Bernstein Raises Equinix Target Price to $1,222, Optimistic About AI-Driven Growth

Overview

Bernstein released an earnings review for Equinix (EQIX.US) covering the first quarter of 2026. The report notes that while Q1 results fell slightly short of expectations due to timing effects in the Hampton xScale project, the company’s core business remained robust, with recurring revenue posting double-digit growth and margins continuing to improve. Based on confidence in revenue growth and margin expansion, along with a reassessment of the company’s long-term capacity expansion plans, Bernstein maintained its Outperform rating and raised the target price from $1,128 to $1,222.

Core views

Performance and Financials: Total revenue for Q1 reached $2.44 billion, up 10% year over year; recurring revenue stood at $2.33 billion, also up 10%. Adjusted EBITDA totaled $1.25 billion, up 13% year over year, with margins expanding to 51%, primarily driven by cost control, power efficiency, and operating leverage. AFFO (adjusted funds from operations) amounted to $1.07 billion, up 11% year over year. Although non-recurring income fluctuated due to timing factors, management reaffirmed unchanged full-year guidance, and excluding timing impacts, all metrics would exceed midpoint targets. AI-Driven Growth Engine: AI-related workloads emerged as a major growth driver, accounting for roughly 60% of largest deals. Customers are transitioning from pilot projects to enterprise-scale deployments, particularly for AI inference and agent workloads. Leading AI model providers and emerging cloud service vendors are actively expanding partnerships with Equinix. Adoption of liquid-cooling technology is accelerating, with 36 deployments globally and liquid-cooling orders up about 50% quarter over quarter, underscoring strong demand for high-density AI workloads. Capacity Expansion and Long-Term Vision: The company is proactively addressing past issues of slower-than-market construction speeds. Combining acquisitions like atNorth, the xScale initiative, and existing land reserves, Bernstein projects approximately 5 GW of additional capacity by 2030—far surpassing earlier estimates of 2 GW. This more aggressive build-out strategy (“Build Bolder”) opens significant long-term growth opportunities. Bernstein remains cautiously optimistic about the xScale fund, projecting it could contribute roughly $500 million in net profit by 2030. Valuation and Rating: Despite a year-to-date stock price surge of over 40%, valuations have returned to near historical averages. However, Bernstein believes that as investor confidence grows regarding Equinix’s construction trajectory, valuation multiples may modestly rise from current levels above 20x to around 25x. The target price is derived using a 25x multiple applied to projected 2027 AFFO of $48.63 per share.

Analysis framework

The firm employed a typical top-down and bottom-up analytical framework. First, quarterly financial data—including revenue, EBITDA, and AFFO—were dissected to identify technical causes of short-term performance fluctuations (timing issues) rather than fundamental deterioration. Next, deeper analysis focused on structural changes in the business mix, especially interconnection services and the structural growth of AI-related demand, validated through tracking Fabric bookings and liquid-cooling deployment data. Finally, at the valuation level, Bernstein adopted the AFFO multiple approach, incorporating a re-modeling of the capacity expansion cycle (CapEx investment lagging behind revenue generation) to adjust long-term capacity projections and valuation multiples, thereby arriving at a higher target price.

Methodology notes

• valuation method

  AFFO multiple valuation

  For REITs (real estate investment trusts), institutions typically use adjusted funds from operations (AFFO) rather than net profit as the primary valuation metric, as it better reflects a company’s ability to generate cash flow. This report assigns a 25x multiple to projected 2027 AFFO to determine the target price.

• industry/sector analysis frameworksupply-and-demand framework

  supply-and-demand framework

  Institutions focus on matching supply-side constraints—such as power, land, and construction speed—with surging demand—particularly AI computing power—in the data center industry. The report highlights how Equinix’s past under-supply limited growth, whereas current accelerated construction aims to capture the AI-driven demand dividend.

• company fundamentals and financial frameworkFree cash flow analysis

  free cash flow analysis

  In heavy-asset industries, institutions closely monitor the balance between capital expenditures (CapEx) and free cash flow. The report examines Equinix’s annual CapEx plan of $4.1 billion and assesses its potential to deliver mid-to-high double-digit unleveraged cash returns over the medium term.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Equinix (EQIX.US)

  Beneficiary: As a leading global data center REIT, directly benefits from AI infrastructure development and growing interconnection demand.

  Strengths

  Robust interconnection ecosystem, prime locations in major metropolitan areas, highly loyal corporate client base, proactive capacity expansion plans.

  Weaknesses

  Past slower-than-market construction led to lost market share, high capital expenditure pressures, early-stage xScale operations.

  Comparison

  Compared to pure hyperscale data centers, Equinix excels in interconnection and multi-cloud connectivity; compared to traditional REITs, it offers stronger tech attributes and AI growth potential.

  Risks

  Slowing demand for enterprise data center capacity, intensifying competition in the interconnection space, declining market share potentially increasing pricing pressure.

Key data

• Total Revenue for Q1 20262.44 billion USDUp 10% year over year
• Adjusted EBITDA Margin for Q1 202651%Up nearly 200 basis points year over year
• AFFO per Share for Q1 202610.79 USDUp 10% year over year
• Full-Year 2026 CapEx GuidanceApproximately 4.1 billion USDRaised from previous estimates
• Target Price1,222 USDBased on a 25x multiple applied to projected 2027 AFFO of 48.63 USD per share
• Proportion of AI-Related TransactionsAbout 60%Share of largest deals attributable to AI

Impact & implications

The report concludes that Equinix stands at a pivotal juncture, transitioning from ‘supply-constrained’ to ‘aggressively expanding.’ The surge in AI demand not only drives short-term revenue growth but also raises industry barriers through technological upgrades such as liquid cooling and high-density racks. The raised target price reflects market recognition of the company’s long-term capacity release and profitability recovery. For investors, attention should shift from short-term quarterly volatility toward the progress of long-term capacity deliveries and the implementation of xScale initiatives.

Risks

• Slowing demand for enterprise data center capacity
• Intensifying competition in the interconnection space
• Continued decline in data center supply market share potentially driving pricing pressure

What to watch

• Available and billed rack counts across regions
• Progress of capacity ramp-ups
• Latest developments in xScale operations
• Completion status and synergies of the atNorth acquisition