How activist Elliott could use its data center know-how to amplify returns at Equinix

Company Overview - Equinix is a real estate investment trust (REIT) operating 270 data centers across 75 metro areas globally, providing carrier-neutral collocation and interconnection services to various clients including networks, cloud providers, enterprises, and hyperscalers [1][4] - The company has a global footprint with International Business Exchange (IBX) and xScale data centers, primarily located in key end-user markets in the Americas, Asia-Pacific, and EMEA regions [1][4] Recent Developments - Elliott Investment Management has taken a position in Equinix, increasing its stake from an initial 0.15% disclosed in the firm's last 13F filing [3][5] - Following Equinix's Analyst Day, the company's share price fell by 17.75% due to higher-than-expected capital expenditures (capex) of $3.3 billion for 2025 and $4 billion to $5 billion annually from 2026 to 2029, alongside a downgraded forecast for adjusted funds from operations (AFFO) to a range of 5% to 9% [4][5] Market Position and Strategy - Equinix is well-positioned to benefit from the increasing demand for data services, particularly in the context of artificial intelligence and hyperscaler growth, with record bookings reported in recent quarters [6] - The company aims to achieve margin growth of 300 basis points from 49% to 52% by 2029, which is considered conservative compared to peers like Digital Reality Trust (DRL) [7][8] Financial Performance - Equinix's AFFO is expected to drop to as low as 5% next year, but is projected to rise to 8% over the next three years and eventually return to 9% [6][7] - Historically, Equinix has traded at a premium multiple, but its recent performance has underperformed DRL by approximately 11 percentage points, now trading at a discounted 24-times enterprise value/EBITDA compared to DRL's 29-times [8] Potential for Improvement - There are opportunities for Equinix to enhance its market communication regarding its capex plan, AI strategy, and long-term growth forecasts, which could help mitigate investor concerns [7][8] - Elliott's experience in the data center industry could facilitate improved execution of Equinix's plans and potentially lead to an invitation for Elliott to join the board before the next annual meeting in May 2026 [8]