Artificial intelligence: Equinix at the battle of global data centres

Beyond the individual numbers, what is clear is - precisely - the global articulation of Equinex's business, which evidently supports the income statement. In this sense, the company reported expanding revenues and profitability in the third quarter of 2024. Turnover was 2.2 billion, up 7% compared to the same period in 2023. Net profit, for its part, stood at 296 million compared to 276 million a year earlier. The picture is similar when looking at the same first nine months of the current financial year. Turnover amounted to 6.48 billion (had been 6.08 in 2023), while net profit rose to 828 million (742 million net profit to 30/9/2023). The upward trend is confirmed on the outlook for the last quarter of 2024. On the one hand, the group expects revenues of between EUR 2.262 and 2.302 billion; on the other hand, adjusted EBITDA should be within the range of EUR 1.01 to 1.05 billion.

These numbers contribute to the upward revision of the full-year guidance. Revenues, previously estimated in the range of 8.692-8.772 billion, could be in the range of 8.748-8.788 billion. Adjusted Ebitda, for its part, is expected to be in the range of EUR 4.086-4.126 billion (EUR 4.066-4.126 billion the previous outlook). Finally, Affo - that is, adjusted cash flows generated by operating activities - is estimated in the range of $3.338-3.378 billion.

Faced with such an environment, the saver asks: what is the stock's stock market performance? To answer this question, we must first reiterate that Equinix is a REIT. That is to say: a corporate form that - in order to maintain tax benefits - must, among other things, distribute a large part of its taxable income to shareholders in the form of dividends and invest a significant portion of its assets in real estate (data centres). That being said, the stock - over the past year and according to the Bloomberg terminal - achieved a linear performance of 18.4 per cent (21.5 per cent total return) as of 9/1/2025. This is less dynamic than that of the Nasdaq (31.2%). True! Equinix is not an exclusively hi-tech company. The real estate component of the business leads - according to several experts - to consider it a 'hybrid' company. Furthermore: the REIT index in the data centre sector in North America has fared better in the past 12 months than the REIT basket in general. Nevertheless, on the one hand, the underlying consideration of weakness in the face of the Nasdaq remains valid; and on the other hand - according to Seeking Alpha - the stock even looks expensive. The prospective 2024 price-earnings ratio is - also as of 9/1/2025 - 83.1 times, while the sector median is 32.3.

On closer inspection, however, given the nature of the business, P/e is not the best indicator for analysis. It is more useful to look at the Price to Affo ratio and the Dividend yield. Well: in the first case, the multiple - calculated by Seeking Alpha - confirms the suggestion offered by the P/e. That is: the ratio on 2024 (26.99) is higher than the median value of 15.5 for the reference sector.

With regard to the second front, the following can be said. The dividend yield is the ratio between the annual coupon offered by the company and the share price. In other words: it reports the dividend yield as a percentage of the company's stock price. A high dividend yield can be attractive, but it has to be seen whether the coupon is sustainable over time as a function of the business. Conversely, a dividend yield that may seem unattractive is not necessarily negative. In the case of REITs - required by statute to distribute a significant portion of profits to shareholders - the dividend yield is normally high. In such a scenario, Equinix's indicator - according to Seeking Alpha and still as of 9/1/2025 - is 1.79% (4.7% that of the reference segment). The company, for its part, expects around 1.624 billion in cash coupons for the full year 2024, for a payout ratio of around 48%. The dynamics, the group always indicates, is of a constant increase of the coupon over the last five years. Against this - it is intuitive - the lower dividend yield compared to the reference sector could be a consequence, among other things, of the Californian multinational's higher stock market price.

In short: the do-it-yourself saver - despite the fact that the world of data centres is rated as interesting by experts - must be very careful and take into account multiple aspects and factors before approaching such a sector. Not least, given the very centrality of coupon distribution, the company's financial structure and its soundness.

Here the company indicates that - as of the third quarter of 2024 - the ratio of net debt to annualised EBITDA is 3.5 times. A figure that in the sector in question does not seem high.

In the end, therefore, the message remains the same: without any suggestion to buy, one must be very cautious, taking one's risk appetite into account.

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