Equinix’s Second-Quarter Results Beat Analysts’ Expectations

Second-quarter performance

Equinix (EQIX) reported overwhelming financial results. The company’s top and bottom-line results for the second quarter were ahead of analysts’ estimates and marked a significant YoY (year-over-year) improvement. The key metrics also surpassed the company’s own expectations.

The AFFO (adjusted funds from operations) of $5.37 per share beat analysts’ projection of $4.99 and registered 17% growth YoY. In absolute value, the company reported AFFO of $428 million, which was significantly higher than $360 million reported in the second quarter of 2017. The AFFO was mainly driven by the company’s strong revenue growth and improved operating performance.

Equinix’s Second-Quarter Results Beat Analysts’ Expectations

The second-quarter revenues increased 18% YoY to $1.262 billion and beat analysts’ estimate of $1.259 billion. The revenues were in line with the mid-point of the company’s own guidance range of $1.257 billion–$1.267 billion (the mid-point is $1.262 billion). Strong demand for cloud services along with acquisitions and better sales execution drove Equinix’s second-quarter top-line performance.

Management’s commentary

In the second quarter earnings release on August 8, Peter Van Camp, Equinix’s executive chairman and interim CEO and president, said, “Equinix delivered another strong quarter with record bookings across all three regions and virtually all key operating metrics showing solid momentum in our go-to-market engine and interconnection strategy.”

Gaining confidence from the strong financial results, Van Camp thinks that the company will continue to perform well in the second half of 2018 due to its strategic growth initiatives including acquisitions and sales activities.

Outlook

Equinix expects that the stronger dollar might have a negative impact on its fiscal financial results. Therefore, the company slightly lowered the 2018 revenue and adjusted EBITDA forecast. The company projects total revenues and an adjusted EBITDA of $5.037 billion–$5.077 billion and $2.379 billion–$2.419 billion, respectively.

For the third quarter, Equinix projects the revenues and adjusted EBITDA to be $1.272 billion–$1.282 billion and $591 million–$601 million.

Peers’ performance

Digital Realty (DLR), CoreSite Realty (COR), and QTS Realty Trust (QTS) have reported 7.8%, 16.4%, and 15.2% growth YoY, respectively, for the second-quarter FFO (funds from operations). The iShares Cohen & Steers REIT ETF (ICF) has allocated ~7% of its funds on Equinix stock.

In this series, we’ll discuss Equinix’s revenues and profitability growth drivers, strategic investments, shareholders’ wealth creation policies, expectations, and valuations.