Colocation providers Digital Realty, Equinix, and American Tower have all released their Q3 2023 quarterly earnings results.
All three posted growth and profits and laid out their plans around the AI boom.
Digital Realty acquired two plots of land for data centers in Marseilles, France, and sold a legacy facility in Chantilly, Virginia.
Equinix announced plans for a new data center in São Paulo, Brazil, and an xScale hyperscale facility in Silicon Valley.
American Tower continues to talk up its aims for an Edge data center portfolio.
Iron Mountain is due to announce its results in the coming days.
Digital Realty: Revenues up, net income up
Digital Realty reported revenues of $1.4 billion in the third quarter of 2023, a 3 percent increase from the previous quarter and an 18 percent increase from the same quarter last year.
Operating income was $58.2 million, down nearly $100 million on the previous quarter, driven by higher operating expenses.
The company posted net income of $746 million in the third quarter of 2023, a large increase on previous quarters driven by gains on sales of investments, and adjusted EBITDA was $686 million
“Digital Realty’s third quarter results demonstrate strong and broad-based demand across our product spectrum. We posted record leasing in the 0-1 megawatt plus interconnection category and robust leasing in the greater-than-a-megawatt category,” said Digital Realty President and Chief Executive Officer Andy Power. “Accelerating Same-Capital cash NOI growth combined with strong progress on our funding plan has enabled the company to deliver while reinvesting to meet the needs of our customers.”
Over Q3 the company signed $152 million in bookings totaling 627,000 sq ft and 69.8MW. $68 million of that were more than 1MW deals in the Americas, and $23 million was for >1MW deals in APAC. Digital also signed renewal leases totaling $157 million.
During the third quarter, Digital Realty signed a 50-year right-of-use agreement related to a 2.7-acre site (MRS5) in Marseille, France, which can support the development of a 22MW data center. Minimum total payments over the next 30 years for MRS5 will be €62 million ($65 million).
The company also acquired approximately 27 acres (MRS6) near Marseille for €47 million ($49 million). The planned data center, MRS6, will be able to offer 50MW to cloud providers.
Digital Realty sold a non-core data center in Chantilly, Virginia for approximately $43 million. A buyer wasn’t listed.
The facility, at 4030-50 Lafayette Drive and known as IAD30 – was built in 2001 and offered 2.4MW across 73,000 sq ft. Digital acquired it in 2010 from 365 Data Centers (then 365 Main) and Rockwood Capital alongside four other data centers in California and Arizona.
CapEx for the quarter was $1.04 billion.
During the earnings call, CEO Power said the company was supporting one customers' AI infrastructure deployments that will incorporate 32,000 Nvidia H100 GPUs. He also said the company was able to accommodate a handful of high-density compute deployments from service provider customers in a 10-plus-year-old data center in one of its smallest markets.
Equinix: Q3 revenue up, new data center planned in São Paulo
Equinix’s quarterly revenues increased 12 percent year-on-year to $2.6 billion. Q2 2023 revenues were $2.02 billion.
Operating Income was $380 million, a 14 percent increase year-on-year, while Net Income increased 30 percent YoY to $276 million. Both were up on Q2. Adjusted EBITDA was $936 million, up 7 percent year on year. Q2 EBITDA was $901 million.
Over the quarter, the company signed more than 4,200 deals across more than 3,100 customers, GPU cloud provider CoreWeave was listed as a customer win, deploying networking nodes at Equinix sites across multiple metros, as was Lambda.
Charles Meyers, Equinix CEO, said: "We delivered another solid quarter of results and continue to drive strong value creation on a per share basis, raising both our dividend and AFFO/share outlook for the full year. We expect Equinix's broad portfolio of offerings, in tandem with our key technology partners, will allow us to capture high-value opportunities across the AI value chain."
During the quarter Equinix launched the DX3 facility in Dubai, UAE (850 racks); MT2 in Montreal, Canada (500 racks); and the MD6 facility in Spain (575 racks).
Expansions were launched in in Dallas (DA11 phase 2 – 1,950 racks); Washington DC (DC21 phase 3 – 1,3250 racks); Kamloops (KA1 phase 2 – 250 racks); and Silicon Valley (SV11 phase 2 – 1,450 racks).
A new $110 million data center was approved in São Paulo, Brazil: SP6 phase 1 will bring 1,125 racks into service in Q1 2026.
New expansions were approved in London (LD10 phase 4 – 850 racks coming Q3 2025); Madrid (MD5 phase 1 – 1,700 racks Q3 2025); Frankfurt (FR8 phase 2 – 1,400 racks Q1 2026); Miami (MI1 phase 3 – 1,050 racks Q1 2025); São Paulo (SP4 phase 4 – 750 racks Q1 2025);
DB1 in Dublin, Ireland, and MT1 in Montreal moved from leased to owned.
The company divested SA1 in Seville, Spain. Equinix took over the facility in 2017 after acquiring Itconic.
For its xScale hyperscale efforts, Equinix leased 5MW of capacity over the quarter.
The company currently has 12 open xScale sites totaling 188MW, 162MW of which is leased. It has 123MW in development, 48MW of which is leased.
The company has added a hyperscale development – Silicon Valley 12x-1 – which will add 14MW from Q1 2024. 5MW of that is leased. It also added Osaka 4x-1, which will add 14MW from Q1 2024.
Mexico City 3x-1’s launch was pushed back from Q4 2023 to Q4 2024. The launch of Warsaw 4x-1 and -2 and Madrid 3x-2 have also been pushed back three from Q4 2023 to Q1 2024. Frankfurt 16x-1 has been pushed from Q4 2024 to Q2 2025.
During the earnings call, CEO Meyers said the company intends to “meaningfully augment” its xScale portfolio to “pursue strategic large-scale AI training deployments” with hyperscalers and other AI ecosystem players.
The company is also seeing densities increase in its retail colocation business. On churn, Meyers also noted that over the first three quarters of 2023, the company has been turning cabinets over that period an average density of 4 kilowatts per cab, but adding new billable cabs at an average of 5.7kW.
“The reality is we've been paddling hard against that increase in density when it comes to cabinet growth,” he said. “We still see meaningful demand well below that 5.7 and then you see some meaningfully above that. We might see deals that are 10, 15, 20 or more kilowatts per cabinet. We may even be looking at liquid cooling to support some of those very high-density requirements.”
“It's an opportunity for us as we have this dynamic of space being freed up to the extent that we can match that up with power and cool it appropriately using liquid cooling or other means or traditional air-cooling means, then I think that's an opportunity to unlock more value from the platform.”
For the quarter, capital expenditures were $618 million.
The company also said it purchased land for development in Manchester in Washington DC.
American Tower: Slow and steady growth – Edge DC opportunity coming
American Tower’s data segment – which includes CoreSite – reported quarterly revenues of $212 million. Operating profit for the uni was $104 million. Data centers make up around 8 percent of the company’s revenue.
Q2 2023 data center revenue was $205m, and saw an operating profit of $103m. Q1 revenue and profit were $203m and $102m, respectively.
The wider company saw total revenues increase more than 5 percent to $2.81 billion. Net income decreased 29.6 percent to $577 million – partly due to $322.0 million in goodwill impairment charges for its India unit. Adjusted EBITDA was $1.81 billion, up 10.4 percent.
Tom Bartlett, American Tower CEO, said: “We had a strong quarter, as our global portfolio of communications assets continued to demonstrate resiliency in an increasingly challenging macroeconomic environment. As the 5G investment cycle continues and data consumption growth persists, we remain focused on driving attractive organic growth rates across our existing portfolio, leveraging our global capabilities and operational efficiency to manage costs and support an expanding margin profile, as well as strengthening our balance sheet and capital resources to provide financial flexibility.”
Total capital expenditures for the quarter were approximately $408 million; around $121.8 million of that was on data center expenditures.
On the topic of AI – which is driving large investments from the cloud providers – CEO Bartlett conceded the opportunity doesn’t fit with CoreSite’s interconnection focus right now, but will in future.
“When low latency interconnection high power density and distributed high performance compute become the priorities, we believe CoreSite and ultimately, our distributed portfolio of franchise real estate assets across the US are going to be optimally positioned to benefit,” he said.
On American Tower’s long-discussed Edge data center roll-out, Bartlett said: “We've been working both internally and with external stakeholders to develop an Edge model we can execute on as compelling opportunities present themselves.”
The company has previously said it has identified thousands of sites with more than 1MW of available power.
“We believe our distributed land footprint in Tier 2 and 3 markets with significant power availability and capability to connect back to CoreSite campuses can serve more distributed power capacity needs, while enabling customers to enjoy the interconnection benefits of the CoreSite ecosystem.”
Iron Mountain: Leases 65MW in a quarter, plans 15MW facility in Miami
Revenues for Iron Mountain’s data center unit were $127.5 million for Q3 2023, up from $100 million in Q3 2022 and from $118 million in Q2 2023.
Adjusted EBITDA for the division was $53.2 million; up from Q3 2022’s $42.6m but down slightly on Q2 2023’s $52.8m.
The company leased 65MW in Q3, for a total of 120MW this year so far. The company signed less than 3MW in Q2 but originally projected 80MW for the year.
60MW of the 80MW signed this month were across two leases to a single ‘Fortune 500 technology company’ at the company’s campus in Northern Virginia that are expected to commence in phases from late 2024 through mid-2025 and have a 15-year term.
“The deal provides this hyperscale customer with capacity across two buildings on our 142-acre, 276MW campus and represents, the largest revenue deal in Iron Mountain data center's history,” William L. Meaney, president and CEO of Iron Mountain, said during the earnings call.
The company also signed a 3MW deal in Frankfurt with an existing ‘North American cloud services customer’ looking to expand their European footprint.
For the wider company, total reported revenues for the third quarter were $1.4 billion, compared with $1.3 billion in the third quarter of 2022, an increase of 7.9 percent. Net Income for the third quarter was $91.4 million, compared with $192.9m in Q3 2022. Adjusted EBITDA was $500 million, up from $462.9m last year.
"We are delighted to have achieved outstanding performance in the third quarter, again resulting in all-time record Revenue and Adjusted EBITDA," said CEO Meaney. “The results of Project Matterhorn's enhanced operating model characterized by cross-selling our products and services is succeeding, and our strong growth reflects the drive and dedication of our Mountaineers as we continue our climb toward ever greater heights.”
In London, LON-2 Phase 1 is set to open in Q4 2023, offering 9MW, while VA-3 Phase 1 in Virginia will open the same quarter and offer 10MW. Both openings are fully pre-leased but were previously due to launch in Q3.
In Frankfurt, FRA-2 Phase 2 expansion is due to be completed in Q3 2023, adding 5.2MW; AZP-2 Phase 5 in Phoenix will add 6MW. Both expansions are fully pre-leased.
During the earnings call, Meaney said the company would be repurposing a former records management facility in Miami, Florida, for data center use. No timelines for development were shared.
“Miami is a key market where a number of our customers are looking for Edge deployments, and this newly repurposed facility will add 16MW to our data center portfolio,” he said. “We are actually scrapping the [original] building. So we're reusing the land in that particular case because it's the way that we could get the most data center capacity into that facility. Otherwise, we would have been leaving much opportunity on the table.”
When asked if other properties in the company’s portfolio are under similar review, Meaney said up to 20 percent of the company’s properties are “under evaluation under any given day.”
“This will be the first of many, we feel, as we continue to go forward," he said.
Cyxtera: shares Q3 revenues after bankruptcy - largely unchanged from Q1
After skipping its Q2 earnings results amid bankruptcy, colo firm Cyxtera said revenue increased by $14 million (7.5 percent) year over year to $200.5 million in the third quarter.
A net profit or loss wasn't shared.
Transaction Adjusted EBITDA increased by $3.7 million (6.3 percent), to $62.2 million.
In its Q1 2023 earnings, the company posted revenues of $196.7 million (up 7.8 percent), a net loss of $325.4 million (including a non-cash Goodwill impairment charge of $278.2 million), and Transaction Adjusted EBITDA of $63.3 million (up eight percent).
Cyxtera CFO, Carlos Sagasta, said: “Q3 represented another quarter of growth across the business and we look forward to continuing to deliver consistent financial results as the business moves into its next phase.”
