Equinix (EQIX) is a tech company from Redwood City, California that specializes in building data centers.
That corner of technology is definitely where the growth is.
Everybody and anybody has heard a few things about this ongoing AI boom and remembers this secular trend hinges on the explosion of data and its incredible volume of it.
The processing of data requires data centers much like the processing of driver's licenses requires the Department of Motor Vehicles (DMV).
It’s not a surprise that the intense demand for data has meant a monumental need to supply new data centers and EQIX exists to deliver that new supply.
EQIX has performed admirably recently with solid revenue growth, a strong forward pipeline, and continued optimism about a differentiated ability to deliver compelling value to shareholders.
In the last quarter, they consummated 4,200 deals across more than 3,100 customers, including record numbers from high-value targeted customers.
EQIX was also able to upsell these companies on data center services, and digital services offerings, all coming together to address the evolving demands.
On the AI front, EQIX continues to cultivate and win significant opportunities across its existing customer base and with AI-specific prospects.
A recent Gartner poll found that 55% of organizations are in pilot or production mode with generative AI.
This is manifesting in accelerated interest from both enterprise customers and from emerging service providers looking to service this demand.
I am witnessing strong similarities between the evolving AI demand and the multi-tiered architectures that have characterized cloud build-out for the past eight years.
I think EQIX is perfectly positioned to capture high-value opportunities across the AI value chain along various key vectors.
First, in the retail business, EQIX will aggressively pursue magnetic AI service provider deployments to support on-ramps and smaller-scale training needs.
EQIX is well positioned here with nearly 40% market share of the on-ramps to the major cloud service providers, key players in the AI ecosystem.
Second, EQIX will meaningfully augment its advanced portfolio of specific data centers, including in North America to pursue strategic large-scale AI training deployments with the top hyperscalers and other key AI ecosystem players, including the potential to serve highly targeted enterprise demand.
I expect a build-out of data centers in retail campuses like the newly announced Silicon Valley 12x asset while other builds will be larger-scale campuses in locations with access to significant power capacity.
I also anticipate a dramatic acceleration in workloads and see Equinix as well positioned to deliver performance and economic benefits derived from network density and cloud adjacency.
While still early, I am seeing broad-based demand for private AI from digital leaders with specific wins in the transportation, education, public sector, and healthcare verticals, including Harrison.ai, a clinician-led healthcare artificial intelligence company that is dedicated to addressing the inequality and capacity limitations in the US healthcare system, by developing AI-powered tools in radiology and pathology.
Recurring revenues from customers deployed in more than one region stepped up 1% quarter over quarter to 77% as customers continued to move to more distributed architectures.
The brilliance of EQIX is that revenue is not a one-off event and companies will return with new data center needs.
If a company is not incorporating the processing of additional data, it most likely means they are not growing revenue.
This gives EQIX the chance to partner with high-quality companies that are at the heart of the digital transformation.
EQIX’s stock speaks volumes about where the company is as the stock has doubled in the past 5 years. They also deliver a 2.10% dividend to shareholders. I believe readers need to buy big dips and hold long-term in EQIX.
