Equinix Analyst Days offers insight into its position in a changing MTDC industry landscape
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Market Insight Report Reprint Equinix Analyst Days offers insight into its position in a changing MTDC industry landscape July 21 2021 by Rahiel Nasir, Mai Barakat, Pedro Schweizer, Dan Thompson The global datacenter provider recently hosted its 2021 Analyst Days, discussing its financial status, business strategy and recent product developments in a series of virtual panels. Equinix described how it is responding to current industry trends, including scaling its activities to meet increased global demand for datacenter services and reaching new markets with its xScale initiatives. This report, licensed to Equinix, developed and as provided by S&P Global Market Intelligence (S&P), was published as part of S&P’s syndicated market insight subscription service. It shall be owned in its entirety by S&P. This report is solely intended for use by the recipient and may not be reproduced or re-posted, in whole or in part, by the recipient without express permission from S&P.
Market Insight Report Reprint Introduction Equinix hosted its 2021 Analyst Days on June 23 and 24, discussing its financial status, business strategy and recent product developments in a series of virtual panels. The datacenter provider described how it is responding to current industry trends, including scaling its activities to meet increased global demand for datacenter services and reaching new markets with its xScale initiatives. Company leadership underscored Equinix’s current financial standing, with the firm going on 73 consecutive quarters of revenue growth, while also engaging in more abstract discussions about what future digital leaders might look for in their services. Among multiple announcements, the company unveiled a new cloud offering in partnership with NVIDIA called AI LaunchPad, and reinforced its commitment to innovating in the leased datacenter space. THE 451 TAKE Equinix’s Analyst Days offered interesting insight into the opportunities and trends datacenter providers currently see in the industry. The company’s xScale initiative, almost two years old and recently further expanded by $3.9bn, served as one of the areas of focus for the events, as well as the provider’s products and strategies deployed to respond to customer’s changing needs. Generally, the datacenter industry has picked up in competitiveness globally within the past year, but there’s also enormous room for growth with increased demand, as hyperscalers and enterprises look to host their datacenter infrastructure with third-party providers influenced by the COVID-19 pandemic. Equinix seems to realize that – it is aggressively pursuing expansions to cater both to the cloud service provider and the retail customer, looking to address the growing desire for hybrid infrastructure with multiple product offerings. The strategy appeals to dualities – retail and wholesale, colocation and cloud – as the company looks to cover all bases and benefit from industry growth across the board. Whether that strategy will be successful or too ambitious, however, remains to be seen. Context Equinix is a global MTDC provider and one of the leaders in the industry. Its total datacenter footprint amounts to more than 220 facilities across the Americas, EMEA and APAC. In October 2019, Equinix and Singaporean sovereign wealth fund GIC created their initial joint venture for what the provider is calling xScale facilities – wholesale facilities designed specifically for hyperscalers. At the time, the partnership entailed $1bn in investments, and would encompass building xScale datacenters in Europe. Equinix’s most recent announcement, in June, expanded the program in unprecedented ways. An additional $3.9bn will be added to the joint venture with GIC, bringing the xScale portfolio to 32 facilities worldwide. When fully built out, the assets could provide upward of 600MW in total capacity. Equinix Analyst Days, a two-day virtual event, covered the firm’s financial performance, strategy, product innovations and future outlooks. The company had previously reported earnings of $1.6bn in global revenue in Q1 2021, and projected over $6.5bn for FY 2021. During the event, the firm noted that it has seen sizeable growth in revenue in recent years, increasing its full-year revenue by $1.6bn in 2020 in comparison to 2017. In the past three years, it also expanded its activities with 29 new datacenters, and entered 11 new markets. When it comes to its xScale initiative, Equinix reported an uptick of 221% in number of megawatts booked between 2018 and 2021. ©Copyright 2021 S&P Global Market Intelligence. All Rights Reserved. 1
Market Insight Report Reprint Customers When discussing the demand trends it has observed in the datacenter industry, Equinix highlighted a growth in API-enabled transactions, reflective of clients’ increased interest in adopting software-defined strategies and needing interconnection to solve their IT needs. The firm expects that demand for digital infrastructure will drive significant industry growth in coming years, with the ecosystem growing for customers in importance, particularly the cloud. Strategy To meet the growing demand for its services, Equinix expects to expand its capacity significantly in coming years. With the previously announced xScale initiative targeting hyperscale customers, the firm forecasts an additional 70MW in capacity will come online by Q2 2022. The xScale program specifically serves multiple strategic goals for the firm. It aims to bolster Equinix ecosystems and interconnection offerings, strengthen its ties to cloud services providers (CSPs) and attract new enterprise deployments. The provider’s relationship with CSPs has been an area of focus in recent years. Equinix has seen a CAGR of 34% in interconnection to hyperscalers, and 24% CAGR growth in cloud on-ramps since early 2018. Equinix notes that products like Equinix Fabric, Equinix Connect, Equinix Metal and Network Edge serve to address retail customers’ growing need for interconnectivity, scalability and flexibility for their workloads, combining the virtual and physical worlds to address the industry phenomenon that has become hybrid IT. On a more general level, the company believes that its future is to offer infrastructure at software speed, one that is self-service and on-demand while being scalable, agile and sustainable. Where next? One of the biggest questions for all global datacenter providers and hyperscalers is: Where next? Although the world’s top-tier leased datacenter markets continue to see huge growth, they will become saturated at some point and (according to one economic theory) reach a natural limit, because every product or service has an innate consumption level where demand no longer increases. In its first quarter earnings for 2021, Equinix reported increased revenue of $1.59bn, most of it earned in the Americas, followed by EMEA and then APAC. Outside North America, the company will continue to invest in ‘safe bet’ markets such as London and Frankfurt in Europe, and Tokyo, Singapore and Hong Kong in APAC, but the ‘where next’ question is where Equinix will need to take more calculated risks. Latin America is one example here. The provider has unveiled plans for xScale facilities in Mexico City and São Paulo, two of the region’s largest datacenter markets, which will serve as its third and fifth facilities in those locations, respectively. Equinix is also making its presence felt in the Middle East with datacenters launched in the United Arab Emirates as well as in the Omani capital Muscat, where it made its debut last year. But the one region that is conspicuous by its absence in the company’s portfolio is Africa. When asked about this, CEO Charles Meyers said that there was a “broad opportunity” across the continent and it was a place that Platform Equinix needed to reach, adding that he expected the firm to find a solution for the region in the “not too distant future.” Competition Equinix is a global provider that is present across dozens of markets in the Americas, EMEA and Asia-Pacific. Consequently, its most direct competition on a global scale will come from players with similarly geographically widespread portfolios, such as Digital Realty, Cyxtera, Lumen and CyrusOne. Within the US specifically, Digital Realty, CyrusOne, Flexential, Evoque, T5 Data Centers, Cyxtera, CoreSite, Zayo, Lumen and TierPoint will pose challenges. Competition is a bit more wide-ranging abroad due to the variety and nature of markets, and includes Interxion, EvoSwitch, Singtel, Ascenty, Scala, ODATA, Keppel DC REIT, KIO Networks, Nabiax, NTT Com, Global Switch, PCCW, iAdvantage, HKCOLO, KDDI Telehouse, Lumen and ITENOS. ©Copyright 2021 S&P Global Market Intelligence. All Rights Reserved. 2
Market Insight Report Reprint
SWOT Analysis
STRENGTHS WEAKNESSES
Equinix’s global footprint and broad portfolio of The provider is taking a sizeable risk by pursuing
services certainly help the provider stand out from its xScale initiative, recently requiring an additional
the competition. With multiple locations across the $3.9bn in investment from Equinix and business
globe, interconnectivity options, and offerings in partner GIC. The move, which will bring online
both the wholesale and retail space, Equinix is well an additional 600MW in datacenter capacity, is
suited to attract most types of customers looking counting on hyperscalers to pick Equinix facilities to
for datacenter services, and also appears to be house their infrastructure. As with any investment
innovating to keep up with their changing demands. of this size, there are high levels of risk associated
with pursuing this type of venture.
OPPORTUNITIES THREATS
The global datacenter industry has seen a surge Equinix is not the only provider expanding
in demand, starting in 2020 with the COVID-19 worldwide as the MTDC space becomes
pandemic. Enterprises across the world are now increasingly global and competitive. Industry
more than ever contemplating housing their players such as Digital Realty, Lumen, Cyxtera and
infrastructure with third-party providers, and CyrusOne are all pursuing ambitious strategies to
datacenter operators that understand customers’ capitalize on the increased demand for datacenter
needs and offer enough flexibility and provide services. Some of them, like Equinix, are targeting
hybrid IT solutions will certainly stand out among hyperscalers as clients and could pose a significant
competitors. threat to the provider.
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