Equinix Earnings: Great Start to Year Leads to Full-Year Guidance Raise, but Momentum Will Slow

Equinix EQIX reported a fantastic first quarter that included revenue and margins both eclipsing guidance the firm gave last quarter. Management raised full-year sales guidance by more than the magnitude of the first-quarter beat while raising EBITDA guidance in line with the first-quarter outperformance. While business looks very strong, and pricing power certainly exists, the next few quarters won’t benefit from the same tailwinds that the first quarter did. Most notably, Equinix’s higher hedge rates on power costs won’t go into effect until the second quarter, but corresponding price increases that Equinix passed through to customers took effect in the first quarter. Still, the impressive first-quarter results and the general strength that continually persists throughout Equinix’s business leads us to raise our fair value estimate to $620 from $580.

First-quarter revenue was up 15% year over year, with each of the three regions looking good. Even without the 5-percentage-point boost that resulted from price increases Equinix implemented in a direct response to rising power costs, the 10% growth would’ve marked Equinix’s best quarter since 2021. All three regions (Americas; Asia-Pacific; and Europe, Middle East, and Africa) grew colocation revenue by about 10% or more, but EMEA was the standout with 25% growth, as it had the highest power cost increases. Apart from the power price increases that drove the headline results, the underlying business remained strong. The company had yet another record quarter of bookings; monthly recurring revenue per cabinet was up $24 even excluding the power price increases; and revenue churn stayed low, at about 2%. While the reported top-line result this quarter was an outlier because of the unusual pricing reset, we expect the underlying demand and pricing power Equinix has to persist.