Equinix's Rosy 2026 Outlook Masks Persistent Execution Risks Despite Strong Q4 Momentum

What happened

Equinix reported robust Q4 2025 results, with MRR up 10% YoY and record annualized gross bookings of $474 million, fueling a positive 2026 outlook that highlights accelerating AI and cloud demand. However, the DeepValue report underscores critical vulnerabilities, including $6.7 billion in unaccrued capex commitments and power availability constraints that have historically delayed project timelines and revenue activation. The PR release touts surpassing 500,000 interconnections and a 10% dividend hike, but these don't address the financing flexibility issues or the deal-closure slippage that led to past guidance cuts. While bookings surged 42% in Q4, the optimism glosses over whether power-secured delivery milestones are being met, a key gating item for converting demand into AFFO growth. Thus, the narrative remains one of strong top-line indicators overshadowed by operational execution risks that could cap near-term value creation.

Implication

The surge in Q4 bookings and interconnection growth bolsters Equinix's ecosystem advantage, supporting recurring revenue stability and long-term demand tailwinds from AI infrastructure. Yet, the elevated capex commitments and leverage ratio of 4.61 net debt/EBITDA heighten sensitivity to financing markets, risking dilution or stress if refinancing costs rise amid high interest rates. Power availability, a core bottleneck per the DeepValue report, lacks specific updates in the news, leaving project delivery timelines uncertain and potentially delaying the revenue recognition needed for AFFO targets. The dividend increase, while signaling confidence, diverts cash that could otherwise ease debt burdens or fund critical capex, given the $6.7 billion in unaccrued commitments. Ultimately, without clear evidence of timely project energization and stable financing, the stock's current valuation offers limited margin of safety, reinforcing a wait-and-see stance until operational execution improves.

Thesis delta

The news validates the bull case for demand strength with bookings up 42% in Q4, but it does not provide the specific 2026 AFFO per share guidance or power-delivery progress required to shift the 'WAIT' rating. Without confirmation that capex commitments are translating into energized capacity or that the delayed campus lease has closed, the thesis remains unchanged, hinging on observable execution improvements in the next 3-6 months.