Equinix Inc (EQIX) — Q3 2025 Earnings Call Transcript

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 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, a 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 three highlights. First, top line growth. We are seeing continued revenue acceleration, delivering monthly recurring revenue (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 adjusted funds from operations (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 capital expenditures 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 HCloud 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 improves 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 six times faster and at one-third 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, among others. As I have shared in previous earnings calls, our strategy comprises three 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 Serve Better. As evidenced by our recent customer wins, Serve 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 our 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 presold 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, 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 two 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, Dell, 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 the enterprise level. And finally, Build Bolder. Through Build Bolder, 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 capacity to approximately 3 gigawatts, a nearly 50% increase from last quarter. These are the latest steps towards doubling our available capacity in the next five years. Since our last earnings call, we added seven 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 77th 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 capital expenditures are 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 joint venture 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 teams delivered 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 highlighted 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 VC capacity, pricing, volume of transactions and cabinets billing. We added a healthy 7,100 net interconnection additions 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 MRR 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 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%, 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 FFO included a $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 MRR 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 London, Miami, Montreal and Washington, D.C. We opened two 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 188 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 PP&E invested. And finally, please refer to Slides 13 through 17 for 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 regard 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.

You have a very strong position with cloud on-ramps, and that's obviously helped to pull a lot of enterprise business over time. You've been starting to land some new cloud on-ramps and network nodes. Adaire, I think you mentioned Nebius and Groq 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 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 two 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, they are like Zetaris, Lyceum who is a GPU as a service provider in Germany, Block, Groq, Outrider, Nebius, CoreWeave to name but a few. Many of these Neoclouds are using Equinix as a point of connectivity and a point of presence. And I suspect there's an element of attraction in terms of our 10,000-plus enterprise customers who are also making use of Neoclouds 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.

On the strength in presale activity, I think you changed your approach with sales not that long ago to enable them to sell capacity further out from 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 activity are you seeing for those?

Aryeh, could you repeat that? You were breaking up just as you asked your question.

First part of your question, you.

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 are 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 and for the repeat. I think that you saw in Q3 in addition to the annualized gross bookings of $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, and 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 two elements, I think, provides greater visibility to our investor community. That being said, when we look at the presales activity, it's fairly evenly spread across the capacity that's coming online, and we certainly have seen very significant activity around locations like Frankfurt, London and others where capacity is in short supply, New York, et cetera. And yes. So definitely seeing the uptick in this, which is why we decided to share that data point with you.

Aryeh, I want to add a point to what Adaire mentioned. It’s crucial to understand that one reason we’ve shifted our sales approach is due to a change in the supply and demand landscape. Currently, we are focusing on meeting demand and are working diligently to increase our supply. We want our sales team to have clear visibility while also enabling Raouf and his Global Design and Construction team to expedite some projects by a quarter or possibly two compared to our original timeline. This combination of high demand and our efforts to quickly deliver capacity to the market has led us to adopt a presale strategy. As Adaire pointed out, the figures of $394 million and $185 million illustrate the momentum we are experiencing compared to where we were two quarters ago and certainly last year.

It’s important to reiterate that the presale pertains specifically to our retail footprint and does not encompass our entire business. When considering our xScale business, we are focusing on it from the perspective of pre-leasing. Thus, the presale is solely within the retail segment.

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, but obviously, interest rates, financing 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, I think a 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. And 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 Pete also mentioned the ability of our amazing design and construction team to be able to accelerate forward RFS dates. 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, two 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. Regarding the balance sheet, in addition to the positive updates shared by Adaire, it’s worth noting that our borrowing costs are currently lower than they were at our Analyst Day, which is good news. Furthermore, we have been able to raise capital across various markets effectively at a low cost. As we look ahead, we plan to explore markets like Canada and Europe to raise more capital, which will help continue to reduce our borrowing costs. Additionally, since we operate on a global scale, repatriating capital to the United States allows us to achieve a higher return. We are managing our balance sheet and associated costs efficiently. Lastly, as we increase our construction projects, we are considering how to capitalize the interest expenses related to these initiatives, such as land development. You will see this reflected in our spending on land and powered land, and we will continue to capitalize interest on these projects as it aligns with our business strategy.

All right. And maybe let me just come back on the pricing question. We're certainly not seeing any dilution in our pricing, very firm.

Great. 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 scale versus retail within those markets on that new land?

Thank you very much. We are very excited about the recent land acquisitions, which we believe are significant and closely tied to the metros where we have high customer demand. These acquisitions have greatly increased our land under control by nearly 50% since last quarter. Regarding our portfolio, in line with our long-term capital investments shared at Analyst Day, we plan to double our overall capacity, including retail and xScale, by 2029. While we are not providing a specific breakdown of anticipated megawatt delivery between retail and xScale for these recent land acquisitions, we expect a considerable portion of the land in London and Chicago will support our xScale business and will be included in a joint venture that will provide compensation to us. Additionally, our global design and construction teams are focused on delivering essential capacity across the portfolio. Consequently, the distribution of megawatts between retail and xScale is somewhat flexible, thanks to the full range of products Equinix offers in traditional retail, larger footprint retail, and xScale. Ultimately, we aim to maximize the value of each of these land acquisitions based on the opportunities they present.

Great. I'm going to see if I can press my luck here. I was looking at the municipal filings for the campus site. And from what I found in the minutes for the meeting, I think there was a talk about a split for that Chicago site, some of it being for xScale, some of it being for retail. I'm just wondering if there's kind of any direction you could give us in terms of what your 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 two questions. Let me address them one at a time. So certainly, the concept of a 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're a participant in the xScale ecosystem or in the broader Equinix ecosystem. As it relates to transactions with banks, certainly, it was interesting to see financial services as a very dominant sector in our Q3 results. And emerging requirements, for example, in theaters of operation like EMEA, where the DORA regulation is requiring a different level of resilience for financial services organizations. 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 Mike, maybe I'll add on just one other thing. You made a reference to the Chicago site, which obviously has 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 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, will look to see how to bifurcate the land so that a portion stays in the xScale 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 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-sized opportunities that are in front of us.

So I have a couple of questions. First, regarding Adaire, you mentioned the larger retail footprint. From the Analyst Day, that was highlighted as one of the additional uses of capital and investment for Equinix. I'm curious about the demand you're observing in that area. Should we expect significant pre-leasing for those deployments as they approach commercial launch? Additionally, I’d like to clarify something. Keith, you talked about the revenue guidance width. This year, for the fourth quarter, it's projected at $120 million compared to $40 million going into the fourth quarter of 2024. Can you clarify the nonrecurring revenue aspect? What would happen if all of the xScale booking opportunities get delayed until 2026 instead of what you hope to achieve in the fourth quarter of 2025?

Can 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 presale sales process because that's one way of securing that contiguous capacity long term, particularly in high-demand markets.

The second question is addressed on Page 15 of the earnings presentation, which some of you may not have reviewed yet. We provide a breakdown of current developments, and it’s evident that there is a significant increase in revenue moving from Q3 to Q4, showing a 7% growth which also reflects in EBITDA profit. Within this context, we mentioned in the prepared remarks that over $60 million will come from recurring revenue, marking a substantial increase compared to our historical recurring figures. This aligns with Adaire's comments on the robust booking activity and the rapid transition to billing. The $60 million is part of this discussion. Transitioning from the normalized figures of Q3 to the midpoint of Q4 represents a $153 million increase, which indicates approximately $90 million in non-recurring revenue. I estimate that about one-third of this is from traditional non-recurring activities, while two-thirds stem from a significant potential transaction we have been pursuing for several months. We expanded the guidance range to accommodate this scenario. We are very confident in closing this transaction within the quarter but wanted to indicate the range should it extend into Q1, which we do not expect. This approach helps us manage the larger non-recurring activities. Additionally, as Adaire mentioned, we are working confidently with the potential partner for this transaction, which involves the complete build-out of 240 megawatts, divided into four buildings of 60 megawatts each. This estimate includes about half of that capacity. If we complete the full transaction, it could place us in a different range than our usual operating midpoint. I hope this clarifies the situation, and if you have further questions, we're happy to address them.

That was very useful information. Thank you, Keith. Since you allowed me an extra question, I want to make the most of it. I'm particularly interested in Slide 8 and 9 regarding regional performance. I noticed the growth rates in normalized constant currency for each region relative to EBITDA while considering margins. It appears that margins improved significantly in the Americas, while there was lower EBITDA growth in EMEA and average performance in APAC. Is there anything noteworthy about this quarter that investors should consider regarding operating leverage or the potential for margin expansion as revenue increases in these regions?

Yes, thanks for the question, Mike. I think one, it's a very fair question and one that we certainly want to talk about. As Adaire alluded to earlier in her 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 three 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, 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. But 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 three regions of the world. And that's something that, again, that 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.

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?

All right. Thank you. 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 energy 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 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.

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, I would like to add to Adaire's comment. If we find ourselves without capacity in certain markets, it's important to note that presales are not included in that $394 million figure. If we reach capacity limits in a highly sought-after market, we may see an increase in presale activity. As Adaire mentioned, there can be some volatility, and we used to experience more seasonal fluctuations. However, the current supply-demand dynamics are quite different. This situation could lead to more presale activity compared to our annualized gross bookings, which convert to revenue more quickly than presale items. There are trade-offs involved, and while I can't provide a specific number right now, we will keep you informed about any developments. If we find ourselves at capacity in five markets, we expect presales to exceed what we typically anticipate in annualized gross bookings, which would generate revenue sooner than from presales.

Great. Can you discuss the increase in cross-connect revenue and the average revenue per unit? What factors are contributing to that? Is it due to higher power densities or changes in customer mix? Also, is the strength observed in the Americas likely to be seen in other markets around the world? It's encouraging to see that leadership 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, and 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 clouds 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. And was it power densities or customer mix? Or what's sort of driving that? Customer mix, customer mix.

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 level of AFFO or the shape of AFFO growth that you laid out 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?

Yes, I'll start with the first question and then hand it over to Adaire. As I mentioned in response to an earlier inquiry, our company has managed to secure capital at a lower rate than we initially anticipated, although much of our refinancing will occur in 2026, 2027, and 2028. Our underlying assumptions have also shifted. I don’t want to take this opportunity to adjust our guidance, as we will discuss our plans for 2026 in February. However, it is accurate to say that our borrowing costs are lower now. We are achieving good returns on the cash held in our balance sheet, and we are capitalizing more due to increased construction activity. Consequently, you should expect a slight rise in capitalized interest. To give you an idea, in Q2, we capitalized approximately $14 million. In Q3, that amount increased to $27 million, and we anticipate capitalizing between $20 million and $30 million in Q4. This is somewhat higher than before, reflecting our accelerated spending. We have encouraged Raouf and the teams to expedite their construction efforts. Therefore, the increase in capital spending will lead to more capitalized interest on the balance sheet.

As it relates to the product portfolio, certainly, you can see this increase in our interconnection revenue up to $422 million in the quarter and a very specific focus on fabric with a 57% year-over-year increase and actually continuing to provision at record levels. We're now up to 110 terabits in terms of fabric provisioning. So I think all of this speaks to the connectivity narrative and opportunity that Equinix represents and the range of services that Equinix can provide to customers who are considering AI and non-AI-orientated workloads. The connectivity of the company is certainly the secret sauce. And I do feel that there are opportunities for us to look at potential for this aspect of our product portfolio. But I would say that connectivity is not just the only dimension around which people are considering Equinix when they look at solving for deploying inferencing and inferencing-based workloads at Equinix. Latency is one dimension, but there are others around model provider flexibility, around edge processing so that you're reducing the cost of bringing data back to the center, around data residency and compliance so that sensitive data is being processed in situ and also around intellectual property protection. And all of these elements are considerations around the platform that is Platform Equinix when our customers consider workload deployment and workload placement with us. So I think this represents a very viable opportunity for us to continue to evolve and grow.

Great.

Thank you, everybody, for joining the call...

And go ahead.

Yes. Thanks, everybody, for joining the call. Have a great afternoon, everybody.