Equinix upgraded to ’BBB+’ by S&P Global on strong asset ownership

Investing.com -- S&P Global Ratings has upgraded Equinix Inc (NASDAQ:EQIX). to ’BBB+’ from ’BBB’ with a stable outlook, citing the data center operator’s predictable earnings growth and significant asset ownership.

The upgrade reflects Equinix’s track record of consistent performance, which S&P expects to continue due to the company’s leading global interconnected ecosystem. S&P has established new rating thresholds for Equinix at the ’BBB+’ level, including a debt-to-EBITDA upgrade threshold of 5.75x and downgrade threshold of 6.5x.

Equinix owns 167 of its 270 data centers, representing about 68% of its retail colocation footprint by revenues as of March 31, 2025. This ownership provides operational control and eliminates lease renewal risk while offering financial flexibility.

The company’s position as the global leader in interconnection is viewed as a key competitive advantage. Equinix has 486,000 customer connections across 10,000 customers globally and holds a 35% market share of cloud on-ramps with 223. Interconnection revenues have grown steadily at around 11% annually over the past five years to about $1.7 billion, representing approximately 19% of total monthly recurring revenue.

S&P believes Equinix is well positioned to capture growth opportunities in existing markets such as networking and multi-cloud, while also benefiting from the expanding AI market. McKinsey estimates AI could represent a $94 billion addressable market by 2029, up from $38 billion in 2025.

However, S&P notes that rapid expansion poses risks if demand does not materialize as expected, potentially creating excess capacity and downward pricing pressure. Management plans to accelerate capital spending to $4-5 billion per year through 2029, up from about $3.4 billion in 2024, to support the market’s shift to AI.

The company also faces pressure from higher interest rates as it refinances approximately $8 billion of debt maturing over the next five years. The current debt carries a low weighted average coupon of 2.1%, but refinancing will likely occur at rates of around 4.5%-5.0%.

Despite these challenges, S&P expects Equinix to maintain financial discipline with debt-to-EBITDA remaining below 6.5x, supporting the stable outlook for the rating.

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