainder of the year.

We now have 52 major projects underway across 33 markets. I also want to take a moment to emphasize something that matters deeply to us as we expand. In the communities where we build and operate, we're not a visitor. We are a neighbor. And that distinction has defined our approach for nearly 30 years as we have built the essential infrastructure that underpins the everyday experiences and connections people depend upon.

Across all of our markets, we engage early and transparently, we listen and adapt to local needs and we invest for the long term because we are there to stay. That's how we build trust. It's what makes communities stronger over time. And it's why we have been able to consistently execute our projects on time and at scale. This quarter, we published our U.S. community principles. They reflect the standards that have long guided our approach and that we hold ourselves to. This includes funding energy and great infrastructure costs directly, investing in renewable energy and water use efficiency and creating meaningful opportunities for the people around us from construction and skilled trade jobs to pathways for veterans, to programs that build the next generation of technical talent.

Based on our long-time leadership in these areas, I was in Washington, D.C. last week to support the rate payer protection pledge. And our commitment to being a good neighbor extends to every community we're part of around the world.

Let me close by saying Q2 was an exceptionally strong quarter and reflects a business that is hitting its stride. We have been deliberate about our strategy, focused in our execution and disciplined in where we invest. Now as the market evolves and expands, our efforts are paying off. And our decision to raise our guidance and put more capital to work reflects our confidence going forward.

I'll now turn it over to Olivier to take you through the financials in detail.

Thank you, Adaire. Our unique positioning and strong execution are evident in our performance and raised outlook through 2029. We're driving momentum across our business with demand strength in every vertical, product and channel. Looking at Q2 results on Slide 7 of our earnings presentation with growth rates discussed on a normalized and constant currency basis.

Recurring revenues increased 11% year-over-year, reflecting the underlying strength of our business and record bookings converted into revenue. Total revenues increased 16% year-over-year. As expected, we closed 134 megawatts of Xcel leases, including Anton, which contributed approximately $120 million in nonrecurring fees. Our adjusted EBITDA margin was 53%, up 300 basis points year-over-year. This is a result of continued cost discipline, scaling our operating leverage and our scale leasing fees.

Excluding scale leasing fees, our adjusted EBITDA margin was up approximately 150 basis points year-over-year, and AFFO per share increased 18% year-over-year. Our nonfinancial metrics also continue to demonstrate momentum and our strategy in action. We added a record 9,700 net interconnections, we added 4,200 net cabinet billings and our backlog sold but not yet installed is at a record level. Churn was 1.8% primarily due to our renewal process execution and some delayed churn. We expect to be near the lower end of our typical 2 to 2.5 range for the back half of the year.

On Slide 10, you see that our capital investments delivered very strong returns. Our 194 stabilized assets are collectively 82% utilized and generated a 27% cash on cash yields on growth to P&E. We continue to achieve these upside returns on assets we have delivered in recent years. reflecting our focus on offering differentiated infrastructure and services to our customers.

On Slide 11, total capital expenditures for the quarter were about $1.6 billion, approximately 90% of which was invested in capacity expansion. Since the last earnings call, we opened new projects in Madrid, Milan and Silicon Valley.

Turning to our capital structure on Slide 12. we have approximately $7.7 billion of available liquidity, including our recently upsized revolving credit facility and our net leverage was 3.6x annualized adjusted EBITDA. We continue to execute on our access to lower cost capital around the world to fund our growth.

Now please refer to Slide 14 to 18 for an updated view of our 2026 guidance. with all growth rates on a normalized and constant currency basis. Based on the robust environment and the team execution, we're raising 2026 guidance for the second consecutive quarter. The rate reflects our recent outperformance and a stronger outlook for the rest of the year. For the third quarter, we anticipate continuing strength, including MRR growth of 9% to 11% year-over-year, total revenue growth of 10% to 12% year-over-year and an adjusted EBITDA margin of 51%. For the full year, with dollar amounts discussed prior to FS adjustments.

We're raising total revenue guidance by $100 million, improving our expected growth range to 11% to 12%. We expect MRR growth to be around 10% at the high end of our prior range. We are raising adjusted EBITDA guidance by $62 million resulting in an adjusted EBITDA margin of approximately 51%, a 200 basis point improvement over last year. We're raising AFFO guidance by approximately $50 million, driving an increase in our expected AFFO per share growth range to 10% to 12%. And excluding real estate acquisition and Xcel, we expect total capital expenditures to be $5 billion to $6 billion as we accelerate capacity expansion into the year.

As Adaire mentioned, a significant portion of our planned capacity additions for the remainder of 2026, are already committed through bookings and presales, providing increased visibility into future growth and returns.

Now turning to our long-term outlook update. We are clearly in a stronger environment, and the team is executing very well. We have been closely analyzing the market opportunity to calibrate where we stand and where we are headed. Through this, we have gained even stronger conviction in our strategy, positioning and trajectory. With AI as an accelerant, we expect demand to remain robust as customers modernize their technology architectures and equixingly orchestrate the strategies on our platform.

Scaling our business will continue to be a focus, driving revenues, controlling expenses and enhancing our margins. Our competitive advantages drive returns on development that are unmatched. Recognizing this strength, we have developed a demand-driven capacity expansion plan that accelerates delivery time line, enables deployment flexibility in response to demand signals, minimizes earnings drag and maximizes our long-term growth profile. Demand is clearly exceeding the assumptions in our prior long-term outlook. Bookings, presales, backlog and pricing are strong. and we are uniquely positioned to meet the durable demand by deploying capital over the next few years.

We expect $5 billion to $7 billion of capital expenditures annually from 2027 to 2029 with the vast majority focused on capacity expansion, delivered into a target market where our value proposition is increasingly differentiated. More than 80% of this expansion will be our top 25 major global metros. The result will be a higher-growth portfolio build over 30 years that is uniquely fit to serve the new technology era.

And as always, our balance sheet and diversified capital program are critical differentiators in combination with significant retained cash flow, we'll continue to access lower cost sources of capital to fund our robust growth opportunity.

Referring to Slide 19. We expect the following for 2027 through 2029. Total revenue growth ranging from 10% to 13% per year. beginning the period at the low end of this range and accelerating as the benefit of our capacity expansion plan builds. Adjusted EBITDA margin to reach 53% or higher by 2029. AFFO per share growth in the 9% to 12% range per year. capital expenditures in the $5 billion to $7 billion range per year, excluding real estate acquisitions and Xcel and dividend growth to approximate AFFO per share growth.

Utilizing our balance sheet, we will achieve this with only a moderate leverage increase, allowing us to maintain our current and critically important investment grade credit ratings.

In conclusion, demand is stronger and more durable. The team is executing our confidence in future growth has increased and we are accelerating capacity expansion to capture the opportunity in front of us.

I'll now turn the call back over to Adaire.

Thanks, Olivier. The first half of 2026 has been a strong one, and it has set the stage for something bigger. The demand signals are clear. Our strategy is working. and the investments we are making today are designed to drive sustainable long-term growth well above our prior expectations. We will maintain our relentless focus on disciplined execution that solves the challenges our customers face and creates value for our shareholders. And our team stands ready to capture the opportunities ahead.

With that, let's open the line for questions.

[Operator Instructions] Our first question comes from Eric Luebchow with Wells Fargo.

Great. Adaire, I just wanted to get your view on the long-term guidance raise. Obviously, a huge change from last year. So maybe you could just talk through a high level kind of what you're seeing in the market that's given you the degree of confidence to raise CapEx this much. And as we think about the forward growth mechanism for revenue of 10% to 13%, I think previously you had talked more about it being more based on MRR per cabinet growth than install the billable cabinets. Has that changed at all based on the CapEx increase based on the pipeline that you talked about in your remarks?

Thanks so much for the question, Eric. Let me maybe start with the view from this year to last. I think that we have seen definitely acceleration in the AI infrastructure cycle, as I mentioned in my prepared remarks, and that plays directly to the strengths of Equinix. We're uniquely positioned, I believe, to enable our customers and our partners to execute their AI strategies, particularly as they shift to inferencing.

And we're pretty rapidly seeing customers become much more sophisticated in how they are pursuing their AI requirements. I think it's fair to say that broadly, we have a broad depth and breadth of customer demand across our portfolio. So AI is an accelerant to the ongoing digitization activities of our customers. In Q2, we saw that the vast majority of our largest deals were driven by AI workloads similar to what we've seen in the previous quarters.

We also spoke about the execution of our team, how our team has performed exceptionally well. I think if I look at the difference between this time last year, execution is essentially better across the board. sales activity, how we're operating margins and cash flows, capacity expansion, how we're financing our growth. And I mentioned externally the market dynamics changing to move inference ahead of perhaps where we initially scheduled or intended that it would be at, and that's much stronger than everything we saw a year ago.

We've been very thoughtful. We've gone back and looked at everything, including the shape of our customer demand, including the optimization of things like our expenses, our CapEx and our finance plans. So our revised outlook, I think, reflects more than a strong quarter. It reflects a market opportunity that has materially improved over the past 12 months. And this has been a huge collective effort, and I'd like to just take a moment to thank our team for all of the work that they've done in this year.

One additional point, it is important, Eric, we put that in our prepared remarks, most of the deployment of the capital, 80% of it will be on our top 25 metros. market where we -- that we understand well, where we have a competitive advantage, where demand is higher than supply, and we have already today a strong ecosystem. with the utility providers, with the global contractors with the community. So we feel today as comfortable as it could be about this updated long-term guidance.

The next question comes from Ary Klein with BMO Capital Markets.

Adaire, with AI strategies being implemented, are you seeing any changes in underlying deal metrics or composition are different markets, more demand? What about deal sizes and interconnection attach rates, especially with the strong net adds this quarter?

Thank you. Thanks, Aryeh, for the question. I think we're definitely seeing some changes in terms of deal structures. Certainly, the density of our deals is moving upwards as customers seek to secure the capacity that they need for their energy and their compute future. So that's absolutely 1 change that we're seeing in the deal mix.

As far as interconnection is concerned, as you can see from our prepared remarks, we had a very strong interconnection quarter, adding over 9,700 net adds and interconnection revenue growing at around 9%. And as customers come on to our platform in the first instance, then we see our interconnection revenue increase as that progresses.

I think even in the face of increasing footprint sizes from our customers, our pricing has remained very firm. and we are managing to secure the yields that you have come to see from Equinix over the past.

I would say, Aryeh, to add and the cover that in a prepared remark. The complexity of the ecosystem we are serving is more -- is increasing more than ever before. cloud providers, Neo cloud, enterprise AI model, all of this trend is playing to Equinix strength.

The next question comes from Matt Niknam with Truist.

Congrats on the quarter. Maybe related on interconnect. Adaire, maybe there, if you can speak to where you're seeing some of this increased demand coming from? And if, in fact, you have a product that is in such high demand. How do you think about the opportunity for maybe incremental pricing actions on interconnect over the longer term?

Thanks for your remarks. Matt, I appreciate that. So just reiterating again, you saw the demand reflected in the ads of -- to our interconnection franchise. I think this is 1 of the unique value propositions of Equinix, 1 of the things that continues to differentiate us as a company. We have, of course, added capabilities to our interconnection portfolio through our fabric product suite, most recently the fabric geo zones, which support sovereignty requirements and I think in last quarter, I mentioned that 20 customers were in preview with this product, and we already have 80 in preview this quarter with our products.

Fabric intelligence providing additional capabilities of observability and management for our customers. So I think that there is the opportunity here to really look at the compelling value proposition that Equinix offers and then the opportunity to elevate that value proposition for our customers through some of these fabric offerings, it's 1 of the jobs that Chris will have on day 1, which today is actually his day 1 as he gets started as our Chief Product Officer. because we can see some very significant growth rates in FCR, for example, our cloud router 170% of year-on-year in bookings there.

And some of that driven through non colo customers, which is also an interesting proposition for us. So this, I think, is an exciting area for us to continue to mine.

The next question comes from Frank Louthan with Raymond James.

When we're looking at the new guide and kind of going forward, what's the right level to think of the normal for nonrecurring revenue and the long-term guidance as a percentage of total revenue? How should we think about that with the new guidance level you said?

You should assume the traditional 5% of total revenue, that would be a good moderate assumption.

The next question comes from Michael Rollins with Citi.

Thanks, and good afternoon. So within the new guidance for revenue, can you share how each of the 3 geographic regions are progressing, how they should grow in each relative to the total portfolio. And as you invest more in the business, is your expectation that revenue growth within this range should be similar in each year? Do you see it accelerating? How does the higher investment levels kind of come through the P&L if you look over the next 3 plus years?

Thanks, Mike. I'll take the first part and Olivier perhaps will take the second part of the question. I think 1 of the benefits that we have at Equinix is the diversification of our customer base and of our portfolio. We have no concentration risk in terms of how our revenue is deployed across both our regions, the industries that we serve and the product groups and cohorts that we manage. As you can see from the deck, the Page 8 of the deck that accompanied earnings, we had a very strong performance in the Americas as it related to revenue performance. And even if we normalize for Hampton inside that performance for the transaction, the NRR transaction that concluded in Q2, we still have low teens double-digit growth in our Americas portfolio.

And we had an amazing quarter in APAC, and I think that's beginning to pick up for us. A lot of tremendous activity from the teams there. in terms of bringing new customers into the Equinix portfolio. And EMEA continues to perform exceptionally well, notwithstanding that 2 of our main metros in EMEA, Frankfurt and Amsterdam are highly constrained metros.

So this balance, I think, is an important aspect of the overall portfolio that we manage. I think we will continue to see this kind of growth in the Americas given that much of the AI activity and company base exists here in the first instance. But as we move across the different regions, we can see that rapidly following in APAC, for example, with local vendors moving into the Southeast Asia market, in particular. And then with EMEA, it might have a different feel on it in that our growth portfolio may be underpinned by the offers that we have around sovereignty, which are particularly relevant to EMEA customers and clients. So I would say a strong balance following what you see already in the regional performance. Olivier, just on that breakdown?

Yes. If you look, Michael, at the range of growth per year, we should -- we expect the growth to be higher at the end of the planning period by 2029. This is going to be a byproduct of our CapEx deployment, and you should expect AFFO to follow the revenue growth. You could have a bit of volatility due to the lumpiness of NRR in a particular year, but that would be the overall trajectory. Another comment also, we think it's important in terms of CapEx deployment at stabilization, which is about 3 to 4 years post RFS, we expect to deliver the traditional 25% cash-on-cash returns that we have mentioned now for a number of quarters and years.

The next question comes from Jonathan Atkin with RBC.

Interested looking at the forward guidance in the contribution of things like renewal spreads to the upside guidance on a multiyear basis? And then as we think about the CapEx plan going forward, what are the financing tools available to you? And how do you think about leverage?

Okay. Thanks for the question, Jonathan. Look, let me take the first part of the question, and I'll pass the second on the opportunities to raise and fund this to Olivier.

If we look at the P&Q side of the equation, if I look at the pre side, I can absolutely see healthy and very firm pricing. And you see that reflected in the revenue growth that we have posted. And then on the Q side, our teams are focused on delivering critical capacity and accelerating that delivery and doing this against this growing demand backdrop. From a pricing perspective, our per kilowatt pricing is highly attractive because of the superior value that we're delivering to our customers.

And our net pricing actions were strong in Q2, and they continue to trend very, very favorably. However, we recognize that we are in a demand and supply continuum. That is absolutely in our favor. And we definitely see meaningful mark-to-market opportunity over the time period of our long-range guide. And this is probably particularly true when we think about highly constrained markets such as those that I've mentioned already and adding a couple of U.S. ones like Ashburn to that picture.

So this is something that the team are consciously looking at as we look at bringing on additional capacity in our top 25 metros.

Going back to your debt question, Jonathan, our balance sheet is a strategic differentiator. We want to tip it this way, keeping investment-grade rating is really a core pillar to our capital strategy. We would expect to fund the growth through 2 levers: one, retain cash flow, as you know, we have a payout ratio in the 50% range. So we will have a sizable returned cash flow. And the rest of the financing will be done through to debt.

We are today looking to use the lever, which will have the most favorable cost of capital. If you were to look at -- as a result of this leverage, which was part of your question, we would expect leverage to increase by about a turn between now and the end of the planning period. And to finalize the blended cost of capital should increase by about 150 basis points, again, blended Jonathan.

The next question comes from Nick Del Deo with MoffettNathanson.

Can you talk about the steps you're taking from an operational and risk management perspective to ensure that you can effectively deploy as much CapEx as your budgeting over the next few years? And can adjust if realized demand doesn't match your forecast for some reason. And I guess when you look out to 2029, do you think the capacity that you'll have online will largely match demand? Do you think you'll still be short supply relative to what customers desire?

Great question. Thank you. So I guess as we look out to 2029, our job is to be very thoughtful about how we deploy our CapEx. How we deploy it and order for highest value and how we deploy it in those metros where we know we will have a maximal opportunity to maximize our returns. and metros that, of course, we're familiar with because we operate in those metros today, understand the customer landscape at the customer layout and so on.

So as we look forward, we're striking, I think, the balance between the opportunity and the managing of our CapEx profile as a company. And when we look to the opportunities to accelerate if we saw more opportunity ahead of us. And certainly, I think we've given some demonstrated proof of that already. In 2025, we were able to accelerate 20% of our retail footprint into 2026. And in our cabinet projections for Q4 of this year, you can see that we're almost tripling the number of cabinets that we will have available at that time frame, bringing additional into that Q4 footprint.

So the team has the opportunity to accelerate. There's some demonstrated proof of doing that. When you look at market dynamics, I guess, in a very thoughtful way and perhaps through a lens that others don't because we're fairly unique in the market in terms of our target focused customer base. And it is a multifaceted look we've developed somewhat, I think, of a proprietary model to enable us to really understand the demand that sits in front of us, a combination of external measures and our internal pipeline, relationship with customers and the fact that we plan alongside them.

So we think with this long-term guide, we've got a very good balance of meeting the demand that sits in the market, meeting the capacity requirements of our customers and managing in a prudent mature way.

Our next question comes from Michael Funk with Bank of America.

Yes. Great. So questions around the development spending that you laid out this evening and in the broader context of a lot of my larger amounts we've seen across the space for others are also developing large scale. So what gives you confidence to increase development spending in current environment that the durability of supply and demand is going to stack?

I'll tackle that question. Thank you very much for the question, Michael. So first off, when you look at it from a performance point of view, over the past 4 quarters and particularly since this time last year, we've seen some tremendous performance from our team around our total sales activity, very firm pricing and churn heading downwards. Equinix in the market is unique in many respects on our focus. We are focused on the enterprise sector. And we believe in the long term that the enterprise sector will be the beneficiaries of AI technology and that on a broad basis, they will continue their path to digitization.

And many things that we're seeing in the market now, now play directly to our strengths because our focus is driven by the unique value proposition that we offer our customers the very dense interconnected environment. ecosystems that are present in our environment already, our global footprint, our presence in metros. So many of the market requirements and opportunities are playing to some of those fundamental strengths that differentiate Equinix.

And we've been very thoughtful about how we've looked at this opportunity and the durability of this opportunity, the durability of this demand, which we believe is persistent. I mentioned -- I'm passing a previous answer to the question that we've looked at this through the lens of a proprietary demand model that we've built out because there is no 1 who is really looking at this segment at the market at the level of detail and the level of execution and the levels of engagement that we are here at Equinix.

And when we look at it through a number of external lenses, there are a few things that are very strong facts. First of all, we're drilled very, very early in enterprise AI. And colo is a durable model as things still settle, who's going to be the dominant player, all of these things play out, we're still very, very early, and we're a very durable end state for customers who are having to make decisions today.

Secondly, we can see that networking demand is also very durable, and it is increasing and AI requirements are additive to these connectivity budgets. and we can see this in rising spend points around networking requirements of our customers. In addition to those 2 pieces, you have enterprise IT budgets, which are healthy and actually firming, you have enterprise server demand, which notwithstanding price changes there is actually accelerating. We look at the backlog of competitors in the OEMs -- a partners in the OEM segment. to understand what their backlog looks like.

And data center silicon is accelerating in both volume and price. So a whole series of factors that allow us to be very confident in the durability of the demand that we see based on some of those external factors, coupled with our own pipeline, our relationship with our customers that has us planning alongside them in a very long-term way. And then, of course, I guess the demonstrated proof of our team to execute against that opportunity as they have been over the past 4 quarters.

And another one, Michael, we did also a bottom-up approach to this pain exercise. And again, 80% plus of our CapEx will be deployed, and I know we keep repeating this, but we think it's important in only 25 metros, where we understand the ecosystem very well, we have a differentiated value proposition and our relationship with utilities, community and general contractors is unique. So we think we have bottom up top-down approach, which gives us a fair amount of confidence on this trajectory.

The next question comes from Michael Elias with TD Cowen.

I want to build on that point in terms of the bottom-up approach. We talk a lot about the demand, but it would be great to talk a bit about the supply side. recognizing that a lot of this incremental capacity is going to come in those top 25 markets, which are also the most power constrained. How should we think about the percentage of the incremental capacity supported by this CapEx where there's an explicit ESA with a utility and you have visibility into that power. And then also, if you could give us color into the visibility that you have on the MEP that you would need and as part of that, the skilled labor to deliver the incremental capacity. Any color there would be helpful.

All right. Thanks very much, Michael. It's a really comprehensive question quite a bit to it. So let me unpack it a little. Today, we have 3 gigawatts of land under control. We're building about 700 -- 700 megawatts of that right now. We are not speculative land developers or land purchases. So those 3 gigawatts were either certain of our power in that it is contracted, or that we have a high degree of confidence that, that power will be contracted, a very high degree of confidence that, that power will be contracted.

One of the things that we're very cognizant of is when we announce and we tend to announce new projects when we've been through some internal gating. And that gazing relates to elements like the power and energization of that plot of land and also permitting. And that is 1 of the reasons why our projects proceed on time and to scale.

To the broader point around the supply chain in general, we have a very, very strong procurement team who look at this very thoughtfully in a very considered way. as well as very significant and in some cases, full 360-degree relationships with our main suppliers. And we have -- as Olivier has already mentioned, the benefit of a very strong balance sheet which has meant that we have been able, where appropriate, to secure our MCE by prepurchasing elements of the equipment that we need for our data centers.

And across our design footprint, our design is fungible. So that gives us the opportunity to move equipment around the entirety of our footprint. So we're feeling very comfortable about where we are on the supply chain dynamics as it relates to the MCE and the other equipment that comes into our data center environment.

I would also say that in the markets where we build and particularly in the North America market, we have a very deep and long-standing relationship with the GCs here. And that is something that has stand in good stead as they often have choice about where they will deploy their own capabilities and skills. So we're feeling that very confident on the supply side that we have managed all of the risks that we are aware of to the best of our ability, putting to work a combination of relationships, process, operation and our balance sheet where necessary.

The final statistic, Michael, a typical data center we will build is about 60 megawatts. So very different than the 1 gigawatt developed by other players in those markets. Much more manageable.

The next question comes from Michael Ng with Goldman Sachs.

I was wondering if you could talk about the $5 billion to $7 billion annual CapEx plan in terms of IT capacity. I think over 3 years, that $11 million per megawatt that would translate to about like 1.6 gigawatts out of the 3 gigawatts of developable capacity. Is that a reasonable way to think about it from an IT capacity perspective? And how are you thinking about refilling the land bank at the end of the 3 years will -- we have 3 gigawatts or more? Or will it get worked down?

Yes. By the end of the planning period, we will have about 2 gigawatts still available and this additional CapEx we use about 0.3 gigawatts of power.

The next question comes from Cameron McVeigh with Morgan Stanley.

I was curious if you're seeing evidence in your leasing pipeline that open weight models are driving incremental private AI or enterprise inference deployments. And then secondly, Olivier, now that you've had a few months in the CFO role, curious how you're framing the capital allocation opportunity and what the key priorities might be for you? And then to that point, are there any updates on how we should think about the puts and takes to the margin expansion over the next few years?

Absolutely. In terms of capital allocation, the company has been very prudent. We're not going to change this in terms of leverage. I mentioned that earlier. We are serving exciting markets. We have a different value proposition. We believe we can get an exciting return from this deployment of capital. So we'll invest mainly internally.

If you look at the margin, I'm glad you're asking the question. We are targeting a 53% plus EBITDA margin, which would be driven by 3 factors: One, that Adaire has mentioned, extensively, which is pricing. Demand is oversupply. So pricing would be a lever. And then cost of revenue improvement and SG&A scaling would be also 2 other levers.

Let me give you a few colors on this. We are a functionalized organization. So all the elements of the value chain at Equinix are functionalized and functionalization drive standardization allows us also to automate AI, our processes, so we believe that, that will drive margin expansion and this improvement of the various functions will impact go-to-market operations and also all the support functions.

Thanks, Olivier. So maybe let me conclude the answer to the question around the kind of use cases that we're seeing today in our -- in our enterprise customer base. Actually, there is 4 distinct types of AI use cases that we're seeing today. The first I'm going to call stack which is where enterprises are running open models but on private AI infrastructure. And they're doing that to cut down their token cost. And that's a use case that speaks well to the AI-ready data centers of Equinix, the connectivity that we have the cloud, the partnership with our OEM vendors and so on.

The second use case that we see is sovereign. This is where our companies are deploying sovereign AI stacks for data residency and compliance reasons. We're very attractive for that for customers because we have a presence in 36 countries. and our fabric capability allows our customers to geofence the traffic into a particular country.

The third use case that we're seeing from customers is a batch use case. This is where they're deploying centers of excellence AI factories for model training, but also for batch inferencing at Equinix. And a lot of this is driven by our opportunity to provide liquid cooling in our facilities.

And the fourth use case that we see from our customers is a agency sensitive one, where the infra stack needs to be present in a metro for latency and also to reduce costs around data backhaul. So those are the 4 main use cases that we're seeing a stack use case, a sovereign use case, a batch use case and a latency sensitive on today in our data centers.

Thank you. That is all the time we have. I will turn it back to Ryan.

Thanks, Julien, and thank you all for joining us today. We look forward to talking to many of you in the coming days and coming weeks. Take care.

Thank you for your participation. Participants, you may disconnect at this time.

All right. Good morning. Thanks, everybody, for being here. My name is Frank Louthan. I'm the senior analyst at Raymond James covering data centers and telecom, and other things. I'm very pleased to have Chief Financial Officer, Olivier Leonetti, here from Equinix. We're going to go through a few questions, and then we'll leave a little time at the end for some questions from the audience. But you guys have to start on with...

And just a quick disclosure statement. Some of what we will be talking about today contains forward-looking statements. Please read our SEC filings for more information about factors that could affect these statements.

All right. Great. I'm sure everyone will have that committed to memory.

Yes. Phillip and I will go through the motions together. Phillip and I are partners in crime.

Great. All right. Well, Olivier, maybe walk us through kind of your vision for the company as you step into the role here. What can we expect from you that may be different from what we've seen in the past from Equinix? And what do you see as the opportunities that really attract you to the position?

Yes. So again, thank you for having us. Thank you to everybody for being in the meeting room. I hope you're having a great conference. It's my first one, and I really enjoyed it. A lot of things going on in our company, so we love your interest. So I joined Equinix about a bit more than 2 months ago. And I joined this amazing institution for 4 reasons: one, attractive end markets being served. Two, amazing opportunity from the company to compete in those markets. We'll discuss a lot about that with Frank. Three, our culture; and four, this partnership is important, as is the vision from our CEO.

And after -- it looks like a marketing comment, but after a bit more than 2 months, I was wrong. Our end markets are better. Our ability to compete is better. Our culture is better and the vision from our management team is better. So what I'm going to do differently is not a lot. I'm going to be a member of the team to really augment, accelerate, facilitate the vision, but I'm going to be one of many shaping the future for this amazing company in those amazing markets. We'll talk about that, I'm sure.

Okay. Great. So maybe update us a little bit from -- you had the Analyst Day last year that you do every 2 years. Maybe update us kind of what's changed there? And what have we seen in the year since that, roughly a year.

Yes. So two things. I mean, if you go back, we have been in business for 3 decades. We were the pioneer to facilitate the Internet. That's first decade. The second decade was to facilitate the cloud revolution. This decade is going to be to facilitate AI. Our CEO has said many times, I think it's a great way to talk about how excited we are. This moment is our moment.

Why? The AI revolution, which is at the start, is creating the need to have a diverse marketplace where players are going to meet and exchange data. That's what AI is about. That is going to play to our advantage. Now to answer to your question, what is new since Investor Day, this vision is playing out in a way which is augmented relative to what we had expected. Those end markets are stronger and our ability to deliver what our customers need is stronger.

What do they need? They need a global network, they need a diverse network with different participants being on it, cloud, neo-cloud, AI lab, enterprise. They need neutrality. They need latency. AI will need to compute fast, close -- being close to where the enterprise is important. And we need also connectivity solutions, which are going to be fast, easy to use. All of that is at play. Equinix is delivering on this.

Equinix is the biggest marketplace on Earth, able to deliver this. As a result, you started to see the numbers being better than what we thought. I give you some numbers for this year. We're going to grow recurring revenue by 10% for the year. We did that in Q1. We did that in Q2. Double-digit growth is the start, and we have been able to clock on those numbers now for a period of time. Two, EBITDA margin, 51%. And three, an important statistic, one, which is one we're going to focus a lot is AFFO per share growing at 10%. So you see this is our moment, the value proposition of the company resonating and us being able to deliver attractive returns as a result.

So maybe take that a little further and your value proposition as you approach customers, what is that? And then how are you differentiated from the competition to be able to accomplish all these things?

Yes. And Phillip and I don't hesitate, Phillip. So if you see today, in the world of AI, you want -- go back to a rich marketplace, a marketplace where all the cloud providers are going to be participated. You want the Neo-cloud and new entrants to be part of this marketplace. You want the AI lab to be part of this marketplace. And of course, you need the enterprise. And you need this marketplace, which is global, neutral, and close to the action to manage latencies.

And what is different is that nobody can offer all of this. Could you have players offering a one-to-one connection, a cloud to a cloud? Some people have started to do that. Yes. Could you have some carriers, which are local doing some of that? Yes. But nobody can do everything we are doing. So that's different. And one of the key success factor of our company is to nurture a rich marketplace. So we are expanding. We're going to double our capacity. I'm sure we'll talk about that with Frank.

This new capacity is created to make sure that we have all the participants needed in those. So that's different. I'll give you some statistics. Neo-cloud, 4 of the top 5 are part of the network. They have deployed with us more than 110 nodes in our network, 8 of the top AI lab as part of the network. All the cloud providers are part of the network, right? So difficult to replicate. Then another part of the value proposition, and our CEO has mentioned that many times is we are not in the compute business.

We are in the connection business. And we want connections we're going to be easy to implement with no human being involved, managed at the press of a dashboard, and probably powered by AI to allow -- to identify which players do you want in your network. We do this. That's different. And we want to today keep increasing the barriers to entry or competitive advantage to make all of that even stronger than now.

And maybe just to add on to that and take a step back when you -- I think there's been a little bit of a homogenization of the data center industry. Now all these things that Olivier talked about around our differentiation. Keep in mind that we are -- we've got over 10,500 customers in our customer base. We did 3,800 transactions in Q1 with over 3,100 unique customers. We're not selling 100 megawatts to one customer and selling out a facility.

We're a very differentiated business model as it relates to the broader data center industry. I think it's really important to take a step back and make sure that folks understand that, that differentiation and all the statistics of how we're curating ecosystems. And because of that, we're driving returns and yields on our assets that are in the mid-20s. That's very different than a lot of others in the data center industry.

Let me build on this, if you don't mind, Frank. If you see the evolution of what we do, in the era of AI. I'm going to make an obvious statement. AI is to compute data at the edge from via sources, right? We are starting to be the place where this compute at the edge is happening, evidence of this. The average -- sorry to mention a technical term, rack at Equinix is 5 kilowatt. This is the average rack density.

We have in our network today racks, which are 100-kilowatt plus. Why would you need a rack like this in our network? They are liquid-cooled. We're enabling this. Why do you need this to compute at the edge. So you see why do you need to compute at the edge? Again, you need to send the fast action to an object, but also it's too expensive to compute in other places because of the traffic cost. So you start to see really the value proposition of what we do increasing step by step. The marketplace, the edge compute, and the ease of connection. So again, increasing the competitive advantage and what we offer to our customers.

That's great. So that actually touches on a topic that I wanted to bring up. I think I've been covering you guys since 2009, give or take a month, something like that. And from day 1, I get the question about obsolescence risk. And as you mentioned, averages 5 kW per rack, you've got customers wanting 100 kW. Walk us through the obsolescence bogeyman here that always seems to come up. It's had quite a resurgence based on inbound calls I've got in the last couple of months. So talk to us about how you -- why that is a threat and how you've managed that all these years? Because so far, it hasn't been an issue. But of course, it's coming now, of course, you never know. So talk to us about that.

It's a great question. So let me give you an example. If you go to headquarters in the Bay Area in San Francisco, we have one of our oldest site. It's in San Jose. You have 4 generations of data center, the first one and the last one. The last one, the biggest microchip in a rack from the #1 microchip manufacturer, 100 kilowatt to a few 4, 5 kilowatt. This full ecosystem is attractive to our customers. All of those cabinets with different level of power are today growing because, again, you need compute at the edge, use the 100 kilowatt. But you need also to use the cabinets to -- for communication. So those worlds need to be part of the ecosystem. So obsolescence today is not something, which is a concern to our company.

Yes. And we've always talked about putting right application in the right workload, in the right data center. And exactly to Olivier's point, I mean, when you look at some of our older facilities, they're the most network-dense, they're the most valuable. And when there is space, trust me, there are customers who want to go into that space. And we've constantly been maintaining these over the years.

And so they are absolutely fit for purpose for those specific workloads. And as we talked about, some of these higher-dense applications and workloads, they're going into our newer facilities. Plus we have 100 of our existing 280-plus data centers, which are fit for purpose for liquid cooling. So we always are thinking about the right mix of applications in the right locations for our customers.

All right. Great. So with that, maybe let's talk a little bit about competition. We've had a very, very strong market for data centers the last few years. It's been fun. But with that always, it attracts new competition. Talk to us a little bit about what do you see as some of the biggest competitive threats in the next couple of years and how you're positioned to address that?

Yes. So the competition is intense, and it's keeping us up at night. It's a good thing. It's keeping us on our edge. And the level of competition is actually the proof point that what we do is important in the era of AI. Carriers are on our network and competing with us, and also collaborating. You have other players as well doing the same. A lot of cooperation, competition happening on the Equinix network. We serve a different purpose.

Nobody today is able to do what I've mentioned. Could you do a 1:1 connection, a 1:2 connection? Yes. Could you do to many everywhere all at once, latency, neutrality, density, nobody can do this. But we're not sleeping. We want to increase the number of data centers we are launching. We want to make our connection business humanless, to be implemented.

And we want to create fast, the best marketplace in the market. So competition is good, validating what we do and good for our customers. And clearly, as a result of that, we -- you see the execution, the speed of execution, and the sense of urgency at our institution being stronger than ever before.

Yes. And I think the marketplace, obviously, we've all talked about the demand environment. There's room for all boats, so to speak. And I think that we feel like we occupy unique place in the data center space, but there is room for all these different workloads to live in different places and room for all of us.

All right. Let's talk about 2 of your products. You talked about interconnection and then also on the xScale side and the larger hyperscale facilities. You've got -- I constantly hear questions from investors, folks like Lumen that have looking at multi-cloud connectivity, worried that's a threat to some of your interconnection revenue and so forth. You've talked -- touched on this a little bit, but maybe address more specifically how some of these telecom carriers that are looking to do that business. How does that impact or not impact your business and what you're trying to do?

Again, so why do you have some carriers and other players part of the network. By the way, we know they exist. We know what they do. We know the footprint they have. It's a cooperation and some level of competition, too, right? We serve different purposes. One-to-one or mainly maybe a U.S. connection is what they will serve. But our customers today, they want a global footprint. A data center in Europe will have a lot of tracking, a lot of traffic coming from other parts of the world. So we want to be differentiated. We are. And we play in this dynamic place in complex connection businesses, and we can cooperate with the other players as well.

And then on the xScale side, you're building larger hyperscale facilities, it's a smaller part of your business, even some of your peers. Talk to us about how you're incorporating that with what you do and where you're seeing success there.

So xScale is not a retail, but it's not a full wholesale either. Why do I say this? They are not gigawatts centers, right? There are hundreds of megawatt centers. They are close to a metro without getting into too many details, you need to be about 30 miles, give or take, to metro to manage latency. Those xScale sites are smaller, close to a large metro.

We will share some of those sites. So we see xScale as being synergistic with what we do. They allow us to do 2 things in addition to have access to a site, they give us purchasing power with the power management company and more intimacy also with some of our large customers.

Okay. Great. All right. So we can't have a data center conversation these days without about the power question. Talk to us about the power. How do you see your ability to get that access for -- you have some pretty broad development needs. How do you see your ability to access power to reach your development goals?

Yes. So I'm kind of embarrassed by what I'm about to say because it's so different than what you have heard, right? We read an article this morning on the Wall Street Journal about how difficult it is to access to everything, right? We build something different, 60-megawatt data centers. We build those in metros. We have been doing that for 30 years. We have great relationship with the utilities companies. We have great relationship with our general contractor, with the power management company.

So today, we have been able to manage these constraints pretty well. We have not experienced any delay. If anything, our team has been able to accelerate the launch of data centers. So we have been largely immune from those constraints. So again, we have access for the next 5 years to more land, power, water, power management equipment than we need. But again, different use case. Let me speak about the community for a second, and we are proud of this approach at our company. We have a team across the world only doing community engagement for the world.

We have a playbook. We are part of the community. Our playbook is as follows: We have been in the community for 30 years. We are green. We manage water, we recycle it. We invest in your schools. We invest in apprenticeship. We're different. We're going to stay. We've been with you for 3 decades. We're going to stay. That resonate, and that allows us to navigate. It's tougher than before. No question, but no delay. Our team is doing an amazing job.

And what about the self-provisioning power? How have you thought about that process? And is that the solution that's right for Equinix? How do you think about that?

You cannot be in this business without thinking about alternative sources of power and local provisioning of the power, particularly to manage peaks in power load. So we do all of this. I mean we're even looking at data center space, I think, is something which is fashionable nowadays. But all of that is being part of the playbook of our company. We have local power provisioning using various sources, gas and green energy as well. So we have to do that, and we do.

Yes. We were one of the first users of fuel cells, for example, in our Silicon Valley. We use gas turbines in some areas in Europe. And as Olivier said, we've kind of taken an all-power approach as we look forward. But I want to make one other comments just about the power situation. We've got 3 gigawatts of land under control. And we -- we're not in the business of speculatively buying land and then figuring out the power situation later. We are doing all this in parallel. And so when we buy a parcel of land, we either have fully contracted power agreements or we are in the very late stages that have high, high confidence about our ability to get the power. So it's a key distinction that we're -- again, we're not out speculatively buying land and then figuring these things out down the road.

Four conditions for us to sign a contract for a piece of property, land, power, water, community at the same time, yes.

All right. Great. And with that, so where are you on the build -- the ambitious build plans? You've got the resources you need, the plan and power. Where are you on the build plans you laid out last year?

Well on track. We have solved the capacity constraints. We have solved the financing constraint. Now we want to offer great network created and great full stack interconnection solutions. That's a work in progress. But the other constraints have been solved.

Okay. And then I'll have one more question, and then we'll take -- see if there's some questions from the audience. If not, I've got a few more. But -- so new CFO, I have to ask a capital allocation question to you. Talk to us about your view of capital allocation for -- as it relates to investors.

Yes. So there are a few things, which are going to be foundational regarding the way we manage our company. And I'm going to state some obvious facts, but they are always good when repeated. One, investment grade is table stakes. We think we can leverage. We have a 3.8x leverage. We believe we can increase the leverage, but investment grade is going to be critical. We want to maintain this. And we believe we can finance our expansion while staying an investment-grade company. So that's one constraint.

The other constraint is we do not want to sacrifice the short term for the long term. 1/3 of our investors want us to do both, and we believe that we're going to be able to do both. So what does that mean? FFO per share is part of the algorithm. Our capital allocation has 4 tenets: one, investment grade; two, top line; three, EBITDA expansion; four, an important our AFFO growth per share, which is attractive to you. So that's what we're going to focus on. Largely, I mentioned it, Phillip mentioned it as well. We have the land, the power, the water we need. At times, we'll be opportunistic to do M&A. AtNorth was one of them, but they are not needed for us to achieve our goals. So that's the framework.

All right. Great. So folks somebody has a question there, there's a microphone or you can just raise your hand, we can grab the questions there. Yes, go ahead.

How fast do you see that power to rack growing. You mentioned kind of 5 kW now and a few that are 100 kW. Is this growing at 10% a year? Or are we going to be at 100 kW for a good bit of?

So this is -- I mean, if you go to the site, those 100 kW rack exist. They are already deployed. It would take time. It will be a diverse set of use cases. So if I give you a statistic, the average kilowatt per rack today at Equinix is 5 kW. In Q1, the increase in density went up by 36%, right? So we're still going to increase in this increase, you're going to have Phillip mentioned it earlier, it was a good set of statistics, low power, high power co-existing. And again, the high power, something very new, which is the need to do compute at the edge.

But just to put it in context, you talked about the 36% growth, that's still single-digit kilowatt per cab, right? So it's -- there's a big installed base for sure, and there are needs for those for all different types of workloads. So I think it's going to be a slow climb, but we are building our new facilities are building towards these increased densities. So we feel like we're kind of going to where the market is and where it's going. We feel very confident about the ability to meet the diversity of the demand around those requirements.

REIT of change is always slower. Any other question? Yes, go ahead.

SpaceX and others are data center space, they still need the interconnection [indiscernible].

Yes. So I mean, everybody has to look at this, right? Elon has been pushing the idea first. People thought it was crazy originally, right? And some people are saying, okay, maybe we need to pay attention. We're looking at this. The physics are going to be challenging. It's over my pay grade. Would you use -- I mean, we're speculating here. Do you need that for large language model? Yes.

Can that be the solution for what we do, retail network proximity? The answer is no. The physics do not allow this footprint to serve what we serve. If you are in the wholesale business somewhere in Arizona or Texas, maybe. If you do what we do, we do, no.

Okay. Great. Any last questions? All right. Well, with that, Olivier, Phil, really appreciate the time here. Thank you very much. Thanks, everybody, for joining...

Good day.

Good afternoon, and welcome to the Equinix First Quarter Earnings Conference Call. [Operator Instructions] Also, today's conference is being recorded. If anyone has any objections, please disconnect at this time. I would now like to turn the call over to Mr. Ryan Burke, Vice President of Investor Relations. You may begin, sir.

Good afternoon, and welcome to our first quarter conference call. Before we get started, I want to remind you that some of the statements that we make today are forward-looking in nature and involve certain risks and uncertainties. Actual results may vary significantly from those statements. and may be affected by the risks we identified in today's press release and in our filings with the SEC, including our most recent Forms 10-K and 10-Q.

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 our policy to not comment on our financial guidance during the quarter unless it is done through an explicit public disclosure.

On today's conference call, we will provide non-GAAP measures. We provide a reconciliation of those measures to the most directly comparable GAAP measures in today's press release on the Equinix Investor Relations page at www.equinix.com.

We have made available on the IR page of our website a presentation to accompany this discussion, along with certain supplemental financial information and other data. With us here today are Adaire Fox-Martin, CEO and President; Olivier Leonetti, CFO; and Phillip Konieczny, VP of Finance. At this time, I'll turn the call over to Adaire.

Thank you, Ryan. Hello, everyone, and a warm welcome to our Q1 2026 earnings call. This quarter's results reflect continued strength across the business as we capitalize on a large and growing set of opportunities. Demand is broad-based and durable. Execution is driving efficiency and AI continues to fuel infrastructure investments that play to our strengths.

Before I get into our results, I'd like to start with some important market context. Over the course of the past year, my conversations with customers have changed. A year ago, they were about piloting AI. Now our conversations are focused on enterprise-wide adoption at scale. New forces are driving this shift.

Inference has grown from experimental workloads to an engine of real-time business decision-making. An AgenticAI is moving from demos into distributed deployments with agents acting autonomously to achieve business outcomes. The reality is that most enterprise architectures are not optimized for these workflows.

Agents need private low-latency paths to data wherever it lives. They perform best at the edge. Closest to where the decisions get made. And they must be able to move freely across models and clouds whilst staying within jurisdictional boundaries. Performance, cost and compliance all suffer when today's agents run on yesterday's network.

Simply put, this deployment gap is an architecture problem. Enterprise is a need infrastructure that's purpose built for the way AI operates. Distributed, interconnected, sovereign by design and in close proximity to the date of that matters most. This is a market that we are built to serve.

Equinix is not simply the world's largest digital infrastructure company. We are the world's most deliberately curated digital ecosystem. And our Q1 results demonstrate the progress we are making to capture the market opportunity.

In Q1, our recurring revenue grew 10% on a normalized and constant currency basis, coming in at the high end of our expectations. This is our second straight quarter of double-digit MRR growth. At the same time, we are driving continued margin improvement. Q1 was also the largest quarter of total sales activity in our history, inclusive of annualized gross bookings and preselling activity.

Total sales activity was up more than 35% year-over-year. We drove significant interconnection and cape billing growth, whilst reducing churn. Reflecting ecosystem strength across our key operating metrics, and we are expanding our capacity whilst bringing new products to market that extend our runway for growth.

Our progress stems from the extraordinary efforts of our team, and I'm proud of the way our employees are stepping up to meet the moment. Let me now provide some color on our overall results and what's driving our performance. As you saw in our press release, our Q1 results do not include the xScale Hampton lease.

We are nearing execution on expanded mutual beneficial terms with our customers. Olivier will provide additional details on how you should model Hampton. Adjusting for the timing of Hampton, our Q1 revenue, AFFO and AFFO per share results were all ahead of our expectations. Overall, our xScale pipeline is robust given that our remaining capacity is in major metros.

Our momentum reinforces our confidence in the trajectory for the year. As such, we have raised our guidance across several key metrics. I am especially pleased with the strength of the position we are building across the AI inferencing ecosystem. The expansion of our relationships with the world's leading hyperscalers, Neo Cloud, AI security vendors and model providers serves as a magnet for agentic AI workloads.

8 of the top 10 AI model providers and 4 of the top 5 Neo clouds are actively expanding with Equinix. They have placed more than 110 separate network nodes with us to support mission-critical and latency sensitive elements of their architectures. Consistent with the prior quarter, approximately 60% of our largest deals in Q1 were AI-related.

Additionally, large capacity fabric connections have tripled from just a year ago. We believe there is meaningful upside to come, given we are still in the early days of the agentic AI wave and inferencing adoption. This momentum is part of a broader uptick in customer demand, spanning a wide range of AI cloud and networking workloads.

Now let me highlight some recent wins and associated use cases. Cupid Pharmaceuticals are quantum AI-driven drug discovery company relies on Equinix for the high-performance, low-latency infrastructure required to run millions of GPU-intensive molecular simulations.

By deploying a dedicated GPU cluster in Equinix data centers with direct cloud interconnection, Cupid has reduced experimental cycles by 20x whilst lowering cost by a factor of 5. Most importantly, our solutions are accelerating the path from discovery to potential therapies that can save lives.

Gammon construction, a leading construction and engineering services company in Asia chose Equinix because of our neutral platform, presence across major metros and connectivity solutions to enable their multi-cloud AI platform.

They are using our fabric interconnection portfolio to power their network infrastructure. which is the base for inhibitive solutions such as AI-powered robotics and drones for on-site risk assessments and smarter decision-making. During the quarter, we expanded our partnership with Options IT, the #1 provider of infrastructure to global financial services firms.

They selected Equinix because of our presence in the locations that matter most to their operations and ecosystems, including London, New York, Singapore and Tokyo. We are enabling options IT to deliver private cloud and AI managed infrastructure solutions to grow their business whilst meeting the date of sovereignty requirements of their customers.

We also grew our relationship with Maersk, a global leader in integrated logistics as it digitizes critical supply chain infrastructure. Maersk recently selected Equinix as its primary data center partner to support high-performance and AI workloads, including its first liquid-cooled AI deployments in Frankfurt.

Our global footprint, secure and resilient operations and industry-leading interconnection capabilities are supporting Mark's ongoing network transformation and long-term growth strategy. I'm exceptionally grateful to all our customers and partners for trusting Equinix to help move their business forward.

The outcomes we are enabling for them reflect rigorous execution against our strategic pillars. Starting with Star better, we delivered annualized gross bookings of $378 million in Q1. We up 9% year-over-year with approximately $140 million of pre-selling activity on top of that.

As I mentioned earlier, that 35% growth in total sales activity in the quarter, resulting in a record backlog. Transaction volumes continue to demonstrate a broad base of workload requirements with over 3,800 transactions spanning more than 3,100 unique customers in the quarter.

Importantly, we also saw increased customer adoption of our South service portal. Our portal is a key area of focus as we work to create a better customer experience. It also drives efficiencies within Equinix compared to a traditional cost-based ordering. This is one example of our broader focus on digitizing processes and workflows across the company.

Customers placed 20,000 orders through our portal in Q1, up 12% year-over-year. and we intend to continue driving enhancements to this solution. Turning to Solve Smarter, our customers consistently raised 2 key challenges to us. The first is AI infrastructure fragmentation. Enterprises are spending too much time and budget. Navigating dozens of disconnected AI model providers, GPU cloud, data platforms and security services.

The Equinix distributed AI hub, which we introduced at NVIDIA GTC solves this by getting enterprises a single private low latency connection to the entire AI ecosystem. Unlike AI marketplaces built by providers with their own services to sell our distributed AI hub is completely neutral, providing access to all models and cloud so customers can select what's best for them.

The second challenge facing customers is network complexity. Most enterprise networks are not designed to handle distributed AI workloads and it's resulting in degraded AI performance, inflated costs and compliance risks.

Equinix Fabric Intelligence solved these problems by monitoring network performance in real time automatically adjusting configurations and flagging anomalies before they become outages, all without human intervention. Unlike other network management tools that sit on top of the network fabric intelligence is built directly into our fabric interconnection platform.

This is a structural competitive advantage given the more than 500,000 live interconnections across our ecosystem. Our innovation is extending our market leadership and driving growth. Total interconnection revenue was up 9% year-over-year in Q1 and boosted by fabric revenue growth of 26% year-over-year.

Fabric bookings were up 70% year-over-year as our attach rate continues to increase. These growth rates are all on a normalized and constant currency basis. On Bill bolder, we continue to expand our capacity to meet demand. We have 46 major projects underway across 32 markets, including 6 excel projects.

More than 70% of this retail expansion CapEx within our major metros with the remainder focused on critical expansion markets, particularly in our Asia region. Given the strength of our presales motion, approximately 25% of our 2026 retail capacity expansion has already been sold.

We continue to meaningfully grow our pipeline for new power land and capacity expansion opportunities that can enhance our long-term growth prospects in key metros and deliver attractive returns. And we're not just growing, we're doing it responsibly.

Last week, we released our annual sustainability report. It shows how we are building essential infrastructure the world needs in ways that are affordable for our communities, sustainable for our planet and reliable for our customers.

These have long been core Equinix values, and they will continue to guide our future investment decisions. In Q1, we announced an important investment in 1 of the world's most sustainability-focused market as we signed a joint agreement with Canada Pension Plan Investment Board to Paratus at North.

This deal will further enhance our position in the Nordics by giving us access to an installed and active development pipeline of approximately 800 megawatts expected to come online over the next 5 years. At Nord's footprint in key markets such as Copenhagen is complementary to our existing EMEA operations and is well positioned to serve enterprise, cloud and AI growth.

The transaction is subject to closing conditions and is expected to be immediately accretive to AFFO per share upon the closing. Overall, Q1 demonstrated continued momentum across the business, and we see significant opportunities to accelerate growth as we deliver on our strategy.

I'm now going to turn the call over to our new CFO, Olivier Leonetti to go into more detail on our financials. Olivier joined us in March. He has already proven to be an excellent addition to our leadership team. Previously, Olivier was CFO of Eaton and Johnson Controls to large suppliers to the data center industry.

He has a strong track record of delivering profitable growth and creating shareholder value, and we look forward to his contributions to our success as we work to deliver healthy revenue growth margin expansion and superior returns. Olivier, over to you.

Thank you for the kind words, Adaire. I'm delighted to be here, nearly 2 months in, I'm excited about the strength of the markets we serve and very impressed by Equinix company culture vision and unique positioning to serve accelerating customer demand.

I look forward to helping enable our vision by prudently allocating capital and thoughtfully utilizing our balance sheet to drive durable, profitable growth. As Adaire summarized, we are executing well across our business. This was the largest quarter of total sales activity and record up 35% year-over-year.

Reflecting broad demand and strong execution. Customer activity increased across all of our verticals, products and channels. Turning to Q1 results on Slide 7 and with all figures discussed on a normalized constant currency basis. Recurring revenues were $2.3 billion, up 10% year-over-year as our bookings performance from the second half of last year is converting into revenue.

Total revenues were $2.4 billion, up 8% year-over-year. Adjusted EBITDA was $1.2 billion, up 13% year-over-year, resulting in a 51% adjusted EBITDA margin which is up 190 basis points quarter-over-quarter and 300 basis points year-over-year. This is a result of our continued cost discipline power cost benefits and scaling our operating leverage.

As we have discussed, driving additional efficiency would be a focus moving forward. Quarterly AFFO surpassed the $1 billion mark for the first time, increasing 11% year-over-year and AFFO per share was $10.79 a up 10% year-over-year. Please note that adjusted for the [indiscernible] excel lease signing, which I will provide details on in a moment. we came in above the midpoint of our Q1 revenue and adjusted EBITDA guidance ranges.

As Adaire mentioned, we are near execution on the Hampton xScale leads. These types of negotiations are fruit and we have adjusted the expected timing while discussing expanded mutually beneficial terms with our customers. Here are the moving pieces as they relate to guidance over the past couple of quarters.

Our guidance for Q4 2025 assumed $54 million of nonrecurring revenue from the deal based on the original terms being considered. Our guidance for Q1 2026 included the expanded terms with an expected contribution of approximately $80 million of revenue, $65 million of AFFO and $0.65 of AFFO per share. The expanded economics are now included in our guidance for Q2.

This timing shift does not impact our full year outlook because the economics were already incorporated. Now to our nonfinancial metrics, which also demonstrate strong momentum. We increased physical and virtual net interconnections by 5,800 with particular strength in fabric additions.

We added 4,100 net cabinets billing and our backlog of cabinets sold but not yet installed is at a record level. Churn came at 1.7%, primarily due to the benefit of some delayed churn and to focus and execution doing our renewal process. For the full year, we are tracking towards the low end of our 2% to 2.5% guidance range.

And MRR cabinet increased to $2,524 up 7% year-over-year. Reflecting the firm pricing environment and continued increase in density. On Slide 12, our capital investments continue to deliver very strong returns. Consistent with prior years, this quarter, we completed the annual refresh of our stabilized pool, which increased by 5 IBX data centers.

Our 192 stabilized assets increased recurring revenue by 6% year-over-year are collectively 82% utilized and generated a 26% cash-on-cash return on gross PP&E. Turning to our capital structure on Slide 10. At quarter end, we approximately had $3.1 billion of cash and short-term investments on the balance sheet, and our net leverage was 3.8x annualized adjusted EBITDA.

During the quarter, we issued $1.5 billion of senior notes at the blended effective rate of 3.1% and reflecting positive execution in the market and our ability to take advantage of lower cost debt around the world. Our balance sheet and diversified capital program are competitive advantages in all macro environments, particularly so in the kind we see today.

In combination with significant retained cash flow, we continue to access lower cost sources of capital to fund our robust growth opportunity. Now looking at capital expenditures on Slide 11. Total capital expenditures for the quarter were about $1.3 billion, approximately 90% of which was growth and value-accretive capacity expansion. We continue to expect mid-20% unlevered cash-on-cash returns on investment.

Since the last earnings call, we opened 6 projects, adding critical capacity to meet demand across 6 metros. Before we get into guidance, I'll briefly address the energy environment given developments in the Middle East. We systematically hedge energy cost to provide predictability to our customers and broader stakeholders, particularly in volatile periods.

Globally, we are more than 90% hedged for 2026. And as usual, we are progressively hedging into the future. As a result, we expect minimum impact for 2026 even if energy prices were to remain elevated. Finally, please refer to Slides 17 for an update of 2026 guidance with all growth rates discussed on a normalized and constant currency basis.

Based on the robust environment and the team's execution, we are raising guidance across key financial metrics. For the second quarter, we anticipate continuing strength across the business, including MRR growth of 10% to 11% year-over-year. For total revenue, the largest piece to consider is that it includes the expanded economics from the Hampton xScale signing that I provided a moment ago.

Again, please note that these economics were already included in our guidance for the full year. They simply shifted from Q1 into Q2. For the full year, we are raising total revenue guidance by $21 million based on our Q1 outperformance, improving expected total revenue growth range by 100 basis points to 10% to 11%.

We are raising adjusted EBITDA guidance by $24 million, resulting in adjusted EBITDA margins of approximately 51%, a 200 basis point improvement over last year. Additionally, we are raising AFFO guidance by approximately $40 million improving our expected AFFO growth range by 100 basis points to 10% to 12%.

This corresponds to a similar 100 basis point improvement in our expected AFFO per share growth range to 9% to 11%. We -- we continue to execute on our capacity expansion to meet robust customer demand. Excluding xScale and land acquisitions, we now expect total capital expenditures to approximate the top end of our prior range at $4.1 billion, including $280 million to $300 million of recurring spend and approximately $3.8 billion of nonrecurring spend.

Given our confidence in the growth opportunity in front of us, the team continues to evaluate opportunities to accelerate our capacity to deliver growth and value to our shareholders. Overall, we are pleased with our progress and confident in our plan.

We will continue executing with discipline to deliver on our goals and create shareholder value. I now turn the call back over to Adaire.

Thank you, Olivier. Our Q1 results demonstrate strong performance and our outlook reflects underlying strength across the business. We see immense opportunity ahead to drive revenue, enhance margins and deliver attractive AFFO per share growth. But we take nothing for granted.

Our continued success demands focused execution against our strategic priorities and disciplined investment to unlock structurally higher returns. Above all, it calls on every member of our Equinix team to deliver exceptional value for our customers each and every day. This is the mindset guiding us forward, and I'm confident in our direction. We are well positioned across our markets.

We are building momentum in key growth areas, and we remain focused on delivering against the goals we have set. With that, let's open the line for questions.

[Operator Instructions] Our first caller is Ari Klein with BMO Capital Markets. Ari Klein with BMO Capital Markets. We'll go to the next caller, Michael Rollins with Citi.

I had a question about some of the comments you made earlier in the call. So I think if I got this right, you mentioned that 8 of the top 10 -- I think it was maybe hyperscalers and 4 of the top 5 -- no clouds are actively expanding with Equinix for AI, 110 separate network nodes.

And I'm curious if you could provide more color, is that 110 in addition to whatever cloud nodes they typically would have? And can you characterize the types of interconnectivity demand that you're already seeing for those AI nodes and how that's informing you maybe early in this environment of the type of growth that's out there from AI for your business model?

Okay. Mike, thanks so much for the question. And maybe let me just clarify a couple of points. So I mentioned that it was 8 of the 10 AI model providers, the LLMs and 4 of the 5 Neo clouds have deployed between the 110 or so separate network nodes to Equinix. And that is in addition to all of the nodes that we see that are being deployed by the hyperscalers in order to manage their connectivity journey.

When we look at the role of the neos here, we can see that for many of them, their journey is evolving a little -- their value proposition was always based on pricing and based on GPU access and largely facilitating large-term training footprint.

Mostly focus with the SaaS and the hyperscaler. As we can see, they're transforming into AI offerings workloads and looking to pursue enterprise customers and medium-sized SaaS companies. we see them as potential inference magnets for our ecosystem going forward. And we see many of them converging, as I've mentioned already, and engaging at Equinix.

It's about a couple of things in terms of the use cases -- it's about network outs that provide connectivity to the CSPs and the NSPs for the NEOs and the L&M. It's about AI inference notes for densely populated metro so a little bit of a different picture. And it's about fabric access to the enterprise customer base of Equinix. So that sums up the 3 things that we're seeing for the OUs of our environment.

Our next caller is Cameron McVeigh with Morgan Stanley.

I wanted to ask about the $140 million in pre-leasing activity. Just curious how tenant appetite is changing and if tenants are willing to commit further in advance for longer terms and really how that's translating to the terms for Equinix, whether through pricing, terms or deposits? Any color there would be helpful.

So pricing remains firm, whether we're looking at presales or bookings within the quarter. And I think the presales booking really provides our customers with security, security in terms of the infrastructure that they're defining and the opportunity to ensure that they are solving for their own compute and energy future. .

So this is something that I think we've done only in the recent past, but we're seeing a great benefit from that in terms of the conversations with our customer and our long-term ability to serve them.

Matt Niknam with Truist.

My question is more big picture on macro. Have you seen any macro dynamics, particularly around rising memory or fuel and energy costs and the prospects for higher IT costs later on in the year, affecting customer behavior at all, whether it's pulled forward demand or pushed out deals if customers are running into supply shortages?

I think as it relates to concerns about energy costs, Olivier mentioned our hedging program which means that we're in a position to be able to continue to support our customers at the price points that we're operating today. .

I would say based on the demand environment that we see that it is a very durable and broad-based demand environment. It is very diverse. And we're not certainly seeing any pullback from customers as it relates to increasing costs, et cetera, at this point in time.

I think you can see that reflected just in the sheer scale of the numbers of transactions and that those transactions occurred across all of our customer segments and also actually equally enough across all industries that were all growing at roughly the same percentage in Q1.

Our next caller is Frank Louthan with Raymond James.

As you see the rising demand for AI inferencing, is there any difference in the incremental capital required that you're seeing to fulfill those new workloads versus what you've traditionally seen? And can you quantify that if there is?

No, we don't see any difference in the capital that will be required notwithstanding the fact that our strategy has been to be very metro focused.

We are located in 77 metros across the world, and we will continue to build on that footprint but that's already embedded into how we've managed our capital because that's part of our 27-year history, and therefore, we don't anticipate any capital differences. I'm going to ask Phillip to add an additional comment here.

Yes. The only thing that I would add on to that, Frank, is that as we are always kind of skating to where the puck is going as they say. And thinking about the types of requirements that are needed for the deployments. And so when you look at some of our facilities that we're going to be bringing online in the next few years, the densities that we are building towards are much higher and much more suited for a lot of the requirements that we're hearing from our customers.

So we're always thinking about where we need to go and what the requirements are of our customers, we're building towards that.

Is that increasing or decreasing the returns that you're looking at going forward with that higher density requirement?

Now the density -- the returns we're underwriting against even those higher densities are still in that mid-20s percent that we've been talking about for a long time.

Our next caller is Vikram Malhotra with Mizuho.

I just want to clarify 2 things. One, just the bookings dipping sequentially. How much of that is seasonal? And maybe you can just some composition of traditional enterprise versus maybe chunky bits? And then just secondly, the interconnection business, given kind of the rapid tripling almost of the fabric business.

How is that playing into interconnection revenue growth overall? You mentioned sort of network enhancements needed there. So I'm just wondering like how does that flow through? Does that mean in the future, we see a greater pickup in the interconnection side?

Yes. So just to comment first on the sequential nature of our annualized gross bookings. First of all, where we've concluded Q1, and Q1 is seasonally a quarter that has traditionally been lower.

But I have to say that I am especially pleased with the performance that we had in given that we came off the back of such a large Q4. And so I think that the team worked really hard to deliver what was our largest Q1 ever and driving our largest backlog ever.

So I look forward to moving that into revenue in the future. And I'm proud that the delivery of our bookings in Q1 isn't just related to top line, but we did it at margins that are growing and profitability that is growing too.

Across the Q1 booking profile, we saw strength, as I mentioned already, across various different industries, but we also saw some very broad-based strength in our under 1 megawatt deal cohort.

As it relates to the second question around interconnection revenue and interconnection revenue growth. And we're obviously very pleased by the performance that we've seen here our Internet connection revenue growth was at 9% on a normalized and constant currency basis.

Fabric revenue growth was at 26%, and our fabric bookings grew 74% year-over-year. And this kind of growth, the value proposition that we're delivering to customers is really behind our investment strategy around our distributed hub and our fabric intelligence, which is in pre-preview with a number of customers and partners who are very positive about the outcomes that we're driving with this solution set.

Our next caller is Jonathan Atkin with RBC.

Yes, I wanted to just follow up on that last response and maybe ask you more directly. Is there a scenario over the next several years, their interconnection growth would exceed the growth that you're seeing and would represent a meaningfully increased percentage of your overall revenue composition?

I guess in some way, Jonathan, we're probably seeing that in our stabilized assets where our stabilized assets are growing at a 6% and interconnection within that asset group is growing at 9%. .

I do believe that there is opportunity for us to continue to grow our footprint and the range of services that we are offering to our customers here because we feel a very specific niche in the market in terms of providing that neutral environment where the ecosystem around AI converges.

And so there is potential for upside here, but that is not yet factored into our plans.

Our next caller is Irvin Liu with Evercore.

And welcome, Olivier. Appreciate the color on energy hedging -- just given your exposure to the Middle East, I wanted to understand whether recent geopolitical cross currency in the region have -- or have had any impact on your operations. specifically related to your ability to sell and/or add IBX capacity?

Yes. Thank you very much for the question. First of all, I think the most important thing for us is the safety of our employees, our customers and our partners, and that was our most important priority as we navigated recent events in the Middle East.

Thankfully, all of our people have remained safe, and our facilities are fully operational. We do have a limited footprint across the region.

We have a total of 6 data centers across the Middle East region, and they're comprising about 1% of total revenues. We have one project underway in Dubai at our DX3 facility. Construction project. And we have seen the RF state of that project be impacted due to the conflict. So limited operational impact, we were able to keep our facilities up and running. But we're watching the situation very carefully.

Our long-term view is that the region will continue to see growth in investment in digital infrastructure as the Middle East itself looks to position itself as a global AI hub.

Our next caller is Nick Del Deo with MoffetNathanson.

First, I want to congratulate Olivier on his appointment. And my question is also for him. I was wondering if you could elaborate kind of share with us your high-level capital allocation and operating philosophies. And whether your previous vantage point as a supplier to the data center industry provides any initial insights into areas where you think Equinix might improve the business or things you'll be focused on? .

Thank you for your question, Nick. First, regarding capital allocation, we're going to keep the course that has worked pretty well for the organization. First, what we want to do to fund our ambition -- ambitious CapEx program, growth program. We want first to use debt as a way to finance our growth.

We can do that based upon the leverage we have today, 3.8x. I mentioned that in my remarks. We will use equity on an opportunistic basis, but the key is going to use debt. Relative to impressions, I guess, that's the question you had as a supplier of Equinix in the formalized I was -- we were all of us very impressed by what we have seen.

We use Equinix always as pioneer in this market. And after 2 months, I've been -- it looks like a marketing comment, but it's true. Impressed by the quality of the team, the culture and also and mainly the rigor with which we run the operation. And what we have said before, you see the play -- we have high-quality data centers in top-tier markets.

We're connecting the world and we are ready to power the AI agent workload. So very happy. We are very differentiated and looking forward to help their and the team to grow this business even more.

Okay. Any particular areas where you're looking to drill down more or too soon to say? .

No. We want to enable the strategy that out there as a lineup, billboard, Solvesmarter, serve better. I'm going to be too many among many others, to enable this strategy, but no change today, not that there was a need to?

Thank you. Our next call is Richard Choe with JPMorgan.

I just wanted to follow up on the churn, 1.7% super low, but I think you mentioned some of it's delayed. And should we go back into the range. I mean, should be above range and -- or the rest of the year at the higher end?

Or could we be seeing a kind of maybe low end or towards the lower end for the full year?

Thanks very much for the question. As you saw at 1.7, we were below the low end of our range. And I think there were probably -- 2 elements as to why that was so. One was the timing of some churn, including our metal business moving forward into this quarter.

And others really is just the continued focus that we've had on the renewal process from our teams and so we're very pleased with the performance that we've seen in Q1. Notwithstanding that we don't want to call victory too early.

And therefore, I think to keep our churn in the range of 2% to 2.5% for the rest of the year, it's the right thing to do. We do believe that our focus on our available to renew contracts. We've been doing that much earlier in the cycle is actually starting to have an impact.

But we will watch those trends closely over the next several or so quarters. And obviously, our aim is to bring churn down consistently over time. But for now, we're holding into the 2 to 2.5 range for the year.

Our next caller is David Guarino with Green Street.

As we think about modeling in these large onetime fees related to xScale leases, I was wondering if there's any framework you can provide us to estimate and forecast how large they might be.

And then kind of tied in with that, we heard some rumors that the Monocle campus might have been pre-leased, but you guys didn't comment on that at all. So could you give an update on what's happening with that project? And how soon we could maybe expect another large xScale leasing fee after the Hampton one?

Look, these transactions are always very complex and multifaceted and particularly as we have very high demand assets locations that are energized within the right time frame in great locations. So I think as we look forward into the second half of next year in terms of Manuka, it is not timing that we have put into the short term is something that we are still working on.

We have a very robust pipeline of interested parties. And obviously, we want to ensure that we're maximizing the outcome for our customers, for our shareholders, for the company. As we look forward into the second half of the year and into 2026, the guide assumes a total NRR of approximately 5.8% for the full year, and a portion of that is associated with xScale leasing.

An additional comment, if I may, David. If you look at the balance of the year, with the exception of the xScale deal we have mentioned many times now, the rest of though the excel deals are relatively small in nature, and we believe that the risk is balanced for the rest of the year. Thanks .

Thank you. Michael Ng with Goldman Sachs.

Adaire, you talked about agents performing best when closer towards the edge -- have you seen some customer workload repatriation or a shift in investment away from public cloud as a result?

And then when enterprises decide to do more in the edge, could you talk a little bit about the customer decision tree between colocated data centers versus on-prem today?

Sure. And so I think the reality of the environment that our customers operate in is the environment that we've been describing on many of these calls, and that is a hybrid multi-cloud environment. where data sits across the plethora of all of those platforms.

And that creates the opportunity for a neutral platform like Equinix to serve customers who want to run agentic workflows across those environments, but need to access the information that fits in more than one location.

So I would certainly say that customers have a multi-cloud environment that they are, of course, looking at the cost associated with their environments as well as important considerations, particularly in locations like Europe around sovereignty and the compliance to the sovereignty legislation, which may mean that certain parts of their data set need to move into a private environment or be repatriated from cloud.

But I wouldn't say that this is a broad-based conversation that we have across our customer base. I think as we talk to CIOs, it's a conversation that is less about on-prem and cloud and more about the journey from token management, token cost all the way through to those kind of sovereign data controls that ensure that the organization is compliant to whatever set of data governance rules that they have in place for their own business.

And that's certainly a conversation that's an important 1 because we can help customers navigate that by providing through the distributed AI hub access to all of the players as well as to private SLL models, which companies have for smaller, less intense AA type activity. So I think the conversation is really about how you navigate from the token and the training all the way through to that compliance conversation often driven by sovereignty in some locations.

Our next caller is Madison Rezaei with Bernstein.

You've talked about potentially building multiple incremental gigawatts with the Build bolder program. With the full year CapEx plan now around $4.1 billion, is this a kind of annual spend we should anticipate for the next couple of years? Is it more front loaded? Do you think the intensity will ramp as you are sort of moving into more large campuses and a short follow-up to that, are you anticipating maintaining the cash-on-cash return level throughout that build process?

Okay. Thank you for the questions. Maybe we'll take that between us given that there's portions for each of us in here. First of all, as I think we mentioned in our materials, we have 3 gigawatts currently either in land under control or in development today at Equinix.

So that's the broad base of the portfolio that we are working with. But as Olivier mentioned in his prepared remarks, we are at the top end of the range that we mentioned for CapEx earlier at Analyst Day last year.

We are continuing to meaningfully grow our pipeline for new power land and capacity expansion opportunities to enhance what we see as the long-term growth prospects in key metros, which, of course, we know delivers very attractive returns.

So we're very pleased and excited about what we see in the business. We're very excited to position ourselves for growth. But you can see that we are at the top end of our range as it relates to from the Analyst Day event when we provided that guide last year. But perhaps I'll flick to Olivier and allow you to comment a little on the returns and so on.

So the diligence we have before to do deals, deploy new CapEx is very strong. The 25% is a target. That's not an aspiration. We are seeing that quarter after quarter. And we feel very comfortable with achieving that return target as we are in a market where demand is oversupply.

So we can be very selective about the deals we take. We are, and we are very differentiated today. And interconnection is more and more an important part of the value proposition of the company. So we feel very confident about this mid-25% target.

Our next caller is Erik Rasmussen with Stifel.

And Olivier, good luck and look forward to working with you. I wanted -- you talked about Maersk, one of your customer highlights. I know you had a liquid cooling deployment in Frankfurt. But maybe just overall, can you give us a sense of where customer demand is for liquid cooling activity today and how many active or signed deployments are using direct to chip or even immersion cooling? And how quickly is that moving from pilots and maybe scale production?

Yes. Thank you. Thank you so much for the question. So we had quite a significant quarter in Q1 as it relates to liquid cooling orders generally, of which Maersk was one I believe it was a 50% growth in terms of our liquid cooling deployments. And today, we have 36 deployments across our footprint of customers using liquid cooling to facilitate the workload and density of the systems that they have put in place. .

It's active across all our regions, and it's something that we continue to evaluate and work closely on with our customers. So that's, I guess, the landscape that we see as far as liquid cooling is concerned. I said, 36 deployment, 7 orders within Q1 across all of our regions, up 50% Q-on-Q.

Our last question comes from Joseph Osha with Guggenheim Partners.

Wow, I made it Kind of a follow-up from the previous question. As you think about these fairly power dense genetic workloads out at the edge of the network, are you encountering situations where either from a physical space of power or just a thermal standpoint, you're running into constraints?

I'm just trying to understand how much of a challenge that is.

I think probably the availability of power would be the largest constraint in our environment. So as densification increases, quite often, we would need to put some space on hold around that particular implementation in order to ensure that IBX, we're meeting not only the obligations of the workload that is the highly dense workload, but also the service level agreements and the obligations that we have with the other customers who are sharing that space and power. .

And that's, I think, one of the reasons why you see the yield on our MRR per cab grow so effectively up to our 2.5% to 4% of 7% year-on-year. partly due to the increase in densification and of course, the association of a value-added products like interconnect with every installation as one of the measures of that.

Thank you. I'll turn the call back over to you for any closing comments.

I just want to thank you all for joining us for our Q1 call. Have a great rest of your day.

Thank you. This concludes today's conference call. You may go ahead and disconnect at this time.

Okay. Might as well get started. Thank you all for coming. My name is Cameron McVeigh. I cover communications infrastructure here at Morgan Stanley. And pleased to welcome Jon Lin, Chief Business Officer at Equinix.

Thank you, Cameron.

Welcome. And before we get started, I have to read this. For important disclosures, please see the Morgan Stanley research disclosure website. If you have any questions, please reach out to your Morgan Stanley sales representative.

Okay. Done. Jon, let's get started. Equinix reported fourth quarter and full year earnings in February. CFO, Keith Taylor, called it the best quarter ever. Jon, what in your view was the main driver of this momentum?

Yes. I think a couple of different areas there. I'd say, first and foremost, when you look at the performance of the business in terms of our bookings, which is how we treat our customer sales essentially best quarter ever. And I think in a recurring revenue business, we're always under pressure to do that. But to be able to deliver that in a momentum that we're seeing around that, I'd say, I think for the full year of '25, we end up delivering 27% growth in bookings year-over-year. I think for Q4 end up being closer to a 40-plus percent number compared to the previous Q4 of the prior year. So it really just shows, hey, you're starting to see continued momentum in the business in terms of customer demand manifesting across a number of different dimensions.

I'd also say in terms of managing the business, I'd say we're continuing to be -- see continued improvements on driving operating margins. Also, the treasury team has done a fantastic job of managing the balance sheet, continuing to do work on our capital raises, et cetera. So when you put all of that together, I think it just put us in an incredible position to win. And that bookings and that customer growth was also across a really distributed base. I think we had 4,500 deals across 3,400 customers. And so it's not one particular segment that ends up translating into across both service providers and enterprises and across different segments inside the enterprise base, really sustained demand.

Great. And as you just laid out, solid 2026 guidance was well ahead of market expectations in the previous guide given at the Analyst Day in June. Maybe just talk about your key priorities and key focus for the year.

Yes. I think 3 different areas there. First, continuing to capitalize on the customer demand that we're seeing out there, satisfying the requirements. It is definitely an area where, one, we've got to make sure we've got the capacity to be able to satisfy the customer requirements. We've got to make sure we've got the coverage and kind of mechanisms from a sales and marketing standpoint to get in front of customers, hear the requirements earlier to be able to understand and shape the demand as they're thinking about these AI requirements.

Over the course of the last 3 years, I think we've been looking at AI at large and our early read around the industry trend was going to be -- there's going to be a lot of activity on the AI training side, which I think we've all seen. There's going to be a lot of investment into that, again, which we've all seen. Our belief was always the durable value creator for AI is going to be around inference. And when that materializes in a real way, that's when we'll want to go ahead and continue to step up in terms of our activity. And I would say that's what we're seeing. I think some of the announcements that we had at Analyst Day around our CapEx intensity and the increase there was a real realization that we're starting to see the enterprise takeoff here around durable use cases, around value creation for them.

And it's not just on the service provider side where, of course, you'd expect service providers to invest early to be able to see like build in front of where the revenue capture was going to be. And so now we're seeing that kind of long-term trend across multiple different segments around various use cases, both ones that are going to be agentic in nature as we're all hearing about now around how that's going to change things around generative AI, around also though core machine learning systems across different modalities that are going to need different intersections with different data sources. And we believe our -- again, Equinix' fundamental value is when data is from different locations, whether that's geographic, whether that's in different clouds, whether that's from different counterparties, we're the logical place to interconnect all of that and really bring that to life. And so we're starting to see that demand.

So the priority #1 is keep building as fast as we can around that, keep delivering that capacity to support these requirements, keep staying in front of customers to understand not just where are those requirements to land immediately, but also where are those requirements into the future so that we can -- again, you've heard us talk about we're preselling more than we ever have in the past. We want to be able to capture those requirements to inform our development pipeline as well.

The second area is just we're continuing to drive improved operating margins for the business. I would say, again, using a lot of the tools that we're looking at for digital transformation that our customers are talking about, we're also seeing the opportunity to transform our lead-to-cash systems, our kind of back-office systems to be able to drive increased efficiency there, and really flatten the curve in terms of the growth of those costs.

And then the third area is managing the balance sheet. Again, capital-intensive business, making sure we've got kind of best-in-class cost of capital access to be able to deliver services and build as we're -- again, a lot of our construction can be multiyear in front of when the revenue is going to show up. We want to make sure we have the best balance sheet and structure possible to drive that.

Great. That's helpful. Jon, I wanted to ask on latency. How often does the issue of latency come up when you're speaking to customers? And are there any particular workloads that are latency sensitive? Maybe how do you expect Equinix to serve a greater share of those workloads going forward?

Yes. Certainly, all the time because we bring it up. But you think about it from 2 lenses on for interconnection requirements for our customers, there's both the latency and also the throughput required for these workloads for AI in particular, but across the board. And the way Equinix has decided where to locate ourselves geographically, operating in 77 metros in 37 countries now around the globe, it's to be closer to where the eyeballs are, right? We're not developing our data center campuses where there's cheap power. We're not like looking for empty farmland. We're actually located where the nexus of population and like fiber connectivity exists so that we can serve those workloads.

And so whenever we're out there, we like to say, I think we're within 90% of the world's population within 10 milliseconds, right? And so when you think about 10 milliseconds, it's faster than the blink of an eye, it really lets you serve almost any kind of workload that is latency sensitive, whether that's real-time interactions, whether that's gaming, whether that's financial trading, whether that's media distribution most effectively, there's a lot of different areas that we can drive around that. And so those conversations come up a lot.

I'd say for AI, in particular, it ends up being twofold. One, when you're -- when all of us are interacting with our chatbot of choice, like that's not particularly latency sensitive, right? We're all waiting for the dots there and like the token generation takes longer than the latency of the network. Where it does become valuable, though, is when you start actually dealing with multimodal systems, so different data pools that are coming in there being ingested by your AI, well, every time that machine needs to go out, establish a new connection, find a new data source, get that and process that, well, that's like essentially hair pinning that traffic back and forth. And so when you start seeing those effects, that's when you really start to see latency sensitivity come into play.

The second is any kind of machine-to-machine communication. Again, when you start interacting with humans, we're all slow, that's okay, especially on a Monday morning. But when you start seeing the machines actually trying to converse with each other, if you're not able to have the lowest latency possible, well, that's just costing you either like time to token or time to value, whatever your transaction might be. And so in the case of financial services, that might look like, hey, for risk management calculations for end of month runs, that's not particularly latency sensitive. When you're trying to do trading and you're trying to make sure that like you understand what your next decision is going to be on a purchase around that or you're trying to go ahead and inform what your next set of currencies that you might want to move during a day period might look like around that or commodities today, right? Like any of that, the latency sensitivity can be dramatically higher. And so like that's an example of a workload.

But I also mentioned like in addition to latency, the throughput has actually become a more and more important element of the conversation. And like for a long time, we've been dealing with data across the network is increasing. But I would say post-COVID, it had kind of plateaued a little bit, right? I mean HD content is HD content is HD content. 3D-s didn't come about. 4K like streaming is there, but it's not massively relevant in terms of passing this. So the part that we had, as an industry, been thinking about was like what's going to be the next big driver of traffic across the network.

And I would say AI is an example of that, right? The ability to process AI is entirely reliant on the ability to process data and actually like process those workflows quickly. Every time that, that data is hung up on the network instead of hitting your GPU, you're costing yourself money, right? The GPU is the most expensive thing on the planet right now in terms of bringing that to life. And you'll hear Jensen talk about that tomorrow, like the unit of value that is most important is making sure that these GPUs are maximized. And that's why we're focused so much around like, well, in order to maximize that GPU, you've got to make sure that data is flowing into that thing as quickly as possible. So that's increased the amount of throughput required.

So we have -- for Equinix, a software-defined network that we call Fabric. It connects to both the cloud and all of our locations together. When we started that, those were 1 gig circuits, growing to 10-gig circuits with like 10 gig ports, growing to 100 gig ports. And now it's like we're upgrading that network fully across the network to 400 gig ports with 100-gig DCs, right? And so a 10x multiple in terms of the throughput and capacity required. And that can be anywhere from our service providers that are looking to drive AI traffic and workloads into enterprise deployments in private clouds to, again, enterprises trying to move data and workloads from different clouds into a central data repository so that they can have their private AI work against that.

Great. Related to that point, during your presentation at the Analyst Day, you mentioned partnerships with NVIDIA, Dell, Groq. How is Equinix leveraging these relationships? How has the partnership evolved? How do you expect these partnerships to help capture more of these AI workloads?

Yes. We're in a unique position in the marketplace as Equinix, where like we've talked about the neutrality of our business, and that's been core to our thesis since we were founded 27-some years ago now. And neutrality means a couple of things. One is we're carrier neutral. So we invite all of the different carriers to come to our facilities and exchange traffic, but it also means we're technology neutral, right? So we want to make sure that we understand and can bring to life all of the most important technologies in the world to our customers. And that's both from a sales perspective, but more importantly, from how can we accommodate that and how can we bring that to life for these deployments.

Our partnership with NVIDIA started maybe 5 years ago, right, before AI was a real thing and before enterprise AI became a real thing. But what we saw was, hey, they're making incredible progress around machine learning, and that's going to continue to be more and more relevant. Well, when that infrastructure comes to life, how are we going to be able to support that for our customers in our data centers. And so a lot of our conversations start there. So they've ended up evolving and obviously becoming an incredible partner from a go-to-market perspective.

But first, we want to understand how can we help them bring this technology to the rest of the world's customers. Again, our customers are the world's digital leaders at 10,500 customers now, roughly divided, 50% of them are service providers. So we've got all of the major cloud providers, all the major networks and all of the emerging ones, the neo clouds that are developing and all of the enterprises that then need to consume those services.

So it's really important for us to then not just understand, but then also be able to take an opinion to these customers like when they're asking how can I support these liquid cooled GB200s? I have no idea. I don't have liquid cooling in my enterprise data center. We can tell them, oh, we've already thought this through. We've worked with NVIDIA for 18 months on designing solutions around this. We can operate this for you with the same reliability of any production facility tomorrow for you, right? And you can go ahead and start deploying. And so that comfort level that can come from that, but also the value then that they can get from that technology becomes very powerful.

That's helpful. And on the topic of liquid cooling, curious if you could provide an update on the rollout of these liquid cooling solutions in the new and existing capacity. And then just how important is liquid cooling for AI inference?

Yes. So Equinix has about 280 data centers around the world. Around 100 -- slightly more than 100 of them at this point across 45 metros, again, globally, are liquid cooling like able to support, right? We've done pre-engineering work, and these include facilities of ours that are 10, 15 years old, where we understand what the central plant looks like. We understand how to bring water in cooling systems directly to a customer infrastructure, and we're actually comfortable operating that, right? I'd say 3 or 4 years ago, if you asked a data center operator, oh, we're going to have water coming to customer equipment that's like heavily electrically loaded. Is that going to be okay? Everyone is like, that might be pretty challenging for us.

And so we spent a lot of time figuring out, well, how do you actually operationalize that, right? The plumbing is one piece, but knowing what to do in the event of a leak, knowing what to do in the event of a fire, knowing what to do in the event of an operational situation where if you lose cooling capacity into that liquid, these machines are so hot that you will thermally overrun essentially within seconds, like that's obviously a more complicated scenario, right? So to be able to do this in production and be globally consistent around that.

So we did that work about 2 years ago, right, in terms of understanding how to productize the capability for liquid cooling, bring that to life for customers and have been solving for that in what we would consider like a standardized, productized way. We had been doing this as one-offs though for customers for over a decade, right? And so like customers would ask us and we try and figure that out. So that is going great.

I'd say we continue to see customer demand scale now, which is super exciting to see. I think we built honestly, in advance of where those requirements were going to be. And now we actually understand that pretty well. We're doing this in a repeatable motion. It's still, though, from a like total percentage of deployments or like customer request basis, it's still the minority, right, to be clear. It's -- when we see these requirements, again, in the 3,600 transactions that we talked about there in the like low double-digit percentages of total deployment. So call it, maybe several dozen to maybe 100, we'll have inquiries around that and figure out how to support that.

So it's still relatively low volume. But these workloads are generally -- when they are liquid cooled, it's almost always going to be an AI deployment. That's probably the most expensive gear that's on the planet that's going into those deployments. And so we want to make sure that we're satisfying the customer on that delivery.

That's great. Jon, I wanted to hit on cabinet density. Maybe just an update on your power density across your existing portfolio versus some of the planned data centers coming online, and how we should think about the average power density currently and at what rate that might start to tick up over time?

Yes. It's an interesting one. Obviously, you look at like Grace Blackwell, and that's at 120 kilowatts of cabinet for liquid cooled deployment supporting the latest NVIDIA, and that's going to go up, right? We all know like NVIDIA is talking about 300 kilowatts of cabinet for future architectures around that. And that's true. Like, again, the deployments that we have supporting some of that are at 120 kilowatts of cabinet. But when you think about the cabinets that are also supporting that, right? So it might be 4 or 8 cabinets of 120 kilowatts a cabinet GPU capacity, it will need 20 cabinets of storage. It will need another like 5 cabinets of networking gear and infrastructure to support that. And so that average can actually come down pretty rapidly.

Across our new deals, I think new deals booked were at 6.6 kilowatts a cabinet across the entire Equinix fleet. Like our existing base, though, across all of the things that are deployed and live is somewhere just north of 4 kilowatts a cabinet. When we think about data center design for the future, we're certainly upticking that though, right? And like the latest design that we're deploying in Dallas, I want to say, is around 18 kilowatts a cabinet. We generally think somewhere between the 15 to 20 depending on the mechanical infrastructure that we have in place. That feels like the right average.

And the reason I say that is we'll have liquid cooling to support as dense as you want. I think the latest designs where the team was telling me it's more like 500 kilowatts of cabinet or maybe even a megawatt. It's just you need a bigger pipe fitting for that, which blows my mind. But the important part is it gives you the flexibility, though, right? Again, if we used up, let's say, it ends -- let's say we're wrong on density that ends up being overly dense. We can support that with the liquid cooling infrastructure that we've deployed there. All it means is we strand shell, right? And honestly, the shell of a data center is the cheapest part about the construction. We want to maximize the utility feed that we're getting out of the utility provider. We want to maximize our electrical and mechanical systems. So we're delivering that.

If we're wrong the other way, if you build too dense and you actually can't sell that dense, you've stranded all of your capital investment on all of your electrical and mechanical plants. So that's a really bad outcome. And what we've seen over the years is it's really hard to tell where the puck is going to land. Our data center investments when we're building them, this is not a 3-year investment, right? This is a 2-year construction project, and we're expecting that to be able to deliver revenue for us for the next 20-plus years.

Like we want to make sure we're thinking about flexibility of that infrastructure then and the long-term value that, that thing can drive for us because we're not just worried about the customer for today, worried about the customer on the renewal. We're worried about the computers and workloads that will be supporting there. And what we've seen over time is that can move, right? Again, everybody has been focused on GPU density and like the training in that density. It is certainly very dense.

When we look in -- and we've been talking with silica start-ups for the last 5 years, when you think about inference and even like NVIDIA's acquisition of Groq, the AI inference chips are actually much less dense, right? The compute required to drive that, the complexity of the silica is significantly lower. And when you think about inference, a lot of that can be air cooled, that can be lower density. And 5 years ago, everyone was saying, hey, Arm is going to be the -- replace all of x86 chips in every data center, densities are going to go down to 4 kilowatts a cabinet. And maybe that will happen, right? So we want to make sure we're designing though so that we can go ahead and drive revenue and value for the long term.

Got it. So I'm curious how you think about price elasticity of your customer base. Monthly recurring revenue per cabinet has been going up. And would you expect this to continue over 2026?

I think there's definitely some amount of price elasticity there. I think it's certainly something that we're always trying to identify and figure out, hey, where are the opportunities for us. And it comes from a couple of directions. One is our pricing per cabinet will go up like inflation is a real thing around the world, right? And like our input cost in terms of data center construction, development, all of that, it has been going up over time and probably will continue to. Utility costs are highly variable. That can go up over time. The density of the cabinet itself, we're delivering, again, more kilowatts into a cabinet than in the past. So that can drive pricing and yield up on a per cabinet basis. Our interconnection offerings continue to drive more and more value for our customers. And again, one of the reasons Q4 was so great for us, like when Keith says it's firing on all cylinders, like interconnection actually started to reinflect in terms of growth, and we're starting to actually see that go up again, that drives more dollars into that yield.

So I'd say, overall, it's a complex algorithm to be able to get to exactly how far you can push that. But I will say the part that's very like interesting over the course of the last like 2 years, especially around AI and the importance of the workloads that are being driven there, the value creation being done out inside of that infrastructure now and also the pricing of like the GPUs and that technology stack is significantly higher than your standard like web servers of the past, right? And so when more and more value gets created out of that deployment, then there's a lot more elasticity around like, well, it's going to cost more to make sure it relies -- runs reliably is always on and can be connected to all of the data sources that matter like people are like, okay, I'll pay up to be able to go ahead and make sure that I'm maximizing my dollar value out of this massive capital investment that we're putting in.

Great. Jon, I wanted to be sure we mentioned power and talk about it. On the last earnings call, Adaire had mentioned the 3 gigawatts of developable capacity is powered or close to being powered. Can you talk about maybe just the power procurement environment and potential challenges Equinix is seeing at the moment?

Yes. It's -- on a global basis, it's interesting and like for the first time to be able to see in the mass media like talk about data centers all the time. So infrastructure is sexy again, that's great, except when it's negative press. It's fascinating, right? I'd say, one, you have to be long-term thinkers in this space to be able to have the relationship with the utilities that matter, and they have to trust you to know that you're going to be there. And candidly, there's a lot of money that's come into the data center space. They aren't long-term operators. They're putting a lot of weird requests in. And as regulated utilities are, they have to respond to those, right? They're not allowed to just say like, I have no idea what you're talking about, and I've never seen you before, I'm not going to give you power. They have to respond to that.

And so that creates a lot of challenges for the entire market of like, well, how do you sort between all of these different requests that may actually be at the end of it with one customer underneath that load, right? And so you end up seeing gigawatts worth of power requests coming into one particular market or jurisdiction. And again, many of us in the industry are like, oh, we know exactly what hyperscalers are, that customer wants that requirement. It's not actually like 2 gigawatts, it's maybe 500 megawatts, and there's this many people that are all trying to sell to that one customer, trying to get power certainty on land.

So we've been working with the utilities, and I'm really, really happy with the work that we've done there and just say like, hey, like raise the bar, right? Like actually force people to make it a little bit harder to get access to the utilities actually put processes in place that require like payments for these load studies. So it can't just be random land developers doing that. We want to make sure that there's real long-term providers that are credible making these requests so that we can get some of the noise out of the system. Again, do it fairly. That's obviously very important for us, and we're very serious about our neutrality. Like we want to make the rules for everybody the same, but like just raise the bar a little bit so that you can get some of the noise out of the system. And that's been a great help.

And then the fact that we're willing to do that, and we're willing to invest in all of the development, and we've been very like loud and open with the communities at large, along with the utility providers like the data center industry needs to make sure that we're paying the fair share of what we're doing, whether that's net new generation creation or transmission costs that we're creating so that we're protecting consumer rate payers for paying for what we're doing as an industry, right? Because -- and one of those is just from an ethos basis, we take that very seriously.

Again, we're going to be long-term owners and operators of these facilities. Our people live there. I live in Northern Virginia. like I see the data center development. I want to make sure like my kids are having the benefit of the tax revenue, et cetera, around that. And so we're going to be in there for a long time, and we're really deeply partnered with the communities.

But the second part is like if we look like more selfishly around that or more commercially, if we're doing bad things and consumer ratepayers are like ending up being impacted, you're going to get regulated. And like that's not a good outcome and you're starting to see the pushback now, right? Because again, I would say some players that were working in this industry weren't thinking as long term around that and you start seeing people say like, we should put a moratorium, like these data center things are going to like impact customer housing.

So I would just say it's an opportunity for the industry as a whole to kind of grow up, take this seriously and work with government, right, work in close partnership to say like we need to do this. Like one of the good things that I'm seeing out of the administration right now is like seeing, hey, there seems to be that lean of -- we need to make sure we're protecting the consumers from the impact of this net new piece.

We've been working with whether it's ComEd or PG&E, you might see some announcements that went out over the past couple of months where, again, because we're working with the utility around this and consuming load of generation that was already there, it actually reduces the consumer payer's price, right? And again, we're paying for substation development. We're paying for actually upgrades to the transmission system to be able to take that. If you have unused generation that's out there in the system, well, the consumer is paying for that as well, right, in terms of a higher unit cost on their power. And so the ability to have that load is useful.

You're starting to see more and more happen in the space, though, right? And I think there's a lot of talk right now about, hey, if you're going to bring large load on to portions of the grid, you've got to go ahead and make sure that you're actually kind of bringing your own electrons, so to speak, creating net new generation around that. And like total believers in that, right? Huge believers that we need to make sure that this industry as a whole is paying our share of the way around that. And whether that's ourselves or our customers around that, like the total economic benefit that we're driving around this is high enough that we should be able to take that.

And I think that, that's a really important message to communities at large. When they hear about data center development, and I'm sure all of you guys have been covering something like that and watching the space, there's a lot of push like what are these things actually doing? And it's like, yes, the data centers are not producing like cat pictures and stuff like some are. But really, like it is the fundamental like driver of economic activity now, right? Like digital infrastructure is the factory of today. It's the economic -- it's the mall of today. It's the economic center that's happening because so much is happening inside of these facilities.

And so it's really important for us as an industry and for our investors, et cetera, to understand that and be able to tell that to your stakeholders around like, hey, like this is actually how like GDP is created now, right? It's a meaningful portion of that, that's going to show up digitally. That's what's happening in the data center, right? It's actually coming online, converting power into money for somebody. That money for power is actually not for the data center developer generally. It's for the customers inside that data center.

Great. And just a follow-up on that point. How does Equinix internally, how are you thinking about using grid connections versus some of these behind-the-meter power solutions, you think about fuel cells or turbines? How does that fit into the strategy?

Yes. I mean we're operating, like I said, in 77 markets across 37 countries. So it's really all of the above strategy. In some jurisdictions and again, in the vast majority of the time, we want to work with the local utility, right? Like grid power is the best solution because you end up creating more shared resource across a broader set of constituents to be able to do that. In cases where the grid is not able to accommodate our power requirements, so we have done and actually created like net new power generation.

And we're looking into the future around that as well as like, hey, how can we scale that up? How can we do that? It's -- on a global basis, post kind of World War II and kind of the industrialization of the global economy, like we've actually generally seen power utilization and draw go down, right, for -- I want to say like a 40-year period. And only recently is it starting to inflect back up because of electrification of the grid, electrification of vehicles, more efficiency around heat pumps, like all of that's driving electric utilization up and then data centers as well. And that was like before AI, like you were actually, for the first time, actually seeing like draw increase across the globe. And then now you layer on, hey, all of a sudden, there's also all of this data center activity associated with AI and the electricity consumed by that. So that's net new like load that's coming on.

And for a long time, again, because utility was going down, well, those power plants were still there, right? You hear about all these like shuttered power plants. It was like, well, they were created because we were smelting aluminum. And I will say, from an environmental impact to data centers far, far better than like having aluminum smelting in the community you're operating in. And so like that's kind of the replacement that we're talking about now, just like, okay, it's fundamentally converting power into financial benefits.

That's helpful. We have a few minutes left. I wanted to open it up to any audience Q&A, if there are any questions. Now you can think about them. I'll ask one.

Go ahead in front -- there's a mic running here.

Just want to -- if you could just talk a bit more about the 20-year life of the assets and how you see that playing out? What do you -- obviously, the CapEx you've spent, a 2-year build cycle and then you're talking about the 20 years. In terms of the upgrade cycle you expect to have to do to make that 20-year life cycle work for the assets. Can you just talk a bit more about that?

Sure. Yes. And I would say it's 20-year plus, right? Again, most of our assets we actually think about as essentially perpetual. Like we've constructed the data center. We're putting in the maintenance CapEx to keep it going there, but it's going to be generating revenue for the entire -- like outside of our planning horizon, I guess, is the way I would say it. Some of that does require maintenance CapEx, right? Obviously, we're putting that in on an annual basis. There's also requirements like for some of the longer lead elements of that, like we started categorizing like redevelopment CapEx to say like, hey, if we have to replace the 15-year plant, like some of the core data center infrastructure, whether that's the generators that are running or whether that's like some of the electrical switching gear or some of the central chiller plant, that could be like a 15-year asset, and we might be able to say, okay, we can put enough maintenance in there to get a little bit longer out of that. But at some point, you're going to go ahead and want to refresh that.

The plus side of all of that work is there's been so much additional work that's happened in terms of efficiency gains and like just upgrading and understanding of how to do that mechanical and electrical work more efficiently that we can upsize that, right? And so in a lot of cases, we've ended up taking like -- take our DC2 facility right now that's going through some of this redevelopment, we can add incremental power availability into that site from both efficiency and from upsizing the infrastructure, which means we can actually generate more revenue into the same facility, right? And so that's how we think about that from an underwriting perspective. But yes, I mean, we're essentially continuing to model our ability to generate revenue out of these things for a very, very long time.

Could you briefly touch on xScale? If you think about it 5 years down the line, has it become a bigger part of your overall business compared to how you thought about it a year or 2 ago?

Yes, it's a great question. I'd say yes is the answer. And certainly, that's the reason that we -- when we started xScale, we were thinking, okay, it's -- our customers have been asking for it for a long time. For folks who don't know what about xScale, basically, our core business for Equinix on the data center side, they're multi-tenant facilities that we call retail, right? In any given facility, we'll have anywhere from dozens to multi-hundreds of customers inside one data center. A large part of the market, like the hyperscalers and some of the other large customers may want an entire facility for themselves, right? And so when we look at that, our average expectation on returns across where we're developing capital for our core business, it's in the -- I think our target that we've said publicly is 25%. It's in the 20% like mid-20s and up range, right? And it's like, again, it's a beautiful business.

I'd say when you're developing a single-tenant facility for a customer, like your costs are pretty well known, right? It's pretty apparent to the market at large around that. And yields around those facilities are generally, call it, in the high single digits to low teens. You can take some leverage on that, work that up into the mid-teens. So for 2 reasons then, Equinix had not wanted to pursue that as one of our growth vectors: one, it can be highly capital intensive with a much lower return; and then two, from an actual like the structuring of that because you want to apply so much leverage to that, we thought we wouldn't be able to maintain or at the time when we were thinking about it, get to investment grade or maintain investment grade, if we were doing a bunch of hyperscale development around that. And that's largely been true, right? When you look at outside of the data center landscape, I think there's 2 maybe like depending on how you squint, maybe 4 public players right now. And that's the reason why, right?

And so when we looked at it, though, our customers were asking us loudly enough for this product that we said, okay, let's see if we can figure out how to do this. We ended up creating a development joint vehicle structure. Our first one was with GIC, the sovereign wealth fund in Singapore, then we did one with PGIM. Now we announced one recently in the U.S. with both GIC and CPPIB, the Canadian Pension Investment Board together for $15 billion in the U.S. So that's where we're doing kind of solving for the hyperscalers around that.

I'd say -- so yes, in the sense that our initial investment for xScale was we had gotten $7.5 billion of equity commitment there. We've tripled that in total size now with the equity commitment from CPP and GIC, and we're executing against that. And I'd say it's delivered what we were hoping out of that, right? One, it gives us capital efficiency, but still gives us the customer -- being able to solve for the customer demand in the ways that we wanted to. And it's also given us quite a bit more scale in terms of our procurement capability on utility as well as equipment. So it's been good, and we'll continue rolling forward with it.

Excellent. We are out of time. Jon Lin, thank you so much.

All right. Thanks all.

[Technical Difficulty] with us, Equinix and CEO, Adaire Fox-Martin. This session is for Citi clients only and disclosures have been made available at the corporate access desk. [Operator Instructions]. Adaire, we'll turn it over to you to introduce your company and team, provide any opening remarks, tell the audience the top reasons an investor should buy your stock today, and then we'll get into Q&A.

Okay. Good morning, everyone. Thank you so much for joining us so early this morning, and thank you to Citi for giving us the opportunity. I'm joined by Phillip Konieczny here, who is our SVP for Finance, our treasury function and our IR function reporting to Phillip. And together, we look forward to addressing your questions today. And then I will have Phillip read that disclosure. Thank you.

Am I on here?

yes.

Okay. Some of what we will talk about today contains forward-looking statements. Please read our SEC filings for information about factors that could affect these statements, and I'll turn it back to Adaire.

So the top reasons for buying Equinix stock. I mean maybe let me just do this. I'll just lay out 4 reasons, and then I'll come back and drill into each one and see how that lands. First, the demand for infrastructure is absolutely surging and Equinix is at the center of that demand. Second, Equinix provides an essential layer of connectivity. Thirdly, we're building as the backbone of AI inference economy. And fourthly, we're executing exceptionally well against the opportunity.

So maybe let me just go back and drill a little on each of those. First of all, the demand for infrastructure is absolutely surging. Customers are asking us the same questions that probably many of your companies are asking around how they can differentiate their business models, their business process, their business outcome with AI as an enabler of those process changes. And that question then leads to considerations about the infrastructure that will be necessary to support that. And there's no doubt that, that infrastructure is much more complex and much more distributed than it has ever been before, and this plays directly to a core strength of Equinix. So our infrastructure demand element is a key factor in driving the growth scenario that we're experiencing today.

Second, Equinix is the essential layer of connectivity. We are very much the neutral ground where AI, cloud and networking requirements converge. So we enable enterprises to connect and to extract real business value. And there are reasons why that is so. First of all, there are advantages that Equinix has built over decades. We have the market-leading number of cloud on-ramps. We are a global organization with presence in many critical metros. We have the broadest enterprise customer base in the segment and more than 0.5 million business-to-business interconnections that are active today. So we are that essential layer of connectivity. These are our core strengths, and we will continue to build and evolve on them.

In the Q4 that just passed, we saw the role that AI has in driving our business momentum. 60% of our largest deals in our Q4 portfolio could be attributed to AI workloads. Now interestingly, of that 60%, 50% of those were led by enterprises. So companies in the retail, financial services, health care and media sectors making use of Equinix to deploy their AI workloads. We also saw an uptick in our liquid cooling sales during Q4. We had 11 sales of liquid cooling during Q4 and 5 of those 11 interestingly went into New York campus to support financial services. So we're certainly supporting the ability to land these workloads in an Agentic world where we're supporting it with network diversity, with cloud proximity, with AI-ready interconnection and with the latency that these workloads require. Location and density do matter, and this is something that is important to us, and our platform continues to excel as every connection adds to the platform.

And then finally, strong top and bottom line growth. We're very much focused on delivering shareholder value. We do that through very disciplined execution. We focus on doing the important things well, on serving our customers so that we generate the highest return and that we deliver the AFFO per share that our shareholders would like to see and expect from us.

So 4 elements that we think are reasons underpinning why our stock is a good buy today, demand for the infrastructure, Equinix as this essential layer of connectivity, the backbone of the inference economy and very strong top and bottom line deliverables underpinned by excellent execution from the team over the last quarter.

Adaire, thank you for that. Maybe jumping in on some of what you were describing. Just from a high level, when you look at the business, what are the metrics that give you and the management team confidence in the durability of this retail-centric strategy given rising power density needs for IT infrastructure and as the hyperscalers are expanding their offerings to go after the same customers.

So I think that there are a number of signals around our KPIs that indicate the durable nature of the demand and also, I guess, the role that Equinix uniquely plays in fulfilling that demand for our customers. First of all, I think you can see it in the bookings performance in Q4. And I would say actually throughout the second half of last year, but particularly in Q4, we had a very, very strong bookings performance, delivering $474 million of annualized gross bookings. But I think it's less about the actual dollar numbers, although they are a significant growth that represents a significant growth on a year-on-year basis and on a quarter-on-quarter basis, but more about the sheer number of transactions that underpinned that number.

We did more than 3,400 transactions with over 4,600 unique customers. So in our model, we are very diversified. We're very diversified across segments. We're very diversified across industries. And we're very diversified across the workloads that we support from our customer base. So I would say one of the first leading indicators of the durability of the model is the bookings because bookings subsequently turn into revenue within that 90-day period.

The second indicator is our pipeline execution and our pipeline discipline. How we are managing to come into every quarter with a highly qualified pipeline of opportunities, which means that our conversion rate in situ in quarter is particularly high. This is nothing other than relentless discipline. And I think that the teams have been doing an amazing job looking at how we navigate our pipeline, but also how we navigate the opportunities that are there to the best location for that opportunity. Today, we're in a supply-demand environment that is very favorable to Equinix. And quite often, we find ourselves in a situation where we may have 8 or 9 customers who want the same piece of capacity in a particular location, in a particular metro. We work now to ensure that through a rubric mechanism, we identify the customer that we will work with to actually implement into that capacity, but that doesn't mean we tell the other 8 to go away. We work with the other 8 to demand shape the workloads into capacity that is available in our footprint. And that has been something that has been very beneficial both in terms of long-term customer relationship, but also in maximizing the use of our capacity.

So bookings, pipeline certainly a second measure. And then I would say the third from a top line perspective is how we are managing churn. When we look at our churn, we're at the lower end of the range that we've guided to. We guide to 2% to 2.5% churn. In Q4, we are at the lower end of that range. And a number of reasons for that internally. One, some new predictive capability that we built ourselves with AI to have a look at our customer base and define our customers into segments that we define as ATR, available to renew. So we know well in advance when a customer is up for renewal. Reconfiguring our customer success motion in order to have them focused on upsell and cross-sell opportunities and making those phone calls early. And we've started to see that have an impact on churn because obviously, keeping a customer means that the revenue continues rather than there being a gap in revenue when you implement a new customer into those environments.

So I think those are some of the top line measures that we're looking at in terms of growing our business. Obviously, we're very focused on our operational efficiency and effectiveness. How we utilize our power is a key component of that. And that's something that we have done very well. Also, we have had a tailwind because power prices have come down, surprisingly enough, given the narrative around energy over the past period of time, and that is something that obviously falls straight to our bottom line.

Very helpful. If we could also double-click on your comments around the bookings. So we think of Equinix as a very well-established company, been operating now for 27 years and you delivered 42% bookings growth in the fourth quarter after building momentum through 2025. So can you discuss as an organization, what has to come together to deliver that type of bookings result? And maybe give us a little preview of what that means also for the sales capability of your organization as you look forward?

Sure. So I think there are a few factors. I mean, first of all, we have a significant presence in all major metros as it relates to sales execution. So we have almost 700 quota carriers across our business who operate across the 10,000-plus customers that today are our customer base. And so when we open capacity in a new metro, we're not necessarily increasing our sales costs in order to prosecute that new capacity because it's already embedded in our metros and embedded in our team.

So first of all, we have a very focused sales force who have targets that they are obviously set to meet, processes that support them in doing that, systems that support them in doing that and looking as always for the opportunity to make that whole process as effective and as efficient as we can so that we convert as many opportunities as possible. I think another important measure of our success last year was our ability to accelerate capacity into the 2026 window, the 2025, 2026 window. Our design and construction team at any one time will have 50-plus projects, 50-plus major projects underway around the world. And our team were tasked with releasing more capacity into the sales force for the sales force to be able to execute against that. They accelerated 30% of the retail capacity last year. And they did that through a number of different techniques, but essentially, it resulted in an acceleration of 30% of capacity.

Now there's still some window to do some of that as we move into this year, but that will become a lever that you can only pull so many times once you've looked at your project processes. But I will say that our design and our construction team are generally accelerating builds and delivering capacity faster. So that was also a factor that enabled us to have the bookings that we enjoyed in Q4. And I think since we opened the visibility of bookings to our investors, we did that in June. You can see that bookings are ticking up and moving to the left -- beg your pardon, moving to the right. And we hope that we're in a position with our pipeline to at least be able to continue that trajectory because certainly, the demand in the market is there. But I would say that bookings can also be variable from a seasonality point of view and so on. One of the things that we've done is try to iron out seasonality across our year. And to have the teams really focus on Q1 and Q2 as 2 quarters that build in current year MRR for the current year, which is obviously how we're judged. And then 3 and 4, 2 quarters that then set us up beautifully to exit into the next year. So my team don't call Q1, Q1, they call it Q5, so that we continue to build on the momentum that we had last quarter.

Maybe just to add one other thing. I think another motion that's relatively new for us is because of the capacity that we've been able to pull forward is what we call kind of a preselling motion. And so we've opened up the window with which we're -- our sales team is allowed to sell into new IBXs that are going to be coming online that used to be -- if you were to ask me 5 years ago, that would have been about a 3-month window, 3 months before our site is going to go live, sales will be able to sell into that. Now we have extended that out to about 12 months. And so we've talked about a presales balance that we have of $170 million, which sits on top of the bookings. And the way to think about that is that will turn into bookings in the future periods. So we're able to derisk some of this capacity that's coming online for us in the future quarters as well.

For example, Mike, in Q1 at our earnings call, we indicated that at the time of earnings call, we'd already closed 45% of our Q1 pipeline, and we had $100 million in presale at the time of earnings.

And that's on top of the $170 million that you started with?

Just as we think about efficiencies internally for the company, how are you thinking about the opportunity from AI deployment internally? How are you thinking about build versus partner versus buy and those solutions and opportunities?

Probably like every other company, looking at it through the lens of how does this help us be accretive to our core measure. There are certainly some things that we would buy, but there are areas of our business where we have, we believe, a unique approach and that process differentiates us and enables us to execute in an extrapolated way around certain topics. I'll give you, for example. We have built AI capabilities into our capacity visualization, which is something that is quite challenging to manage in a retail colocation facility. Remember, we have hundreds of customers sitting across our various different data centers. And in many cases, you're managing your capacity a little bit like a Tetris block. So one customer may take this small piece here and another customer a small piece here and then you have to look at the capacity that's available in that location and see how you best configure that in order to make that available for our customer. So making that visible to our sales team through the lens of AI and being able to look at in real-time potential configurations of that available capacity is something that's been highly valuable.

And just providing a single source, enabling us to work with customers across regions, across geographies, just one example of where we self-build. We've also self-build an AI capability around our cage configuration. We collect a terabyte of data a day. It's incredible to think of the data that we collect and have available every day. And when we look at our customers, they're often in more than one location with us. And so we know already from engaging with them pieces of how they like to make use of Equinix and what kind of configuration they like to have in Equinix. So rather than start with a blank sheet of paper, we start with a twin. Based on all the data of their previous implementations, we can now say things where we visually build this cage, we can say to the customer, "Hey, you always have the camera in the top left corner. Is that where you wanted in this cage." And then we just place the virtual digital camera in that environment, regenerate the cage specs again. And so by the time that we get to closing that transaction, we're very close to understanding what actually has to be implemented. It just passes across, which means that we reduce the time frame between booking and billing, which means then that we can get faster to MRR. So lots of examples of where we're using this also on our construction side, too.

Thanks. And for our last 15 minutes, I'm going to give a little preview of the topics that we're hoping to hit? And then if there's any other questions or topics that our group here wants to hit, please raise your hand or use the system. So real quick, we'll talk about AI inference, the financial guidance. xScale enterprise a little more and atNorth, which was recently announced. So maybe first, moving over to -- or staying on this whole theme of AI. Can you describe a little bit more from a customer perspective, what you're seeing in terms of the uptake of the inference models? And what are the milestones that investors should be looking for as they try to gauge the timing and magnitude of benefit for Equinix, including what enterprises could contribute to this?

So first of all, we have the privilege of spending a lot of time with our customers. I meet a lot of customers every single week in different parts of the world from different industries. So you get a lot of anecdotal information around our customers' use of this tech based on those meetings, those conversations and the work that our technical teams are doing with our customers. I would say that we are like very early days really in this. If you think about your own company, probably like I have just described, many of you are making the move from proof of concepts that have demonstrated some business value to the implementation of a solution in real production environment.

And the vast majority of companies are no different to the kind of journey that you and your own companies are on. So I think it's very early to specifically call milestones at this point. But there's no doubt in our minds that the demand is extremely sustainable, and that we will see this continue to augment the broad base of workloads that we support in our data center environments. I think that 60% figure is an important indicator, but that was of our top deals. Today, we are working on the systems to enable us to capture that information all the way through the segments of transactions that we capture. And I guess we'll get better to let me when we achieve that. But today, it is early to call specific milestones, I think, but we can absolutely see architectural and infrastructure discussions, I mean, that take into consideration things like the fact that most customers will be multi-cloud. Most customers, particularly if they're regulated, will maintain a part of their data either with us, usually with us or behind their own firewall. Most customers will have complex requirements when it comes to managing the underpinning network and the connectivity that an Agentic workload may require. And data gravity and access to your customers are key components of being successful here. And I think these are all elements that play to the Equinix value proposition.

And then moving on to the financial guidance. Just given the bookings momentum that you were describing earlier, what are the opportunities to grow recurring revenue at the upper half of the range or better? And maybe also it's an opportunity just to bridge how the AFFO per share growth outlook has evolved from back from the Analyst Day, which is mid-single digits. Now you're in upper single-digit territory.

Yes. I think there are probably 3 reasons why you see a difference between now and Analyst Day, and then I'll get Phil to drill in with a degree of specificity. First of all, our bookings performance, our top line performance was better than we expected in the second half. And I think we have -- specifically as we ended the year, and I think we have built momentum and muscle memory into the system around that bookings performance.

Secondly, from a capital perspective, we were able to raise at a lower cost than we had initially envisaged at Analyst Day. And we also were able to utilize that capital very efficiently and capitalize it. So that also, I guess, was a second reason why you would see a difference in terms of where we are, and I'm completely having a blank on the third. Yes. And the third was the capacity that we were able to accelerate into the year, which I have already mentioned to you.

So I think those are some of the differences between where we were on Analyst Day in June and where we are now. And we're very pleased with that performance and very pleased with the momentum that we see in the business. And so working to ensure that we continue to drive for value creation and that we continue to drive as hard as we can towards the top end of that range that we guided to.

Yes. And maybe just to add on a little bit just on some of the numbers specifically. So on the AFFO per share guidance that we gave of 8% to 10% for the year, so 9% at the midpoint. That does include 100 basis points of benefit from the timing of a transaction moving from Q4 to Q1. So we want to make sure we normalize for that. But it's still, I think, to your point, Mike, 300 basis points of improvement relative to what we saw last summer, all to the reasons that Adaire kind of just pointed out and what's driving that. So we feel really good about the momentum there. And I guess just one last point that I would make around when you think about the underlying performance of the business, obviously, it all drops to the bottom line on AFFO per share. But really one area to continue to focus on is our MRR growth, our recurring revenue growth, which really talks about the underlying fundamentals of the business. And again, we've seen incredibly strong momentum around that in 2025, and that's obviously extending into 2026. So that's the key -- one of the other key metrics, I think, to focus on as we go through the year.

We have a handful of questions that are coming in through live Q&A. So we'll make sure to get to those. One of them is, are you comfortable with the return and control you give to capital partners at xScale? Will you adjust that in the future?

Sorry, can you repeat the first bit? We didn't catch that.

Sure. It said, are you comfortable with the return and control you give to capital partners at xScale? And will you adjust that in the future?

I think our partnership with our xScale partners is working exceptionally well. we continue to evolve and grow our xScale portfolio with their support. So no, I don't see that changing in the short term or medium term.

And so with xScale, maybe one other question is just an update on the pipeline that you're seeing for xScale and the regional expansion opportunities beyond the Hampton facility, which I think Equinix has described in the past is expecting to lease up during this calendar year.

Yes. We have a very strong pipeline for our xScale opportunities. It's a model that allows us to serve a very strategic set of customers. It's also important to remember that many of those customers also have a very strong position in our retail footprint. And that joint adjacency between xScale and retail is something that is a value add both for them and also for the broader customer base who require cloud adjacency for their workloads.

And I was just going to say that some of -- you've seen some of the land acquisitions that we talked about last year that we've done. Some of those we anticipate will be contributing to the xScale franchise here in the U.S. But I think it also points to -- we've got ambitions to do more in EMEA and APAC as well with our xScale business. And some of what we've talked about that we have acquired, we anticipate standing up additional JVs in those theaters as well.

And can you discuss how you look at the TAM expansion opportunity from going after what I think are described as more midsized deployments from your enterprise customers? And maybe dovetailing into the atNorth announcement, how does that play into your enterprise strategy? And maybe just help people understand how to frame that in the broader portfolio in xScale.

Okay. So when we look at our enterprise TAM, I think what you're referring to there, Mike, is that our customers are certainly asking us for larger footprints than we have been previously asked for in the past. And this is something that we factor into our acquisition strategy, both our land, our power acquisition strategy, our capacity development strategy and the design of our data centers. The latest data centers that we're designing are being designed to a higher density than the ones that we would have built, for example, 10 years ago.

We are still commanding high pricing and strong pricing against that demand backdrop. And I think that our flexibility to be able to support the multimodal requirements of our customers from those in -- who operate in the KVA space up to those who operate in the megawatt space is something that marks us as a little unique across the segment because we manage across 3 footprints from wholesale to large footprint all the way through to retail colo. In addition to the TAM at the enterprise level for large footprint, I also think that as we begin to navigate through our channel strategy this year that, that will unlock more TAM for us as we will have sellers on the street who are not part of the cost of sales specifically or the SG&A costs of Equinix, and that is something that we're actively engaged on this year looking at how we -- with some of the tools that we've developed, really activate our channel partners to sell and represent Equinix.

And then as it relates to the atNorth acquisition, Phil was very close to that, so I might allow him in a moment. But we're very pleased with the acquisition. We're very pleased with the partnership as it continues to evolve with CPPIB. We believe it's a very complementary acquisition. First of all, in a theater of operation that's extremely important to us. Secondly, with a company that has a 17-year history and shares many of the ethos and values that we do around power and the sustainability narrative in that region. But thirdly and more importantly, releasing capacity for us in EMEA, where we know we have a very, very strong demand profile in a time frame that will be critically important to us.

And then fourthly, knowing that as soon as we close this transaction, it will be immediately AFFO accretive. So a lot of very positive elements about the atNorth transaction, which, of course, is announced but still subject to regulatory process.

I just want to hit another one that came in. What is your exposure to the software industry? And how do you view the risks this industry is facing from AI?

So when we think about the software industry, I'm assuming that there's an underpin around some of the Software-as-a-Service providers here that would make use of Equinix as an environment. Our exposure is extremely limited. Less than 3% of our total MRR would come from companies in that segment. So our exposure is extremely limited. I think, again, just to reiterate, we have an extremely diverse customer base across all segments, across all industries, across all geographies. So we have very little risk concentration in either a single segment or a single customer across our revenue mix. I do think what's unfolding in the software industry will take some time because when you think about many of these solutions, they are the backbone of operations for many companies, and they are not something that can be simply just switched off or simply replaced. But to answer the question around exposure, it is less than 3% and speaks to the diversity of customer base that we enjoy at Equinix.

Great. That brings us to our rapid fire. So on what KPI would you pick as the most important for your category? And what is your expected growth in that metric for 2027?

Well, for us, AFFO per share is the most important measure, and I think we've already indicated our growth prospects.

And then just Will the data center sector have more or fewer or the same number of companies a year from now?

Probably roughly the same, but we do know that there are some that are looking to go public this year, mostly in the wholesale space, but we'll see how that pans out.

Terrific. Thank you.

Okay. Thank you.

Good afternoon, and welcome to the Equinix Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Also, today's conference is being recorded. [Operator Instructions].

I would now like to turn the call over to Philip Konieczny, Senior Vice President of Finance. You may begin.

Good afternoon. and welcome to our fourth quarter 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 identified in today's press release as well as those identified in our filings with the SEC, including our most recent Form 10-K filed on February 11, 2026, and our most recent Form 10-Q. 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 our policy not to comment on its financial guidance during the quarter unless it is done through an explicit public disclosure.

On today's conference call, we will provide non-GAAP measures. We provide a reconciliation of those measures to the most directly comparable GAAP measures in today's press release on the Equinix Investor page at equinix.com. We have 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.

With us today are Adaire Fox-Martin, CEO and President; and Keith Taylor, Chief Financial Officer. At this time, I'll turn the call over to Adaire.

Thanks so much, Philip. Hello, everyone, and a warm welcome to our call today. I'll start by saying on a personal level, how deeply pleased I am with our performance in 2025 and particularly in Q4. I Demand for our solutions has never been higher, and our teams have stepped up exceptionally well to capitalize on it.

To our employees around the world, I'd like to say a huge thank you for all you are doing to achieve our goals. I also want to thank our customers and partners for the trust they have placed in Equinix as we intensified our investment in growth, investment that is already paying off.

Our bookings have accelerated dramatically. Our recurring revenue growth rate continues to climb, and we are managing our spend with great discipline. All of these factors are combining to fuel an expansion pipeline and growth in AFFO per share materially ahead of expectations. Given our momentum exiting 2025, our confidence in our 2026 plan has grown. This is reflected in both our revenue and our AFFO per share outlook.

Our performance and our outlook demonstrate 2 things: The first is that Equinix is connecting the fastest-growing segments of technology infrastructure and the value of our platform is increasing with every connection. The second is that our execution continues to improve. This winning combination delivers superior customer outcomes and stronger shareholder returns. Not only are we on the right track, we're moving far faster along it.

Now our momentum is clear across several key metrics. Monthly recurring revenue, the most powerful driver of long-term value creation grew 10% in Q4 and 8% for the full year on a normalized and constant currency basis. And for bookings, the leading indicator for revenue performance, the story is even stronger. We delivered annualized gross bookings of $1.6 billion in 2025, up 27% year-over-year. Our Q4 bookings were $474 million, up 42% year-over-year and 20% from Q3, well ahead of our plan.

And we delivered record capacity to meet growing demand. including 23,250 cabinets in our retail footprint and more than 90 megawatts in our xScale business in 2025. We delivered more than 30% of this retail capacity ahead of schedule, which we believe will accelerate our growth in 2016 and beyond.

Now Keith will go deeper into our metrics shortly, including recommendations on how to model the Hampton transaction. As you saw in our release, the expected timing of this transaction shifted from Q4 to Q1, which, as we have shared in the past, simply reflects the fluid nature of ex-scale lease signings.

Before I turn the call over to Keith, I'd like to provide some additional perspective on why our business is performing so well. For starters, we are building on the strength of our fundamentally differentiated value proposition. Our decision to double down on the digital infrastructure and connectivity requirements of enterprise customers is fueling our success, particularly as they implement AI across their operations.

In Q4, approximately 60% of our largest deals were driven by AI workloads. That's up from approximately 50% earlier this year, a trend line that we believe will continue as we are really only at the beginning of this journey. Equinix is the neutral ground, where enterprise infrastructure converters, and we provide the essential layer of connectivity that make it all work at scale to unlock real business value. This is a long-term tailwind for our business, particularly as AI inferencing expands across industries.

With market-leading native cloud on-ramps, the largest global footprint across the most critical markets and the broadest enterprise customer base, we deliver what AI inference demands, network diversity, cloud proximity, AI-ready interconnection and low latency. These are structural advantages we have built over decades, and we believe they will continue to set us apart.

In 2025, we completed over 17,200 transactions, up 6% year-over-year with over 6,100 unique customers. Our Q4 transaction volume was the highest ever at over 4,500 deals with more than 3,400 unique customers. We saw an uptick in volumes for all workload sizes from single cabinet requirements up to our largest page configurations. And more than 60% of our existing customers added new services last year.

Now let me share some recent customer wins and use cases that really showcase what's driving this demand. Salesforce chose Equinix to create a private multi-cloud networking there for the engine inside their data and AI foundation. This is our largest global fabric cloud router sales to date. By deploying Equinix Fabric cloud router across 14 countries and 21 metros, we are enabling private network connectivity between Salesforce's presence in AWS, Azure and other cloud service providers.

Alembic, an AI-powered marketing analytics platform selected Equinix for the scale and consistency of our global operations and the richness of our interconnection ecosystem. We are working with Alembic as they deploy the NVIDIA DGX superpad with NVIDIA Grace Blackwell systems to expand their addressable market through distributed AI. Signet, a leader in AI-powered workplace safety and operational intelligence shows us because Equinix Fabric security connects their edge devices, cloud providers and customer networks. This enables them to deliver real-time AI-driven quality control for industries ranging from food processing to manufacturing.

Leading quantitative trading firm, Hudson River trading, selected Equinix because our global footprint and our advanced cooling solutions enable them to achieve the latency and the density requirements they need to power their next-gen AI trading workloads. And Fortune 500 multinational Honeywell Corporation expanded its relationship with Equinix because of the secure flexible solutions and global fabric connectivity we provide, including for key metros such as Shanghai, Tokyo and London.

This is the first of many projects driving the integration of internal AI applications and the wider transformation at Honeywell. These are just some of the use cases underpinning our momentum. Our progress is a direct result of the changes we have made through our Serve better, Solve Smarter and Bill bolder initiatives.

Starting with Serve better. Customers continued to secure both near-term and long-term capacity across our global platform. Our $474 million in annualized gross bookings in Q4 were supported by an incremental presales balance of $170 million. with more than $60 million occurring in the quarter. larger footprint requirements from enterprises and service providers contributed to this performance.

Our pipeline is strong. and we have already booked approximately 45% of our Q1 2026 target and signed an additional $100 million plus of presales as of today, already our largest presale quarter ever. As we accelerate growth, we are committed to a disciplined pricing strategy that's commensurate with both the strong and durable demand patterns we see and the differentiated value our solutions provide. This translates into our strong cash and cash return profile and the premium yields we secure.

We continue to underwrite our newest projects with these principles in mind. With Solve smarter, we are helping customers connect and simplify their infrastructure. Interconnection revenue grew 9% year-over-year on a normalized and constant currency basis. We added 7,800 net interconnections in the quarter, including our adjustments.

We also crossed an extraordinary milestone in Q4, surpassing 0.5 million interconnections worldwide. To put this into context, that's more than double our nearest competitor. As AI amplifies the need for massive real-time data movement, Equinix is delivering the connectivity infrastructure that enterprises depend on the most.

As part of our Build Bolder initiative, the work we are doing across our global development portfolio is strengthening our competitive advantage. In Q4, we delivered more than 12,000 cabinets to our retail business across key metros. Our development engine remains exceptionally active with 52 major projects underway across 35 markets, including 9 xScale projects. Since October, we have added 10 new expansion projects.

We also closed on a number of strategic land acquisitions last year, adding approximately 1 gigawatt to our powered land under control balance. This positions us well to meet long-term demand from both enterprise and hyperscale customers.

Our xScale business achieved a key milestone in recent weeks. In January, we contributed our Hampton asset to the Americas JV, an important first step towards deploying $15 billion of capital across major metros in the U.S. The Hampton facility will support approximately 240 megawatts of IT capacity when fully built out.

The signing of the lease for half of this facility to a hyperscale customer is expected in Q1, and we expect the site to be fully leased later this year. In addition, we have established a healthy leasing pipeline, demonstrating the value of our ex-scale strategy. Of the approximate 3 gigawatts of capacity that can be developed close to 1 gigawatt is currently earmarked for our Excel business.

Further, our land acquisition pipeline continues to grow as we maintain our focus on major metro expansion opportunities where we are confident of significant long-term demand. As such, we expect xScale will continue to contribute to NRR over the next several years as we execute our strategy. Overall, we're winning where it matters most. By connecting the infrastructure that powers the AI build-out happening across industries. And we are laser-focused on expanding our category leadership through disciplined execution that drives healthy revenue growth, margin expansion and superior shareholder returns.

I'll now turn it over to Keith to take a closer look at the numbers behind the quarter and our outlook.

Thanks, Adaire, and a very good afternoon to everyone. First and foremost, I'll start by briefly building on Adaire's comments. Simply, it was an outstanding close to 2025. From my perspective, Equinix delivered its best quarter ever. By far, closing the last quarter of the year with over $470 million of annualized gross bookings and more than $60 million of presales activity, well ahead of our expectations and certainly any prior quarter.

The magnitude of our quarterly activity both across a substantial number of diverse deals, but also with over 3,400 customers underscores that our strategy is working. -- and meeting the opportunity in front of us. Also, I'd say that is our retail business that's the standout, delivering record bookings across each of our small, medium and large size of deal categories. And alongside our strong sales execution, the teams continue to operate the business with great focus and discipline, and we're only getting started.

This created better-than-expected margins. We raised our capital more efficiently than planned and investor to utilize the cash more effectively, creating better-than-planned cash flows. Suffice it to say, our performance is creating momentum in the business to drive attractive recurring revenue growth and the scaling of healthy AFFO per share performance.

Now I'll cover some of the highlights for the quarter as depicted on Slide 7. Note all growth rates in this section are on a normalized and constant currency basis. First, as we indicated last quarter, our Q4 guide assumed the execution of a large ex-scale lease for 2 of the 4 buildings on the Hampton campus. As Adaire noted, this transaction is now expected to close in the first quarter.

We also had some onetime planned benefits, which will not repeat themselves in Q1. That being said, our fundamental underlying performance was meaningfully better than our expectations from top to bottom. Please refer to Slide 15 that bridges our quarterly revenues from Q4 2025 to Q1 2026.

Now let me move specifically to revenues. Q4 revenues were $2.4 billion, up 7% over the same quarter last year, fueled by continued strength in our monthly recurring revenues, which was up 10% over last year and as you likely noted, a steady quarterly improvement throughout 2025. Q4 revenues, net of our FX hedges, included an $8 million currency headwind when compared to our prior guidance rates.

Global Q4 MRR churn was 2.2% lower than planned. And for the full year, our average quarterly MRR churn was 2.4%. Looking forward, our teams remain highly focused on reducing MRR churn, which includes the development of AI predictive tools to help identify opportunities to eliminate or defer any MRR churn. Global Q4 adjusted EBITDA was $1.2 billion or approximately 49% of revenues, up 15% over the same quarter last year. Q4 adjusted EBITDA, net of our FX hedges included a $4 million FX headwind when compared to our prior guidance rates.

Our 2025 margin improvements reflect our continued focus on delivering higher operating leverage across the business while also investing in growth. As it relates to 2026, we expect to continue to deliver improved adjusted EBITDA margins while also absorbing both accelerated and increased expansion drag, the byproduct from our growth investments. Global Q4 AFFO was $877 million or up 13% over the same quarter last year, including the seasonally higher recurring CapEx spend.

Q4 AFFO included a $2 million FX headwind when compared to our prior guidance rates. And our nonfinancial metrics continue to demonstrate strong momentum across our core or key metrics of net interconnection additions, net new cabinets billing and MRR per cabinet pricing. Our net interconnection additions increased by 7,800, including both physical and virtual connections and also include our adjustments. As Adaire highlighted, we've now surpassed the 0.5 million interconnection milestone across our ecosystem, an unmatched competitive advantage, which has been curated over 25 years of history.

Turning to our cabinets billing. We added 4,300 net cabinets billing in the quarter, including cabinets from our Main One portfolio. Our underlying net cabinets billing increased by the highest level in 3 years, driven by strong bookings performance across each of our 3 regions. Our backlog of cabinets sold, but not yet installed, stands at a record given the bookings performance, especially in the second half of 2025.

And finally, we continue to drive attractive MR per cabinet yields, stepping up $65 quarter-over-quarter on a normalized and constant currency basis, driven by very favorable pricing backdrop, increasing power density and strong interconnection attach rates.

Turning to our capital structure. Please refer to Slide 10. As of year-end, our balance sheet increased to approximately $40 billion, including cash and short-term investments, totaling about $3.2 billion. Our net leverage was 3.8x our annualized adjusted EBITDA. We -- during the quarter, we issued $1.8 billion of senior notes at an effective rate of about 3.2%.

Throughout 2025, our diversified capital raising program allowed us to raise debt at very attractive rates, which helped us optimize our 2025 net interest expense.

Looking at 2026, we plan to continue to raise debt in Loracost locations, either directly or synthetically. -- including Canada, Singapore and Europe. And now looking at our capital expenditures for the quarter. Please refer to Slide 11.

Capital expenditures were approximately $1.4 billion, including our planned seasonally higher recurring CapEx of about $140 million. We opened 16 major projects across 14 markets since our last earnings call, adding important retail capacity to several of our key undersupplied metros. And we announced 10 new projects, which will be added to our global portfolio over the next few years. Revenues from owned assets are 70% of our recurring revenues.

Our capital investments delivered strong returns as shown on Slide 12. Related to our now 187 stabilized assets, revenues increased by 6% year-over-year on a constant currency basis. These stabilized assets are collectively 82% utilized and generated a 27% cash on cash return on the gross PP&E invested on a constant currency basis.

Now given our strong underlying Q4 results, our 2026 outlook is expected to be meaningfully ahead of our expectations that we shared with you at our June 2025 Analyst Day. Our strong pricing discipline, coupled with our best-in-class capital allocation efforts should allow us to generate industry-leading durable cash flows with attractive cash yields, thereby delivering revenue growth and long-term value for our shareholders.

Please refer to Slides 13 through 17 of our summary of 2026 guidance and bridges. Do note all growth rates are on a normalized and constant currency basis.

Starting with revenues. For the full year 2026, we expect total revenues to grow between 9% and 10%, which includes a modest 40 bps attributed to the NR from the XL lease timing. We expect our monthly recurring revenues to grow between 8% and 10%, driven by strong 2025 bookings performance, including presales momentum. MRR churn is anticipated to remain comfortably within our targeted range of 2% to 2.5% per quarter.

We expect 2026 adjusted EBITDA margins to be approximately 51%, an expected 200 basis point improvement over 2025 and reflecting anticipated revenue growth and focused expense management. 2026 AFFO is expected to grow between 9% and 11% compared to the previous year. AFFO per share is expected to grow between 8% and 10%, which after adjusting for 100 basis points of ex-scale lease timing is 300 basis points higher at midpoint relative to our prior expectations from past summer.

2026 CapEx is anticipated to range between $3.7 billion and $4.2 billion including about $280 million of recurring CapEx spend. We have not included any on-balance sheet xScale spend as we do expect to be reimbursed for these costs as we transfer these assets into the XL JVs. And finally, we expect our quarterly cash dividend increase by 10% over 2025 on a per share basis. As a result, our total 2026 cash dividends paid will approximate $2 billion. So let me stop here. I'll turn the call back to Adaire.

Thanks very much, Keith. As this is my first opportunity to address all of you since Keith's retirement announcement, I wanted to take a moment to acknowledge his tremendous impact on Equinix over the past 27 years. His leadership has been integral to our success and has helped us lay the foundation for our future. I am particularly grateful for Keith's partnership since I joined the company, and I look forward to his continued support as a special adviser over the next year.

Our process for selecting Keith's successor is well underway and we look forward to updating you when we have news to share.

Before we turn to questions, I want to leave you with a final thought. Equinix is at the center of a historic multiyear infrastructure investment cycle. To deploy AI at scale, enterprises need to connect and manage increasingly complex and distributed technology ecosystems. Equinix is the neutral connector that unlocks business value for our customers. It is what we do best. It is where we have continued to focus and our focus is paying off. We were built for this moment, but execution is everything.

And we will continue to prioritize doing the most important things exceptionally well, so that we delight our customers whilst delivering structurally higher returns and AFFO per share growth for our shareholders. That's exactly what we did last quarter, and it's what you should expect from us going forward.

So with that, let's open the line for questions.

[Operator Instructions]. Our first question comes from Eric Luebchow with Wells Fargo.

Adaire, maybe you could touch a little bit on kind of the bookings momentum that you talked about that came through in Q4, and it sounds like you're off to a really good start in Q1. I think you said 60% plus of the largest deal came from AI workloads. Are you seeing more of these kind of coming from traditional enterprise companies adopting AI? Is it coming more from the hyperscale? Or you're just putting edge nodes in your facility? And as you kind of look out, do you think that is going to continue to rise throughout the course of the year.

Thanks very much for the question, Eric. Let me perhaps unpack a little of that stat for you. And I think the value that we provide is obviously something that's been amplified, thanks to the continued investment in this sector overall and the excitement around it. I think for us, the breadth and scale of our product continuum, they're very -- it's very uniquely aligned to meet this demand. And as I mentioned in my prepared remarks, and you just repeated there, 60% of our largest deals were driven by AI workloads.

Now during the course of the quarter, when I look at that 60% related to AI, interestingly enough, nearly half of them were deployed by noncloud and IT companies but they were deployed by companies in the retail, e-commerce, manufacturing, financial services and content sector.

So I think this demonstrates increasing enterprise AI adoption outside of the service provider community. We also had 11 liquid cool deployments in Q4, 5 of which were in our New York City facilities underpinning the requirements of our FSI customers to support elements, use cases like algorithm training in that sector.

So I think this also demonstrates continuing strong diversity, and from an interconnection lens, we see a very healthy growth in the AI service provider ecosystem, although it's still early days, given, I think, the breadth and depth of our established ecosystem density. So interesting to see that it was -- of the 60%, 50% driven by noncloud and IT providers, really demonstrating the growth in enterprise application of AI processes to business. And we see this as a continued positive tailwind for our company.

Our next question comes from Jonathan Atkin with RBC.

I was interested if there was any update to your multiyear guidance provided at the Capital Markets Day last June. And are those targets still relevant? Or should we be thinking about 9% as being the new baseline for AFFO per share growth?

Jon look, first and for foremost. Thank you very much for the question. I think what's most important is to understand just the underlying momentum of the business. As Adir highlighted both in her prepared remarks and certainly in the commentary around our booking activity. The business is performing well. We sort of said and we've said it over the last 2 quarters, and we're sort of -- we're talking about it this quarter. It's the execution on the top line is the management of the cost as well as efficiently raising capital and deploying it appropriately.

And so I think we're on the right trajectory. We're delighted with what we've delivered for 2026. I just feel it's a little premature to talk about 27 and beyond. But as you can appreciate, -- the momentum is windowed or back. And I would add to that, I think currencies are going to continue to be winded or back as an organization. So the combination of really strong performance, the ability to maybe invest faster than we were anticipating, as Ralph sort of bringing forward as many of the assets as possible. I just think we're in a really good spot.

And I think it's just a bit early to talk about 2017 and beyond. But I know you can do math very, very well. And so I'm going to leave it to you to sort of interpret both how we're performing this quarter being Q1 '26 and what that really implies is exiting 2026. So again, feel good about our position, but let's defer the '27 discussion until later.

Our next caller is Aryeh Klein with BMO Capital Markets.

First, I guess, Keith, congrats on your career and wishing you the best moving forward. I guess, just going back to the previous question around AI in that 50%. Do those deals look differently than different than some of your more traditional deals, be it from a size or location standpoint? And then, I guess, from an underlying demand standpoint, it seems like things have meaningfully accelerated since the Investor Day back in June. Can you just pass that, what specifically has, I guess, driven that acceleration momentum?

Yes. So let me comment perhaps on that accelerated momentum first, and then I'll address the second part of your question, which is around the characteristics of some of those AI deals that we saw in the first quarter. I think when I look at the gross booking outcome that we saw in Q4, in fact, it was an acceleration from Q3 all the way through to Q4, very much across the second half of the year.

And as we've mentioned, in Q1, we already see some early acceleration in the current quarter. So when I look at the characteristics of what is driving that, I think it's, in large part, 2 very specific but very different themes. The first is the external one, and I'll speak to that in a moment, and the second is the internal one. So if I think about the external one, we're seeing robust demand right across all workload types.

And what was extremely interesting about the demand profile more generally across our Q4 performance was that it was right across the different segments that we serve. We saw all segments and all verticals grow. So it was a very robust, broad-based demand across numerous different types of workloads. We, of course, saw specificity around AI opportunity where there was connectivity requirements for near metro connectivity requirements or connectivity requirements to unlock the value in that process.

So very robust demand across workloads, across all industries, across all regions and across all of the segments that we serve. Then there is the internal piece, which is the execution of the team against this particular opportunity that we saw in the market. First of all, we did accelerate some capacity into the year. And that was a helpful element in terms of our output and our performance.

But we also had a phenomenal pipeline conversion rate. So the team converted at around 49% in Q4 which speaks, I think, to the quality of the pipeline that we had coming into the quarter. And as I've mentioned previously, we've been putting a lot of focus on ensuring that we're forecasting the future pipeline with the same intensity that we're forecasting the current booking pipeline and really building our footprint strongly as we enter each quarter so that we know that we're executing on very highly qualified, very highly qualified opportunities.

Interestingly, it was also great to see some very firm pricing right across all of those segments and across all of those regions in Q4. So great disciplined internal execution that kind of met the market moment where the market was at -- and as it relates to the characteristics of the transactions that set in that 60% contingent, it was, of course, some of our larger transactions were related to our AI opportunity.

And I think one characteristic of all of them, I've shared with you some of the use cases already across the different segments that we facilitated this functionality into. But 1 characteristic was that we saw a 33% increase in density compared to the non-AI deals. So an average of about 10 kVA per cab for these transactions.

Our next question comes from Michael Rollins with Citi.

Keith, I also want to extend my congratulations and best wishes on your upcoming retirement. Maybe going back to some of the comments from earlier in the call, Keith, I think you were discussing the opportunity to improve churn. And curious, as you're preparing these new tools to help get that churn down, how much of this is in the company's control versus how much of it is just simply customer optimization of workloads that the churn will happen irrespective of how Equinix tries to get in front of it.

And then just a secondary clarification on the 6% stabilized revenue growth, can you unpack that a little bit in terms of what's delivering that incremental strength relative to the recent history.

Yes, Mike, this is Adaire. I might take the churn question, and then Keith answer the question around the 6% stabilized growth for you.

Let me unpack the churn commentary. So over the course of the past 2 quarters, we saw that our churn has set more at the lower end of the range that we guide to that at the higher end. And this is a combination of access to data and unpacking the data, the tool that we're working on and have some early pilots in place that Keith alluded to in his prepared remarks, the fact that we identify much earlier in the process, what we call ATR or available to renew. So much earlier in the process, the cohort of our customers that sit in that ATR category and then being able to deploy our customer success team onto that ATR cohort of customers in order to make phone calls much earlier in the process than we've been doing in the past and to facilitate not just a renewal, but even potentially an upsell opportunity.

One of the things that we saw in Q4 was that 60% of our existing customers added additional services from Equinix to their portfolio. And every time you have a call with the customer, you have an opportunity to share what we're doing around new services. So I think it's the combination of those elements, ATR, telemetry and visibility into our data -- the customer success team focused on this and tools that help us predict more accurately.

And there is, of course, as you quite rightly point out, a proportion of churn that is not addressable by us. And that is now something that we have visibility into, and it means we focus our resources, our efforts on the proportion where we can actually address an outcome for the customer and for the business.

Michael, first, thank you for the nice comment. I appreciate it. To respond to the question on stabilized assets and the growth rate. The beauty of what we shared, number 1 is that there's more and more volume going through basically the stabilized assets that isn't necessarily cabinet related because our utilization is 82%. So that's number one.

Number two, you got higher density per average cabinet. And so that that's working in our favor. Number three, which I think is really important. And then also sort of refers back to 1 of the comments I made in my prepared remarks, where we have some one-off benefits that don't necessarily repeat themselves at least quarter-over-quarter. And that's basically price increases, price increases relating to the fourth quarter. And so it's a combination of all those that really delivered a strong stabilized growth rate on an asset abate that's really quite substantial. And so feel very good about what we delivered. I probably would say, though, and to try and give you some steer if you will, as you look forward. We still generally feel good about the stabilized assets, growing 3% to 5%. That's the typical range.

We are going to have these these periods were slightly higher and sometimes we might be a little bit lower just based on the timing. But overall, we feel really good about the 3% to 5% growth rate attributed to stabilized assets.

Next caller is Frank Louthan with Raymond James.

So part of your footprint expansion was to be able to capture some of the increased power demand from enterprises and we've definitely seen the demand ramp up. So where are you today with regards to your ability to offer -- to meet that customer demand for folks needing incrementally new levels of power from enterprises. Have you caught back up on that? Where are you in that process?

I'll answer that for you. Thanks for the question, Frank. So obviously, power and the sourcing of power is a very significant factor for us as a data center operator. having power means that we're able to secure the compute and energy future of our customers. As we indicated, we currently have of developable land under control, and it's not develop a landfill stop. It is powered land or land that we are close to securing the power on.

So I guess we're not in the business of sortitiously buying a block land if we're not sure that we can power that asset. And so that means that as we look at our capacity and our build profile moving out, we are building against powered land portfolios, which, therefore, will enable us to continue to advance and evolve our footprints and our facilities to meet the density requirements of our customers.

As I mentioned, we saw already in the AI workloads that that we enjoyed in Q4 being 33% more dense than non-AI workloads, and we can certainly see that density increasing across our footprint. So we believe that we're very well positioned to address those requirements of our customers.

And Frank, maybe just adding on to what Adaire said because I think it's important is we have 52 projects currently underway. They're energized projects. And that -- I'm talking about generally the retail space. And as we shared with you at Analyst Day, whether you look at a DC 17 or our new Dallas build, they're coming with scale and size, but they're not so big that maybe there's excess focus on it. And so I feel really good. We talked about the 167 megawatts. And so it gives you a sense of we're building capacity in markets where there's a sort of broad need for that capacity, and they're the important markets, the Chicago, the New York, the Dallas is the Washington and you go around the world and think about all those critical markets and that we're trying as hard as we can to build out on that capacity. And.

So with the 52 projects currently underway, it sort of just -- it adds to what Adaire saying that we have the current opportunity and then we also are creating the future opportunity for ourselves as well.

Our next caller is Michael Funk with Bank of America.

Yes, Keith, first, congratulations there. over the years. So in the prepared remarks, you mentioned a disciplined pricing strategy. Keith, just curious kind of the magnitude of how much higher you can take pricing? And then you mentioned a minute ago, the 3% to 5% projected range for growth with some variance. Can you add any more comments around what would cause the variance, whether seasonality timing? And maybe a final part of my question would be, -- are you seeing ability to change contract terms on renewal, whether that's increased escalators or other factors?

Okay. I'll take the question, and Keith can add some components to it as needed. As I mentioned, we experienced very firm pricing throughout Q4 across all segments and for all regions. And we're very disciplined around the approvals and the approach that we take with our customers. because we recognize that in the platform that is Equinix, there is a range of differentiated value that allows us to accelerate the pricing opportunity.

Our pricing commanding yields as a result of our interconnection density as a result of our cloud on-ramps -- and of course, the metro locations, which becomes even more important when we look in a low latency world around certain applications of AI workloads. So I think from a pricing perspective, we're very disciplined. We're very focused on that, and we know that we have opportunity to accelerate that in that regard.

The vast majority of our contracts auto renew, and they renew with a particular pricing increment applied to them. But this is also an opportunity for us to have a conversation with our customers. And that's why the ATR program is an extremely important 1 for us because it does allow us to look at customer usage, not just of the space and power within our footprint, but some of the additional and incremental services that Equinix offers and then allows us to enjoy the price point that those services represent in terms of value for our customers.

Our next caller is David Guarino with Green Street.

Your stabilized cash gross profit growth has been excellent all year, is in 2025. And part of that, I know, was due to shrinking expenses. So wondering do you think that trend of reducing cost will continue or at some point, are you going to have to increase staffing levels if this outsized pace of bookings continues?

David, let me take that one, Adaire, jump in as needed. So one of the comments we made is that we're just getting started. I think when you step back and look at the organization, we're driving the top line. Ralph and his organization is doing a great job of managing the IV access to the gross profit line and then you have the rest of the organization. And today, for round numbers, you're 18%, 19% SG&A as a percent of revenue, right?

We have a stated goal that we really would like to get -- we'd like to improve that. And that's through bending the cost curve. It's not necessary -- it's not always about eliminating costs, it's bending of the cost curve and becoming more efficient. -- so our goal is to get to 15% over some period of time. And so the combination of managing into the different markets and also managing the spend while also investing behind [ Hermine ] and her efforts to, I guess, to create efficiency in our organization through processes through systems, through tooling -- it's a combination of all these things that I think can make a difference over the years and still early, but we're offering up this year a guide of roughly 200 basis points of improvement is coming from the top line, is coming certainly from Ralph's organization, and we're still investing in the business to develop future opportunity for us.

So I'm not necessarily sort of subscribing to what you said that we need to throw more bodies at it. We tend to be a little bit more head count dense than almost anybody else out in the marketplace. And I would argue that we get more leverage from that as we introduce more assets into our environment. You don't -- if you build another -- put up another building in Dallas, as an example, you don't need to necessarily go higher more SG&A to support that asset.

And so I feel very comfortable that when you look out that we can become an increasingly more efficient business. And consistent with the comments we made at Analyst Day that we're certainly on a nice trajectory, but we said 52% plus. And there's a very good reason why we put the plus at the end of the 52. So it's a journey that we're going to be on together, and I'm excited.

Our next caller is Michael Elias with TD Cowen.

And congrats on the results. question for you regarding the bookings. Obviously, great to see big bookings quarter in 4Q. What I'd like to get a sense of is how would you rank order the contribution to the bookings from the cabinets that you have coming online in capacity-constrained markets, obviously, brought on cabs and Nova as well as Frankfurt, both of which we're capacity constrained versus it being a structural acceleration in demand.

And really, what I'm trying to get at is how sustainable is the 4Q bookings level because that obviously has implications for forward revenue growth?

Okay. Michael, I'll have a stab at the question and then Keith can jump in if I -- if we need additional clarification on a couple of points. I guess, over the course of the last year, we began to show our annualized gross bookings to you as a metric. And the reason for doing that was to give you with the combination of the presales number to give you a sense of the momentum that we see inside the business in any given quarter.

And since we've done that, we've seen our annualized gross bookings moving upwards every quarter. And certainly, Q4 was no exception to that particular outcome. We have a very strong pipeline going into Q1. We've already closed 45% of our Q1 target. And we've had a meaningful presales experience in Q1 to date that has given us our largest presell quarter even though we're just halfway through.

So I think looking forward, our bookings growth will continue to be a very strong indicator of underlying help I think the best line of best fit is up and to the right, but that's where we see the demand. But obviously, there will be some variability quarter-to-quarter seasonality and other elements kick in. So that's something that we will manage as we look at it on a quarterly basis.

Then as it relates to the cabinets, Keith, do you want to...

Yes. Michael, I'll just add a little bit to what Aldaire said as well. I think our expansion tracking sheet gives all the people on the call and a pretty good sense of where we're making our investments. we need more capacity, and we're going to continue to invest more capacity. And as Adaire alluded to, we have roughly 3 gigawatts that we're considering over a period of time, while we're still building currently I think the combination of continuing to make the current investments while thinking longer term, while at the same time, demand shaping to markets -- and you've always heard us talk about the right customer with the right application going into the right data center, and that will continue to hold true.

But particularly in markets where they're constrained, not just for us but for the industry, we feel that we can demand shape that opportunity into other markets that are proximate or within the fiber route sort of environment that would make it suitable for our customer to consume -- and so I would just say that there's a lot of things that are going into it, different markets, they're going to have different sets of circumstances. But this is what we're focusing on as an organization, not only increasing the density, but making sure that we demand shape to the right markets in support of the customers' needs. And that also plays in a little bit to the pricing as well.

So hopefully, that gives you a bit of a sense that, yes, we understand that some markets are more constrained than others, but we're we're also going to build in adjacencies such that we can maybe continue to enjoy the opportunity that's in the marketplace.

Our next caller is Nick Del Deo with MoffettNathanson.

And Keith, congratulations on your upcoming retirement, and thanks for all your help over the years. At Dare, earlier in the call, you noted the strength in the interconnection franchise some of the big cloud service providers that you work with have announced and are developing products to help customers go to multi-cloud route I was wondering if you could talk a bit about the puts and takes of those efforts as it relates to your interconnection franchise.

Thank you for the question. I guess at Equinix, we have always understood and always appreciated the importance of the network. And I think some of the announcements that we've seen around connectivity is a validation of connectivity and the importance of the network as part of the broader AI ecosystem and landscape. And of course, we have continued to invest in our network products, in our interaction product portfolio, and it is a significant part of our footprint and a significant part of our global revenue.

We recognize that many of the clouds have made a cloud-to-cloud connectivity announcement. But this is a very simple use case. -- cloud to cloud is a simple connectivity use case. In reality, the reality of our customers is much more complex than this.

We've always believed in a multi-cloud hybrid world. And that requires a much more complex consideration around connectivity and networking strategies for our customers. And the interesting element for us, of course, is that for many of these clouds, they are very valued partners of Equinix and they use a large part of our infrastructure to help create their value proposition in terms of networking positions and network puts -- now we're always evaluating our strategy here and always looking at what is emerging around the ecosystem.

And that's why for us, we recognize the inherent value of our interconnection franchise. The role of fabric continues to evolve within that franchise as we see provisioned VC capacity stepping up quarter-over-quarter.

We have a range of very exciting developments around our footprint here, our product footprint here and developments that will simplify the networking journey for our customers, developments that will support as it relates to the augmentation of AI agents and AI workloads and development that will really enhance the optimality -- sorry, I'm stumbling over that word that our customers enjoy on our network.

So a lot happening in this space for us but we really see that many of the announcements really validate the role that the network plays in any AI ecosystem and is really, I think, a validation of the connectivity opportunity that we see ahead of us and is 1 of the reasons why we've continued to invest in this space.

Last question comes from Cameron McVeigh with Morgan Stanley.

I just wanted to echo my congratulations to Heath. And Secondly, you've spoken in the past about the shift from training to AI inference workloads. And curious if you have any updated views on the timing you've seen -- and then secondly, this may be a follow-up to the last question, but just how important interconnection offerings are to drying AI inference workloads from enterprises?

On the first part of your question, I think when you look at how our deal profile has moved through the course of into 26, an uptick of 50% to 60%. We can see this tailwind of opportunities perhaps margin earlier as an enterprise footprint than we originally thought when we presented in summer of last year. And so I think that's a really good news because it is taking the promise of AI and putting it into the hands of consumers of citizens and customers all the way around the world. And as it relates to the role of interconnection in AI workloads, I think there's a very significant element here for us to consider.

And in some ways, the sales force example and that I shared in prepared remarks is a really great example of where our connectivity capability was able to provide a very unique service to sales force around creating private network connectivity. And so we're very excited about the opportunity to serve our customers' evolving needs, needs in a complex hybrid multi-cloud world.

We think it's a very fast-growing space. We think it's something that would be additive to our colo capabilities because it will broaden the range of customers and that it will continue to strengthen our platform and our ecosystem. So this is something, as I've mentioned before, that we're very excited about the opportunity and see that we have a very strong competitive differentiation when it relates to others in the segment with this interconnection footprint.

Okay. Great. Well, thanks, everybody, for joining our conference call today, and have a great afternoon.

Thank you all.

Goodbye.

And this concludes today's conference. Thank you for participating. You may disconnect at this time, and have a great rest of your day.

Good afternoon, and welcome to the Equinix Third Quarter Earnings Conference Call. [Operator Instructions] Also, today's conference is being recorded. If anyone has any objections, please disconnect at this time.

I would now like to turn the call over to Phillip Konieczny, Senior Vice President of Finance. You may begin.

Good afternoon, and welcome to our third quarter 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 identified in today's press release as well as those identified in our filings with the SEC, including our most recent Form 10-K filed on February 12, 2025, and on our most recent Form 10-Q.

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 our policy not to comment on its financial guidance during the quarter unless it is done through an explicit public disclosure. On today's conference call, we will provide non-GAAP measures, we provide a reconciliation of those measures to the most directly comparable GAAP measures and a list of the reasons why the company uses them in today's press release on the Equinix Investor Relations page at www.equinix.com.

We have 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 currently available information. With us today are Adaire Fox-Martin, CEO and President; and Keith Taylor, Chief Financial Officer. Following our prepared remarks, we will be taking questions from sell-side analysts.

At this time, I'll turn the call over to Adaire.

Thank you, Phillip. Hello, everyone, and a very warm welcome to our Q3 2025 earnings call. Equinix delivered a very strong third quarter. Our performance that continues to demonstrate our ability to rapidly invest in significant expansion whilst growing our top line and improving profitability. This performance was underpinned by 3 highlights. First, top line growth. We are seeing continued revenue acceleration, delivering MRR growth of 8% year-over-year on a normalized and constant currency basis. Further, we also achieved record annualized gross bookings of $394 million, a meaningful 25% increase year-over-year and up 14% over Q2.

Importantly, this accelerated growth comes from a highly diversified set of customers across geographies, industries and segments. Second, profitability. We again delivered strong adjusted EBITDA margins for the quarter, and AFFO was up 12% year-over-year on a normalized and constant currency basis. This was better than expected and reflects strong flow-through of our operating results, favorable net interest expense and timing of recurring CapEx spend.

As a result, we are raising our adjusted EBITDA, AFFO and AFFO per share guidance for the full year. Third, expansion. Given the strong demand backdrop, we are advancing our build bolder strategic move where our intent is to double capacity by 2029. We have recently closed on substantial land acquisitions in our greater Amsterdam, Chicago, Johannesburg, London and Toronto metros. Which will support over 900 megawatts of retail and xScale capacity. These results indicate that our strategy is gaining even more traction and resonating with our customers. as we continue to deliver differentiated infrastructure, products and levels of service. On the topic of customer resonance, we achieved significant momentum in Q3. Closing over 4,400 deals with more than 3,400 customers. This volume reflects continued demand for a wide variety of latency-sensitive AI and non-AI workloads, supporting significantly increased data residency and sovereignty requirements and delivering seamless connectivity to distributed data sources. Our rich ecosystems continue to proliferate across a variety of sectors. Including key verticals such as automotive, financial services, networks as well as cloud and AI service providers. Hyundai Motor Group, for example, runs its proprietary [indiscernible] cloud platform at Equinix. Using Equinix Fabric, Hyundai connects to multiple cloud providers in Asia Pacific, the U.S. and EMEA. This enhances customer experience and improved service quality for over 10 million Hyundai connected car subscribers worldwide. Zetaris, an AI data lake house platform provider relocated its AI workloads to Equinix. Using Equinix's distributed AI infrastructure, Zetaris is helping its customers develop agentic AI and other AI applications 6x faster and at 1/3 of the cost. ING is making a strategic shift by migrating its core banking infrastructure in Germany to Equinix, showcasing our ability to help customers meet strict regulatory standards and requirements. Nitori, the largest furniture and home furnishing chain in Japan with over 1,000 stores across Asia and the U.S. partners with Equinix to connect its Osaka and Tokyo operations with low latency to Oracle Cloud.

This helps them simplify their network for future expansion. And supports Nitori's growth objectives of tripling their branches worldwide. In addition, we saw continued momentum with key AI-related magnets and enterprises, including Ally Bank, Bristol-Myers Squibb, Nebius and Groq, amongst others. As I've shared in previous earnings calls, our strategy comprises 3 strategic moves orchestrated across the business, to accelerate our expansion, innovation and profitable top line growth. We continue to deliver strong results and see accelerating momentum against each.

The first strategic move is SAR better. As evidenced by our recent customer wins, SAR Better is rooted in delivering value to customers at every stage of their engagement with us. Customers are increasingly looking to secure both their immediate and their long-term infrastructure requirements. This robust demand profile resulted in a record $394 million of annualized gross bookings in Q3. For clarity, this annualized gross bookings number represents the bookings we expect to start generating revenue within the next 90 days.

Additionally, we have a presold balance totaling $185 million of annualized gross bookings. This presell cumulative balance will start generating revenue beyond 90 days. As of yesterday, we have closed more than 40% of our Q4 bookings plan. We have ample pipeline to achieve our Q4 bookings targets and to build momentum heading into 2026. Our second strategic move, Solve Smarter, is focused on simplifying the consumption of our solutions and extending the value of our leading interconnection capabilities. Our interconnection products had an exceptional quarter. We added 7,100 net physical and virtual connections in Q3. We bringing our total to more than [ $499,000 ]. Interconnection revenue grew 8% year-over-year on a normalized and constant currency basis. To $422 million, driven partially by a 57% year-over-year increase in our fabric bookings in Q3. We also added 2 new native cloud on-ramps in Barcelona and Dubai, adding to our market-leading share of native private cloud on ramps. These results highlight the critical importance of low latency and proximity to end users and our ability to deliver it as both enterprises and service providers manage their distributed architectures.

In September, we unveiled our distributed AI infrastructure solution. This includes a new AI-ready networking backbone and fabric intelligence software designed to support enterprise inferencing workloads. We showcased these capabilities at our first AI Summit, together with key partners and industry leaders. Including NVIDIA, Dow, Groq, HPE, Adobe, Zayo Zoom and WWT. Our customers and partners provided use cases to highlight how Equinix is uniquely positioned to comprehensively deliver on their demands and requirements at enterprise level. And finally, Build Boulder. Through Bill Boulder, we are both accelerating and innovating the delivery of capacity around the world and securing our future through strategic land acquisitions. As mentioned earlier, we are excited to announce that we have recently closed on land acquisitions in several high demand markets to serve customer demand across both our retail and xScale businesses.

This brings our total developable vocasity to approximately 3 gigawatts and nearly 50% increase from last quarter. These are the latest steps towards doubling our available capacity in the next 5 years. Since our last earnings call, we added 7 new projects, including our Dallas 12 development. which is expected to deliver roughly 3,700 cabinets or approximately 67 megawatts of capacity to this key metro. We now have 58 major projects underway globally including 12 xScale projects. 20% of our retail capacity has been considerably accelerated from the initial delivery date. We also opened our 77 market in Chennai, India as we continue to invest in this fast-growing region.

More than 75% of our retail expansion is in major metros, and more than 90% of our expansion CapEx is on owned land or where we have long-term ground leases. Our stabilized cash-on-cash return expectations for these retail expansions are approximately 25%, which is consistent with our existing portfolio. Our North American JV continues to show exciting progress with the closing of our Chicago land acquisition, which we anticipate will be contributed in large part to our xScale business in 2026. In addition, we are in late-stage negotiations for the lease of the entire capacity at our Hampton campus with potential xScale customers. The overall demand picture for our xScale business remains robust. As key players continue to seek capacity in major metros aligning with our xScale strategy.

As our results show, we are consistently delivering on the immediate needs of our customers and the expectations of the market, whilst expanding our salable capacity in anticipation of even greater sustained long-term demand. And we are doing this very profitably. We have been built for this opportunity, and we will continue to build for it.

Let me now turn it over to Keith to share more on the quarter and our Q4 outlook.

Thanks, Adaire, and good afternoon to everyone. Further to Adaire's remarks, the business delivered a very strong third quarter, which immediately translated into solid financial and nonfinancial results. Nearly every key metric was at or better than expected. Our sales team has delivered a record annualized gross bookings across our diversified customer base, resulting in very healthy net bookings in Q3. To further demonstrate the strong momentum in the business, Adaire highlight that we now have $185 million of annualized presales, which will be recorded as bookings in future quarters. Over 40% of the current presales balance was signed in Q3. As customers increasingly look to secure their future growth within our ecosystems. And we continue to deliver accretive value to the bottom line with AFFO well ahead of our expectations for the quarter.

So our strong performance in Q3, coupled with our strategic efforts to continue to secure land for future growth in our major metros is setting the stage for 2026 and beyond. And given our balance sheet is a strategic differentiator, it provides us with the flexibility to invest into a robust demand backdrop and the financial capacity to secure our future energy needs. Finally, our relentless focus on best-in-class capital allocation for our investors while delivering durable long-term value remains a key priority for us as we execute against our Build Bolder initiatives. As it relates to our nonfinancial metrics, they continue to demonstrate positive momentum across nearly all dimensions, including net interconnection additions, provision BC capacity, pricing, volume of transactions and cabinets billing. We added a healthy 7,100 net interconnection ads in the quarter supported by cloud and enterprise connectivity. Cabinets billing stepped up 2,500 cabinets led by strength in the Americas region. With our record Q3 gross bookings performance, we expect our Cabinets billing metric to continue to be strong in Q4.

Our global MR per cabinet yield stepped up $41 quarter-over-quarter on a normalized and constant currency basis, primarily due to increasing densities strong interconnection and firm pricing across each of our regions, consistent with the broader supply-demand dynamics in the marketplace. As Adaire highlighted, we continue to make great progress with our Build Bolder strategy. Our recent land purchases will support more than 900 megawatts of incremental capacity across our full product continuum once built out, meaningfully increasing the capacity to be developed across our portfolio.

The capacity to be developed now stands at 3 gigawatts positioning the Equinix to serve the expanding market opportunity across hybrid and multi-cloud and AI. Our investments remain focused on either enhancing our strong existing ecosystems or laying the foundation for both current and future AI inferencing solutions, which will be built on top of our highly differentiated platform.

Now let me cover the highlights for the quarter as depicted on Slide 7. Do note that all growth rates in this section are on a normalized and constant currency basis. Global Q3 revenues were approximately $2.32 billion, up 5% over the same quarter last year. Our recurring revenue growth stepped up 8% and which is underpinned by the continued bookings momentum of the business. As expected, our nonrecurring revenues moderated sequentially, largely due to lower xScale fees. Q3 revenues net of our FX hedges included a $9 million FX headwind when compared to our prior guidance rates. Global Q3 adjusted EBITDA was $1.15 billion or approximately 50% of revenues, up 8% over the same quarter last year. Q3 adjusted EBITDA, net of our FX hedges, included a $4 million FX headwind when compared to our prior guidance rates. Global Q3 AFFO was $965 million, up 12% over the same quarter last year and meaningfully above our expectations due to strong operating performance, disciplined balance sheet management and timing of recurring CapEx spend.

Q3 AFFO included $2 million FX impact when compared to our prior guidance rates. As expected, global MRR churn in Q3 stepped down to 2.3%, and we expect Q4 MR churn to be within our 2% to 2.5% quarterly guidance range. And now looking at our capital structure. Please refer to Slide 10. Our balance sheet was approximately $38 billion, which included cash and short-term investments totaling $2.9 billion. Our cash and short-term investments stepped down from elevated levels in Q2 as our capital and real estate investments stepped up, and we repaid $1.2 billion of senior notes. Our net leverage was 3.6x our annualized adjusted EBITDA. During the quarter, we issued U.S. dollar equivalent $500 million in Singapore denominated green notes at a rate of 2.9%. We also published our green bond allocation and impact report in September. Equinix has now issued approximately $9.5 billion in green bonds with $7 billion in net proceeds allocated to eligible green projects.

Turning to Slide 11 for the quarter. Capital expenditures were approximately $1.14 billion, including a recurring CapEx of $64 million. We opened 8 major projects across 7 markets since our last earnings call adding retail capacity in key metros, including in London, Miami, Montreal and Washington, D.C. We opened 2 new data centers, one in Chennai, India, the other in Monterrey, Mexico. Revenues from owned assets are 69% of our recurring revenues. Now moving to Slide 12. Our capital investments continue to generate strong returns. Our now 180 stabilized assets increased revenues by 4% year-over-year on a constant currency basis and are collectively 82% utilized and generate a 26% cash-on-cash return on the gross PPE invested.

And finally, please refer to Slides 13 through 17 for an updated summary of 2025 guidance and bridges. Do note, all growth rates are on a normalized and constant currency basis. For the full year, we're maintaining our underlying revenue outlook with a 7% to 8% normalized and constant currency growth rate. Our expected quarter-over-quarter MRR step-up is greater than $60 million. A significant year-over-year increase, highlighting the underlying momentum in the business and gives us the confidence as we look into 2026. And as we previewed in July, our Q4 revenue guidance also includes a meaningful step-up in nonrecurring fees attributable to the xScale business. As Adaire mentioned, our discussions with potential xScale customers are in their advanced stages. But as with transactions of this size and complexity, the timing of contracting can be fluid. Hence, the expanded revenue guidance range.

Given our strong profitability in Q3, we're raising our underlying 2025 adjusted EBITDA guidance by another $21 million. Adjusted EBITDA margins are expected to range between 49% and 50% for the full year. We're also raising our underlying 2025 AFFO guidance by another $31 million. AFFO is expected to grow between 11% and 13%, while AFFO per share growth is expected to range between 8% and 10% compared to the previous year.

And finally, 2025 CapEx is now expected to range between $3.8 billion and $4.3 billion including approximately $290 million of recurring CapEx spend.

So I'm going to stop here. I will turn the call back to Adaire.

Thanks very much, Keith. So in closing, we remain excited and optimistic about the future and our differentiated and durable market position. We are focused on executing against our Q4 expectations. And building our momentum for 2026, and we are very much on track on both accounts. Our intent is to continue to build on the outcomes that defined this quarter. Greater capacity, increased revenue and improved profitability and accelerate them as our strategy achieves even greater traction. We were built for this moment. And I am confident we will continue to make the very most of this opportunity in regards to both the long-term growth and long-term value creation for our shareholders.

So I'll stop here and open it up to questions.

[Operator Instructions] Our first question comes from Nick Del Deo from MoffettNathanson.

You have a very strong position with cloud on ramps, and that's obviously helped point a lot of enterprise business over time. you've been starting to land some neo cloud on-ramps and network nodes. Adaire, I think you mentioned [indiscernible] In your prepared remarks. I guess how strategic do you think these deployments will be relative to some of the more traditional cloud on ramps? And what are you doing to attract -- to actively attract AI magnets like these?

Yes. Thank you very much for the question. Yes, you're right. We have a market-leading position in native cloud on-ramps, which is, I think, a very important part of the connectivity narrative that we have for our customers, and we're in a position to add 2 additional on-ramps this quarter to our installed base. We also, as you mentioned, have a very strong presence in terms of AI magnets sitting inside the Equinix ecosystem. Companies that I mentioned in my prepared remarks there like Zetaris [indiscernible] , who is a GPU as a service provider in Germany, Block [ rockwitht ] Q out rider Nebius [indiscernible] to name about a few. Many of these neo clouds are using Equinix as a point of connectivity and a point of presence. And I suspect there's an element of a traction in terms of our 10,000-plus enterprise customers who are also making use of neo clouds for data storage and for connectivity. So our team, particularly our team in the Americas focuses on this aspect of our customer cohort and manages and engages those relationships appropriately in order to ensure that we have the right magnet representation in our ecosystem going forward.

Next, we'll go to the line of Aryeh Klein from BMO Capital Markets.

On the strength in presale activity, I think you changed your approach with sales not that long ago, enable them to sell capacity for their outcome delivery. Is that some of what you're seeing helping to drive the strength there? And then maybe on a related basis, there's a lot of capacity that's set to come online in some of your most important markets. How much pre-leasing actually you're seeing for those?

Aryeh, do you mind -- you broke up there just when you asked...

First part of your question. Yes.

Could you repeat that, please?

Yes, sure, sorry. Just on the strength in presale activity, I think not that long ago, you changed the approach enabling your sales force to sell capacity further out from delivery. Is that some of what you're seeing helping to drive the strength there? And then just on a related basis, there's a lot of capacity set to come online in some of your most important markets. How much pre-leasing activity are you seeing for those?

Okay. Thanks very much for the question. For the repeat, I think that you saw in Q3 in additional in addition to the annualized gross bookings of the $394 million that the team delivered. We also shared the cumulative total presold balance of $185 million of annualized gross bookings, which will be recognized in future quarters. This presales motion is a relatively newer motion for our core retail business, and we have recently extended the window for our sales team to be able to sell retail capacity ahead of delivery for the next 12 months. Previous to that, it was a 3- to 6-month window. This presales opportunity is something that gives our sales team critical capacity to sell into. And it actually is a degree of comfort for our customers because it enables our customers to know where their deployments will be placed when they need them.

And I think in the overall macro environment, with the demand continuing to outpace supply, we actually have seen the velocity of presales increase over the course of 2025, through to Q3. I think Keith mentioned in his remarks that 40% of our total presales balance was signed in Q3 of 2025. So providing these 2 elements, I think provides greater visibility to our investor community. That being said, when we look at the presales activity fairly evenly spread across the capacity that's coming online. We certainly have seeing very significant activity around locations like Frankfurt, London and others where capacity is in short supply, New York, et cetera. Yes. So definitely seeing the uptick in this, which is why we decided to share that data point with you.

Aryeh, maybe I'll just add one other comment, on to what Adaire said, I think it's also important to realize that part of the reason that we've sort of entered into another sales motion as Adaire refers to is the fact that you've got a supply and demand environment that has shifted. And we're -- right now, we're chasing demand. We're trying as hard as we can to bring new supply into the business. And so we want to make sure that our sales organization has the ability to have that visibility. At the same time, having Ralph and his organization, Global Design and Construction, accelerate as fast as they can, some of the builds that were out there to a quarter or potentially 2 quarters sooner than we originally had planned.

So it's the combination of basically -- demand-rich environment, and also as chasing the ability to deliver capacity into the market as fast as we can that really allowed us to enter into the sort of presale arrangement -- and so as Adaire said, the combination of the $394 million, the $100 million, $185 million, it just gives you a real sense of how much momentum there is in the business relative to where we were, not only 2 quarters ago, but certainly last year.

The one other remark that I think it's important just to reiterate, the presale relates to our retail footprint. So not to the entirety of our business. When we look at our ex-scale business, That, of course, is -- we're looking at through the lens of preleasing. So presale is entirely within the retail business. Thanks, Aryeh.

Next, we'll go to the line of Eric Luebchow from Wells Fargo.

Great. I appreciate you guys taking the question. I just wanted to touch on -- what you're seeing in kind of the pricing environment today, you said you're doing more presales -- are you seeing firm pricing or improving pricing just based on some of the capacity constraints we see in the market? And maybe just if I could squeeze one more in, I know you guys have kind of preguided to about a 5% AFFO growth rate next year. I know there's a lot of moving parts as we think into next year, and obviously, interest rates, financial costs looking a little better than you guided to. So any thoughts to some of the moving parts as we kind of roll our models forward to 2026?

Okay. Maybe I'll take the second piece first, and then make some comments on the remarks. Big part on your questions around pricing. So I guess, as we look ahead into 2026, we're certainly focused on our execution in Q4. So revenue is a very prime focus for us, ensuring that we have a very strong exit from Q4. We're certainly feeling very confident about the demand that we're seeing. And I guess our presale and our Q3 gross bookings is evidence of that demand. And Keith also mentioned the ability of our amazing design and construction team to be able to accelerate forward RFS states. We are monitoring and forecasting RFS with the same intensity that we do for revenue. And we did see a 20% acceleration on the 58 projects that we have underway. So the first, I guess, 2 elements of our 2026 color is this focus on revenue, this focus on RFS acceleration date.

We will also continue to focus on cost and how we are operating the business from an efficiency and effectiveness perspective. In order to ensure that we're delivering a very strong operating performance. And I think you can already see some very positive trends there as it relates to that. And then, of course, there is the capital model and the astute management of our capital and our CapEx requirements, which Keith you may want to comment on?

Yes. And so Eric, the -- as it relates to the balance sheet, the one thing in addition to all the good news that sort of -- Adaire was sharing with you there. The other part of the story is slightly different than where we were at our Analyst Day is that a rate of -- the cost to borrow, not only presently, but as you look forward is lower today than it was. So that's the positive news. Add on to that, our ability to raise capital in this environment across different markets and really get a fairly effective low cost of borrow. And as we look forward, we're probably going to continue to as I mentioned maybe in some of the last calls, continue to look at markets like Canada, Europe, whether it's synthetic or otherwise, we're going to raise more capital. And so we'll continue to drive down our over cost to borrow.

The other thing I would say is we have the ability. Again, we run the business on a global basis, as you understand. And so when we repatriate the capital into the United States, we get a higher return on that capital. And so the ability to sort of manage our balance sheet really effectively as well as the cost line that goes through the P&L is we're quite effective at that. And maybe the last part I would say is, as we've started to increase our construction in progress, no surprise to you, we're continuing to look at how we capitalize the interest expense associated with those construction initiatives, whether it's the prebuy or it's the development of land and you can see that over -- not only this quarter, but as we look forward, we'll spend more and more on land in powered land, and so we'll continue to capitalize interest into those projects appropriate with the business.

All right. So maybe let me just come back on the pricing question. We're certainly not seeing any dilution in our pricing, very firm.

Our next question goes to the line of Jonathan Petersen from Jefferies.

Great. Thank you. You talked about the 900 megawatts of land acquisitions that you did in Amsterdam, Chicago, Johannesburg, London and Toronto. Can you give us just some more details on if any one or two of those sites are particularly larger than the others and where you might be expecting to build ex-scale versus retail within those markets on that new land?

Okay. Yes, thank you very much. We were very excited about those land acquisitions. We believe they are very meaningful and associated closely with the metros where we have a lot of demand from our customers. So as you know, these recent land acquisitions have really brought our land under control. to a very significant level, enabling us to -- actually since last quarter to increase land under control to nearly by nearly 50%. And -- in terms of how we view the various different elements of the portfolio here in alignment with the long-term capital investments that we detailed at Analyst Day, we do plan to double our overall capacity, both inclusive of retail and xScale by 2029. And whilst we're not providing a very specific breakdown of the anticipated megawatt delivery between retail and xScale within these recent land acquisitions, we do anticipate that a significant proportion of London and Chicago land purchases will be earmarked for xScale business and will be contributed to the JV for which we will be compensated.

And I think our global design and construction teams also remain highly focused on delivering critical capacity across the portfolio. And so to some extent, the split of megawatts between retail and xScale is somewhat fungible because of the full product continuum that Equinix offers across traditional retail, larger footprint retail and xScale. And so really, we're looking to maximize the value based on the opportunity that we see for each of those land acquisitions.

Next, we'll go to the line of Michael Elias from TD Securities.

I'm going to see if I can press my luck here. I was looking at the municipal filings for the Manuka campus site. And from what I found in the minutes of the meeting, I think there was a talk about a split for that Chicago site, some of it being for xScale, some of them being for retail. I'm just wondering if there's kind of any direction you could give us in terms of what you're leading is for that campus for retail versus xScale. And then also as part of that, just curious, you talked about signing a bank deal in this quarter. We're seeing some large bank deals out in the market. I'm curious if xScale, you're still thinking about reserving that for hyperscale customers or maybe you'd be willing to take on some large enterprise customers within that space?

All right. So 2 questions. Let me address them one at a time. So certainly, the concept of the mega campus considers the possibility of jointly co-locating xScale with retail on a single campus. And that is certainly something that we are actively reviewing and considering as we plan out our mega campuses and something that I think will be a value add to all the participants, whether they are a participant in the xScale ecosystem or in the broader Equinix ecosystem. As it relates to transactions with the banks, certainly, it was interesting to see financial services as a very dominant sector in our Q3 results. And emerging requirements, for example, in series of operation like EMEA, where the door regulation is requiring a different level of resilience for financial services organization. This is also something that's helping to augment the demand that we're seeing in the Financial Services segment.

Certainly, we believe that our capacity is somewhat fungible across our xScale and retail footprint. And if there was an opportunity to service a large footprint through an xScale capacity that was available, then we would certainly work with our partners to ensure that, that would be something that we could consider for that customer.

And Michael, maybe I'll add on just one other thing. You made a reference to Manuco, which obviously, many hundreds of megawatts of capacity in that market. As Adaire alluded to, we look at the test fits and understand what is the best structure for for both the partnership and for the retail business because quite overly, we want a certain amount of capacity to come into the retail portfolio because we need that capacity in some of these larger markets. And so we're going to continue to look at that. The team, as part of any of these large campus type builds. We'll look to see how to bifurcate the land so that the portion stays in the ex-scale structure and then a portion of it can be owned by Equinix directly.

But again, I'd just say appropriately, you could appreciate that there is some of these larger markets, and Adaire alluded to London London and Chicago. But the other one that's out there is Amsterdam, which is in the greater Amsterdam area and something that we really are putting a lot of attention to. So hopefully, that gives you a little bit more color on the large-size opportunities that are in front of us.

Next, we'll go to the line of Michael Rollins from Citi.

So a couple of questions. First, with respect to -- there, you just referenced the larger footprint retail. And from the Analyst Day, that was one of the incremental uses of capital and investment for Equinix. So curious what you're seeing on that front in terms of demand? And are those the types of deployments that you should also see some significant pre-leasing as you get closer to bringing them online commercially. And then just one clarification. Keith, you mentioned the the width of the revenue guidance. I think this year, for 4Q is $120 million versus $40 million when you're coming into the fourth quarter of [ '24 ]. And just kind of curious like if you could frame the nonrecurring revenue toggle of what if all of that opportunity for xScale bookings gets pushed into 2026 versus maybe being able to get all of what you'd like to see in the fourth quarter of '25?

Could I go first?

Yes.

Thanks, Mike. So as it relates to large footprint, we actually had a very healthy mix in our Q3 revenue mix of large footprint deals but also a very, very healthy retail and interconnection uptick in the quarter. As it relates to the applicability of large footprint to the presale sales motion. Certainly, we're seeing -- customers who require capacity that is contiguous as part of that presales process because that's one way of securing that contiguous capacity long term, particularly in high demand markets.

And then the -- the second question, which is we really highlighted on Page 15 of the earnings deck. And I know some of you might not have seen the deck yet, but we sort of give a breakdown of bridge on sort of what's happening in. Clearly, there's a meaningful step-up in revenue between Q3 and Q4, and you can see that at 7%, and that also translates into revenue -- sorry, EBITDA profit, 7% quarter-over-quarter growth. embedded in that, in the prepared remarks, we sort of noted that $60 million plus will come from recurring. Again, a very steep increase from where we historically have been on a recurring basis, and it's very reflective of the comments that Adaire made on the strength of our booking activity and how quickly that turns into sort of a billing line. And so that deal -- that's sort of the $60 million as part of it. But going from sort of the normalized Q3 to midpoint of Q4, it's $153 million step-up. And so it tells you that there's roughly $90 million nonrecurring. Of that, of that, I would say, roughly 1/3 of it is traditional nonrecurring activity, 2/3 is this large potential transaction that we have been working on for months.

And so part of the reason we expanded the range quite simply is we have a certain assumption that's based in the fourth quarter here. We want to live within the guidance range that we're guiding you to. Our intention is, and we are highly confident that we can close this transaction in this quarter, but we wanted to give you the range on what would happen if it didn't close this quarter and it closed in Q1, which is not our intention. So again, I think it's just an appropriate way to manage the -- again, the large nonrecurring activity. I might leave you with one other thought. Again, Adaire sort of alluded to it already, as we work with great confidence with, again, potential party to this transaction, it is for the full build -- it is for potentially the full build-out, and that's 240 megawatts. Those 240 megawatts are split into 4 buildings at 60 megawatts each. Embedded in this number is roughly half of that. So you can get a sense that to the extent that we do the entire transaction, that sort of puts us in a different part of the range than where we typically try and run at midpoint or better.

So hopefully, that gives you the color that you need. And -- and because it was a complex response, we probably would happy to let you ask a follow-up question if you need to.

That was super helpful color. So Keith, thank you so much. But since you're giving me the extra question, I have to take advantage of it. So just curious, one of the things I was looking at was when I look at the Slide 7 -- actually, sorry, 8 and 9, and I'm looking at the regional performance. And then looking at the normalized constant currency type of growth rates in each region relative to the EBITDA and trying to think about margins, what's happening in the segments where it looked like margins accelerated significantly in the Americas. You had less EBITDA growth in EMEA and kind of middle of the pack in APAC. And is there anything unique about this quarter in terms of the way investors should be thinking about operating leverage or just continuing to expand margins as revenue grows in each of these regions?

Yes. Thanks for the question, Mike. I think one, it's a very fair question and and one that we certainly want to talk about. Adaire alluded to earlier in our comments, in addition to driving the top line growth, which you're seeing, obviously, the magnitude of increase in our annualized gross bookings. In addition to that, you can throw on the presales, the business is performing really well. But we are actively going after the cost. And the thing that's unique about the Americas, remember, we break our business into 3 segments. And embedded in the Americas business is basically all the corporate SG&A, which, of course, is a lot of the SG&A line that sits on our financials. And so by attacking the cost line, you're seeing a lot of benefit coming into the Americas region for those reasons.

The second thing I'll talk about is you've got some one-offs. And like anything, when you have xScale and you have transactions and particularly last year in EMEA, there's some transactions in the xScale space that didn't repeat themselves and so the profitability shifts between the years. But I would say that just fundamentally, there's one-offs in EMEA this quarter to the tune of roughly $10 million. And if you compare it to the same quarter last year, there was a $10 million benefit in the quarter. And so you have a $20 million swing. And that has a big enough move in the EMEA business to cause some movement around the margin line. Fundamentally, you can see when you look at APAC, you look at Americas and ultimately, when you take out sort of the seasonal aspects of power costs and some of the one-offs from xScale, the fundamental business, the profitability is increasing in all 3 regions of the world. And that's something that, again, Adaire has been pushing us on across the markets and also the corporate functions to make sure that we're as judicious as possible with our spend.

Next, we'll go to the line of Jim Schneider from Goldman Sachs.

A little bit of a left field question. Given the 12 xScale projects you're working on, maybe give us a sense about your level of confidence of power availability and scheduling for those additional projects? I'm assuming you feel relatively confident, but maybe kind of give us a sense of the time frame for planning those. And then any changes you're seeing in terms of your anticipated use of power, whether it's grid power or other alternative sources for those?

Yes. All right. There's a lot to unpack in that question, because I think -- there's a lot to unpack in the power and energy narrative around the data center space. And there's no doubt that this is a complex area, and the complexity is certainly growing by the day. I think Equinix has a number of significant benefits here when it comes to navigating power as a constraint in the industry. First of all, your 27-year history. Which has a very clear profile of how we use power, how we minimize and optimize our use of energy and also the relationships that we've developed over that period of time with all of the utilities who provide us service and partner with us from the grid. And this is something I think that's held us in good stead as we are looking at this issue holistically across the business.

I think the second thing that we can see is that there is a change in terms of the customer supplier dynamics between the data center and large NG users and the utilities overall in that, in many cases, for many of these land acquisitions there is a contract that you enter into in order to secure the load ramp that you have identified for this acquisition, and that often requires a CapEx investment in order to secure that power commitment. I think as Keith mentioned earlier, we're extremely fortunate to have a very, very strong balance sheet and to be able to meet those requirements in a very differentiated way. When we look at the land acquisitions that we've made recently for the land that's under our control, either the power for these lands is either already fully committed or we're in very advanced stages of discussions with the power providers because as I'm sure you know that we're not in the business of speculatively buying -- speculatively buying land.

As it relates to our 12 xScale projects that are underway, all of our current 12 projects all have power secured. So power is not a constraint on the 12 xScale under development scenarios. I hope that gives you a picture of where we are in terms of the 12 xScale projects, but also the broader power continuum.

Next, we'll go to the line of David Guarino from Green Street.

A question on the annualized gross bookings and now the new metric, presold gross bookings, I'm admittedly still trying to wrap my head around what a normal run rate each quarter should look like. So -- was this a one-off quarter? Or is this the normal run rate we should expect going forward? And then similarly, on that comment, Adaire, just to clarify the comment you made earlier. There is no price difference for customers committing to capacity 12 months out versus committing today. Is that correct?

Yes. Maybe the first part of your question, I'll try to address. Look, I think when you look at our bookings history and of course, this is a relatively new measure that we revealed on Analyst Day for the first time. And we did provide a little historical perspective when we provided that number on Analyst Day. You can see that it is a relatively consistent growth story across the annualized gross bookings measure. But in fairness, it is also a measure that could be quite volatile depending on how a particular quarter would play out. I think as it relates to our position as we move into Q4 and executing now as we are on Q4, already 40% of our Q4 budget and target is already closed at this point of the quarter. And the pipeline that we have as it relates to Q4 is a very strong pipeline. And so our standard conversion rates applied against that pipeline would lead us to believe that we will meet our Q4 budget.

So I think for the period of time that we have shown this data you can see a relative degree of consistency in terms of growth over quarter-over-quarter, but I would make the point that bookings can be inherently volatile. And therefore, it's not possible to predict that bookings themselves will always be up and to the right even though we believe that the underpinning demand in the market and the momentum in the market is up and to the right.

And David, maybe just one sort of add-on to Adaire's comment. To the extent that we don't have capacity in certain markets, and as we talked about, there's -- presale isn't in that number, that [ $394 million ] and so to the extent that we say we run out of capacity and given a sort of highly sought aftermarket, you might see a scenario where presale activity moves. So as Adaire said, you can have some volatility and we used to have more seasonal volatility. But because of the supply-demand dynamics, I think that's very different today. But that also presents a scenario where you could have maybe more presale activity than you would have basically annualized gross bookings. So there's going to be these trade-offs. And again, we don't -- can't give you a number right now, but I think to the extent that we see things happening, we're going to guide you to it. I'm going to say, "Hey, we're out of capacity in these 5 markets, we anticipate more more presales than we'd say annualized gross bookings, which turn into revenues much sooner than a presale item.

Next, we'll go to the line of Frank Louthan from Raymond James.

Talk to us about the uptick in the cross-connect revenue and the ARPU there. What's driving that? Is that more power densities or customer mix? And is that strength you're seeing in the Americas replicable in other markets and other areas of the world? Is that sort of a is that agreeing to see the lead there in the Americas?

Yes. Thank you. Certainly, the Americas is the leader in terms of the demand that we're seeing for our interconnection portfolio. We added 7,100 physical and virtual interconnects. And as a result of that, our interconnection revenue grew 8% year-on-year. The cohort of customers, you can see the technology and infrastructure providers, the cloud being the ones who are driving that demand, primarily in the Americas business. And I guess, as we start to see those organizations and segments proliferate into other markets, then we will see that continue to evolve and grow in other theaters of operation. But you're quite correct in your assumption that this was largely driven by our Americas business this year -- this quarter rather.

And was it power densities or customer mix? Or what's sort of driving that?

Customer mix -- customer mix.

And for our final question, we'll go to the line of Michael Funk from Bank of America.

Yes. Thank you for the question. So First for you, Keith. I heard the comment on the call about accelerating some of the builds and also your comment about capitalizing some of that expense. But does any of that change your thought or outlook on the level of AFFO or the shape of AFFO growth that you laid at Analyst Day? And then second, for you, Adaire, putting your tech hat back on, as you think about distributed AI infrastructure solution and other emerging solutions at Equinix, can you size the addressable market for us for those and how you think about it?