Equinix Raises Growth Forecast Despite Questions Facing Data Center Sector

Tariff concerns and fears that Big Tech’s data center appetite may be shrinking have done little to derail Equinix.

The world’s largest data center REIT reported better-than-expected first quarter revenue and leasing numbers Wednesday, and the firm’s leadership increased its annual growth projections.

Equinix’s $2.2B in Q1 revenue marked an 8% year-over-year jump that landed well north of the company’s previously issued guidance. Equinix also beat its own forecast for adjusted funds from operations — a key metric for REITs. Leasing numbers were significantly above expectations as well, with U.S. markets leading a record quarter for bookings in the Americas. 

The firm reported particularly robust demand from tenants in financial services and artificial intelligence, with strong leasing growth in Chicago, Dallas, New York and Silicon Valley. Half of its top 25 deals were AI-related, executives said Wednesday, an increase from previous quarters as AI inference accounted for a growing share of demand.

Looking ahead, Equinix expects this accelerated growth to continue throughout 2025.

The company increased its annual revenue forecast by $142M while also upping its guidance for AFFO and other key financial metrics. Its stock price jumped Thursday morning following the earnings release before coming back down to an 0.6% gain by late afternoon. 

The California-based REIT’s surprisingly strong earnings report comes despite swirling macroeconomic uncertainty around the data center sector driven by fears of a leasing pullback from hyperscale tenants and the impact of tariffs from the Trump administration. 

Equinix CEO Adaire Fox-Martin addressed the tariff concerns on the company's earnings call Wednesday. While Equinix has experienced minimal impact on costs from the tariffs directly, she said the administration’s trade policies are likely to be felt acutely by a significant share of the firm’s major tenants, particularly those in consumer goods, materials, transportation and energy.

Should the uncertainty around tariffs continue for an extended period, there is a risk that key tenants could take a “wait-and-see approach” and delay planned spending on data centers and other digital infrastructure, she said. 

Still, Fox-Martin expressed confidence that no such enterprise leasing pullback is imminent, citing feedback from the firm’s annual tenant conference — held a week ago — where she said customers indicated they were staying the course.

“These customers are collectively signaling firm demand, which supports our operating plans despite the economic uncertainty,” Fox-Martin said. “Whilst we are tempering our optimism with prudent caution, we believe that demand for our digital infrastructure will persist through varying business cycles and economic policies.”

Beyond tariffs, data center firms also face anxiety from investors that hyperscale tenants like Microsoft, Amazon, Google and Meta may also moderate their demand for data center capacity.

These long-term demand concerns emerged in January following the release of an AI model from Chinese firm DeepSeek that seemingly required far less computing power than its competitors. It gained steam last month with revelations that Microsoft and Amazon are canceling or pausing several data center leases and development projects. 

On Wednesday's earnings call, Fox-Martin echoed a chorus of Big Tech executives in refuting the idea that a major drawdown in data center demand is underway. But even if shifts in the AI landscape drive changes in demand or in how hyperscalers make leasing decisions, she said Equinix should remain relatively insulated compared to some other data center providers.

Leasing massive blocks of capacity to hyperscalers for AI training or other cloud services accounts for just a small fraction of Equinix’s overall business, which focuses primarily on colocation and interconnection in major metro areas. Furthermore, the single-tenant data centers in Equinix’s hyperscale-focused xScale business line are all located in key markets with major backlogs that are unlikely to see any diminished demand, Fox-Martin said. 

Equinix’s leadership expressed confidence in the stability of hyperscale demand. The company has 12 xScale projects in development, and 85% of that future capacity has already been preleased. The firm expects to steer additional investment toward expanding the xScale buildout in the year ahead. 

“Whilst there have been some rumors around certain hyperscalers pulling back, others are pushing ahead, and certainly hyperscalers are organizations that can move past periods of consumption very, very rapidly,” Fox-Martin said.

“We have a very broad range of relationships with our hyperscalers — not just an AI-orientated relationship but a broader cloud demand and a connectivity relationship … and this flows very well as they become more selective in their leasing decisions in future months.”

Equinix’s leadership indicated the firm has no plans to dial back on development due to macroeconomic uncertainty and the skepticism around demand, with its capital expenditure expectations for 2025 remaining at between $3.4B and $3.7B. 

Equinix has 56 major projects underway in 33 markets across 24 countries. The company is continuing to execute a major shift in its development strategy that it launched earlier this year. Rather than pursue dozens of projects targeting various use cases scattered across global markets, Equinix’s new development model would consolidate new data center construction on large-scale campuses near the largest global data center hubs.