Equinix's AI-Driven Bookings Buoy Guidance, But Overvaluation and Power Risks Loom Large

What happened

Equinix reported strong FY'25 growth and raised its 2026 revenue and AFFO guidance, yet Q4 missed revenue and earnings expectations, revealing underlying volatility. AI-driven demand is fueling record bookings and interconnection revenue, with management targeting 9-11% AFFO growth for 2026, as highlighted in the Seeking Alpha article. However, the stock trades at a steep ~24-30x FFO multiple, far above datacenter REIT peers, indicating overvaluation that prices in near-perfect execution. The DeepValue master report critically notes execution risks, such as power constraints and policy scrutiny, which could pressure margins and AFFO growth despite the AI tailwind. Thus, EQIX faces a pivotal moment where strong demand clashes with high valuation and pending proof points like the xScale Hampton lease closure.

Implication

The raised 2026 guidance confirms robust AI-driven demand, but the stock's high multiples, like ~24-30x FFO, leave minimal upside if execution falters. Critical risks from the DeepValue report, such as power constraints and regulatory scrutiny, could derail margin expansion and AFFO growth, especially with high debt and commitments. Failure to close the xScale Hampton lease or manage power costs might trigger a re-rating, given the crowded AI-infrastructure narrative and sensitivity to misses. While Equinix's interconnection moat provides stickiness, any slowdown in net adds or Fabric bookings would weaken the investment case. Therefore, investors are better off waiting for concrete deliverables, such as Hampton closure and sustained interconnection metrics, before considering entry.

Thesis delta

The news reinforces the existing WAIT thesis by highlighting overvaluation and Q4 misses, which align with DeepValue's concerns about timing and execution risks beyond AI hype. No material shift occurs, but it underscores the urgency of monitoring power mitigation and policy outcomes, as these could make or break the guided margin expansion. The core thesis remains unchanged: delay investment until proof points like Hampton closure and consistent interconnection growth provide a safer entry point.