Q4 2023 Equinix Inc Earnings Call
Good afternoon, and welcome to the Equinix fourth quarter earnings Conference call all lines will be able to listen only until we open for questions.
Operator: Good afternoon and welcome to Equinix, quarter Online. Also, to these. I'd now like to turn the call over to.
Also today's conference is being recorded if anyone has objections. Please disconnect at this time I'd now like to turn the call over to chip NUKEM Senior director of Investor Relations.
Operator: The Bulletproof Executive 2013, you may be. Good afternoon, and welcome to today's 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, involve risks, and uncertainty. actual results may vary significantly from those statements and may be affected by the risks we've identified in today's press release and those identified in our filings with the SEC, including our most recent Form 10-K, filed February 17, 2023, and Form 10-Q, filed October 27, 2023. 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 Equinix's policy not to comment on its financial guidance during the quarter unless it's done through an explicit public disclosure.
Chip NUKEM: They begin.
Chip NUKEM: Good afternoon, and welcome to today's conference call before we get started I'd 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 maybe affected by the risks we have identified in today's press release and those identified in our filings with the SEC, including our most recent Form 10-K filed February 17th 2023, and 10-Q filed October 27 2023.
Chip NUKEM: 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 equinix as policy not to comment on its financial guidance during the quarter unless it is done through an explicit public disclosure.
Operator: In addition, we'll provide non-GATT measures on today's conference call. We provide a reconciliation of these measures to the most directly comparable GATT measures and a list of the reasons why the company uses these measures in today's press release on the Equinix Investor Relations page at www.equinix.com. We've 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 current available information. With us today are Charles Meyers, Equinix's CEO and President, and Keith Taylor, Chief Financial Officer. Following our prepared remarks, we'll be taking questions from cell site analysts. In the interest of wrapping this call up in one hour, we'd like to ask these analysts to limit any follow-on questions to one. At this time, I'll turn the call over to Charles.
Chip NUKEM: We will provide non-GAAP measures on today's conference call. We provide a reconciliation of these measures to the most directly comparable GAAP measures and a list of the reasons why the company uses these measures in today's press release on the Equinix Investor Relations page at Www Dot Equinix dotcom.
Chip NUKEM: We've made available on the IR Patrick page of our website a presentation designed to accompany this discussion along with certain supplemental financial information and other data.
Chip NUKEM: I 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 current available information with.
Speaker Change: With us today are Charles Meyers, Equinix, as CEO, and President and Keith Taylor Chief Financial Officer.
Charles J. Meyers: Following our prepared remarks, we'll be taking questions from sell side analysts in the interest of wrapping this call up in one hour, we'd like to ask these analysts to limit any follow on questions to one at this time I'll turn the call over to Charles.
Charles J. Meyers: Thank you, Chip. Good afternoon, and welcome to our fourth quarter earnings call. We had a solid close to 2023 as digital transformation and accelerating AI demand drove a record quarter for X-scale leasing, robust pricing dynamics, and continued momentum across our data center and digital services portfolios. For the full year, we delivered more than $8 billion of revenues, eclipsing 21 years of consecutive quarterly growth, all while driving AFFO per share performance above the top end of our long-term expectations. As we look ahead, we see our overall relevance to customers continue to rise, with our global reach, highly differentiated ecosystems, and full-range portfolio of services positioning us as a key long-term partner to fuel digital transformation and unlock the enormous potential of AI. At the same time, many customers remain cautious in the face of macro uncertainty and are driving optimization across their broader IT infrastructure, freeing up dollars for AI-related investments while still managing within a tighter overall
Charles J. Meyers: Thank you chip good afternoon, and welcome to our fourth quarter earnings call. We had a solid close to 2023 digital transformation and accelerating AI demand drove a record quarter breck scale leasing robust pricing dynamics and continued momentum across our data center and digital services portfolios for the full year, we delivered more than $8 billion of revenues a clip.
Charles J. Meyers: In 21 years of consecutive quarterly growth, all while driving <unk> per share performance above the top end of our long term expectations.
Charles J. Meyers: As we look ahead, we see our overall relevance to customers continue to rise with our global reach highly differentiated ecosystems and full range portfolio of services positioning us as a key long term partner to fuel digital transformation and unlock the enormous potential of AI at.
Charles J. Meyers: At the same time, many customers remain cautious in the face of macro uncertainty and are driving optimization across their broader it infrastructure freeing up dollars for AI related investments, while still managing within tighter overall budgets.
Charles J. Meyers: These dynamics, combined with capacity constraints in certain key markets, continue to create cross-currents in our business, with solid gross demand and strong pricing dynamics being offset by more deliberate buying decisions and slightly higher levels of churn. Meanwhile, we continue to realize the benefits of efficiency investments over the past few years and are showing strong operating leverage in the business, allowing us to maintain our differentiated return on invested capital, expand margins, and deliver outsized performance on AFFO per share, which we continue to see as our lighthouse metric and the bedrock of long-term value creation. As we work to make digital infrastructure more powerful, accessible, and sustainable, we are building relationships as trusted advisors to our customers, innovating across our product portfolio, deepening our technology partnerships to solve customer challenges, and maintaining our discipline to put the right customers with the right workloads on the right assets. This approach reinforces the competitive advantages of Platform Equinix as we focus our efforts in 2024 on four key areas. First, we plan to continue to expand our unmatched global reach, expanding to 76 metros in 35 countries by year-end, including opening new markets in India, Indonesia, Malaysia, and South Africa.
These dynamics combined with capacity constraints in certain key markets continue to create cross currents in our business with solid gross demand and strong pricing dynamics being offset by more deliberate buying decisions and slightly higher levels of churn.
Charles J. Meyers: Meanwhile, we continue to realize the benefits of efficiency investments over the past few years and are showing strong operating leverage in the business, allowing us to maintain our differentiated return on invested capital extend expand margins and deliver outsized performance on <unk> per share, which we continue to see as our lighthouse metric and the bedrock of law.
Charles J. Meyers: Long term value creation.
Charles J. Meyers: As we work to make digital infrastructure and more powerful accessible and sustainable we are building relationships as trusted advisers to our customers innovating across our product portfolio deepening our technology partnerships to solve customer challenges in maintaining our desk wanted to put the right customers with the right workloads into the right assets.
Charles J. Meyers: This approach reinforces the competitive advantages of platform Equinix as we focus our efforts in 2024 on four key areas first we plan to continue to expand our unmatched global reach extending the 76 metros in 35 countries by year end, including opening new markets in India, Indonesia, and Malaysia and South.
Charles J. Meyers: Africa, we also intend to add much needed capacity in high demand existing markets across all three regions, including significant retail phases in New York, Paris, and Tokyo and accelerated investment in our ex cat portfolio.
Charles J. Meyers: We also intend to add much-needed capacity in high-demand existing markets across all three regions, including significant retail phases in New York, Paris, and Tokyo, and accelerate investment in our X-scale portfolio. Second, we intend to extend our interconnection leadership by combining the scalability and performance of physical interconnection and the agility of Equinix Fabric with an commitment to lead the way in the massive market of multi-cloud networking with new innovations and products like our recently announced Equinix Fabric Cloud Router. Third, we'll continue to prioritize our future-first sustainability strategy, making Equinix the clear partner of choice to help our customers track and achieve their sustainability goals and manage an increasingly complex global power landscape.
We intend to extend our interconnection leadership by combining the scalability and performance at physical interconnection and the agility of Equinix fabric with a commitment to lead the way in the massive market of multi cloud networking with new innovations and products like our recently announced equinix fabric cloud router.
Charles J. Meyers: Third we will continue to prioritize our future first sustainability strategy, making equinix the clear partner of choice to help our customers track and achieve their sustainability goals and managing increasingly complex global power landscape.
Charles J. Meyers: And finally, we intend to unlock the power of platform Equinix embracing key partners and making it easier than ever to combine our value with theirs. So we can solve our customers' problems together in particular, we will focus on AI is we joined forces with incredible partners, such as Nvidia to ensure that platform equinix as the place where private.
Charles J. Meyers: And finally, we intend to unlock the power of Platform Equinix, embracing key partners and making it easier than ever to combine our value with theirs so we can solve our customers' problems together. In particular, we'll focus on AI as we join forces with incredible partners such as NVIDIA to ensure that Platform Equinix is the place where private AI happens. Turning to our results, as depicted on slide 3, revenues for the full year were $8.2 billion, up $925 million, a 15% increase year-over-year, or a 9% increase excluding the impact of power price increases. The adjusted EBITDA was $3.7 billion, up 11% year-over-year, and AFFO was more than $3 billion for the first time, resulting in AFFO for share growth of 11% year These growth rates are all on a normalized and constant currency basis.
Charles J. Meyers: I happens.
Charles J. Meyers: Turning to our results as depicted on slide three revenues for the full year were $8 2 billion up $925 million.
Charles J. Meyers: A 15% increase year over year, or 9% increase excluding the impact of power price increases.
Charles J. Meyers: Adjusted EBITDA was $3 $7 billion up 11% year over year, and <unk> was more than $3 billion for the first time, resulting in a <unk> share growth of 11% year over year.
Charles J. Meyers: These growth rates are all on a normalized and constant currency basis.
On the AI front, we saw strong momentum across the value chain in Q4, as we cultivated key partnerships and one significant opportunities.
Charles J. Meyers: On the AI front, we saw strong momentum across the value chain in Q4 as we cultivated key partnerships and won significant opportunities. While still early, Gen AI has the capacity to transform every industry and is poised to accelerate rapidly. By 2026, Gartner predicts that over 80% of enterprises will have used Gen A APIs and models or deployed Gen AI-enabled applications in production environments, up from just 5% in early 2023.
Charles J. Meyers: While still early Gen. AI has the capacity to transform every industry and is poised to accelerate rapidly by 2026, Gartner predicts over 80% of enterprises will have use gen. A API and models or deployed yet AI enabled applications in production environments.
Charles J. Meyers: Just 5% in early 2023.
Charles J. Meyers: We're leaning into this opportunity and recently announced our expanded partnership for NVIDIA DGX Private Cloud at Equinix. This new service provides customers a fast and cost-effective way to adopt advanced AI infrastructure that's operated and managed by experts globally, so enterprises can move quickly while balancing performance requirements, a need for cloud adjacency, and a rapidly increasing desire to maintain control of critical enterprise data. We're seeing strong interest in this service across all three regions with early adoption from digital leaders in biopharma, financial services, software, automotive, and retail. Early wins in this partnership include a Fortune 100 global biopharma company that will create an AI center of excellence to accelerate its research and development process and shorten time to market for new medications.
Charles J. Meyers: We're leaning into this opportunity and recently announced our expanded partnership for Nvidia D. Gx private cloud at Equinix. This new service provides customers a fast and cost effective way to adopt advanced AI infrastructure, that's operated and managed by experts globally.
Charles J. Meyers: So enterprises can move quickly while balancing performance requirements or need for cloud adjacency and are rapidly increasing desire to maintain control of critical enterprise data we're.
Charles J. Meyers: We're seeing strong interest in this service across all three regions with early adoption from digital leader is in Biopharma financial services software automotive and retail sub segments.
Charles J. Meyers: Wednesday. This partnership include a fortune 100, Global Biopharma company, who will create an AI center of excellence to accelerate its research and development process and shorten time to market for new medications.
Charles J. Meyers: Our data center services portfolio continues to scale, with nine new data center openings since our last earnings call. Given the strong underlying demand for digital infrastructure and the long duration of delivering new capacity, we continue to invest broadly across our global footprint. We currently have 49 major projects underway in 35 markets across 21 countries, including 11 X-scale builds representing nearly 20,000 cabinets of retail and more than 50 megawatts of X-scale capacity through 2024. Wednesday's quarter included a European biotechnology company exiting its traditional data centers in favor of a global, network-dense, hybrid, and multi-cloud environment, including liquid cooling requirements, and Orin Holding, a Turkish conglomerate mainly serving as a strong global automotive supply company, expanding with Equinix to support its operations across 15 countries.
Charles J. Meyers: Our data center services portfolio continues to scale with nine new data center openings since our last earnings call given the strong underlying demand for digital infrastructure and a long duration and delivering new capacity, we continue to invest broadly across our global footprint. We currently have 49 major projects underway in 35 markets across 21 country.
Charles J. Meyers: These including 11 X scale builds representing nearly 20000 cabinets of retail and more than 50 megawatts of X scale capacity through 2024.
Charles J. Meyers: Wins this quarter included a European Biotechnology company exiting their traditional data centers in favor of a global network dense hybrid and multi cloud environment, including liquid cooling requirements and oren holding our Turkish conglomerate, mainly serving as a strong global automotive supply company expanding with Equinix to support their operations.
Charles J. Meyers: Across 15 countries.
Charles J. Meyers: Shifting to our ex scale initiative, the wave of Hyperscale demand to support AI and cloud is translating into robust demand and pre leasing activity since our last earnings call. We leased 90 megawatts of capacity across six assets in EMEA and APAC, including approximately 32 megawatts leased at the start of the year. This brings total.
Charles J. Meyers: Shifting to our X-scale initiative, the wave of hyperscale demand to support AI and cloud is translating into robust demand and pre-leasing activity. Since our last earnings call, we have leased 90 megawatts of capacity across six assets in EMEA and APAC, including approximately 32 megawatts leased at the start of the year. This brings total X-scale leasing to 300 megawatts globally.
Charles J. Meyers: X scale leasing to 300 megawatts globally.
Charles J. Meyers: Wins this quarter included supporting strategic Gen AI workloads, as well as a hyperscaler's first scaled liquid cooling deployment at Equinix. Looking ahead, we have a meaningful pipeline of opportunities to drive continued X-scale momentum in the quarters to come. Turning to our industry-leading global interconnection franchise, we now have more than 462,000 total interconnections deployed on our platform.
Charles J. Meyers: Wins this quarter included supporting strategic journey, I workloads as well as the Hyperscale is first scaled liquid cooling deployment at Equinix.
Charles J. Meyers: Looking ahead, we have a meaningful pipeline of opportunities to drive continued X scale momentum in the quarters to come.
Charles J. Meyers: Turning to our industry, leading global interconnection franchise, we now have more than 462000 total interconnections deployed on our platform in Q4 interconnection revenue stepped up stepped up 8% year over year on a normalizing constant currency basis, and we added an incremental 4300 organic interconnections for the quarter, we again had.
Charles J. Meyers: In Q4, interconnection revenues stepped up 8% year-over-year on a normalized and constant currency basis, and we added an incremental 4,300 organic interconnections for the quarter. We again had healthy gross advertising activity, offset somewhat by continued grooming and consolidations into higher bandwidth connections. The Internet Exchange saw peak traffic up 3% quarter-over-quarter and 22% year-over-year, to nearly 36 terabits per second, led by expansion from existing customers.
Charles J. Meyers: Healthy gross adds activity offset somewhat by continued grooming and consolidations into higher bandwidth connections.
Charles J. Meyers: Internet exchange saw peak traffic up 3% quarter over quarter, and 22% year over year to nearly 36 Terabits per second led by expansion from existing customers. Additionally, during the quarter. We added four new native cloud on ramps in Bogota Calgary Zurich.
Charles J. Meyers: Additionally, during the quarter, we added four new native cloud onramps in Bogota, Calgary, and Zurich. Equinix customers can now enjoy low latency access to multiple native cloud onramps in 37 metros, including eight out of the 10 world's largest metros by GDP. Wednesday's quarter included a leading European quantum computing company offering its technology through Equinix Metal and Equinix Fabric, enabling different industries to explore potential use cases for quantum computing. And OutSurance, a South African insurance company expanding in EMEA, leveraging Equinix Fabric and a managed service solution to be ready to begin trading. In our digital services portfolio, we saw continued momentum as Equinix Metal and NetworkEdge drove attractive pull-through to Equinix Fabric. In January, we announced the general availability of Equinix Fabric Cloud Router, a new virtual routing service to simplify enterprises' complex cloud-to-cloud and hybrid cloud networking challenges by providing an easy-to-configure, enterprise-grade, multi-cloud routing service that can be deployed in under a minute. Customers can deploy Equinix Fabric Cloud Router in all 58 Equinix Fabric-enabled metros globally with low latency connectivity to all the major cloud providers, as well as hundreds of other service providers.
Charles J. Meyers: Equinix customers can now enjoy low latency access to multiple multiple native cloud on ramps in 37, metros, including eight out of the 10 world's largest metros by GDP.
Charles J. Meyers: Wins this quarter included a leading European quantum computing company offerings, its technology through equinix metal and equinix fabric, enabling different industries to explore potential use cases in quantum computing and <unk>, a south African insurance company expanding in EMEA, leveraging equinix fabric in a managed service solution to me.
Charles J. Meyers: Ready to begin trading.
Charles J. Meyers: In our digital services portfolio, we saw continued momentum as equinix metal and network edge drove attractive pull through to Equinix fabric in January we announced the general availability of Equinix fabric cloud router, a new virtual routing service to simplify enterprises' complex cloud to cloud and hybrid cloud networking challenges by providing an easy to use.
Charles J. Meyers: Figure enterprise grade multi cloud routing service that can be deployed in under a minute.
Charles J. Meyers: Customers can deploy equinix fabric cloud router in all 58, equinix fabric enabled metros globally with low latency connectivity to all the major cloud providers as well as hundreds of other service providers.
Keith D. Taylor: Key digital services wins included NetApp, who expanded their partnership with Equinix to deliver a bare metal as a service solution, a comprehensive compute network and storage infrastructure stack with low latency connections to major public clouds, and a leading semiconductor company establishing a cloud-native storage presence using Equinix metal and pure storage with integration into AWS. Our channels program delivered another good quarter, accounting for 35% of bookings and over 50% of new logos. We saw continued growth from partners like Avant, HPE, HCL, NVIDIA, and WWT, with wins across a wide range of industry verticals and digital-first use cases. Wins this quarter included supporting a consumer health care company's business unit spin-off with Dell, and setting up a hybrid IT environment by leveraging co-location and the cloud for their SAP environment in London and Singapore. Now, I will turn the call over to Keith to discuss the results for the quarter. Great Thank you, Charles, and good afternoon to everyone.
Key digital services wins included that App, who expanded their partnership with Equinix to deliver a bare metal as a service solution a comprehensive compute network and storage infrastructure stack with low latency connections to major public clouds.
Charles J. Meyers: And a leading semiconductor company, establishing a cloud adjacent storage presence using equinix battle and pure storage with integration into AWS.
Charles J. Meyers: Our channel program delivered another good quarter accounting for 35% of bookings and over 50% of new logos. We saw continued growth from partners like Avant HPE, Hcl, Nvidia and Ww T with wins across a wide range of industry verticals and digital first use cases.
Charles J. Meyers: Wins this quarter include supporting our consumer health care companies business unit spinoff without setting up a hybrid it environment by leveraging co location and cloud for their SAP environment in London, and Singapore now, let me turn the call over to Keith to cover the results for the quarter great. Thanks Charles.
Keith D. Taylor: Good afternoon to everyone.
Keith D. Taylor: As highlighted by Charles, we had a solid end to 2023. The Equinix team continued to execute at pace across all levels of the organization to ensure our strategy as the world's digital infrastructure company continued to separate us from our peers. For the full year, our healthy gross bookings allowed the team to close almost 17,000 deals across more than 5,900 customers, again highlighting the diversity and strength of our unrivaled go-to-market engine. The net positive pricing activity both in the quarter and throughout the year created strong pricing dynamics, resulting in normalized and constant currency MRR per cap yield stepping up $38 for the quarter and $127 for the year to $2,227 per cap. And we had record X-scale leasing over the year while generating approximately $40 million of non-recurring X-scale fee revenue in the quarter, primarily related to the EMEA region.
Keith D. Taylor: Highlighted by Charles we had a solid end to 2023.
Keith D. Taylor: <unk> team continues to execute at pace across all levels of the organization to ensure our strategy as the world's digital infrastructure company continues to separate us from our peers.
Keith D. Taylor: For the full year, our healthy gross bookings allowed the team to close almost 17000 deals across more than 5900 customers again, highlighting the diversity and strength of our unrivaled go to market engine.
Keith D. Taylor: The net positive pricing activity, both in the quarter and throughout the year created strong pricing dynamics, resulting in normalized and constant currency MMR per cab yield stepping up $38 for the quarter.
Keith D. Taylor: $27 for the year to 2227 per cap.
Keith D. Taylor: And we had record exco leasing over the year, while generating approximately $40 million of nonrecurring ex keel escape fee revenue in the quarter, primarily related to the EMEA region.
Keith D. Taylor: On the sustainability front, we're pleased to again be listed on CDP's prestigious 2023 Climate Change A-List and again to be recognized in JustCapital's 2024 rankings as number one in real estate. As we look forward into 2024, our customers remain committed to all things digital, and we believe we're the best manifestation of this opportunity, as customers digitally transform their environments both in the cloud and through AI. Hence our enthusiasm about our position in the broader market and the opportunities that lay ahead for us. That said, we remain highly vigilant to the current market conditions and the impact on our customers. As mentioned last quarter, capacity constraints exist across a few of our markets, driving continued firm pricing power, albeit with some moderation to short-term growth.
Keith D. Taylor: On the sustainability front, we're pleased to again be listed on CD PS prestigious 2023 climate change a list and again to be recognized and just capital's 2024 rankings as number one in real estate.
Keith D. Taylor: As we look forward into 2024, our customers remain committed to all things digital and we believe we're the best manifestation of this opportunity as customers digitally transform their environments, both in the cloud and through AI.
Keith D. Taylor: Hence our enthusiasm about our position in the broader market and the opportunities that lay ahead for us.
Keith D. Taylor: That said, we remain highly vigilant at current market conditions and the impact on our customers.
Keith D. Taylor: As mentioned last quarter capacity constraints exist across a few of our markets driving continued firm pricing power, albeit with some moderation to short term growth.
Keith D. Taylor: But as highlighted on our expansion tracking slide we have several new markets and additional capacity coming online later this year with many other projects currently being contemplated as we look to extend our platform and drive growth.
Keith D. Taylor: But, as highlighted on our expansion tracking slide, we have several new markets and additional capacity coming online later this year with many other projects currently being contemplated as we look to extend our platform and drive growth. Also, we're very pleased with the operating leverage the business is delivering, benefiting from prior investments while being highly focused on future spends, resulting in improving adjusted EBITDA margins for the year. Importantly, our forward guide on our core metric, being AFFO per share, reflects our confidence in the long-term opportunity of our business, a preferential position, I believe, relative to any others in our space, given the foundational differences of our platform. Additionally, ARAJ's reported guidance includes positive FX tailwinds due to the weaker U.S. dollar relative to 2023 rates. And Net Power Price decreases as utility rates moderate across both our regulated and unregulated. Now, let me cover the highlights from the quarter.
Also we're very pleased with the operating leverage the business is delivering benefiting from prior investments while being highly focused on future spend resulting in improving adjusted EBITDA margins for the year.
Keith D. Taylor: Importantly, our forward guide on our core metric being <unk> <unk> per share reflects our confidence in the long term opportunity of our business a preferential position I believe relative to any others in our space given the foundational differences of our platform.
Keith D. Taylor: Additionally, our as reported guidance includes positive FX tailwind is due to the weaker U S dollar relative to 2023 rates.
Our net par price decreases as utility rates moderate across both our regulated and unregulated markets.
Speaker Change: Now let me cover the highlights from the quarter do know that all comments in this section are on a normalized and constant currency basis.
Speaker Change: As depicted on slide four global Q4 revenues were $2 1 billion up 15% over the same quarter last year due to strong recurring revenue growth prior price increases and record ex scale nonrecurring fees.
Speaker Change: As you would expect we're very pleased with the continued success of our <unk> portfolio and the Anr and other fees generated while also expecting a strong year in 2024.
Keith D. Taylor: Please note that all comments in this section are on a normalized and constant currency basis. As depicted on slide 4, global Q4 revenues were $2.11 billion, up 15% over the same quarter last year due to strong recurring revenue growth, power price increases, and record X-scale non-recurring fees. As you would expect, we're very pleased with the continued success of our AgScale portfolio and the NRR and other fees generated, while also expecting a strong year in 2024. However, as noted previously, XScale NR is inherently lumpy.
Speaker Change: As noted previously X scale N ours inherent inherently lumpy for Q1, we expect NR will step down sequentially, yeah remain elevated as a percent of revenues due to strong APAC ex scale leasing activity in January.
Speaker Change: Q4 revenues net of FX hedges includes a $3 million benefit when compared to our prior guidance rates.
Speaker Change: Global Q4, adjusted EBITDA was $920 million or 44% of revenues up 12% over the same quarter last year due to strong operating performance, although down quarter over quarter due to a $15 million charge related to our planned corporate real estate activities and a higher seasonal increase in repairs and maintenance spend.
Keith D. Taylor: For Q1, we expect NR to step down sequentially, yet remain elevated as a percent of revenues due to strong APAC XScale leasing activity in January. Q4 revenues net of our FX hedges include a $3 million benefit when compared to our prior guidance rate. Global Q4 adjusted EBITDA was $920 million, or 44% of revenues, up 12% over the same quarter last year due to strong operating performance, although down quarter over quarter due to a $15 million charge related to our planned corporate real estate activities and a higher seasonal increase in repairs and maintenance spend. Q4 just to debut on out of our IFS hedges had a minimal IFX impact when compared to our prior guidance rates and does include $4 million of Global Q4 FFO was $691 million, above our expectations due to strong business performance and favorable interest income offset, offset in part by higher seasonal recurring capex.
Speaker Change: Q4, adjusted EBITDA net of our hedges had a minimal FX impact when compared to our prior guidance rates and does include $4 million of integration costs.
Speaker Change: Global Q4, <unk> was $691 million above our expectations due to strong business performance and favorable interest income offset offset in part by higher seasonal recurring capex.
Speaker Change: Q4, <unk> included a $4 million FX headwind when compared to our prior guidance rates.
Speaker Change: Global Q4, MSR term stepped up to two 4% and in the higher end of our range due to customer optimizations.
Speaker Change: For 2024, we expect <unk> churn to stay in the upper side of our churn range in the first half of the year, then moderate down in the second half and we expect this key metric to average within our targeted two to two 5% per quarter range for the year.
Speaker Change: Turning to regional highlights whose full results are covered on slides five through seven.
Speaker Change: On a year over year normalized and constant currency basis, EMEA was our fastest growing MMR region at 27% due to prior price increases followed by our APAC and Americas regions at 9% and 7% MLR growth respectively.
Keith D. Taylor: Q4 AFFO included a $4 million FX headwind when compared to our prior guidance rate. Global Q4MR term stepped up to 2.4% at the higher end of our range due to customer optimization. For 2024, we expect MR churn to stay in the upper side of our churn range in the first half of the year, then moderate down in the second half, and we expect this key metric to average within our targeted 2 to 2.5% per quarter range for the year. Turning to our regional highlights, whose full results are covered on slides 5 through 7. On a year-over-year normalizing constant currency basis, EMEA was our fastest growing MRR region at 27% due to power price increases, followed by our APAC and Americas regions at 9% and 7% MR growth, respectively. The Americas region had a solid quarter with strong new logo growth and firm pricing led by our Chicago, New York, and Washington, D.C. metros.
Speaker Change: The Americas region had a solid quarter with strong new logo growth and firm pricing led by our Chicago, and New York, and Washington D C Metro.
Speaker Change: The Americas saw a good step up in cabinets billing in the quarter, which now includes the antell assets in our non financial metrics.
Our EMEA business had a strong quarter led by our German business and our growth in emerging market metros.
Speaker Change: We also had strong ex scale activity across a number of our markets over the year.
Speaker Change: Meanwhile, our business in Ghana, Ivory Coast, and Nigeria is performing better than our business case on a constant currency basis. Additionally.
Speaker Change: Additionally, we signed our first deal in Joanna and our Johannesburg, one asset in South Africa, which opens in Q3.
Speaker Change: And finally Asia Pacific region saw good performance in both our Japanese markets and in Mumbai.
Speaker Change: As it relates to our soon to be opened new markets in the region. We're actually building a strong pipeline of key ecosystem customers, which we expect to close prior to the Ibs openings.
Speaker Change: Also we're pleased to have recently announced our first long term PPA in APAC for 151 megawatts.
Speaker Change: To date Equinix has executed 21 ppas across Australia.
Speaker Change: <unk> Iberia, the Nordics and the U S, which will generate more than a gigawatt of clean energy once operational.
Keith D. Taylor: The Americas saw a good step up in cabinet's billing in the quarter, which now includes the Antel assets in a non-financial metric. Our May business had a strong quarter, led by our German business and our growth in emerging market metros. We also had strong X-scale activity across a number of our markets over the year. Meanwhile, our business in Ghana, Ivory Coast, and Nigeria is performing better than our business case on a constant currency basis. Additionally, we signed our first deal on our Johannesburg I asset in South Africa, which opens in Q3. And finally, the Asia-Pacific region saw good performance in both our Japanese markets and in Mumbai. As it relates to our soon-to-be-open new markets in the region, we're actively building a strong pipeline of key ecosystem customers, which we expect to close prior to the IBX openings. Also, we're pleased to have recently announced our first long-term PPA in APAC for 151 megawatts. To date, Equinix has executed 21 PPAs across Australia, France, Iberia, the Nordics, and the U.S., which will generate more than a gigawatt of clean energy once operational.
Speaker Change: This will certainly help these markets accelerate their clean energy transition.
Speaker Change: And now looking at our capital structure, please refer to slide eight.
Speaker Change: Our net leverage remains low relative to our peers at three seven times, our annualized adjusted EBITDA, our balance sheet increased to approximately $32 $7 billion, including an unrestricted cash balance of $2 1 billion.
Speaker Change: Our cash balance includes the settlement of approximately $433 million of ATM forward equity sales.
Speaker Change: Timing triggered by the increase in our Q4 quarterly cash dividend.
Speaker Change: Additionally, during the quarter, we executed an incremental $500 million of ATM forward equity sales, which we expect to settle in late 2024.
Speaker Change: As I've noted previously we expect to remain opportunistic in the timing and currency of our financing strategy, including our plans to refinance the $1 billion of debt maturing this year.
Speaker Change: Turning to slide nine for the quarter capital expenditures were $996 million, including a recurring capex of $105 million.
Since our last earnings call, we opened seven retail projects, including four new data centers in Frankfurt, Kuala Lumpur sold in Washington D C.
Speaker Change: In our <unk> program, we opened seven new projects and are now 87% leased or pre lease for all of our operational and in those projects.
Keith D. Taylor: This will certainly help these markets accelerate their clean energy transition. And now, looking at our capital structure, please refer to slide 8. Our net leverage remains low relative to our peers at 3.7 times our annualized adjusted EBITDA.
Speaker Change: During the quarter, we also purchased our London, eight IV ex asset and land for development in Mexico City.
Speaker Change: Revenues from owned assets increased to 66% of our recurring revenues a meaningful step up from last quarter, highlighting the progress we've had around asset ownership, a long term control over assets.
Keith D. Taylor: Our balance sheet increased approximately $32.7 billion, including an unrestricted cash balance of $2.1 billion. Our cash balance includes the settlement of approximately $433 million of ATM forward equity sales, the timing triggered by the increase in our Q4 quarterly cash dividend. Additionally, during the quarter, we executed an incremental $500 million of ATM forward equity sales, which we expect to settle in late 2024. As I've noted previously, we expect to remain opportunistic in the timing and currency of our financing strategy, including our plans to refinance the billion dollars of debt maturing this year. Turning to slide 9 for the quarter, capital expenditures were $996 million, including recurring capex of $105 million.
Speaker Change: Our capital expenditures delivered strong returns as shown on slide 10.
Speaker Change: A 174 stabilized assets increased revenues by 9% year over year on a constant currency basis or 5%, excluding the benefit attributed to our prior price increases.
Speaker Change: Our stabilized assets are collectively 85% utilized and generate a 27% cash on cash return on the gross PP&E invested.
Speaker Change: As a reminder, unlike prior years, we plan to update our stabilized asset summary on the Q1 earnings call.
And finally, please refer to slides 11 through 15 for updated summary of 2020 for guidance and bridges.
Speaker Change: Starting with revenues for the full year 2024, we expect top line growth of 7% to 9% on an as reported basis or.
Speaker Change: Or 7% to 8% on a normalized and constant currency basis, excluding the impact of lower power cost pass through to our customers.
Keith D. Taylor: Since our last earnings call, we opened seven retail projects, including four new data centers in Frankfurt, Kuala Lumpur, Seoul, and Washington, D.C. In our XScale program, we opened seven new projects and are now 87% leased or pre-leased for all of our operational and announced projects. During the quarter, we also purchased our London 8 IBX asset and land for development in Mexico City.
Speaker Change: We expect 2024, adjusted EBITDA margins to be approximately 47%.
Speaker Change: 160 basis point improvement over last year due to strong operating leverage target expense management initiatives and power price decreases.
Speaker Change: We expect to incur $25 million of integration costs, primarily related to the main one business projects, which we expect to complete by end of year.
Speaker Change: <unk> is expected to grow between nine and 12% compared to the previous year.
Keith D. Taylor: Revenue to Promote Assets increased to 66% of our recurring revenues, a meaningful step up from last quarter, highlighting the progress we've made around asset ownership and long-term control over assets. Our capital expenditures deliver strong returns, as shown on slide 10. Our 174 stabilized assets increase revenues by 9% year-over-year on a constant currency basis or 5% excluding the benefit attributed to our prior price increases. Our stabilized assets are collectively 85% utilized and generate a 27% cash-on-cash return on the gross PPE invested.
Speaker Change: <unk> per share is expected to grow between eight and 10% at the top end of our longer term targeted range on both an as reported and normalized and constant currency basis.
Speaker Change: 2020 for Capex is expected to range between two eight and $3 billion, including about $220 million of recurring capex.
And finally after moving forward with the 25% increase in our per share cash dividend last quarter, we're holding our quarterly cash dividend constant at $4 26 per share for 2024.
Speaker Change: For the full year, the cash dividend will approximate $1 6 billion a year over year increase of 19%, 100%, which is expected to be sourced from ordinary income given our expected strong operating performance.
Keith D. Taylor: As a reminder, and like prior years, we plan to update our Stabilized Asset Summary on the Q1 earnings call. And finally, please refer to slides 11 through 15 for an updated summary of 2024 guidance and bridges. Starting with revenues for the full year 2024, we expect top-line growth of 7-9% on an as-reported basis or 7-8% on a normalized and constant currency basis, excluding the impact of lower power costs passed through to our customers. We expect the 2024 adjusted EBITDA margin to be approximately 47%. A 160 basis point improvement over last year due to strong operating leverage, targeted expense management initiatives, and power price decreases. We expect to incur $25 million of integration costs, primarily related to the main one business projects, which we expect to complete by the end of the year.
Speaker Change: So let me stop here and turn the call back to Charles Thanks, Keith.
Charles J. Meyers: In closing 2023 was a year of significant progress and focused execution against our ambitious agenda, while macro uncertainties persist. We anticipate continued economic recovery as we move through 2024 and believe this will continue to embolden customers to accelerate their digital transformation agenda with a keen focus on capturing business value.
Through the extraordinary power of AI.
Charles J. Meyers: Against this backdrop demand for hybrid digital infrastructure should continue to grow and we're confident that the character of this demand will increasingly aligned with the distinctive advantages of equinix operating customers the flexibility to deploy architectures that are more distributed more cloud connected more on demand and more ecosystem rich than ever before features that have position.
Charles J. Meyers: The Equinix once again as a leader in IDC markets gave us worldwide assessment of datacenter services.
Keith D. Taylor: AFFO is expected to grow between 9% and 12% compared to the previous year. AFFO per share is expected to grow between 8% and 10% at the top end of our longer-term targeted range on both an as-reported and normalized in-constant-currency basis. 2024 CapEx is expected to range between $2.8 and $3 billion, including about $220 million of recurring CapEx. And finally, after moving forward with the 25% increase in our per share cash dividend last quarter, we're holding our quarterly cash dividend constant at $4.26 per share for 2024. For the full year, the cash dividend will approximate $1.6 billion, a year-over-year increase of 19%, 100% of which is expected to be sourced from ordinary income, given our expected strong operating performance.
Charles J. Meyers: Digital transformation is reshaping the fabric of our world unlocking extraordinary possibilities and changing the basis for competition in almost every industry. Thanks to our distinct and durable advantages equinix is well positioned to capture these opportunities through the combined balance sheet firepower of Equinix and our JV partners, we will continue to invest in <unk>.
Charles J. Meyers: Porting the vigorous demand for large scale cloud and AI infrastructure around the world simultaneously, we will leverage the reach and connectivity of the world's leading retail platform to ensure that equinix remains the best manifestation of the digital edge and a critical point of Nexus for modern cloud centric architectures reaffirming our purpose to be the platform.
Speaker Change: And where the world comes together, enabling the innovations that enrich our work our life and our planet. So let me stop there and open it up for questions.
Speaker Change: Thank you if you would like to ask a question. Please on mute your phone press star one and record your first and last name solely Unclearly. Please press star to his job right to withdraw your request.
Charles J. Meyers: So let me stop here and turn the call back to Charles. Thanks, Keith. In closing, 2023 was a year of significant progress and focused execution against our ambitious agenda. While macro uncertainties persist, we anticipate continued economic recovery as we move through 2024 and believe this will continue to embolden customers to accelerate their digital transformation agendas, with a keen focus on capturing business value through the extraordinary power of AI. Against this backdrop, demand for hybrid digital infrastructure should continue to grow, and we are confident that the character of this demand will increasingly align with the distinctive advantages of Equinix, offering customers the flexibility to deploy architectures that are more distributed, more cloud-connected, more on-demand, and more ecosystem-rich than ever before, features that have positioned Equinix once again as a leader in IDC Marketscape's worldwide assessment of data center services. Digital transformation is Thanks to its distinct and durable advantages, Equinix is well-positioned to capture these opportunities.
Speaker Change: Our first caller is Simon Flannery with Morgan Stanley You May go ahead. Your line is open.
Simon Flannery: Alright. Thank you very much two if I could the first one on the revenue guidance I think at the analyst day, you talked about it.
Simon Flannery: Percent to 10% revenue guidance is is that is that the macro conditions, causing the lower end to be at that 7%. This year and you've talked in the past Charles about exploring opportunities in the U S X scale hyperscale market any update on your thoughts there.
Speaker Change: Sure. Thanks for the question Simon.
Charles J. Meyers: Yes look I would say overall demand signal I think remains strong, but as I referenced in the script. We continue to see what we're characterizing as these crosscurrents in the business and we've seen seen those create varying levels of revenue headwind over the past few quarters really from from three sources I would say the first two really related to macro as you mentioned and.
Charles J. Meyers: The last one a bit more equinix specific first I think a bit of extension in the sales cycle.
Charles J. Meyers: In Q4, a bit similar to what we saw in Q1 of 'twenty three we saw more deal slippage, which we really had not seen in Q2 and Q3 and so we thought that we were sort of in a better spot.
Charles J. Meyers: But not a lot not a lot of lost deals, but a number of deals that got pushed one or more quarters and that that affected the quarter and the exit rate second we.
Charles J. Meyers: Through the combined balance sheet firepower of Equinix and our JV partners, we'll continue to invest in supporting the vigorous demand for large-scale cloud and AI infrastructure around the world. Simultaneously, we will leverage the reach and connectivity of the world's leading retail platform to ensure that Equinix remains the best manifestation of the digital edge and a critical point of nexus for modern cloud-centric architecture, reaffirming our purpose to be the platform where the world comes together, enabling the innovations that enrich our work, our life, and our planet. So let me stop there and open it up to questions. Thank you. If you would like to ask a question, please unmute your phone, press star 1, and record your first and last name solemnly and clearly. Please press star 2 to withdraw your request.
Charles J. Meyers: We saw churn is slightly elevated and I think more towards the high end of our range, which really reflects the continuation of the optimization activity that we and candidly others across the infrastructure space have been highlighting throughout 2023, and then the last one I'd say it was really more a little more specific to US I think we continue to grapple.
Charles J. Meyers: With some capacity constraints in some of our key markets and that hits us on the gross bookings since we really can't accommodate larger footprint requirements in those markets and it hits us on the churn side in some cases as we work to try to free up capacity through some inducing some some churn and so we've seen that it certainly in markets like <unk>.
Simon Flannery: Our first caller is Simon Flannery with Morgan Stanley. You may go ahead. Your line is open.
Charles J. Meyers: A poor so.
Charles J. Meyers: All of those factors combined to give us a little lighter Q4, and therefore, a little bit lower exit run rate and as you know in a 95% recurring revenue business that kind of puts you that behind the power curve. So are our full revenue guide come in a little bit below our analyst day range, but but you know again as you saw you know a lot of things I think to be fair.
Simon Flannery: Great, thank you very much. Two, if I could, the first one on the revenue guidance. I think at Analyst Day, you talked about 8 to 10% revenue guidance. Is that, or are macro conditions causing the lower end to be at that 7% this year? And you've talked in the past, Charles, about exploring opportunities in the U.S. X-scale and hyperscale market. Any update on your thoughts there? Sure.
Charles J. Meyers: Good about given the X scale strength I think we saw a strong bookings performance in our retail sweet spot.
Charles J. Meyers: Thanks for the question, Simon. Yeah, look, I would say, you know, the overall demand signal, I think, remains strong. But, as I referenced in the script, we continue to see what we're characterizing as these cross currents in the business, and we've seen those create varying levels of revenue headwind over the past few quarters, really from three sources, I'd say the first two really related to macro, as you mentioned, and the last one a bit more Equinix specific. First, I think a bit of extension in the sales cycle. In Q4, it will be a bit similar to what we saw in Q1 of 23.
Charles J. Meyers: Healthy pipeline and starting to see signs of the emergence of a of an even bigger AI related pipeline. So we continue to be upbeat about the long term opportunity and importantly, I think despite the lower revenue guide I think we're continuing to see robust pricing really driving some operating leverage in the business.
Charles J. Meyers: When that continues to really translate to those attractive returns on capital.
Charles J. Meyers: Rowing dividend and <unk> <unk> per share performance that really isn't at the top end of our long term guidance range. So so I think that's the overall thing in and again I think.
Charles J. Meyers: Really we'd love to be in that range believe me.
Charles J. Meyers: We saw more deal slippage, which we really had not seen in Q2 and Q3. And so we thought, you know, that we were sort of in a better spot. But you know, not a lot, not a lot of lost deals, but a number of deals that got pushed one or more quarters and that affected the quarter and the exit rate.
Charles J. Meyers: And as disappointing that we're not but I think we're giving you a realistic view of what we think.
Charles J. Meyers: The current market conditions will support and we're going to we're going to go like Hell They try to beat that.
Charles J. Meyers: So that's that relative to our U S X scale, yes, we are absolutely.
Charles J. Meyers: Second, we saw a turn slightly elevated and, I think, you know, more towards the high end of our range, which really reflects the continuation of the optimization activity that we and, candidly, others across the infrastructure space have been highlighting throughout 2023. And then the last one, I'd say is really more a little more specific to us. I think we continue to grapple with some capacity constraints in some of our key markets. And that hits us on gross bookings since we really can't accommodate larger footprint requirements in those markets.
Charles J. Meyers: Working on how we're going to continue to be more aggressive in this market.
Charles J. Meyers: We think there is opportunity as you know our our tune in my opinion, specifically has changed a bit on that over the last couple of years I think and I think we're positioned to really continue to get some significant both economic and strategic benefits by Advair.
Charles J. Meyers: Advancing our investment in that and so we're hard at work on that nothing specific to report here, but I think you'll hear from us in the near future on that.
Speaker Change: Thanks, a lot very helpful.
Charles J. Meyers: And it hits us on the churn side, in some cases, as we work to try to free up capacity through some, you know, inducing some churn. And so we've seen that certainly in markets like Singapore. So, you know, all those factors combined to give us a little lighter Q4, and therefore a little bit lower exit run rate. And as you know, in a 95% recurring revenue business, that kind of puts you behind the power curve. So our full revenue guide comes in a little bit below our analyst day range.
Speaker Change: And our next caller is Ari Klein with BMO capital markets. You May go ahead. Your line is open.
Ari Klein: Thank you.
Ari Klein: On the AI front currently that momentum is accelerating.
Ari Klein: How you think about the Tam there, particularly relative to the 21 billion outlined at the analyst day, and then maybe just on that <unk> gtx offering how meaningful can that be calm and is that something you can ultimately offer anywhere and beyond the 12 or so markets initially targeted.
Charles J. Meyers: But, but, you know, again, as you saw, there are a lot of things I think we should feel good about, given the X scale strength. I think we saw strong, you know, bookings performance in our retail sweet spot, a very healthy pipeline, and starting to see signs of the emergence of an even bigger AI related pipeline. So we continue to be upbeat about the long-term opportunity. And importantly, I think, despite the lower revenue guide, I think we're continuing to see robust pricing, really driving some operating leverage in the business, which continues to really translate to those attractive returns on capital, a growing dividend, and an FFO share performance that really is at the top end of our long-term guidance range.
Speaker Change: Yeah, Yeah, Yeah, it's a really interesting one I think there is a massive opportunity I think similar to what other people are people are seeing we see it is hugely promising and moving very quickly, but still pretty darn early in the overall cycle. So it's clear.
Speaker Change: Clearly was a major factor in our X scale leasing.
Speaker Change: Obviously record the record bookings, there and and I expect we're going to continue to see a lot of strength and that's informing a bit of that desire to lean in on that on that investment.
Speaker Change: I wouldn't say, it's yet proving to inflect, our retail bookings as I. Just said you know we've kind of we were a little shorter than we wanted to be there, but again, we're seeing the green shoots there we saw some great early wins on the retail side, both last quarter in terms of these network nodes to support large scale training requirements with summit.
Charles J. Meyers: So, I think that's the overall thing. And again, I think, really, we'd love to be in that range, believe me, and it's disappointing that we're not, but I think we're, you know, giving you a realistic view of what we think the current market conditions will support and we're gonna, we're gonna go like hell to try to beat that.
Speaker Change: Service providers.
Speaker Change: <unk> talked about those and then some really good enterprise wins as a as theyre looking at.
Charles J. Meyers: So, that relative to the US X scale, yes, we are absolutely working on how we're going to continue to be more aggressive in this market. We think there is opportunity, as you know, our, and my, tune specifically has changed a bit on that over the last couple of years. I think we're, and I think we're positioned to really continue to get some significant both economic and strategic benefits by, you know, advancing our investment in that. And so, we're hard at work on that. Nothing specific to report here, but I think you'll hear from us in the near future on that. Thanks a lot.
Speaker Change: Really enterprise level training as well as inference and how to really unlock the full power of the AI ecosystem and so and we think the Nvidia <unk> private cloud managed service is a really distinctive offering and <unk> and we're seeing big big pipeline build there with with Nvidia on that front and so so.
I do think we have a very broad range of where I think we can offer that around the world and <unk> and we will continue to.
Speaker Change: And that over time, but again I think it's I think it's a hugely exciting opportunity in terms of you asked about the Tam I mean on a as I said at the time as I said at the Analyst Day I think you know the Tam is is huge and so I think it's probably bigger than what we've set out there I think when you look at the past.
Charles J. Meyers: Very helpful. Our next caller is Ari Klein with BMO Capital Markets. You may go ahead; your line is open.
Ari Klein: Maybe just on the AI front, clearly the momentum is accelerating. I'm curious how you think about the 10 there, particularly relative to the 21 billion outlined at the analyst day. And then maybe just on the NVIDIA GDX offering, how meaningful can that become? And is that something you can ultimately offer anywhere and beyond the 12 or so markets initially targeted? Yeah, yeah, I mean, AI is a really interesting one.
Speaker Change: <unk> impacts and kind of what we're seeing in terms of the early returns on AI I think youre going to continue to see a lot of investment flow to that and so I think that the Tam is probably bigger than what we outlined I think the key for US is really where can we be distinctively differentiated in that yes, I think we're going to get a piece of it on the scale side.
Charles J. Meyers: I think there is a massive opportunity. Similar to what other people are seeing, we see it as hugely promising and moving very quickly, but still pretty darn early in the overall cycle. So it clearly was a major factor in our X-scale leasing, obviously record that record bookings there.
Speaker Change: But I think the more differentiated position for us over the long term is unlocking the power of the AI ecosystem through this sort of cloud adjacent set of offerings and on the digital services side, our cloud adjacent storage and fabric cloud router or all sorted hitting in that.
Charles J. Meyers: And, and I expect we're going to continue to see a lot of strength. And that's informing, you know, a bit of that desire to lean in on that investment. But I wouldn't say it's yet proving to affect our retail bookings. As I just said, we kind of, we were a little shorter than we wanted to be there. But again, we're seeing the green shoots there.
Speaker Change: Sweet spot of what we think customers are really looking for and control over their enterprise data the ability to access AI tools from a from the hyperscale or who are innovating rapidly in that area and stitch. It all together and make it work in a way that makes sense for them and so fabric cloud router fabric cloud adjacent <unk>.
Charles J. Meyers: We saw some great early wins on the retail retail side last quarter in terms of these network nodes to support large-scale training requirements with some of the service providers. We talked about those and then some really good enterprise wins as they're looking at, you know, really enterprise-level training, as well as inference and how to really unlock the full power of the AI ecosystem. And so, we think the NVIDIA DGX private cloud managed service is a really distinctive offering.
<unk> all things that really really play into that so we continue to be very optimistic about that but I would say tempering expectations I think it's going to it's going to take a little time for that to really fully realize itself in terms of the bookings flow.
Speaker Change: Thanks for the color.
Speaker Change: Our next caller is Jon Atkin with RBC.
Jonathan Atkin: You May go ahead your line is open.
Charles J. Meyers: And, and we're seeing a big pipeline build there with NVIDIA on that front. And so, I do think we have a very broad range of where I think we can offer that around the world. And, and we'll continue to, you know, expand that over time. But again, I think it's, I think it's a hugely exciting opportunity, you know, in terms of you asking about the TAM, I mean, on that, as I said, at the TAM, as I said, at the analyst, I think, you know, the TAM is, is huge. And so I think it's probably bigger than what we've said out there.
Jonathan Atkin: Thanks, very much on the churn commentary is there anything to call out in terms of regions, where you saw it or which products was it mainly cabinets or cross connects or other.
Jonathan Atkin: Yeah, I would say.
Jonathan Atkin: More on more on cabinets and power.
Jonathan Atkin: The cross connect churn is looking a lot like it has for the last several quarters John.
Jonathan Atkin: Gross activity continues to be strong.
Jonathan Atkin: I think we're seeing some grooming, particularly in the network service provider segment as their businesses are a bit more challenged and I think they are really focused on cost reduction we are seeing some consolidation into higher speeds. So that's a bit of a a bit of a headwind but.
Charles J. Meyers: I think when you look at the possible impacts and kind of what we're seeing in terms of early returns on AI, I think you're going to continue to see a lot of investment flow into that. And so I think that the TAM is probably bigger than what we outlined. I think the key for us is really where can we be distinctively differentiated in that. Yes, I think we're going to get a piece of it on the X scale side.
Jonathan Atkin: But I think more and more the elevation was a bit more on the on the cabinets and power and cabinet side, but it really is related primarily.
Charles J. Meyers: You know, but I think the more differentiated position for us over the long term is, you know, unlocking the power of the AI ecosystem through this sort of cloud-adjacent, you know, set of offerings. And on the digital services side, our cloud-native storage and fabric cloud router are all sort of, you know, hitting that sweet spot of what we think customers are really looking for, you know, control over their enterprise data, the ability to access AI tools from, from the hyperscalers who are innovating rapidly in that area, and stitch it all together and make it work in a way that, you know, makes sense for them. And so fabric cloud router, fabric, cloud-adjacent storage, all things that really, really play into that.
Thank to people re sizing.
Jonathan Atkin: Oh footprints in a way that is.
Jonathan Atkin: It aligns to what Theyre more immediate need is because I think that it's.
Jonathan Atkin: We haven't I think there was a time there when people were saying, hey, I have more than I need, but I'm, just kind of hang onto it.
Jonathan Atkin: And I think that was the case in 'twenty two but in 'twenty three we have seen people a lot more.
Jonathan Atkin: <unk> bye budgets part of that we think is actually related to.
Jonathan Atkin: A lot of you guys asked us a lot of questions. When we did the PPI around would that create elasticity and we haven't seen what I would consider traditional elasticity of demand, but what we have sort of heard coming from our sales teams is a pressure that it says hey, I ate up all my budget with the PPI and and so I can't grow as I expected it.
Charles J. Meyers: So we continue to be very optimistic about that. But I would say tempering expectations. I think it's going to take a little time for that to really fully realize itself in terms of the bookings flow and the color.
Jonathan Atkin: So if I wanted to do some of the things I'm looking to do on the AI front I gotta find room, and so they've been more typically contracting footprints and so that's that's really the dynamic we're seeing let me give you a little more color on a couple of areas one only a single digit percentage of our churn is full customer churn.
Charles J. Meyers: Our next caller is John Atkin with RBC. You may go ahead; your line is open. Thanks very much.
Jonathan Atkin: On the churn commentary, is there anything to call out in terms of the regions where you saw it, or which products? Was it mainly cabinets or cross-connections? or other. Yeah, I would say, you know, more on more cabinets and power. The cross connect term is looking a lot like it has for the last several quarters. John, growth activity continues to be strong. I think we're seeing some consolidation, particularly in the network service provider segment, as their businesses are a bit more challenged. And I think they're, you know, really focused on cost reduction. We are seeing some, you know, consolidation into higher speeds. So that's a bit of a bit of a headwind.
Jonathan Atkin: So almost all the rest of it is all people moving around re sizing footprints that kind of activity and quite encouraging and I said well, let's look at those customers and those that are churning and tell me what their other act what their activity level is across the rest of the platform and quite encouraging for.
Jonathan Atkin: For the most part you are finding those customers are buying elsewhere in tandem with the optimization work that they're doing and so I think that's that's really the dynamic there in terms of I would say, we've seen a little more of that in Europe John.
Charles J. Meyers: But, But I think the more the more the elevation was a bit more on the cabinets and powering cabinet side, but it really is related primarily, you know, I think to people resizing their footprints in a way that is, you know, aligns to what their more immediate need is because I think that it's, you know, we have, I think there was a time when people were saying, hey, I have more than I And I think we, you know, that was the case in 22. But in 23, we've seen people a lot more, you know, pressured by the budget.
John: And that's probably because we were had a little more large footprint population. There. So I think we're seeing it a little heavier there.
John: But but again.
John: Guide says.
John: <unk> assumes that we're going to continue to see some of this through the first half of this year with the attenuation of that in the back half.
John: Of 24.
Speaker Change: Got it and then and then secondly, I was curious about the X scale initiative and the growth paths in the Americas and kind of the puts and takes of pursuing that organically versus inorganically.
Charles J. Meyers: Part of that, we think, is actually related to, you know, a lot of questions when we did the PPI about whether that would create elasticity, and we haven't seen what I would consider traditional elasticity of demand. But what we have sort of heard coming from our sales teams is pressure that says, hey, I ate up all my budget on the PPI. And, And so I can't grow as I expected.
Speaker Change: Yes, I mean, I think we're very focused right now on organic.
Speaker Change: Certainly not be.
Speaker Change: <unk>.
Speaker Change: We wouldn't necessarily not be open to it.
Speaker Change: Inorganic I just think it's a it's a tougher thing in terms of identifying those assets I think the multiples at which those things are trading.
Speaker Change: <unk> to say, the least and plenty of competition for those assets and so I think we're primarily focused on organic and but again, if the circumstance and conditions change one our balance sheet is always ready.
Charles J. Meyers: And so if I want to do some of the things I'm looking to do on the AI front, I got to find room. And so they've been, you know, more typically contracting their, you know, footprints. And so that's, that's really the dynamic we're seeing. Let me give you a little more color on a couple areas.
Speaker Change: And and I think we'd be open to that but I think our focus is probably more so on the organic side.
Charles J. Meyers: One, only a single digit percentage of our churn is full customer churn. So almost all the rest of it is all people, you know, moving around, resizing footprints, you know, that kind of activity. And quite encouragingly, I said, well, let's look at those customers and those that are churning and tell me what their other activity level is across the rest of the platform. And quite encouragingly, for the most part, you're finding those customers are buying elsewhere in tandem with the optimization work that they're doing. And so, I think that's, you know, that's really the dynamic there in terms of, I would say we've seen a little more of that in Europe, John, and that's probably because we had a little more of a large footprint population there.
Speaker Change: Thanks, so much.
Speaker Change: Okay.
Speaker Change: And our next caller is Michael Rollins with Citi. You May go ahead.
Michael I. Rollins: Thanks, and good afternoon, just first following up on the point that you're making about customer optimization.
Michael I. Rollins: In the past you've used the analogy of managing the retail data centers, just like a tetra sportive fitting different pieces of deployments together.
Michael I. Rollins: Is there some optimization can you share your opportunity to resell any space or power capacity that you get back and how that plays into the dynamic for 2024, and then just secondly, just curious if.
Speaker Change: If you could.
Speaker Change: Unpack the constant currency organic growth range X power.
Speaker Change: 7% to 8% in terms of what stabilized growth would be.
Speaker Change: And then within stabilized how to think about the price or two component relative to the volume component.
Charles J. Meyers: So I think we're seeing it a little heavier here. You know, but again, our guide says, you know, sort of assumes that we're going to continue to see some of this through the first half of this year, with, you know, attenuation of that in the back half, you know, of 24. I was curious about the X-Scale initiative and the growth paths in the Americas and the kind of puts and takes of pursuing that organically versus inorganically.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Maybe Keith you might want to jump in here on the on the second part of that too.
Keith D. Taylor: Tag team it a bit but let me let me catch your first one first yes, youre absolutely right we.
Keith D. Taylor: <unk> for many years talked about our business is a bit of a tetris game in terms of figuring out how to get optimal returns from our capacity.
Keith D. Taylor: And I would tell you that I think that given the increasing price environment, given the tendency for our churn to be a bit biased towards the large footprint side of things, we generally see churn as value accretive over time that that doesn't mean, we want it all.
Charles J. Meyers: Yeah, I mean, I think we're very focused right now on organic. We would certainly not be, you know, we wouldn't necessarily not be open to, you know, inorganic. I just think it's a tougher thing in terms of identifying those assets. I think the multiples at which those things are trading are pretty heady, to say the least, and there's plenty of competition for those assets. And so I think we're primarily focused on organic, but again, if the circumstances and conditions change, one, our balance sheet is always ready. And I think we'd be open to that. But I think our focus is probably more on the organic side. Thanks so much.
Keith D. Taylor: But it's you know.
Keith D. Taylor: Sometimes we need it and we actually may sort of work to get it to happen.
Keith D. Taylor: As I said that happens sometimes in Singapore.
Keith D. Taylor: The markets like that but there is inherently a trade off between growth rates and return on invested capital.
Keith D. Taylor: And what we're seeing is that even in high high demand markets. There is vacancy drag.
Keith D. Taylor: What I mean by that is the timeframe that it takes to really fully replace churn.
Michael I. Rollins: And our next caller is Michael Rollins with Citi. You may go ahead. Thanks, and good afternoon.
Keith D. Taylor: Following up on. In the past, you've used the analogy of managing the retail data centers is like a Tetris board of fitting different..., https://www.youtube.com, Cell, any space or power capacity that you get back and how that plays out, dynamic for 2024. And then, just secondly, I'm just curious if you could unpack the constant currency organic growth range, XPower, of 7 to 8 percent in terms of what stabilized growth is and then within stabilized, how to think about the price ARCU component relative to the volume. Thanks.
Keith D. Taylor: With with new revenue in that and Thats, particularly true when you're replacing a single large foot implementation with a large number of smaller deals, we're seeing probably a little longer vacancy drag than what we maybe would have thought and so so while I think that that kind of pause.
Keith D. Taylor: Is it a mark to market.
Keith D. Taylor: Opportunity exists and improving our business mix has always been central to our ability to deliver increasing MMR per cab and return on invested sort of stabilized asset performance and importantly, <unk> per share.
Keith D. Taylor: Yeah. Okay. Maybe, Keith, I'm going to jump in here on the second part of that, too, and we'll tag-team it a bit, but let me catch the first one first. Yes, you're absolutely right. We've long, for many years, talked about our business as a bit of a Tetris game in terms of figuring out how to, you know, get optimal returns from our capacity. And I would tell you that I think that, you know, given the increasing price environment, given the tendency for our churn to be a bit biased towards the large footprint side of things, We generally see churn as value accretive over time. That doesn't mean we want it all, but it's, you know, sometimes we need it and we actually may, you know, sort of work to, you know, get it to happen, and that's, as I said, that happens sometimes in Singapore in the markets like that, but there is inherently a tradeoff between growth rates and return on invested capital, and what we're seeing is that even in high-demand markets, there is a vacancy drag, and what I mean by that is the timeframe that it takes to really fully replace churn, you know, with new revenue, and that's particularly true when you're replacing a single large-foot implementation with a large number of smaller deals.
Keith D. Taylor: It is a it is sometimes a revenue headwind for us. So so we do see that on the churn, but I think there are there are positive aspects to it as well.
Keith D. Taylor: As to the 7% to 8% you know look if you looked at it look at stabilized assets.
Keith D. Taylor: Absent the PPI there in that 5% range.
Keith D. Taylor: And and so but that includes selling interconnection into them at <unk>.
Keith D. Taylor: Probably not a ton of additional volume growth that they're operating at reasonably high levels of utilization.
Keith D. Taylor: So so I do think youre going to see some positive price on mark to market.
Keith D. Taylor: And I think youre going to see continued interconnection, so probably more in our more traditional range and then the rest of that that growth is going to have to come.
Keith D. Taylor: From the broader.
Speaker Change: The broader footprint, including our non stabilized assets, which are probably growing at a slightly higher rate if anything to add further on that Mike. So let me just add maybe just a few other quick points. We've always said that we think stabilized assets can grow 3% to 5%.
Speaker Change: On a sort of.
Keith D. Taylor: We're seeing probably a little longer vacancy drag than we maybe would have thought, and so while I think that that kind of positive mark-to-market opportunity exists, and improving our business mix has always been central to our ability to deliver increasing MRR per cab and return on invested, you know, sort of stabilized asset performance and, importantly, FFO per share, it is sometimes a revenue headwind for us, so we do see that on the ch As to the 7% to 8%, you know, look, if you look at stabilized assets, you know, absent the PPI, they're in that 5% range, and so, but that includes, you know, selling interconnection into them, and, you know, it's probably not a ton of additional volume growth.
Speaker Change: Constant currency and normalized basis.
And this quarter, where we're at that range of 9% with the with.
Speaker Change: With the power price increases what are you going to feel what youre seeing this year.
Speaker Change: 2024, there's a couple of things who have neutralized currency with neutralized for all intensive purposes, the power price decreases.
Speaker Change: Again, that's going to have a roughly.
Speaker Change: 30 basis point impact impact.
I mean, the power price.
Speaker Change: Power price detail that will impact.
Speaker Change: The growth rate a little bit there.
Speaker Change: So where we're focusing is really the timing.
Speaker Change: Great.
To somebody here, so what we're really focusing in on the timing and so as you know as Charles alluded to had a little bit higher churn as we entered the exited the year.
Speaker Change: We are a little bit more higher churn at the front end of the year and so when you look to the back end of the year, you actually get a much more attractive growth rate than what you you started the year right and so what it blends itself out.
Keith D. Taylor: They're operating at reasonably high levels of utilization, you know, so I do think you're going to see some positive price, you know, on mark-to-market, and I think you're going to see, you know, continued interconnection, you know, sort of probably more in our more traditional range, and then the rest of that, you know, that growth is going to have to come, you know, from the broader footprint, including our non- Do you have anything to add further on that? Yeah, Michael, let me just add maybe just a few other quick points. You know, we've always said that we think stabilized assets can grow 3% to 5% on a sort of constant currency and normalized basis, and this quarter, you know, we're at that range, 9%, you know, with the power price increases. What you're going to feel, what you're seeing this year, being 2024, there are a couple things. So we've neutralized the currency.
Speaker Change: Basically you've got a seven 7% to 8% growth rate, but over overall when you sort of look at the business in and of itself extreme.
Speaker Change: Extremely strong pipeline, we're taking into consideration what we think is the timing delays and although a reasonable book to bill interval, we still think that there's just how the speed at which things are converting from the pipeline into into a billable event is just taking longer.
Speaker Change: And then the other thing I would just say as nonrecurring revenues for all intensive purposes, it's going to be roughly flat year over year is going to move around quarter to quarter. As we've talked about Q4 was very rich Q1 is still pretty pretty darn good because we closed to two large assets.
Speaker Change: In the <unk> space in January and so we will get those be some fees for that but I think what what's most important is understanding the richness of the pipeline.
Speaker Change: The timing of the year and what we envision that we will exit 2024 with is what gives us the confidence that we can continue to drive the value into into into therefore per share number and give you the growth, but Mike I would say that yes. The short story on it is.
Keith D. Taylor: We've neutralized, for all intents and purposes, the power price decreases. Again, that's going to have a roughly... 30 basis point impact on power deep, and it will impact sort of the growth rate a little bit there. And so where we're focusing is really the timing. Right, www.equinixinc.com www.equinixinc.com www.equinixinc.com www.equinixinc.com www.equinixinc.com Thanks Mike. You're welcome.
Speaker Change: Seven to eight I think is three to five is the way to think about the stabilized assets and the balance of that is going to really need to come from from the broader portfolio, which is probably going to have less mark to market juice I think the 3% to 5% has to come in part from from some juice in the mark to Mark to market opportunity that we have in the stabilized assets.
Speaker Change: Those are the ones that are going to be rolling through you're probably a little less than less than that in the non stabilized portfolio, because they're newer and newer contracts with probably less of a gap. There and then we're just going to have to continue to drive the volume on the gross booking site.
Thanks for all those details.
Speaker Change: Thanks, Mike our next call.
David William Barden: Thanks Mike. Our next caller is David Barden with Bank of America. You may go ahead. Two questions. Charles, you know, we were talking about the hybrid, private, public cloud. Microsoft Office Word Microsoft, Inc. It was an amazing company. Title Microsoft Office Word Document MSWordDoc Word.
Speaker Change: Our next caller is David Barden with Bank of America, You May go ahead.
David William Barden: Hey, guys. Thanks for taking the questions.
David William Barden: Two if I could just real quick.
David William Barden:
David William Barden: Charles.
David William Barden: And about the hybrid.
David William Barden: Public cloud.
David William Barden: Restructure for the longest time, you brought up a new term that I hadn't heard before the private AI.
Speaker Change: And I wondered if you could maybe elaborate a little bit.
Charles J. Meyers: Document.8, And I wondered if you could maybe elaborate a little bit, and how that compares, contrasts, or doesn't compare to our understanding of hybrid private-public cloud, like what is that? www.equinix.com. Last quarter we talked a lot about cabinets, A-dubs per cab, www.thevenusproject.com. Thanks, David. So on private AI, I do think there's, you know But I think the dynamic is quite similar. And in fact, you know, I was looking at an industry survey that was recently given to me that, based on their discussion with respondents that were implementing Gen AI, that about 32% of those respondents were doing that in public clouds exclusively. About 32% were doing it in the private cloud exclusively.
Speaker Change: That compares contrasts where it doesn't through.
Speaker Change: Do you know.
Speaker Change: Our understanding of hybrid private public cloud, but what is that.
Speaker Change: Private AI architecture look like as far as an equally.
Speaker Change: Is concerned and then second.
Speaker Change: Keith last quarter, we talked a lot about cabinets <unk> per cab.
Speaker Change: Assumption and how that was evolving and the potential to bring a new number.
Speaker Change: Forefront, which would be something like a cabinet equivalent billing number could you kind of elaborate a little bit on how that looked like in the fourth quarter, and where we already evolving that disclosure.
Keith D. Taylor: Thanks, David Yeah.
David William Barden: So on private I I do think there is a strong similarities are some differences between what we would think about private cloud or hybrid cloud, but I think that dynamic is quite similar and in fact I would say.
David William Barden: Looking at an industry survey that was recently given to me that showed that based on their discussion with responded that we're implementing gen. AI that about 32% of those refunds were doing that in public clouds exclusively about 32% were doing it in private cloud exclusively and about <unk>.
Charles J. Meyers: And about 30, and the balance 36% were doing it in a hybrid between, you know, some private cloud and some public cloud. And the folks who were doing it in the public, many of them were doing it in more than one public cloud. And so that dynamic, I think, is actually going to take shape even maybe faster than it did in sort of how we saw cloud computing, you know, writ large, play out over the last several years. And I think the end state is going to be that that 36% is going to be a much bigger number. In other words, a much larger number of people are going to be sort of pursuing their AI agenda through both public and private infrastructure.
David William Barden: The balance 36%, we're doing it in a hybrid between some private cloud public cloud.
David William Barden: And the folks who are doing it in public many of them, we're doing it in more than one public cloud.
David William Barden: And so that dynamic I think is actually going to take shape, even maybe faster than it did in sort of how we saw cloud writ large play out over the last several years and I think the end state is going to be at that 36% is going to be a much bigger number in other words, a much larger number of people are going to be.
David William Barden: Sort of prosecuting their AI agenda through both public and private infrastructure, but I would say when we talk about where private AI happens a lot of it is really focused on where people want to place their data.
Charles J. Meyers: But I would say, you know, when we talk about where private AI happens, a lot of it is really focused on where people want to place their data. And this desire to, and it is sometimes about the proprietary nature of that data and controlling it, etc. And it's sometimes about the cost of moving data in and out of public clouds and other factors, including performance. And so, you know, private AI for, what we're seeing is people saying, well, look, I want to maintain my, you know, control over my enterprise data. And I want to place it in a place somewhere that is cloud-adjacent because the hyperscalers are innovating at such a rapid rate that I want to use their models, and their tools there.
David William Barden: And this this desire to and it is sometimes about the proprietary nature of that data and controlling it et cetera, and in sometimes about the cost of moving data in and out of public clouds.
David William Barden: <unk> and other factors, including performance and so private AI for what we're seeing is people, saying well look I I wanted to maintain my control over my enterprise data and I want to place it somewhere that is cloud adjacent because the hyperscale are innovating as such a rapid rate that.
David William Barden: I wanted to use their models their tools there and then you have this broader ecosystem outside of just the hybrid hyperscale or is that is also evolving that people want to connect to and so cloud adjacent storage equinix fabric and fabric cloud router, our incredible tools and then you mix that with the Colo opportunity.
Charles J. Meyers: And then you have this broader ecosystem outside of just the hyperscalers that is also evolving that people want to connect to. And so cloud-adjacent storage, Equinix Fabric, and Fabric Cloud Router are incredible tools. And then you mix that with the colo opportunity that they might need to place GPU infrastructure and that kind of thing. And that's really, you know, what we see as the essence of the private AI opportunity. And so, and it does, I think, seem to be taking shape in a way that's really positive for us. And then we go ahead on the second piece on the...
David William Barden: They might need to place GPU infrastructure and that kind of thing and that's really what we see is the essence of the of the private AI opportunity and so and it does I think seem to be taking shape in a way it is.
David William Barden: Positive for us.
Speaker Change: And then go ahead on the second piece on the because I know I know that we had had that question before it ever do we figured that one might be coming.
Charles J. Meyers: I know that we had that question before, David. We figured that one might be coming. Yeah, David.
Speaker Change: Yes, David so as it relates to some new metrics, we're continuing to review that.
Keith D. Taylor: So as it relates to new metrics, we're continuing to review the data sets. The team, we're not clear yet exactly what needs to be presented that we can comfortably put out into the market on a consistent basis. But one of the things we're thinking about, just to give you a sense, and we're not ready for primetime yet, is looking at density that's over a threshold. And to the extent that there's a certain amount of density over some required threshold, we'd modify the cap nets. Again, as you all know, we report on a cabinet-equivalent basis.
David William Barden: The datasets.
David William Barden: The team, we're not clear yet exactly what what needs to be presented there that we can comfortably put out to the market on a consistent basis, but one of the things. We're thinking about just to give you a sense and we're not ready for primetime yet is looking at density this over a.
David William Barden: Threshold and the extent that that.
David William Barden: There is a certain amount of density over some required thresholds, we would modify the cabinets again as you all know we report on a cabinet cabinet equivalent basis. So that's what we're thinking about it because we think the cabinet is probably the best representation for you to get a sense of of how we're utilizing the asset that all said, we still think we have to continue to do.
Keith D. Taylor: So that's what we're thinking about because we think the cabinet is probably the best representation for you to get a sense of how we're utilizing the asset. That all said, we still think we have to continue to be quite transparent about the overall density of the cabinet sold, so that you can see sort of a trend line. We spent some energy thinking about power. Power just doesn't feel like the right metric to be sharing, given the nature of our business model relative to others. Again, as you know, we're a retail retail player, and it just, it's just, it's a different type of metric. And we're not sure that that is a valuable, valuable metric. So looking forward, we're going to continue to work it out, and we'll absolutely be absolutely be sort of ready to go, I think, sometime in the first half of this year with either adjusted metrics or a different view on how we're going to represent our appeal rate. Alright guys, thanks for the update.
David William Barden: To be quite transparent about the the overall density of the cabinets sold so that you can see sort of a trend line.
We spent some energy thinking about power apart just doesn't feel like the right metric to be sharing given the nature of our business model relative to others again as you know we're a retail retail player that just it's just a it's a different type of metric and we're not sure that that is a valuable valuable metrics. So looking for.
David William Barden: Forward.
David William Barden: We're going to continue to work it and we'll absolutely be.
David William Barden: Well, absolutely be sort of ready to go I think sometime in the first half of this year with with either adjusted metrics are a different view on how we're gonna represent our fill rates.
Speaker Change: Hi, guys. Thanks for the update.
Speaker Change: Our next question is from Michael <unk> with TD Cowen you May go ahead.
Michael I. Rollins: Our next question is from Michael Elias with TV Cowan. You may go ahead. Great, thanks for taking the questions. Two, if I may.
Michael I. Rollins: Great. Thanks for taking the questions two if I may.
Michael I. Rollins: One of the questions we get from investors is whether GPU-based compute is distanced from mediating CPU-based compute, and if so, how will the legacy data centers designed at lower cabinet densities be able to handle that? Are you seeing customers swapping CPUs for GPUs in their existing data center deployments? And if so, how do you mitigate, essentially, the obsolescence risk in existing facilities? That's the first question. And then the second question is along a similar vein for AI inference. The thought is that the model will need to sit proximate to the data, which candidly lives within your facilities.
Michael I. Rollins: One of the questions. We get from investors is whether GPU based compute as distance for mediating CPU based compute and if so how the legacy data centers designed at lower cabinet densities will be able to handle that.
Michael I. Rollins: Are you seeing customers swapping Cpus for Gpus for their existing data center deployment and if so how do you how do you mitigate essentially against the obsolescence risk in existing facilities. That's the first question and then the second question is along a similar vein for AI inference.
Michael I. Rollins: One is that the model will need is approximate to the data, which candidly lives within your facilities. Although I think there's also a question of whether that's a CPU based our GPU based as you look to capture demand for influence how is the standard data center design for your guys evolving from both a power density perspective, and a cooling architecture standpoint.
Charles J. Meyers: I think there's also a question of whether that's CPU-based or GPU-based. As you look to capture demand for inference, how is the standard data center design for you guys evolving from both a power density perspective and a cooling architecture standpoint? Any color there would be helpful.
Speaker Change: Color there would be helpful. Thank you.
Charles J. Meyers: Thank you. There's lots there, all kinds of things. Thanks for the question, Michael, and all things that are obviously tops of discussion around equinix in various places. I do think that, you know, look, GPUs are, you know, sort of something that is much more special purpose, dedicated compute that goes beyond the traditional CPU realm. I mean, I think that is a very, very clear trend. That said, I don't think that it's a world where all things compute and all things AI are necessarily done by GPUs.
Speaker Change: There's lots there at all of things. Thanks for the question Michael are all things that are obviously tops, whom discussion around equinix.
Speaker Change: In various places.
Speaker Change: I do think that Gpus are sort of.
Speaker Change: Something that is much more special purpose dedicated compute that is.
Speaker Change: Beyond the traditional CPO realm.
Speaker Change: <unk> is a very very clear trend that said I don't think that that's a <unk>.
Speaker Change: World where.
Speaker Change: All things compute and all things AI are necessarily.
Speaker Change: Done by Gpus, and I think that.
Charles J. Meyers: And I think that there is going to be a range of players that I think will continue to evolve on the compute side of things to provide, you know, chips that meet various sets of, you know, various purposes in the AI realm. And so in terms of the, and I don't know, what we aren't seeing is this, you know, massive shift out or, you know, from CPU to GPU. What we're typically seeing is people adopting GPUs in parallel. And I think that even some things that are currently GPU-centric, we think, over time, you know, may actually be well served by either current or future generations of CPUs. And so we're not seeing that as a big obsolescence trend.
Speaker Change: There is going to be a range of players that I think continue to evolve on the compute side of things to provide.
Speaker Change: <unk> that meet various various sets of various purposes in the AI realm and so.
Speaker Change: In terms of yeah.
Speaker Change: We arent seeing is this massive shift out or.
Speaker Change: From CPU GPU, what we're typically seeing is people are adopting gpus in parallel.
Speaker Change: And I think that even some things that are currently GPU centric. We think over time, you know may actually be well served by either current or future generations of CPU and so we're not seeing that as a big obsolescence trend and that relates a little bit to the second part of your question and I think both on inference and training.
Charles J. Meyers: And that relates a little bit to the second part of your question. And I think about inference and training because I would say that the evolution of the data center design needs to respond to both of those things. I would say the more acute near-term evolution is on the training side because it's substantially more power dense and does require, I think, different thinking around that power density and the cooling to support it.
Speaker Change: Because I would say that the evolution of the of the.
Speaker Change: Data Center design.
Speaker Change: Needs to respond to both of those things I would say the more acute near term evolution is on the training side, because it substantially more power dense.
Speaker Change: And does require I think different thinking around that power density in the cooling to support it and so so I think that that much.
Charles J. Meyers: And so I think that, you know, the much higher average density design that we would probably put forward in an X-scale build out would be, you know, would be that more acute representation of the near-term change. On the inference side, and I think broadly on the retail side, we are seeing densities, power densities rise at a much slower rate. And I think that our ability to implement liquid cooling, as long as we have access to a chilled water loop, our ability to get liquid cooling into the facility to support high-density implementations is quite high.
Speaker Change: Much much higher average density design that we would probably put forward in our X scale build out would be would be that that more acute representation of the of the near term change on the on the inference side and I think broadly on the retail side, we are seeing densities power densities rise, but at a much slower rate.
Speaker Change: And I think that our ability to implement liquid cooling.
Speaker Change: As long as we have access to a chilled water loop, our ability to get liquid cooling into the facility to support high density implementations is quite high and in fact, we announced that we can do that in a large number of markets around the world. So.
Charles J. Meyers: And, in fact, we announced that we can do that in a large number of markets around the world. So, you know, I think we're in a good position. I don't think we face a situation where we're going to have meaningful obsolescence, even of our significantly more dated, you know, assets.
Speaker Change: I think we're I think we're in a good position I don't think we face.
Speaker Change: A situation, where we're gonna have meaningful obsolescence even of ours is significantly more.
Speaker Change: David.
Speaker Change: Assets.
Charles J. Meyers: And so, especially as we can implement liquid cooling inside of those facilities. And so, but I think we're, you know, those are things we continue to track. And I do think they're going to have to be, you know, very top of mind for us. And probably the overall pace of change in our design is going to increase in this next decade than it was in the one prior, for sure, for the caller. You bet, Michael.
Speaker Change: So, especially as we can implement liquid cooling inside of those facilities and so but I think those are things, we continue to track and and I do think they're going to have to be very top of mind for us and probably the overall pace of change in our design is going to is going to increase in this next decade than it was in the Hawaiian prayer for sure.
Thanks for the color I appreciate it John.
John: You bet Michael.
John: Our next caller is Matt <unk> with Deutsche Bank You May go ahead.
Matt McNam: Our next caller is Matt McNam with Deutsche Bank. You may go ahead. Hey guys, thanks for taking the question. I will keep this brief. It's two follow-ups.
Matt: Hey, guys. Thanks for taking the question I will keep this brief it's two follow ups number one.
Matt McNam: Number one, uh... What guides your expectation for churn to, I guess, improve slightly in the second half? Is there anything you're seeing in terms of visibility or anything guiding that expectation for improvement? And then, secondly, in terms of just macro, you talked about some... Deal slippage and dynamics that maybe resemble 1Q of 23 that you saw in 4Q. Just any updates in terms of, you know, we're now, I guess, halfway into 1Q. Have those deals closed? Are they still out there?
Matt: What is your expectation for churn to I guess improved slightly in the second half is there anything you are you seeing in terms of visibility, but anything guiding that expectation for improvement and then secondly in terms of just macro you talked about some I guess deal slippage and dynamics that resemble maybe <unk>.
Matt: <unk> of 23 that you saw in <unk> and just any updates in terms of where now I guess halfway into <unk>.
Matt: And those deals closed or are they still out there just any color I guess from what you've seen in the first six weeks of this year.
Charles J. Meyers: Just any color, I guess, from what you've seen the first six weeks of this year. Thanks. Yeah, let me take the second one first, Matt.
Speaker Change: Yeah, Let me take the second one first Matt.
Charles J. Meyers: We have some of that business closed; some of that closed very quickly, immediately after the quarter. And that's just sort of a natural turn of events. Some of it is, you know, in our commit for Q1, and some of it has rolled into Q2 or quarters forward from that. So very little lost.
Speaker Change: Some of that business has closed some of that closed very quickly immediately after the quarter and that's just sort of a natural churn of a turn of events. Some of it is.
Speaker Change: In our commit for Q1 and some of that has rolled into Q2 or quarters forward from that.
Speaker Change: Very little lost we did we have lost some of that but very little of it and so.
Charles J. Meyers: We did, we lost some of that, but very little of it, and so really, primarily pushed forward. Again, as I said, Q4 did, unfortunately, look a little more like Q1. We would have, we would have preferred it to look a lot more like Q2 and Q3. But, but that is the dynamic.
Speaker Change: Primarily a push forward.
Speaker Change: Again as I said Q4 did unfortunately look a little more like Q1, we would refer to look a lot more like Q2 and Q3.
Speaker Change: But but that is the dynamic and I think that.
Charles J. Meyers: And, you know, I think that, you know, we're, it's hard to fully predict, but again, our customers, the sentiment we hear from customers is one of yes, we have tighter budgets, yes, we're continuing to, you know, optimize, but boy, we sure are committed to what we're doing on the digital side of things. And, yes, we want to talk to you about what we're doing in AI. And yes, we want to figure out where to place our data, but I think those things take a little time to translate into firm bookings trajectory.
Speaker Change: It's hard to fully predict but again our customers. The sentiment we hear from customers is one of yes, we have tighter by the jets, we're continuing to optimize but boy. We sure are committed to what we're doing from the <unk> on the digital side of things and yes, we want to talk to you about what we're doing in AI and yes, we want to figure out where to place our data but.
Speaker Change: I think those things take a long time too.
Speaker Change: Translate into into firm bookings trajectory in and then as to why we feel.
Charles J. Meyers: And then as to why we feel, you know, a comfort level around mitigation of the churn, one, we do have good visibility into our pipeline. In fact, our large deal churn, we've gotten very good at forecasting. We saw a little bit, little bit more midsize churn in Q4, which contributed some to the elevation. And so I think we have to keep our eye very closely on that. And I don't have a ton more to offer you on that particular, you know, view. But I think that, you know, we do think that it is, it is realistic for us based on what we're hearing in terms of appetite from customers, that we would see some abatement and churn in the second half. I'll add one more comment. They used to be; I would say 21.
Speaker Change: Our comfort level around mitigation of the churn one we do have good visibility to our.
Speaker Change: And to our pipeline in fact, our large deal churn we've gotten very good at forecasting we saw a little bit a little bit more midsized churn in Q4, which contributed some to the elevation and so I think we have to keep our eye very closely on that and I don't have a ton more.
Speaker Change: More to offer you on that particular.
Speaker Change: <unk>.
Speaker Change: But I think that we do think that it is it is realistic for us based on what we're hearing in terms of appetite from customers.
Speaker Change: That we would that we'd see some abatement in churn in the second half I'll add one more comment.
Speaker Change: It used to be I would say 'twenty, one and most of 'twenty two.
Charles J. Meyers: And, you know, most of 22. I think there was a scarcity mindset relative to data center capacity. 23 really changed pretty meaningfully, the macro conditions changed, this sort of desire to tighten budgets, the PPE, you know, the desire to kind of offset the impact of PPI, you know, I think all, all did play into what we were hearing was this, you know, this very different appetite and a higher degree of optimization. I would say I think we're seeing the front end, though, of some of our customers who have at least talked to Because we're not sure we want to give up capacity in this market.
Speaker Change: There was a scarcity mindset relative to data center capacity.
Speaker Change: 23, really changed pretty meaningfully they are macro conditions changed the sort of desire to tightened budgets.
Speaker Change: <unk> desire to kind of offset the impact of PPI.
Speaker Change: I think all all did play into what we were hearing was this.
Speaker Change: This is very different appetite and a higher degree of optimization I would say I think we're seeing the front end, though some of our customers who have at least talk to us about turning back up.
Speaker Change: Some capacity sort of come back and say, yes don't don't put that back on the market yet.
Speaker Change: Because we're not sure we want to give up.
Speaker Change: Capacity in this market and so that's the first time I think in a while that we've heard that kind of mindset. It's typically four from larger service providers.
Charles J. Meyers: And so that's the first time I think in a while that we've heard that kind of mindset, you know, it's typically from larger service providers. But I think we're gonna probably see, we're starting to see the front end of that. And so, again, if macro, you know, does what we think it will do, which we would probably see some, you know, some improving interest rates over the course of the year, you know, I think we would see a generally improved macro environment. And I think that, you know, that's sort of informing our guide. Great, thank you.
Speaker Change: But I think we're going to probably see we're starting to see the front end of that and so again, if macro does what we think it will do which we would probably see some some.
Speaker Change: Moving interest rates over the course of the year.
Speaker Change: I think we would see a generally improved macro environment and I think that yes.
Speaker Change: That sort of informing our guidance.
Speaker Change: Great. Thank you.
Richard Y. Choe: Our next caller is Richard Choe with J.P. Morgan. You may go ahead. Hi, I wanted to follow up on the competitive environment. Are you seeing deals?
Speaker Change: Our next caller is Richard Choe with Jpmorgan you May go ahead.
Richard Y. Choe: Hi, I wanted to follow up on the competitive environment are you seeing deals go to competitors or in markets, where you are tight or are they just being pushed out.
Charles J. Meyers: The Bulletproof Executive 2013, are by Chao. Yeah, I mean, we certainly see some, it's not like we don't see any competitive loss, but our, our, and I would say it's more typically on, you know, some of the larger footprint stuff. It's, you know, I think there are certain use cases that we're just so, you know, competitively distinguished that we are that we have less, you know, that there's less, it's less likely that we'll see those is oftentimes more a timing issue. I do think that where we're tight, you know, a customer sometimes has to find another way, right, you know, and so we hate that, but it happens.
Richard Choe: Yeah.
Richard Y. Choe: Yeah, I mean, we certainly see some it's not like we don't see any competitive loss, but I R. R.
Richard Y. Choe: I would say, it's more typically on some of the larger footprint stuff. Its you know I think there are certain use cases that we were just so.
Richard Y. Choe: Competitively distinguished that we are that we have less than <unk>.
Richard Y. Choe: It's less likely that we will see those is oftentimes more a timing issue I do think that where we're tight.
Richard Y. Choe: Customers, sometimes have to find another way right and so we hate that but but it happens, but I wouldnt say overall rich that there is a meaningful change in the overall competitive environment that we're operating in as I said, yes, you've always heard me say this there are certainly certain markets, where we have solid people with us.
Charles J. Meyers: But I wouldn't say overall, Rich, that there is a meaningful change in the overall competitive environment that we're operating in. As I said, you know, there, you've always heard me say this, there are certainly certain markets where we have solid people with a solid value proposition, you know, that, I think, you know, can compete effectively in certain markets. And I do think we're starting to see also, you know, just people thinking about how they want to allocate their workloads. And so, you know, the overall share of wallet continues to be more of the question in terms of how people are thinking about their spend going forward. And then, in terms of pricing actions for the year, what... supplied and guided.
Richard Y. Choe: Solid value proposition.
Richard Y. Choe: That I think can compete effectively in certain markets.
Richard Y. Choe: And I do think we're starting to see also.
Richard Y. Choe: People thinking about how they wanted to allocate their workloads.
Richard Y. Choe: So the overall share of wallet continues to be more of a question in terms of how people are thinking about their spend going forward.
Richard Y. Choe: And then in terms of pricing actions for the year, what's kind of implied in guidance and should we expect that there is some.
Charles J. Meyers: Yeah, I mean, I think we're overall seeing a really robust pricing environment, right, you know, and so and probably many of the you know, we put forward through a number of price increases. I do think we're evaluating a price increase on interconnection in the US market. And I think, but overall, I think that's certainly one contributing factor to our ability to continue to drive growth in the business. And I think that that firm pricing is also what's really, I think, informing the really critical overall message here, with which there is a degree of confidence and a really attractive guide to the improving profitability of our business and the FFO for share guidance, which is, in fact, more towards the top end of our analyst's guidance.
Richard Y. Choe: Price increases for interconnection this year.
Speaker Change: Yeah, I mean, I think overall, we're seeing a really robust pricing environment, right and so and probably many of them. We put forward. It through a number of price increases I do think we're evaluating our price increase on interconnection.
Speaker Change: The us market.
Speaker Change: And I think but overall I think that's certainly one contributing factor to our ability to continue to drive growth in the business and I think that that firm pricing is also what's really I think informing they are really critical overall message here with which is a degree of confidence and a really attractive guide on the improving profitability.
Speaker Change: <unk> of our business and the <unk> per share guidance, which is in fact at the sort of more towards the top end of our analyst Day guide and so and again as we've said that's really our lighthouse metric. We think it's the bedrock of value creation. When you combine that with our dividend yield and overall creates a really attractive story.
Charles J. Meyers: And so, and again, as we've said, that's really our lighthouse metric. We think it's the bedrock of value creation when you combine that with our dividend yield, and overall, it creates a really attractive story. And our next caller is Frank Louthan with Raymond James. You may go ahead. Great, thanks. And just maybe to follow up on that, Charles, you know, with some of this optimization with customers, are there any thoughts about customers possibly looking for some products you have, such as CrossConnect or others, trying to find that from others? For the left, as they're trying to optimize their budgets, is there any concern there? Yeah, generally, we don't see that as typical.
Speaker Change: Great. Thank you.
Speaker Change: And our next caller is Frank Louthan with Raymond James You May go ahead.
Great. Thanks, and just maybe to follow up on that.
Speaker Change: Charles.
Frank Garreth Louthan: Some of this optimization with customers or any.
Frank Garreth Louthan: Any thought about customers, possibly looking for some products you have such as cross snacks or others trying to find that from others offer less as they tried to optimize their budgets is there any concern there.
Charles J. Meyers: Yeah, generally we don't see that as typical.
Charles J. Meyers: It's, you know, there in a lot of markets; I think that our, you know, our position is so, it's not that we're the only game in town. And so yes, there is, you know, some, some substitution in cases, but it really is more people saying, hey, things that they weren't using, things that they can consolidate on the higher speed circuits, those kind of things are really the, you know, the broader dynamic. Also, I would tell you that I think we're seeing that the positivity, or the positive, you know, benefits of being able to have the full range of services available for our customers are really there. And so they may say, hey, you know, your metal offering really meets our immediate need here, it's more agile, it's more flexible, we may eventually move that into co-location over time, or, you know, sometimes the opposite.
Charles J. Meyers: They're in a lot of markets I think that our position is so just curious that that we're the only game in town and so yes. There is some.
Some substitution in cases, but it really is more us seeing that people, saying, hey, things that they werent using things that they can kind of consolidate on a higher speed circuits. Those kinds of things are really the the broader dynamic also I would tell you that I think we're seeing that the positivity or the positive.
Charles J. Meyers: Benefits of being able to have the full range of services available for our customers is really there and so they may say hey, you're.
Charles J. Meyers: We take your metal offering really meets our immediate need here, it's more agile more flexible we may eventually move that into co location over time or sometimes the opposite and so.
Charles J. Meyers: And so, I think that the, you know, the momentum, both in the data center services and, I think increasingly, on the digital services side, even though I think we've got a lot of work to do, continue to evolve our go-to-market strategy and our underlying, you know, quote, cash systems and processes, etc., to really support the slightly different business that an as a service model provides for digital services. But I think we're continuing to make good progress there. And I think our full portfolio of offerings is responding well with customers. I agree.
Charles J. Meyers: So I think that the.
Charles J. Meyers: The momentum both in the data center services and I think increasingly on the digital services side, even though I think we've got a lot of work to do continue to evolve our go to market motion in our underlying quote to cash systems and processes et cetera to really support the slightly different business that in as a service model provides in digital services, but I think we are.
Charles J. Meyers: Continuing to make good progress there and I think our full portfolio of offerings is resonating well with the customer.
Speaker Change: Alright, great. Thank you.
Operator: This concludes our fourth quarter earnings call. Thank you for joining us today. Goodbye. And this concludes today's conference. Thank you for participating. You may disconnect at this time and have a great rest of your day.
Speaker Change: This concludes our fourth quarter earnings call. Thank you for joining us today.
Speaker Change: Goodbye.
Speaker Change: And this concludes today's conference. Thank you for participating you may disconnect at this time and have a great rest of your day.