Good afternoon, and welcome to the Equinix Second Quarter Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to Chip Newcom, Director of Investor Relations. You may begin..

Good afternoon, and welcome to today's conference call. Before we get started, I would like to remind everyone that some of the statements we will be making today are forward-looking in nature and involve risks and uncertainties.

Actual results may vary significantly from those statements and may be affected by the risks we have identified in today's press release and those identified in our filings with the SEC, including our most recent Form 10-K filed February 18, 2022 and 10-Q filed April 29, 2022.

Equinix assumes no obligation and does not intend to update or comment on forward-looking statements made on this call. In addition, in light of Regulation Fair Disclosure, it is Equinix' policy to not comment on financial guidance during the quarter unless it is done through an explicit public disclosure.

In addition, we will provide non-GAAP measures on today's conference call. We provide a reconciliation of those measures to the most directly comparable GAAP measures and a list of the reasons why the company uses these measures in today's press release on the Equinix Investor Relations page at www.equinix.com.

We have made available on the IR page of our website a presentation designed to accompany this discussion, along with certain supplemental financial information and other data.

We would also like to remind you, we post important information about Equinix on the IR page from time to time and encourage you to check our website regularly for the most current available information. With us today are Charles Meyers, Equinix' CEO and President; and Keith Taylor, Chief Financial Officer.

Following our prepared remarks, we'll be taking questions from sell-side analysts. In the interest of wrapping the call up in 1 hour, we would like to ask these analysts to limit any follow-on questions to 1. At this time, I'll turn the call over to Charles..

Thank you, Chip. Good afternoon, and welcome to our second quarter earnings call.

On the heels of a record Q1, we had an outstanding Q2, with strong and sustained demand across our product portfolio, broad pricing momentum and solid sales execution, with particular strength in Americas and EMEA, resulting in record growth and net bookings and our best-ever quarterly revenue step-up.

As our customers progress and accelerate their digital transformation journeys, the relevance of Platform Equinix continues to grow.

In our recent global tech trend survey, nearly 70% of the 2,900 IT decision-makers polled indicated their intention to adopt private or hybrid as their cloud architecture of choice, with over 45% of those polled working with 3 or more cloud providers and over 80% indicating their intention to sustain or increase their spend on interconnection.

Today, we're seeing this demand for interconnected digital infrastructure across our regions. This quarter's bookings sizably surpassed the prior peak, a great indicator of the strength of the business and our go-forward pipeline.

Our business remains resilient and highly diversified, with nearly 1/3 of our 10,000-plus customers closing incremental business in any given quarter.

Despite macro conditions, this customer demand, paired with lower-than-expected churn, is driving us above the upper end of our Analyst Day revenue guidance this year and benefiting our AFFO per share guide, with the impact of pricing increases still largely unrealized. Turning to our results.

As depicted on Slide 3, revenues for Q2 were $1.8 billion, up 10% over the same quarter last year, representing our 78th consecutive quarter of top line revenue growth, a clear reflection of the durability of our business model across economic cycles.

Adjusted EBITDA was up 8% year-over-year, with AFFO meaningfully ahead of our expectations due to continued strong operating performance. Interconnection revenues continue to outpace the broader business, growing 13% year-over-year. These growth rates are all on a normalized and constant currency basis.

Customers continue to embrace Equinix as the best manifestation of the interconnected digital edge. And we continue to scale, extend and innovate across our data center services portfolio.

We now have 49 major projects underway across 34 metros in 21 countries, with 13 new projects this quarter, including new data center builds in Dublin, Montreal, New York, Paris, Warsaw and our first build in Chennai, India, the first of several anticipated metro expansions in this fast-growing market.

Our unparalleled global scale and reach continues to be a strategic advantage, driving success with service providers looking to extend their reach and rapidly implement as a Service models and with enterprise customers across nearly every sector of the global economy as they modernize their infrastructure and embrace hybrid and multicloud.

Wins this quarter included a multinational energy conglomerate, implementing their hybrid cloud strategy across multiple regions, leveraging Network Edge and Equinix Fabric, and F5, a global technology leader in application security and multicloud networking, establishing additional networking nodes in all 3 regions to better support their customers.

In May, we closed our acquisition of 4 data centers from Entel, extending Platform Equinix into Chile and bringing our global footprint to 70 metros across 31 countries.

Equinix has a decade-long history in Latin America, and this acquisition provides significant expansion capacity, enabling both local businesses and multinationals the opportunity to accelerate their digital transformation and our Lat Am aspirations.

We also expect to close on the acquisition of one additional data center from Entel, extending our reach to Lima, Peru in Q3. As the world's digital infrastructure company, we believe it's our responsibility to help bring about a more sustainable future.

In 2022, we continue to advance our bold future-first sustainability strategy and are pleased to have been recognized by Sustainalytics as among the best large-cap REITs for ESG and to be ranked seventh on US EPA's National Top 100 list of the largest green power users.

We continue to accelerate the transition to cleaner energy grids and recently executed our second Virtual Power Purchase Agreement in Finland.

Once operational, these 2 new wind projects, combined with our prior projects, will bring Equinix' total renewable VPPA capacity to 300 megawatts, and we continue to explore additional PPA projects across all 3 regions as we progress towards our goal of 100% clean and renewable energy.

Turning to our industry-leading interconnection franchise, we're seeing continued diversification of our ecosystems and robust activities, including a win with Fast Shop, one of Brazil's largest electronics retailers, who chose Equinix to help strengthen interconnection for its digital core, improved cloud connectivity and integrate with the digital retail ecosystem.

In Q2, we added an incremental 7,600 interconnections and now have over 435,000 total interconnections on our platform.

Equinix Fabric saw a notable increase in provision capacity as channel enablement is driving network resale use cases and customers are increasingly using inter-metro connections on Fabric to connect across their deployments, including a win with Zivver, a cybersecurity company in the Netherlands using Equinix Fabric to connect deployments in Amsterdam and London to provide connectivity for its customers as part of its business expansion.

Internet Exchange saw peak traffic up 4% quarter-over-quarter and 25% year-over-year, to greater than 25 terabits per second. Pivoting to our digital services portfolio. We continue to see strong growth and significant opportunity as customers increasingly leverage more Virtual as a Service and Edge solutions.

Equinix Metal had a strong bookings quarter as partner-driven solutions like Pure Storage and Dell PowerStore on Equinix Metal are driving performance-centric hybrid cloud opportunities with enterprise customers. Network Edge also had a strong quarter, with a notable increase in large multi-instance deployments from enterprise customers.

Both Metal and Network Edge are also driving attractive revenue pull-through to Equinix Fabric.

Digital services wins this quarter included Protocol Labs, an open-source R&D lab, increasing its usage of Equinix Metal to support projects that decentralize the web and cloud storage, and a leading waste management services provider, leveraging Fortinet on Network Edge to connect their business units in Asia to their data centers in the U.S.

across Equinix Fabric. Our strategy remains simple, to translate our unique and durable advantages into being the platform where buyers and sellers of digital services can come together, enabling them to deploy and interconnect the infrastructure that they need to transform their business.

For service providers, demand remains robust as businesses around the world are planning major investments in digital technologies to support ambitious expansion plans following lessons learned from the pandemic. This year, Gartner projects that global spending on public cloud services will reach nearly $500 billion.

And we're seeing strong demand across multiple vectors with these key cloud and IT customers. In the quarter, we added 3 new cloud on-ramps in Paris and London and now have nearly 200 on-ramps to the major cloud service providers deployed on our platform, making Equinix the home of hybrid multicloud.

We also continue to see tremendous success supporting our hyperscale partners as they invest in subsea cables to facilitate the rapid growth of Internet traffic between continents.

And in addition to being an integral part of hyperscale architectures, we continue to drive go-to-market alignment with these market-shaping players, partnering to meet end customer needs for hybrid cloud and making the hyperscalers some of our most productive channel partners. Hyperscaler demand for our xScale offering also remains robust.

We had high leasing activity in Q2, pre-leasing our entire Dublin 6 asset, the first phase of our Paris 13 asset and the second phase of our Frankfurt 11 asset, representing more than 38 megawatts of capacity. Looking across the various xScale JVs, we've seen strong demand, with over 170 megawatts now leased across our portfolio.

And we currently have 11 xScale builds under development, of which more than 80% is pre-leased. On the enterprise side, Gartner also continues to view digital transformation not as a 1- or 2-year trend, but as a systemic and long-term theme.

Our pipeline strongly supports this thesis, and our enterprise activity this quarter was robust with Americas and EMEA regions driving record bookings, with particular strength in banking and health care. Expansions included a leading U.S.

health care software vendor, creating an edge hosting environment on the West Coast, and the Hertz Corporation, one of the largest worldwide vehicle rental companies, who deployed on Platform Equinix to support its digital transformation journey, locating infrastructure proximate to cloud providers and tapping into our digital solutions.

And once again, our channel program continued to thrive, delivering its fifth consecutive quarter of record bookings, including strong performances for our EMEA and APAC regions, accounting for more than 35% of bookings and nearly 60% of new logos.

Wins were across a wide range of industry verticals and digital-first use cases, with hybrid multicloud as the clear architecture of choice.

We saw strength from strategic partners, like AT&T, Cisco, Dell, Google and Microsoft, and including a win with Orange Business Services for -- a security services technology company, to deploy their payment card encryption solution while interconnecting to our financial services and cloud ecosystems.

We're also proud to have been named HPE GreenLake's Momentum Partner of the Year for 2022 as we together work to deliver a consistent hybrid and multicloud experience for our joint customers. Now let me turn the call over to Keith and cover the results for the quarter..

Thanks, Charles, and good afternoon to everyone. I hope you're all doing well and enjoying the summer months. Well, as you can see from our results, Q2 was one of our best quarters to date, if not our best. The go-to-market engine continues to convert our healthy pipeline into record bookings with attractive pricing, coupled with low churn dynamics.

In fact, it was our eighth straight quarter of increasing net bookings activity, and our forward-looking pipeline remains robust.

Our success and the momentum in the business are strong indications of the value customers place on our highly differentiated ecosystems or the breadth of our service offerings, the global scale and reach of our platform and of course, the quality of our operational delivery.

With a great first half of 2022, we're again raising our underlying guidance across each of our core financial metrics. Now as you can see from our performance, we continue to manage an instrument in the business to perform across varying economic cycles, even ones like we're experiencing today.

While all things macro remain within our focus, we do feel well positioned to address the volatility in the market, and here's why. We have low customer concentration, with no customer representing greater than 3% of our revenues, and our top 50 customers continue to diversify across our platform and as a percentage of revenues.

With regards to supply chain, our best-in-class design and construction and strategic sourcing teams are delivering projects consistent with our budget expectations with limited delays and have access greater than $300 million of inventory holds to mitigate future disruptions across a number of critical functions.

On inflation, we've largely been effective by protecting our customers and partners from the market fluctuations. But as we continue to assess the likely go-forward trends related to the cost of energy and construction, in addition to the broader inflationary increases affecting wages and other operating costs, we do expect to raise our prices.

And with 60% of our revenues coming from outside the U.S., a strong dollar in Q2 has had a notable impact on our as-reported numbers and outlook, yet our sophisticated hedging program has meaningfully dampened the impact to our financial statements. Now let me cover the highlights for the quarter.

All comments in this section are on a normalized and constant currency basis. As depicted on Slide 4, global Q2 revenues were $1.817 billion, up 10% over the same quarter last year and above the top end of our guidance range due to better-than-expected step-up in recurring revenues and strong xScale NRR fees.

Full MRR per cabinet yield reached the new mark of $2,000 per cabinet. Q2 revenues, net of our FX hedges, included a $20 million impact when compared to our prior guidance rates due to broad dollar strength.

Global Q2 adjusted EBITDA was $860 million or 47% of revenues, up 8% over the same quarter last year, above the top end of our guidance range due to strong operating performance. Q2 adjusted EBITDA, net of our FX hedges, included a $10 million FX impact when compared to our prior guidance rates and $4 million of integration costs.

Global Q2 AFFO was $691 million, above our expectations due to strong operating performance and included a $9 million FX impact when compared to our prior guidance rates. Global Q2 MRR churn was 2.1%, again at the lower end of our guidance range.

Looking forward, we expect MRR churn to continue to trend favorably and remain at the lower end of our 2% to 2.5% per quarter range. Turning to our regional highlights, whose full results are covered on slides 5 through 7.

APAC was the fastest-growing region on a year-over-year normalized MRR basis at 14%, followed by the Americas and EMEA regions at 11% and 9%, respectively. The Americas region had a record bookings quarter with great performance in our Canadian and Mexican businesses as well as our Denver and Silicon Valley markets and healthy new deal pricing.

The Americas go-to-market edge then continues to sell the platform with strong global exports. The Entel Chile assets are performing well against our initial expectations, and we look forward to adding Lima, Peru to our global footprint in August.

Our EMEA region also delivered a record bookings performance, with broad-based strength across our cloud, enterprise, content and digital media verticals, led by our London and Paris markets as well as our emerging markets.

In the quarter, we saw healthy retail activity with strong pricing across our varying deal sizes and solid adoption of our digital services products. The integration of the MainOne assets into our platform is progressing well, and the business is tracking ahead of our expectations.

We're seeing increased focus on sustainability across our European stakeholders, and thus, we're taking an active leadership role through the European Data Centre Association to address this growing and critical matter.

And finally, the Asia Pacific region had a strong quarter with robust channel activity, led by our businesses in Australia and Singapore. I would also like to take this opportunity to thank our Shanghai operations team for their dedication and effort during their very strict COVID lockdowns over the past quarter to deliver 100% uptime.

Their efforts are a shining example of what we call the magic of Equinix as they put "we" before "me" to ensure our customers' critical infrastructure remained operational. And now, looking at our capital structure, please refer to Slide 8.

We ended the quarter with cash of approximately $1.9 billion, an increase over the prior quarter, largely due to our April green bond debt offering and strong operating cash flow created by the business, offset by our growth CapEx, the cash dividend and the acquisitions closed in the quarter.

In June, Fitch Ratings upgraded us to BBB+, given the strength of our business performance and its cash-generating capabilities as well as our balanced capital funding posture. We're very appreciative of the support received from Fitch.

Additionally, during the quarter, we executed some ATM for resale transactions, which will provide approximately $400 million of incremental equity funding when settled later this year.

Looking forward, as stated previously, we'll continue to take a balanced approach to funding our growth opportunities with both debt and equity, while creating long-term value for our shareholders. Turning to Slide 9 for the quarter. Capital expenditures were approximately $490 million, including a recurring CapEx of $35 million.

In the quarter, we opened 4 retail projects in London, Mexico City, Milan and Tokyo and 2 xScale projects in Frankfurt and Sydney. We also purchased land for development in Bogota and Mumbai. Revenues from owned assets stepped up to 61% of our total revenues, reflecting our long-term strategy of both developing and purchasing land and IBXs.

Our capital investments delivered strong returns as shown on Slide 10. Our 162 stabilized assets increased recurring revenues by 7% year-over-year on a constant currency basis. These stabilized assets are collectively 87% utilized and generate a 28% cash-on-cash return on the gross PP&E invested.

And finally, please refer to slides 11 through 15 for an updated summary of 2022 guidance and bridges. Do note, our 2022 guidance now includes the anticipated financial results from the Entel Chile acquisition, which closed in May.

For the full year 2022, based on the momentum we're seeing in the organic business, we now expect our revenues to increase 10% to 11% on a normalized and constant currency basis over the prior year, trending above our Analyst Day revenue range, a reflection of the healthy digital infrastructure demands that are driving the momentum in our business.

Relative to our prior guidance, we're increasing our revenues by $65 million, including $30 million of revenues from the Entel Chile. We expect 2022 underlying adjusted EBITDA to increase by a net $33 million compared to our prior guidance, including $18 million from Entel Chile. We now expect to incur $30 million of integration costs in 2022.

We're raising our underlying 2022 AFFO by $33 million to grow between 8% and 10% on a normalized and constant currency basis.

And given the strength in our business, 2022 AFFO per share is now expected to grow between 8% and 9% on a normalized and constant currency basis, above the top end of our prior guide, with both the MainOne and Entel acquisition immediately accretive to our business.

2022 CapEx is now expected to range between $2.3 billion and $2.6 billion, including about $185 million of recurring CapEx and about $110 million of on-balance sheet xScale spend. So let me stop here. I'm going to turn the call back to Charles..

Thanks, Keith. In closing, we had an outstanding first half of 2022, and our business continues to deliver strong and consistent results. Despite a challenging macroeconomic and sociopolitical landscape, demand remains robust as customers continue to invest heavily in digital transformation.

And as infrastructure needs evolve, Platform Equinix is increasingly relevant as a point of nexus in IT architectures that are more distributed, more hybrid and more cloud-connected, giving us a distinctive value proposition and meaningful pricing flexibility.

The emergence of the cloud continues to disrupt the multitrillion-dollar global IT market, fueling both our hyperscaler relationships and our broader service provider business as successful new entrants extend and expand their infrastructure to drive revenue growth and traditional technology leaders build out distributed delivery infrastructure as they transform to as a Service models.

We continue to invest behind this momentum, both in expanding the reach and scale of our data center platform and in accelerating the evolution of our digital services portfolio, which is seeing strong customer interest. In that vein, we're pleased to welcome Jeetu Patel and Fidelma Russo to our Board of Directors.

As veteran operating leaders at Cisco and HPE, they bring deep knowledge of both technology and go-to-market aspects of the evolving digital infrastructure landscape. And we're excited about their contributions as we continue to innovate our service offerings for the digital leaders of today and tomorrow.

So let me stop there and open it up for questions..

[Operator Instructions]. Our first question comes from Matt Niknam with Deutsche Bank..

Congrats on the quarter. Just first, maybe on bookings. So you talked about record quarterly gross and net bookings, Americas and EMEA leading the way.

I'm just wondering if you can talk a little bit about how trends evolved over the course of the quarter and whether you've seen any moderation, maybe either late 2Q or early 3Q, just in light of the macro backdrop. And then one follow-up. Keith, you mentioned the $400 million in ATM, equity issuance.

I'm just wondering, with leverage under 4 turns, can you talk about the strategic rationale for the issuance and how you're thinking about potential uses..

Hey, Matt. It's Charles. I'll take the first one and hand it over to Keith for the second one. So no -- I would say, the trend line on bookings continues to be strong. I think we're seeing real commitment from folks relative to digital transformation.

I think we're seeing that strength across regions and across sectors, both in the service provider side of our business and the enterprise side of our business. And that's literally across virtually every sector, as we said in the script. So no moderation, in fact, I would tell you that our pipeline going into Q3 is stronger than it was going into Q2.

We've got a lot of forward visibility and really continue to feel very good about the overall demand backdrop for the business..

And Matt, sort of responding to the second question, as it relates to using our ATM, first and foremost is, as you probably heard in the prepared remarks, we've done that on a forward basis so we haven't pulled down the equity yet. And part of it I think is, look, there's a lot of disruption in the marketplace.

And one of the things that we know is we're going to continue to build. As you heard, we announced 49 new product -- we have 49 projects underway. We added 13 new projects this quarter. We're closing on the acquisitions, and we're going to continue to fund these dividends.

As we think a lot about what we need, not only through the rest of this year but through the end of next year, we want to make sure we bring balance to the market, balance to our capital plans, but also recognize that there was volatility in the marketplace.

And so we basically did a forward sale through a number of transactions at $680 a share over the quarter. We're very selective in our timing as you can appreciate. And we just felt that it was a good thing to add to the overall liquidity position of the business. Let me just also, just sort of say one last thing.

As you step back and you recognize the momentum in our business and what Charles has just -- what we said in the prepared remarks, but certainly what Charles has also spoken of, the momentum in our business is substantial and the investments that we're making in our assets is going to continue to be substantial.

As a result, we want to make sure that we have sufficient liquidity in these periods of great uncertainty. And so raising capital at a time when you can is appropriate, so using the cash on our balance sheet, using our equity.

And of course, as you can appreciate, we're going to be looking at some debt structures as well to augment our liquidity position so that we don't have to worry about that next decision, which is what will we do if an opportunity presents itself.

So again, it's more about being prudent, having balance, supporting our ratings and at the same time, creating liquidity in the balance sheet for future decisions..

Our next question is from Aryeh Klein with BMO Capital Markets..

Same-store revenue growth was the best it's been in a while. I think, last quarter, you mentioned you got a 50 basis point benefit from energy. Is that still the case? And then can you talk about the pricing strategy outside of energy? It sounds like you are increasing prices.

So can we see increases above and beyond the 2% to 5% that you've received historically?.

Yes. Thanks, Aryeh. The same-store, yes, tremendous quarter on that. And in terms of how much of that wind at the back is energy, it's actually probably a little less than that number in terms of any contributions to that. So really strong quarter overall. So I believe it was, I want to say, 40 bps in that $6.7 million that was associated with energy.

So -- but really, I think we would still see north of $6 million even without that. And so a good -- a really good result there and feeling great about that and feel like we can continue to deliver in sort of our previously guided range going forward. In terms of the broader pricing strategy, absolutely.

We're looking holistically at the pricing strategy, not only -- and I've talked about this in a number of other forms. There are sort of several levels to the pricing strategy and execution.

One is power, and that is about sort of making sure that we can fully recover sort of increases to power in markets where that's occurring and align that up with our hedging strategy.

And we've talked in depth about that, but we continue to have high degrees of confidence that we can -- the combination of our hedging and our ability to pass that through will allow us to mitigate those impacts on the business.

Second is actually just a broader increase in list pricing on space and power, that is already rolling through, and on interconnection.

And interconnection tends to perhaps have a slightly faster impact just because it's -- when things roll through, it's a little more dynamic, if you will, in terms of the way interconnection rolls through the business. So we're raising list prices there.

And then as you know, escalators, and I think we will begin to reset escalators at levels that we think are more appropriate for the current environment and dynamics of the market.

And so we are already looking at new contracts priced at new list price levels with new escalators, and that -- and as I said in the sort of prepared remarks, I said that the pricing impacts are largely unrealized. Meaning that what you saw in our guide today is not really being fueled by pricing.

It is really being fueled by strength in unit volumes, firm pricing, certainly, in terms of how we're pricing, but that's really yet to roll through in terms of -- and I really think we'll start to see those positive pricing impacts in '23..

Got it.

If I can just follow up, is there point at which the higher prices force companies to start to reevaluate their objectives around data center expansion and whatnot?.

Yes, it's a great question. Obviously, sort of what is the elasticity of demand and how elastic or inelastic is the demand is a question we constantly ask and answer. I would tell you that quite empirically, our evidence would demonstrate that our business is highly inelastic.

And in fact, if you look at our interconnection pricing activity in Europe over the last couple of years, we saw a tremendous flow-through on that and very little implication from a churn perspective.

And so -- and then the other thing I would -- we've looked hard at kind of where people are in terms of how much of their spend overall is tied up in Equinix as a key sort of point of nexus in their digital infrastructure strategy. And the reality is, is they're getting significant value for that investment.

And adjustment in pricing on that has a relatively limited impact in their overall -- in the overall dynamic there. And so we're -- we absolutely want to deliver superior value. We think we can do that at higher price points and still deliver the value that is going to compel people to make Equinix a central part of their long-term architectures..

And our next question is from David Barden with Bank of America..

I guess I have two kind of higher-level questions. Charles, a lot of the investor base hasn't really lived through the possibility of recession as it relates to data centers. And there's two big questions that we get.

One is, will businesses kind of pull back on their data center budgets in a recession? And the second is, given all the IPOs we've seen, some of these companies, smaller companies, start to fail as we saw maybe back in 2001, '02.

Is that going to create pressure for the data center business? And I guess, if I could ask a second question, maybe this one is for you, Keith. We obviously saw a well-regarded, short-selling investor come up with a thesis that said that the data centers have 2 problems.

One is that they're going to end up competing with their biggest customers, and that's going to cannibalize the need for legacy data center businesses. And second, that it's not obvious the returns on the consolidated data center businesses are actually great. So I know you guys know the answers to those questions.

So I would love to kind of just air those out and kind of hear what you guys are thinking now..

Sure. David, I'll start, and I'll probably not be able to resist the chance to answer some of the second one, in addition. So -- and then -- but I'll hand it over to Keith.

As for the broader question on recession and potential impact to the demand backdrop and in particular, around exposure to failures, business failures and weaknesses that, that might represent in either startups or those types of companies, as I said, right now, we're seeing no waning of demand relative to people's investment in digital transformation.

In fact, I would argue, that I think as they look forward to a potential recessionary environment, many of them are using that either to try to reduce costs by modernizing their IT infrastructure and moving to hybrid and multicloud with greater agility in their IT footprint and architecture.

Or they're using that as a fundamental driver of competitive advantage and therefore fuel to their top line, that I think they don't believe they can afford not to invest in. And you're seeing that in virtually every sector.

You look at retail, for example, and that's a classic example of a sector that people are saying, oh, boy, recession could clearly impact consumer wallet spend and retail would suffer from that. Well, we are not seeing that show up in terms of their decision-making around their commitment to digital.

They simply can't afford not to be prepared for the digital future. And so we see real strength in that sector. Same could be said for various elements of banking and financial services, which people say could feel some of the sting, and yet they continue to invest.

And so every quarter, it seems that we give you a different set of sectors that are demonstrating strength in our business. And I think that's just a reflection of just how durable that demand profile is.

And so we're keeping a close eye on it, but our previous experience in recessionary environments as well as the current pipeline would lead us to believe that demand continues to be strong. And frankly, we're investing behind that. We're going to be prudent and appropriate and watch it carefully.

But we're going to put more quota-bearing heads on the street, given the level of demand that we're seeing in the business. As to startups, honestly, our exposure is relatively limited. Startups often start in cloud. And only as they scale, they move to hybrid infrastructures. And so we don't see a lot of exposure there.

And we have not seen sort of business failures or pullback in those as any kind of meaningful contributor to the business.

On the short thesis, I would just tell you that I think it represents an underdeveloped understanding of the data center market and the relative position of various players because I think that as I said -- as we said in the script in various ways, our relationship with the hyperscalers, which is a key part of that thesis, is significant, both in terms of our underlying contributions to their architecture in terms of network nodes, on-ramps, et cetera, as well as our alignment with them from a go-to-market perspective.

Because we are -- in fact, they're amongst our most productive channel partners as they are selling large multimillion, sometimes multihundred, million-dollar contracts to players that are implementing cloud.

Those customers want an answer to what they're going to do with their private infrastructure and how they're going to place that proximate to the multicloud and how it's going to perform. And those are the answers that we're providing. Those are the questions that we're providing the answers to.

And so I think that we continue to feel like that this notion of us, sort of that this is a sort of a zero-sum game between us and the hyperscalers, I think, is just not an accurate view of the marketplace. And so -- and then on the broader returns, again, I would say, yes, our business is dramatically different on a return basis.

Look at our same-store sales and look at the 28% cash-on-cash returns of those, growing at 7%, which is what we demonstrated this quarter. That is a very, very different story than virtually any other player in the industry can give you. So I couldn't resist stealing that question from Keith. But Keith, please feel free to add your two cents..

David, maybe I could add just a couple of points to what Charles said, which is all very accurate. But the other thing I think is very important for, I think, our investors to appreciate is that we were very wise in our decisioning on how to manage the hyperscale relationships.

We have the business that Charles alluded to that sits inside a retail business. And again, as the on-ramps, the aggregation knows the regional network gateways, and things are very critical to running their core infrastructure.

But then there's the piece of the business that is substantial in scale and size, that we always chose not to do inside the retail business and instead set up a structure, which is our xScale business. And as we have just talked about, our xScale business is humming as well, given the momentum we're seeing. We have 11 builds underway.

We're roughly 80% utilized across all the inventory, that we have not only built but are building or are leased, I should say. And so that puts us in a very good position. Also, to isolate it, in that we only have effectively 10% exposure on an equity basis to those investments.

The other thing I think is important to note is these hyperscalers, they're looking for alternatives to -- other than self-build with others because we can do it in locations cheaper and faster than they could do it themselves. And I think it's a testament to the quality of our global design and construction teams.

And then last part, I think, is really important to appreciate. A lot of these deals that are done, they're price to yield. And so the price to yield based on a cost model, prices aren't going down, and they're only going up. They're longer-term in nature, your price to yield, and I think it's a really important aspect of the contracting terms.

And as a result, as I said at the Analyst Day last year, at maturity, the likelihood, the revenues associated with hyperscale for us represent about 1% to 2% of our top line and will represent a full maturity, again, assuming we spend that $8 billion, plus 3% to 5% of our AFFO.

And so we feel that is very resilient, not only to the overall performance of our business, but it's also resilient to the price to yield strategy that you deploy when you contract under these arrangements..

Well, and just to be clear, that last statement in terms of the percentage was relative to xScale. Our broader business with hyperscale is just meaningfully larger than that.

It's a $1 billion-plus business outside of xScale run rate and growing nicely because we play a very critical role in that infrastructure in terms of what they do inside of our retail facilities around the world and because of our relationship with them on a go-to-market alignment perspective..

Our next question comes from Michael Rollins with Citi..

A couple of questions, if I could. First, just on power. If you can give a little bit more detail of what you're seeing in terms of not just power cost in Europe and other markets where there could be issues, but also power availability.

And how should investors frame the risk of the supply side of the equation? And then just switching gears over to the change in the annual organic revenue growth guidance, can you give some additional details of as the -- you've seen that evolution in guidance over the last couple of quarters.

Where is the relative strength coming from in terms of regions and/or verticals?.

Thanks, Mike. Again, I'll start, and Keith can add on here. Yes, obviously, we're super tuned-in to the overall energy situation globally, with a particular focus on Europe, given the uncertainty created by the war in Ukraine. And so -- and you're right, it's not just a cost question, which we're certainly tuned into, but also availability.

So let me tackle them both a little bit. Not a lot new to add on the pricing, power cost situation. It is clearly going up in many markets around the world, and I think that's more evident and more acute in Europe. But we are well advanced in our hedging strategy for '23 already.

And we are looking at kind of where we will be on that and then how we will pass that through to our customers. And we continue to feel -- have a high degree of confidence in our ability, both contractually and executionally to get that done. The question of availability is a little bit of a different one, and we know that that's on people's minds.

And although we don't want to minimize the issues there, and there's clearly some level of risk that certain trade-offs really need to be made in some countries relative to how power will be allocated, we continue to feel really confident in our ability to maintain availability of our services to our customers.

And let me tell you kind of why that is. There's really 3 different levels to the issue. And this relates particularly to the question around natural gas, potential implications to the Nord Stream availability and overall supply there. And so we think about it in kind of 3 levels.

First one is will the grid be sort of constrained in its ability to deliver the amount of electricity required.

And that's really a factor of, particularly as it relates to gas, a factor of 1, is the grid primarily or substantially gas-powered; and two, if it is gas-powered, how exposed is it to the potential shortfalls associated with particularly Russian supply.

And what I would tell you is that, generally speaking, natural gas is the underlying source for just a fraction of the electricity generation across our EMEA portfolio. It ranges from almost 0 in the Nordics, to, call it, 30% of roundabout -- around there in the Netherlands, U.K., Turkey and Portugal.

Then there's a second-level question though, which is in markets that are dependent, to some degree, on natural gas, how much of that is potentially at risk for -- in terms of Russian supply. And in that case, only the Netherlands and Turkey have more than a 25% dependency on Russian gas.

So the composite is really -- the composite risk is really the product of those 2 things. And candidly, we feel like it's very manageable. So that's the first level, is will the electricity grid really be impacted by these things and fall short of its ability to deliver.

The second-level question is, if that were to occur, which we think it has some chance of occurring, what will local governments and regulators do and how will they deal with power allocations.

And on that level, we think that -- we're confident that we -- we think that those local regulators have a very deep understanding of the criticality of our facilities and that those are -- that our facilities are inherent to the proper functioning of the Internet, of the economy and candidly, to society at large.

And we have these sort of critical infrastructure designations in these countries for that reason. And so we feel confident that we're going to continue to have continuity for Equinix data centers, to be a key area of focus for those folks and get the appropriate allocations accordingly.

And then the last level of that question is even if all of that were to fall down, we have the resilience within our facilities in the event of any interruption or intermittency in electric supply. And so our facilities are designed with high degrees of redundancy.

And our ability to manage through intermittent or even extended periods of interruption to grid availability is very strong. And our track record on delivering exceptional availability even in adverse circumstances like that is well known and I think, frankly, a testament to really the professionalism and preparedness of our team.

So that's a lot, but it's -- we've been -- as you might imagine, it is a topic of significant energy and discussion and focus for us. And all in all, we feel, while it is a less than ideal situation in terms of rising costs and potential risk around availability, is one that we feel very well-positioned to manage..

And just while we're on the topic of power, maybe before getting to the revenue question, just one other follow-up.

Any update on Singapore, which is a larger discussion during the 4Q earnings call?.

Sure. Quick one, Mike. No real update. We -- it's coming in pretty much as we had expected. And again, that exposure in terms of what we're kind of eating, if you will, relative to Singapore, we think, will resolve itself going into 2023. And so no real update.

It has some level of impact on our business from a margin perspective this year, but we believe that we can resolve that going into '23..

And then just the regions and verticals of relative strength as you've increased your organic constant currency revenue growth guidance..

Yes. I'll give you a quick two cents on that and then have Keith add to it. Look, it's -- our business is super diverse in terms of -- and all of our regions are performing well. Absolutely great quarter from Europe. Americas performance continues to be strong. And you saw APAC was our fastest grower, right? Now I expect that to be the case.

I think that the overall dynamics of Asia are going to continue to allow it to lead there. But amazing performance in Europe, really strong across sectors. And again, I think we're seeing strength in -- this is really the ecosystem nature of our business.

We're seeing strength both on the supply side, meaning all these service providers ramping their business to deliver services required for digital transformation and they're doing that at Equinix, and then the enterprise buyer really seeing nexus as that point of -- or seeing Equinix at this point of nexus to really house their hybrid IT infrastructure.

And so the short answer is we're seeing it across regions and across sectors.

Keith, what do you want to add there?.

Yes. And Mike, maybe just adding a couple of points to Charles' comments. When you look at our overall growth, we telegraphed above sort of Analyst Day guide and said that we can grow the business on a normalized and constant currency basis, so normalized, taking out the acquisitions by 10% to 11%.

And of that 10% to 11% of growth, roughly 60 basis points is power -- roughly 60 basis points are power price increases that we sort of initiated at the beginning part of the year. So you can see that the core business is performing just phenomenally well.

And the U.S., the Americas business specifically, is performing exceedingly well and growing at 10%, 11%. It just gives you a sense of the momentum. And it's across the verticals and it's in the markets that we're fueling basically the capacity.

You can also see that we're building in 13 new projects -- there's 49 projects in total, and we call them major projects. There's much more than 49 projects underway, but 49 major projects underway, a number of -- 34 markets, I think, 21 countries. So we're building across the portfolio.

And just as a reminder to everybody, the majority of our growth comes from the installed base. 90-plus percent of our bookings is coming from that installed base. And so despite the fact that we don't -- we're seeing the concentration decrease, but the dispersion increase. And that's just -- that's a phenomenal aspect of our business model.

And that -- and then the last thing I would just say is our pricing has been strong. Again, another quarter of net positive pricing actions, notwithstanding all the comments that Charles made, which is those are things we'll see in the future, but the relationship of a price increase to a price decrease this quarter was 3.2:1.

So for every $1 of decrease, we saw $3.2 of increase. So it gives you a sense of the momentum in our business. And then -- and you can't hide away from the fact that our digital services, they're performing at a very high clip, and that's adding to the overall business.

So it's a combination of all these things that are giving you the positive momentum in revenues..

And our next question is from Jon Atkin with RBC Capital Markets..

So you talked a lot about influences around the business, around strong demand and power costs, pricing increases.

I wonder if you can maybe flesh out a few of the other kind of headwinds or tailwinds as we think about how to model the rest of this year or next year around churn and G&A and maybe any other items that you want to call out and then crystallize maybe kind of the net impact of how you see margins and AFFO per share trend into next year..

Sure. Yes. I mean I think there's obviously a lot of levers in the business. I do think churn continues to be generally a good news story. I think we're seeing -- I think our level of sophistication we have in sort of understanding, modeling and being able to effectively manage churn has really improved dramatically over the years.

And I think -- so we have -- we forecast virtually with pretty great precision, our churn, on a quarter-to-quarter basis. And so I think we see that as actually a continued positive story, and that's part of what's been contributing to the sort of record net bookings levels. I think G&A is an area of continued opportunity for us in the business.

I think as we look at our hiring, for example, I said we're investing in the business in terms of driving quota-bearing heads into the market given the strong demand backdrop, but we're being very prudent as it relates to adding G&A.

We think that's appropriate in this environment, and we're really kind of pulling the reins back, adding only where we feel that's absolutely critical and then also investing in some of the automation and simplification that we're looking for to drive efficiencies in the business.

And I think that what we hope that, that will continue to do is give us progression over time towards that long-term target of 50%. And I think we're already seeing some of that. I think on the other side of it, there probably -- there are some headwinds, right? And utilities are part of that. The Singapore situation was fairly unique this year.

We think that will resolve next year.

But I do think that the broader utility situation as we -- as prices rise, even though I think our hedging strategy and then our pricing increases will allow us to recover that, I do think that some of the increases are going to be a bit more 0 calorie from a margin standpoint, and that is probably going to affect margins on a percentage basis.

But I think that our focus is really on driving the top line and then getting the flow-through to AFFO per share. And I think that's what you're seeing in our guide, and that's what we're going to really continue to focus on..

And Jon, let me add a couple of comments, just to Charles' comments as well. Again, you asked about the second half of the year. I think it's important to realize, number one, we -- Q2 had some xScale nonrecurring revenues in it.

And so think about next quarter, that -- our nonrecurring revenues are going to go down about $10 million quarter-over-quarter. And then you should see them step back up in Q4. So that's one thing that's happening. Second thing is we're making an investment in the business.

We're being very deliberate about committing to the top line, committing to the value on a per share basis and driving as hard as we can on that, but at the same time still making decisions about investing in the business. So Charles alluded to the quota-bearing heads.

There's development costs, another $10 million of costs in the second half of the year that weren't in the first half of the year. There's some lease adjustments of $11 million that went -- that's going through the second half of the year, related to some Hong Kong leases.

And then we're investing in T&E, another $15 million, because we think that's money well spent, getting our go-to-market engine in front of the customers as well as our teams working together, coming out of a post-COVID environment. So overall, I would say you're going to continue to see momentum in the business.

The guide is the guide, but we're deliberately making investments to set ourselves up for a good 2023. And the last thing I think is really important to note. Look, absent the implications of currency, with 60% of our revenues residing outside of the U.S., it has an impact to us. But we know that, that will revert over some period of time.

And so when we look at it is we're making -- we're putting -- placing our bets on our -- in our hedging strategies. We're doing all the things that you would expect us to do to try and give you the predictability and the forward-looking visibility.

But by the same token, absent what we just -- we reported our revenues, we just hit it this quarter for $100 million because of the weakness in the non-U.S. currencies. When that goes back to more traditional levels, where other markets start to increase their interest rates, similar to what the U.S.

is doing here to stave off inflation, you're going to see us recover that type of value. And the implications on revenue is $100 million, EBITDA is $50 million and AFFO is $42 million. You had $0.46 just this quarter alone. We're impacting the year's guidance by $0.46 just because of FX.

And most of that is being recovered by better business performance. And so there's a number of things that we'll continue to talk about in Q3, Q4 and certainly as we spend time with you in February on the 2023 guide on these matters..

That's very helpful. xScale had a strong leasing quarter.

Are you pricing in line with the market? Or are you seeing a slightly different trend?.

Yes. I mean I think that, as we've said, xScale tends to be one where it's probably a narrower band in pricing. And so -- and it really -- pricing, I think, is dictated substantially more by supply/demand characteristics in any given market. And so I would say that we feel great about our ability to deliver a fantastic offering to those customers.

But I would say it's -- it prices more -- market and xScale, I think, is going to price in a narrower band..

And our next question is from Frank Louthan with Raymond James..

How many new logos did you sign in the quarter? And how has that been trending in the last few quarters? And in particular, what sort of verticals are you seeing the most strength with?.

Well, look, overall, there's roughly 300 new logos in the quarter. I think the exact number is 286. Is that -- anyway, so -- and as I said, we're seeing it -- look, a lot of the growth comes from the installed base, as you understand. But we're seeing it across the portfolio. We talked about content and digital media, cloud, IT services.

It's really across the board. And it goes back to Charles' comments. And as companies start to progress with their digital transformation, all sort of paths lead to Equinix.

And from our perspective, there's not -- anything and everything that you sort of look at, we have an opportunity to either we have won it or we are -- or we actually have it within our pipeline. And so I would say that it's hard to sort of pinpoint one thing because if we have the capacity, we have the ability to sell in that market.

And one of my prepared comments was, in the emerging markets, what we call the growth in emerging markets out of Europe, we're seeing tremendous opportunity there. It was, again, a high-performing quarter for us. And these are sort of the, if you will, the secondary markets to our majors, our majors where we do $100 million or more.

So it's really right across the board, both from a geographic perspective, from a vertical perspective and then certainly from a customer perspective.

And it's the combination of all those that make us feel very, very good about what we're seeing in our pipeline and the amount of activity we saw this past -- really this past quarter, but we've had growth over the last 8 quarters in a row in our net bookings line. And so it tells you about the momentum, and this quarter wasn't off the charts, one.

Last quarter was fantastic. This quarter was better than fantastic..

Yes. I would add 2 more pieces of color around new logos, Frank. One, I would say, if you look at the nonfinancial metrics, it's -- we're in a relatively tight band on that. And -- but I think the one thing that gets lost in that a bit is the number of customers that come to us through channel partners.

And so those don't show up in that because we actually booked that through the channel partner.

And so that really masks, I think, some of the momentum we like to see, particularly in the broader enterprise market, where we're relying on some of our key partners around the world, whether that be an AT&T or an Orange or a Telstra or whatever, a variety of types of partners of ours that are bringing those customers to the table.

And so I think that's something that's kind of lost there, but an area, and given the strength of our channel, I think that's continuing to add significantly. And then the other thing I would say is our success with what we refer to as STAR targets, these sort of the Global 2000-type companies that we're really focused on, good momentum there.

In fact, we had a number of Global 2000 additions this quarter. And I think the team is just doing a fantastic job of helping those large, complex global multinationals really think through their strategies on the enterprise side.

And then on the service provider side, virtually every enterprise there, a lot of them are becoming service providers, and we're helping them on that journey and because everything is going as a Service. And so I think we're seeing some real strength on that side as well..

Thank you. This concludes our Q2 conference call..

Goodbye. And this concludes today's conference. Thank you for participating. You may disconnect at this time..