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Equinix EQIX is well-poised to benefit from the robust data center demand. Its recurring revenue model and strategic expansions are encouraging. A solid balance sheet provides financial flexibility. Regular dividend payouts result in shareholder wealth creation.
However, competition from other data centers, which leads to aggressive pricing policies, is a key concern for Equinix. High interest expenses add to its woes.
What’s Aiding Equinix Stock?
The demand for high-performing data centers will escalate in the years to come with the exponential rise in data traffic, which will require enterprises to engage data-center service providers such as Equinix. Therefore, the increasing total addressable market for data centers provides an immense growth opportunity for Equinix. Management expects total revenues to increase 3-4% in 2025 from the previous year.
Equinix is likely to benefit from favorable operating leverage. Its business generates a substantial portion of monthly recurring revenue bookings (greater than 90% of total revenues in the last three years) from existing customers, contributing to its revenue growth. The company generated 36% of the recurring revenues from its 50 largest customers in 2024. We estimate recurring revenues to increase by 3% and 5.9% in 2025 and 2026, respectively, on a year-over-year basis.
Equinix continues to focus on acquisitions and developments to expand its data center capacity in key markets and strengthen its competitive positioning and global reach. In February 2025, the company opened its first International Business Exchange data center in Jakarta, Indonesia, to meet the increasing digital infrastructure and connectivity needs in Southeast Asia. In November 2024, it announced its plans to establish its sixth data center in Singapore, with an initial investment of $260 million. As of Feb. 12, 2025, it had 62 major builds underway across 36 markets in 25 countries, including 16 xScale builds. This represents approximately 34,000 cabinets of retail capacity and 165 megawatts of xScale capacity, which will be delivered through to the end of 2026.
Equinix’s robust balance sheet position enables it to capitalize on long-term growth opportunities. As of Dec. 31, 2024, the company’s liquidity totaled $7.5 billion. Moreover, it enjoyed investment-grade credit ratings of Baa2 from Moody’s, BBB rating from S&P Global Ratings and BBB+ from Fitch Ratings as of the end of the fourth quarter of 2024, rendering it favorable access to the debt market.
Solid dividend payouts remain the biggest attraction for REIT investors, and Equinix has remained committed to that. It has increased its dividend five times in the last five years, and its five-year annualized dividend growth rate is 12.14%. Given a robust operating platform, our year-over-year growth projection of 8.7% for 2025 adjusted funds from operations and a healthy financial position, its dividend distribution is expected to be sustainable over the long run. Check Equinix’s dividend history here.