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Digital Transformation Is Driving Unstoppable Growth for This REIT

Nothing has stopped Equinix’s (NASDAQ: EQIX) ability to continue growing in recent years. The real estate investment trust (REIT) has expanded its revenue for 77 straight quarters. It recently extended that growth streak by increasing its quarterly revenue by 9% in the first quarter.
The data center REIT sees more growth ahead. Digital transformation continues to move more business processes online, driving demand for digital infrastructure. As a leader in the space, Equinix expects to capitalize on this megatrend.
Image source: Getty Images.

A strong start to what should be another excellent year
“We had a great start to 2022,” commented CEO Charles Meyers in the company’s first-quarter earnings release. Revenue grew 9% from last-year’s first quarter and 2% from the fourth quarter to $1.7 billion.
Meanwhile, adjusted funds from operations (AFFO) grew even faster, rising 16% from the fourth quarter and 15% per share. The REIT is benefiting from strong operating performance and seasonally lower capital expenditures. Meyers stated:

While there are a number of macroeconomic factors we continue to proactively manage, the business continues to perform exceptionally well. Underlying demand for digital infrastructure continues to rise as enterprises in diverse sectors across the globe prioritize digital transformation and service providers continue to innovate, distribute and scale their infrastructure globally in response to that demand.

That’s evident in the net bookings, which were the highest in the company’s history during the quarter. Overall, it signed more than 4,200 deals with over 3,100 customers. Its digital-services portfolio had a strong quarter, with Equinix Metal adding the most net customers since its launch. Meanwhile, Equinix Fabric added the most quarterly virtual connections ever.
The company is seeing demand from a wide range of customers. For example, CEO Charles Meyers noted on the first-quarter conference call that “Party City, a global leader in the celebrations industry, is using network edge to enable cloud connectivity and allow private interconnection between sites as they continue with their digital transformation.”
Meanwhile, other recent wins and expansions include a global cloud-hosting provider, a leading SaaS company, a credit-reporting company, and a large media company. Overall, “wins were across a wide range of industry verticals and digital-first use cases,” according to Meyer, as more companies look to “quickly adopt new digital business models.”
Setting the stage for future growth
This strong demand for data infrastructure is enabling the REIT to continue expanding its global platform. It currently has 43 projects underway across 29 metros in 20 counties. It recently started new projects in the Atlanta, Mumbai, Sydney, Tokyo, and Washington, D.C. metro areas.
Equinix also closed two acquisitions this year. In April, it entered the African continent by purchasing MainOne for $320 million. Meanwhile, it spent $735 million to acquire four data centers in Chile. These deals expanded its global footprint, opening the doors to additional expansion opportunities.
CEO Charles Meyers commented on the strategic rationale behind these transactions on the first-quarter conference call. He noted that the acquisition of MainOne extended the company’s platform into Nigeria, Ghana, and Ivory Coast. He said that, “Nigeria, in particular, is emerging as an innovative and dynamic player in the global digital economy, representing a significant opportunity for the expansion of digital services and a key first step in our long-term strategy to extend our carrier-neutral digital infrastructure platform across Africa.”
The country has the largest population and economy in Africa, with about 142 million active internet subscribers. It’s also home to many innovative digital companies.
Meanwhile, the company’s expansion into Chile represents another long-term growth driver. Meyers stated on the call that:

Chile is the fourth-largest economy in South America with the highest GDP [gross domestic product] per capita in the region. And Santiago is emerging as a technology hub, serving both regional cloud and content demand, as well as local enterprises. This transaction … will further solidify Equinix as the leading provider of digital infrastructure in Latin America.

The region’s digital growth should drive additional expansion opportunities for the company in the future.
Nonstop growth ahead
Thanks to strong demand, Equinix now expects to grow its revenue by 10% this year, while AFFO should expand by 7% to 8% per share. That’s a slight boost from its initial expectations for 9% revenue growth and 6%-8% AFFO per-share growth.
Despite that unstoppable growth, shares of Equinix are currently 19% below their recent high. That makes it look like a great buy these days, given its proven ability to capitalize on the data infrastructure megatrend.
Matthew DiLallo has positions in Equinix. The Motley Fool has positions in and recommends Equinix. The Motley Fool has a disclosure policy. –

Nothing has stopped Equinix‘s (NASDAQ: EQIX) ability to continue growing in recent years. The real estate investment trust (REIT) has expanded its revenue for 77 straight quarters. It recently extended that growth streak by increasing its quarterly revenue by 9% in the first quarter.

The data center REIT sees more growth ahead. Digital transformation continues to move more business processes online, driving demand for digital infrastructure. As a leader in the space, Equinix expects to capitalize on this megatrend.

Image source: Getty Images.

A strong start to what should be another excellent year

“We had a great start to 2022,” commented CEO Charles Meyers in the company’s first-quarter earnings release. Revenue grew 9% from last-year’s first quarter and 2% from the fourth quarter to $1.7 billion.

Meanwhile, adjusted funds from operations (AFFO) grew even faster, rising 16% from the fourth quarter and 15% per share. The REIT is benefiting from strong operating performance and seasonally lower capital expenditures. Meyers stated:

While there are a number of macroeconomic factors we continue to proactively manage, the business continues to perform exceptionally well. Underlying demand for digital infrastructure continues to rise as enterprises in diverse sectors across the globe prioritize digital transformation and service providers continue to innovate, distribute and scale their infrastructure globally in response to that demand.

That’s evident in the net bookings, which were the highest in the company’s history during the quarter. Overall, it signed more than 4,200 deals with over 3,100 customers. Its digital-services portfolio had a strong quarter, with Equinix Metal adding the most net customers since its launch. Meanwhile, Equinix Fabric added the most quarterly virtual connections ever.

The company is seeing demand from a wide range of customers. For example, CEO Charles Meyers noted on the first-quarter conference call that “Party City, a global leader in the celebrations industry, is using network edge to enable cloud connectivity and allow private interconnection between sites as they continue with their digital transformation.”

Meanwhile, other recent wins and expansions include a global cloud-hosting provider, a leading SaaS company, a credit-reporting company, and a large media company. Overall, “wins were across a wide range of industry verticals and digital-first use cases,” according to Meyer, as more companies look to “quickly adopt new digital business models.”

Setting the stage for future growth

This strong demand for data infrastructure is enabling the REIT to continue expanding its global platform. It currently has 43 projects underway across 29 metros in 20 counties. It recently started new projects in the Atlanta, Mumbai, Sydney, Tokyo, and Washington, D.C. metro areas.

Equinix also closed two acquisitions this year. In April, it entered the African continent by purchasing MainOne for $320 million. Meanwhile, it spent $735 million to acquire four data centers in Chile. These deals expanded its global footprint, opening the doors to additional expansion opportunities.

CEO Charles Meyers commented on the strategic rationale behind these transactions on the first-quarter conference call. He noted that the acquisition of MainOne extended the company’s platform into Nigeria, Ghana, and Ivory Coast. He said that, “Nigeria, in particular, is emerging as an innovative and dynamic player in the global digital economy, representing a significant opportunity for the expansion of digital services and a key first step in our long-term strategy to extend our carrier-neutral digital infrastructure platform across Africa.”

The country has the largest population and economy in Africa, with about 142 million active internet subscribers. It’s also home to many innovative digital companies.

Meanwhile, the company’s expansion into Chile represents another long-term growth driver. Meyers stated on the call that:

Chile is the fourth-largest economy in South America with the highest GDP [gross domestic product] per capita in the region. And Santiago is emerging as a technology hub, serving both regional cloud and content demand, as well as local enterprises. This transaction … will further solidify Equinix as the leading provider of digital infrastructure in Latin America.

The region’s digital growth should drive additional expansion opportunities for the company in the future.

Nonstop growth ahead

Thanks to strong demand, Equinix now expects to grow its revenue by 10% this year, while AFFO should expand by 7% to 8% per share. That’s a slight boost from its initial expectations for 9% revenue growth and 6%-8% AFFO per-share growth.

Despite that unstoppable growth, shares of Equinix are currently 19% below their recent high. That makes it look like a great buy these days, given its proven ability to capitalize on the data infrastructure megatrend.

Matthew DiLallo has positions in Equinix. The Motley Fool has positions in and recommends Equinix. The Motley Fool has a disclosure policy.

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