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Equinix Data Center Expansion Continues as Hyperscale, AI Demand Persists
Analysts highlight Equinix’s ongoing data center growth, driven by strong demand for AI and hyperscale services.
6 Min Read
The Equinix SG4 data center in Singapore.Image: Equinix
Data center giant Equinix continues to expand its operations as demand for its services shows no signs of slowing down amid the AI revolution.
The Redwood City, California-based company reported its second-quarter financial earnings on August 7, detailing its strategic focus on both traditional retail data center offerings and hyperscale facilities.
Equinix reported Q2 2024 revenues reached $2.2 billion, up 8% year-over-year. The company is also optimistic about its future performance, raising its annual revenue forecast to a range of $8.69 billion to $8.77 billion – an increase of around 7% over 2023.
A key driver for Equinix's data center optimism is the potential of AI.
“Business transformation remains a critical priority for our customers and the emergence of AI marks a pivotal point for our industry," Equinix CEO Adaire Fox-Martin said during his company’s earnings call. “AI, similar to the growth of cloud technologies a decade ago, will take time to fully develop.”
As the demand for AI infrastructure services continues to soar, analysts said Equinix is well-positioned to consolidate its position due to its geographic spread and diversified service portfolio.
xScale Program Expansion to Meet AI Demand
Equinix is positioning itself to capture both the training and inference aspects of AI workloads.
“In the near term, AI training workloads are driving significant demand, particularly from service providers,” Fox-Martin said. “Our xScale program continues to be a direct beneficiary of this demand.”
Equinix’s xScale program, which focuses on hyperscale data centers, was launched in Europe in 2017 and has since expanded to Asia and the US.
The company recently closed on land and power for its first multi-hundred-megawatt xScale campus in Atlanta. This expansion complements Equinix’s existing robust portfolio across Europe and Asia-Pacific
Over the last quarter, Equinix leased an incremental 17 MW of capacity in its Silicon Valley 12 and Paris 13 facilities.
“This brings our total global xScale leasing to 365 MW, representing nearly $6 billion of total contract value and more than $700 million of annualized revenue once these assets are fully ramped,” Equinix CFO Keith Taylor said.
Interconnection Strategy and Performance
The xScale isn’t the only growing business at Equinix. The operator’s interconnection business continues to show strength, with over 472,000 total interconnections now deployed. Equinix reported that gross interconnection additions were at the highest level in two years, with pricing trending favorably.
“In absolute numbers, our A-to-Z connections continue to increase, and we’ve seen this quarter over quarter,” Fox-Martin said. “This is obviously the way that we define unique relationships between companies in a metro and I think this really truly speaks to the value of Equinix.”
Equinix is also focusing on sustainability and innovation in its data center operations. The company has been involved in initiatives such as subsea cable landing stations and next-gen mobile applications, which are part of its broader strategy to support digital transformation and interconnection.
During the Paris Olympics, Equinix’s PA10 data center which opened in 2023, played a supporting role in helping to heat some Olympic pools.
The Equinix PA10 facility in Paris (Image: Equinix)
Global Expansion and Market Penetration
Equinix is continuing to expand its global data center footprint. In May, Equinix opened its first data center in Johor, Malaysia. In June, the company announced it was building a new data center in Lisbon, Portugal.
The following month, the company announced plans to enter the Philippines market through the acquisition of three data centers in Manila from Total Information Management.
“The combination of our strong leadership position in our Singapore hub and our entries into Malaysia, Indonesia, and the Philippines, strategically positioned Equinix to help our customers capitalize on the expanding digital opportunity in the fast-growing Southeast Asia region,” Fox-Martin said.
Analysts Remain Upbeat on Equinix Growth
Equinix’s growth is part of an overall trend of increasing demand for data center capacity and services in 2024, somewhat driven by AI.
Last month, Moody's reported that it was seeing a surge in data center demand. In a data center REIT report also published by Moody’s in July, the financial ratings agency commented positively on the geographic mix of Equinix's portfolio including its development pipeline, presence in retail colocation, and interconnection.
Analyst firm IDC is also seeing a positive trend in Equinix’s strategy, especially compared to others in the data center space.
“Equinix had a great quarter, surpassing year-over-year growth of 1Q24, and continues to be a top performer among its peers,” Courtney Munroe, vice president of worldwide telecommunications research at IDC told Data Center Knowledge.
Munroe noted that over the quarter Equinix increased coverage, with expansion across several countries globally, and is investing steadily in xScale facilities to meet hyperscale demand.
“They also have perhaps the most which is a key driver for their performance, such as digital services including bare metal and AI-ready facilities and partnerships,” Munroe said. “Based on the current challenging economic environment, their guidance for the rest of 2024 if achieved will be impressive but not unexpected.”
How Does Equinix Compare to Other Hyperscale Operators?
According to a new report from Synergy Research, there are now over 1,000 large data centers operated by hyperscale companies. Equinix does have a play there too, though there is some nuance to the numbers.
John Dinsdale, chief analyst at Synergy Research Group told Data Center Knowledge that to understand Equinix’s position with hyperscale operators, you have to look beyond the top-level financials in its earnings release.
“Its published revenue numbers cover all of its retail colocation activities, but it targets the wholesale side of the colocation market via a series of unconsolidated xScale joint ventures,” he said. “So, Equinix financials will include a share of the profits from those joint ventures, but the joint venture revenues will not be included in Equinix’s top-line numbers.”
Dinsdale noted that typically, Equinix will own 20% of the xScale joint ventures and will be responsible for data center construction, operations, marketing, sales and customer support. The partners will provide most of the funding and will own 80% of the joint ventures.
Read more of the latest hyperscale data center news
As far as clients are concerned, Dinsdale said these are Equinix data centers and they are dealing with the usual Equinix people.
According to Synergy Research, in the retail colocation market Equinix is the clear market leader. It has a 21% share of the worldwide market and is almost four times the size of the next biggest player. Hyperscale operators are the biggest customer grouping for Equinix and so it is clearly the biggest retail colocation provider to hyperscale operators.
Dinsdale explained that hyperscale operators use retail colocation facilities to house cloud on-ramps, local points of presence, CDN or edge nodes and smaller local cloud zones.
“In the wholesale market Equinix is a relative newcomer, with xScale entering the market in 2020, but it has already established itself as one the leading providers of wholesale facilities to hyperscale operators,” Dinsdale said.
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