Equinix, Inc. (EQIX) Earnings Call Transcript & Summary

Okay, great. Good morning. My name is Colby Synesael, and I'm the communications infrastructure analyst here at Cowen. Welcome to day 1 of Cowen's Communications Infrastructure Summit coming to you virtual this year. That said, Karl did not get the memo and he still showed up and he's actually in Boulder as we shoot right now. So apologize, Karl. We should have let you know that we weren't going to actually be showing up this year.

Yes. It would have been nice to walk the 2 blocks and see everybody in person. I so desperately need that these days.

Yes, we all do. But thank you for doing this. And we do have 40 minutes. It's structured as a fireside chat so I prepared a bunch of questions. I'd point out for those that are listening in, you do have the opportunity to ask your own questions. Just type that out and that will pop up on the screen, and I'll try to get to as many of those as I can as well.

All right. Why don't we start off with demand. So kicking things off with demand. Management noted that it signed a high volume of small deals in the second quarter, including plus 4,200 deals across plus 3,000 customers. Is this the byproduct of the type of demand you're seeing in the market maybe because of COVID-19 or part of an intentional strategy?

Yes. Yes. So Colby, first of all, great to be here. Thank you for the invite. Would love to be in person to see everybody. And of course, I got to say my disclaimer before I jump in. So some of what I will talk to contains forward-looking statements. Please see our SEC filings for more information about factors that could affect these statements. Look, the simple answer to that question, it is -- I am super proud of those numbers because it is a core part of our strategy and has been for the last several years. We are very clear of the value we play with our key customers and those high propensity customers that we go after, and making sure that we go after the right workloads deployed in the right locations, which I know we can talk about, is a core part of that. And when we engage with customers, we don't go after all of their workloads. We have a thoughtful dialogue to understand which part of them are destined to the cloud and which cloud they're destined to, and then we help them with the distributed IT architectures that they're all deploying across our footprint. And so yes, really, really pleased with those numbers. May they continue.

At our NAREIT meeting last year, Charles highlighted a focus on signing the right deals at the right price point. How is Equinix's thinking about what is the right deal at the right price point evolved over the last few years?

Yes. No, so obviously, inherent in that is that disciplined notion that I talked about in your first question, which is there are -- it starts with the right customer. We've talked about this before. We use a propensity weighting score. We call it STAR, segmentation, targeting, activations and results, and it's a learning model. So every time we win a new customer, we understand those attributes of that customer. There's about 4,000 attributes that we use against the model. So focusing our teams and our channel partners against those high-propensity customers that we know have a need for what we offer is where it starts, and then engaging those customers to understand how can we help them with their wide area network optimization and how can we help them with their cloud access strategies, and then what does that imply from a deployment standpoint. I would say not a lot of that has changed. I'd say the rate at which it -- has changed certainly. And it's something that we've been maintaining the discipline on for a number of years. We, as you know, reorg-ed the entire company about 1.5 years ago and so my responsibilities changed somewhat. So now I have global responsibilities for all the go-to-market functions around the globe. And so bringing all of those teams into that same disciplined approach has been fun, and that's what we've been focused on. So that's an evolution of the approach and it's working out well.

We've heard from people we speak to in the industry that they've seen a slowdown in enterprise demand, that those businesses reassess their IT priorities among the COVID-19 environment. Have you observed this at all? And maybe more specifically, what changes have you observed from your enterprise-type customers between when the pandemic began and the discussions you're having with them today?

Yes. It's -- I would say at the highest level, Colby, it's digital transformation is probably more important to most companies today than it was before. And whether the catalyst is supporting work from home or transitioning their business model to one that's taking cost out or optimizing their digital front end to engage their customers and suppliers in unique ways, that dialogue is accelerating and is something that is, I would say, more important today than before. In addition, obviously, there are segments within the enterprise space, specifically, that are suffering more than others. And so we are seeing people put a hold on the gas pedal or put a foot on the brake pedal, so to speak, on some of the projects, and where some of those projects, the time -- the cycle time are a little longer on an engagement level. But then likewise, we're seeing other segments accelerate because of the inherent need to save money or take costs out or deploy new ways to interconnect with customers. And so there's -- it's a mixed bag, to be honest with you. I'd say the biggest dynamic change, we can talk more about this, is how everything is virtual now. We have to virtually create demand gen and we have to virtually engage with our customers, both existing customers and new persona within new targets. And those are -- we're learning new skills on how to do that. And it's -- but it's a big part of -- actually, I'm super proud of it, but it's a big part of a lot of the evolutionary approaches that we're using to approach customers. We're having more customer meetings today than ever before because of that.

And small tip, I've been doing virtual beer tastings. So if you want to [ pick ] that...

Okay. Same.

[ Want to ] know how I do it. But online. And on a more serious topic, though, when you think of the net impact of those things, you said it's a mixed bag. I mean from a financial perspective, how do things ultimately end up shaking out in terms of the financial targets and quotas and bookings and all that other stuff that you're looking at?

Yes. I mean you saw our results in Q3, which were -- I mean, Q2, which were incredibly strong from a booking standpoint. So look, we're cautious. We have no idea how long this lasts. We don't know what a second wave means, and we don't know what that impact will have on buying criteria and decision-making. But I can tell you now, we like what we're seeing. We like the volume of deals. We like how it's translating into the pipeline. We're cautious about cycle times, meaning the time it's going to take to get the deals done just because some companies have more reviewers and more approvers than they otherwise would in whatever normal is, a normal time. But so far, so good, Colby.

Equinix saw a record plus 30% of bookings driven by the channel in the second quarter. It seems like this will only continue to grow as, number one, you need to source larger number of deals to maintain your growth rates. And two, as you go after more enterprises for sub-demand, they're also likely to come from the channel who's working with those customers on broader IT and cloud initiatives. I guess, one, do you get this view? And two, do you get to a point where you actually become too dependent on the channel for your growth?

I -- look, I love those stats as well similar to the ones you articulated upfront. Channel is, if I had the point on the most important vector that I'm particularly focused on continuing to evolve, it's our channel approach. And so we -- look, we're continuing to add quota-bearing headcount. But at the end of the day, we think the opportunity is so much larger than we ourselves can cover on a direct basis. And so partnering with the right channel partners, we love our discipline, but those Verizons, those Ciscos, the strategic alliance partners of Microsoft, Amazon, Google, et cetera, are -- they're delivering to us effectively reduced cycle time because they're bringing our teams or our solutions into buyers already in a trusted status, if that makes sense. And so it really helps us take out all of that upfront proof who Equinix is in the dialogue. And so it is accelerating cycle time for deals. So I love it. We're working hard to try to automate a lot of our interfaces, enable our partners to be more self-sufficient, to make sure that our new product offerings and existing offerings are more easily consumable by channel partners. And so we're investing heavily to ensure that this continues to be a key vector for growth. And look, the deals are -- the price points are strong. The returns are strong. So I don't see us becoming a problem, the only problem I see is that I don't -- I think we can move faster. I think we can grow it and scale it even faster than we are.

Is the margin profile that much different from a direct deal you would source yourself, just considering the shared economics with the partner?

No, it isn't. Because -- I mean, what you got to realize is, generally speaking, we're a small component to a larger integrated solution that's being delivered to the end customer. That's one of the special powers of the channel. So if we're going to market with Verizon, we're 1/4, 1/5, maybe even 1/7 of the total deal that they're contracting for. So it's not a price discussion. It's a -- what is the embedded value of including our platform is part of that solution discussion.

Okay, that's helpful. And then shifting over to pricing. On the earnings call, Charles referred to a sawtooth pattern with many customers where you sign them for a 3- or 5-year term with some type of escalator, but then when the lease expires, they're above market and you need to cut it and then start that same process all over again, albeit starting at a lower base than where that pricing was in that final year of the lease. Is this pattern becoming more prevalent than it had been in the past?

Yes. So we've always had this pattern. It's not more prevalent today. The slope of that tooth, so to speak, in that metaphor isn't steeper. So it's something we've been accustomed to and we've managed for a long time. There's a couple of factors that I think that are in our favor. One is we generally have low wallet, the majority of our customers and so we have such an awesome upsell, cross-sell opportunity, upselling new products, cross-selling new geographies. And so it's always part of a growth story when we're doing these renegotiations for renewals. So that's a positive. And I think a barometer read is you can see that we continue to have positive price actions. So you can see that overall pricing continues to be strong and is valued by our customers.

See, so that's where I'll push back. So in the second quarter, Americas MRR was essentially flat quarter-over-quarter, driven by 1% quarter-over-quarter decline in co-location revenue despite positive cabinet adds. So you break out, what is it, colo and then interconnect and then managed services, let's get you to MRR and then you have NRR. I always drove by your colo revenue by cabinets, so I'm ignoring what's happening from a pricing perspective and so forth is [indiscernible] that.

Understood.

And when you do that, the revenue actually went down. So how do you come up with this argument that pricing has been a net positive when your co-location revenue was down quarter-over-quarter?

Yes. So the dynamic that you're articulating is 1 quarter 1 period of time. The thing that you're missing is, obviously, and you know this, which is the timing of churn. So when cabinets are removed from that figure based on churn obviously impacts whether you have a positive net add of cabinets or not. And so we had timing on churn, continued on the Verizon churn that we've seen based on Terremark cloud services that were sold to IBM. And of course, we also had, unfortunately, the FX hit for the real down in Brazil, which was pretty painful given the currency dynamic down there.

So to be clear you're not seeing or are concerned about an incremental level of pricing pressure. Because just to give some context, I mean, we saw STAR on the large hyperscale deals. It feels like it's come to some of the larger enterprise-type deals. And then the next leg, if you will, would be more of the interconnect-oriented stuff. An argument is that, listen, yes, there's a value proposition to be had going within Equinix and that's why even though you're more expensive, I'll do that versus some of those other choices. But does the delta between what their prices and yours get so great that it starts to create some type of friction in that conversation that wasn't previously there, and that results in what could be some now incremental pricing pressure on your side of the business?

Yes. I think, look, we started the whole conversation on just discipline and focus, and that is going to be -- continue to be our execution, which is we're selling to customers that are valuing and need interconnection in the locations in which we operate, which is a huge differentiator, as you know. And so that gives us the ability to have protection around the value and the price points in which we offer the services. And it should because we've invested heavily to ensure that we have that capability in support of our customers by specifically targeting cloud nodes, specifically ensuring that we have the network density, specifically deploying more IXs around the platform, specifically interconnecting the sites so that you can have virtual access to interconnections of data centers that you're not physically deployed in for customers. And so it's really around that value of performance latency that our customers are seeing that drives the value in the pricing.

I totally get it from an enterprise perspective and for a variety of your customers. Where I've heard the most pushback on your pricing the last 2, 3 years has been more from telcos who feel like in the last -- over that period of time, whether it's 1 year, 2 years, maybe even 3 years that Equinix has gotten a lot more tight on how they approach pricing conversations with some of these telcos. And for lack of better words, I think it's pissed some of them off. Have you seen big pushback there? Is that potentially a risk to the strategy going forward?

Well look, I mean, nobody -- it depends on what part of the telco you're talking about. If you're specifically talking to someone whose job it is to save money every single year, obviously, there's going to be pressure there. But if you're talking to somebody in the telco who is driving interconnection value to access new customers and are focused on top line growth and portfolio expansion, you're having a really positive conversation. So it depends, and it's a balance between those 2. And so we've got -- look, our responsibility is we've got to provide value, right? And if we're not providing the value and we're charging our high prices, then you're right, that's not going to be a long-term strategy at all. And so you've got to balance both sides of that equation.

Okay. Last question on this, then we'll move on. But I know you don't disclose cash renewal spreads. But can you give us some color on how this metric has been performing and your expectations going forward?

Yes. So our expectations are consistent. We're seeing net positive price actions across the board, and we saw that across the 3 regions. And I think, look, escalators vary by customer, but generally, they are a fixed percentage.

And I guess that was going to be my last housekeeping question, honest, is that across the revenue base, what is the average escalator for the business? And how has that changed if at all in the last 2 years?

Yes. It hasn't changed and it varies, but it's generally a fixed percentage.

Got it. That's a good way of answering not answering the question. So switching over to acquisitions and talking specifically about BC and Packet and then others. But relating to your BCE acquisition, management noted that it is expected to generate about $105 million in fourth quarter '20 annualized revenue, and that's paying about 15x, applying about $50 million in 4Q '20 annualized EBITDA. Can you give us a sense for what the revenue and EBITDA growth is expected to be this year?

Yes. Well as you can imagine, you got the numbers right from the press release. And of course, it's 13 centers across Canada. We're very excited about this transaction. As you know, we've been trying to figure out a way to expand in Canada for a long time. And this one seems perfect. And so we're excited about it. I will say this. Unfortunately, we haven't closed yet. And so understanding the performance of how it's going to exit this year is probably a question better suited for Bell Canada. But we like where -- we like those estimates. The integration planning and closing -- preparation for closing is going well. And it's a nice transaction.

And operator, I just want to confirm. I just got 2 messages from people asking for having technical difficulties, and someone said the screen is dead and no audio. Are we live right now? We are live. Okay. So we'll keep going. I guess along those lines, do you expect churn within the BC portfolio similar to what we saw with the Verizon portfolio post close?

Yes. I mean, so a couple of things just to ground ourselves on the transaction. So if you're thinking of transactions to liken BCE one, too, I'd say it should be a combination of Metronode and Verizon. Metronode and the fact that it really positioned us as the #1 retail player in the country in Australia and similar is what Bell Canada will do for us overnight. And like Verizon, it is a telco carve-out. So no question, there's some complexity in how to manage that from a systems and customer transition and support standpoint. The really good news about -- and there are a number of them about the Bell Canada deal, is that unlike Verizon, which we knew and we articulated upfront and we negotiated an agreement with Verizon, Bell Canada is a very small portion of the customer base within the sites themselves. And so we're not going to have that same Bell Canada as a customer optimization dynamic that we've had to manage with Verizon, which was a big part of the churn on the platform.

Why was that -- why was that a big part of the churn for Verizon? I guess, I don't quite understand.

Yes. Well because if you think about it, Verizon had a number of variables, but Verizon had what was the Terremark cloud service offering that we did not buy and they sold that to IBM, and so we knew that they were going to attrit. IBM was going to do what anybody does when you buy something like that, you're going to rationalize the platform, consolidate it where it makes sense. And so they've been doing that, unfortunately more slowly than we had planned. And so we've enjoyed the cash flow, but obviously, the impact to growth rates over a period of time have been muting the Americas growth rate. But that's the dynamic there really. Bell Canada, we don't have that dynamic. And what's great about the Bell Canada deal is Bell Canada as a partner. As you know, Bell Canada owns the enterprise space. They're certainly a really strong player from a telco standpoint across Canada from an enterprise pursuit standpoint. And having them as a go-to-market partner is going to be really powerful.

Got it. Apparently, our screen went dead and people missed the pricing conversation. If we have time, I'll go back to that afterwards.

Well that was my most fun part of the conversation.

I know. That's when you gave guidance for '21 and everything. So just keeping going with the BC and Packet acquisition and acquisitions-type conversation. Are there a lot more BCE-like companies out there that could make sense for you guys?

Well look, I'm not sure if you saw the announcement this morning about our acquisition for India.

Saw it last night.

There you go. Good. So that transaction, as you well know, is not a BCE-like transaction, but I'll tell you, we're super excited about its kind of the scope and size and the type of transaction that, that is. So yes, there are opportunities for us to go into new markets, and we'll always consider whether those are organic pursuits, inorganic pursuits through M&A or JVs. But if we could find more GPXs, we would, because going in with an interconnection leader with the density that they have in a particular market from day 1 and then expanding against that platform, we like. We like those types of transactions.

And I mean, I want to hear more about India in a moment, but you've been talking about India back up until last night. My question was management had talked about doing stuff in India for a while now. Why the delay? Well planned. But what other markets are kind of on the short list, if you will, market set? You mentioned in the India press release, for example, that your customers have been telling you that's where they want to see you go. What else is on that list?

Yes. I mean, look, I think we've talked about Africa for a while, I think trying to figure out what that strategy is going to be across the continent, and then what's a good entry point is always something that we're thinking about and considering different options. I think further expansion of some of the markets in Asia. AP is just -- is -- we like the growth rates we're seeing broadly out of Asia and so we think that there's more opportunity there. Those are probably top areas for us to keep an eye on.

Okay. And then as it relates to the GPX acquisition, paying USD 161 million, 15x when fully utilized. I guess, 2 questions come to mind. One, what is the growth rate of that business, if you can give us some color if it's -- that would be helpful. And then secondly, what is their current utilization? You mentioned that 15x is on 100% utilization. What is the utilization today?

Yes. I don't think I know the exact utilization, to be honest with you, Colby, so we'll have to follow back up with you. I'd say the Mumbai 1 site is fully leased sold out. So -- and then the Mumbai 2, we're saying it's a 2- to 3-year fully -- to get it fully loaded, and that's probably conservative given the platform benefits and the fact that, as you articulated, India is our #1 requested market from our customer standpoint. So I think we're going to bring a pretty nice warmed-up pipeline on day 1. The thing about India itself as a market, it is -- has got about a 12% CAGR from a growth rate standpoint. And so we think there's really opportunity to match that growth rate and really help continue to not just invest in GPX but expand and invest in kind of a broader India strategy over time.

So the 12% growth rate, what was that for that you referenced just now?

Just from an -- their economic growth rate, right? So just their -- it's -- I think it's the third highest in the world right now from -- for India as an economy.

Okay, okay. I'm sorry. Okay, great. And then I guess just shifting again, relating to Packet. On its recent earnings call, management noted that it has made progress with the go-to-market integration and it's seeing strong new logo engagement with the building funneled enterprise targets. Besides the go-to-market, what are some of the other key aspects of integrating Packet into the Equinix family, if you will?

Yes. No. So it's -- we're learning a lot. And so Zac and Jacob and team have just been incredible positives to the team. I think they're learning about infrastructure and how to operate within a larger company, and we're learning how to really think about physically deploying capabilities but making it at software speeds from a consumption standpoint. And so there's a lot. There's a lot of learnings going on. Certainly, refactoring the go-to-market machine is a key part of it and we'll continue to do that. As you can imagine, how they engage customers is fairly unique relative to how Equinix has engaged customers in the past. Lots of their customers buy the service aren't necessarily sold the service. And then you have to engage the customer after that happens to ensure that they're reaping the true value of the service. So lots of learnings there, what does that imply for our go-to-market design and motions and how we're going to support that. But I'd say the biggest focus outside of those things are just the engineering and product road map. How big are we going to go? What markets are we going to deploy? What additional feature functionality do we want to add to the existing Packet capability set? And a lot of that engineering and design work around the integrated product set has been a big focus as well.

Do you want to keep Packet deployed now on a go-forward basis inside Equinix' explicit facilities? Or will you maintain what Packet's strategy had been, which is to not just put them in Equinix facilities but in others as well?

Yes, really good question. I mean I think, obviously, the intention, and we've been pretty public about this, is to deploy it across the Equinix footprint to really just enable it, so it's proximate to ECX Fabric, proximate to the interconnection density, proximate to Network Edge, which is already deployed in 9 markets today. Having that virtual capability for our customers. So if you think about a traditional sales motion or a dialogue that's happening with an enterprise today is will help them build out their core infrastructure in 4 or 5 markets with Performance Hub, which is physically deployed. And then they have an option, hopefully, to virtually spin up instances and deploy workloads in markets that they might not think are ready for a full physical deployment. And so that would suggest deploying it more broadly across the Equinix platform.

At a high level, when you think about what we've talked about so far, pushing further into the channel, making acquisitions in markets where you don't have a big presence or no presence at all, whether it's Canada or India, adding products like Packet. As investors, how should we think about that? Is this really about sustaining the current growth rates to which the company is currently producing? Or do you think that all this combined could actually accelerate the growth rates to which the company is seeing? How do you think about it when you guys sit around the table as a management team? I mean, what is -- what do you think?

Yes. Well look, we -- I think we're learning. I think our customers are our biggest weapon of those learnings and getting closer to our customers and understanding how they prefer to work with us and how they prefer to operate and deploy capability sets, I think, is insightful. We know that physical co-location in its currently physically deployed infrastructure will always be relevant to a subset of the workloads and customers. But we do believe that having an easier, more easily consumable virtual capability set that is a bit more comprehensive than we've had across the platform is something that customers want. We think there is elasticity and simplicity, we do. We think if we have these capabilities, people can try things that they otherwise wouldn't because they don't have to work with vendors to deploy gear, deploy people, ship product, be ready to manage and maintain certain instances themselves. So look, we're trying to broaden the portfolio of capabilities for those customers that we're going after and we'll see. We'll see how -- what it does to our growth rates and the impact to business. But we're excited about it. But there's a lot of learnings, a lot of learnings for us as a business.

Why don't we shift over and talk about your sales force?

Yes.

So you guys had stated you guys have about 530 QBRs as of year-end '19. And I think the goal is to grow that by plus 10% this year. I was wondering if, one, you can give us an update on what that number was as of the end of the quarter, second quarter. And then two, whether in a COVID-19 environment, you still think you can get to that plus 10% this year?

Yes. No, it's great question. So for -- at the end of Q2, we had approximately about 600 quota-bearing headcount. And that included those coming over from Packet and Axtel, given the acquisition in Mexico. We are going to continue to invest in that as a vector. And look, we're seeing some interesting dynamics when it comes to recruiting and retaining employees during this COVID period of time. I think I've articulated this many times to you, which is I still think the #1 strategic advantage we have as a company is our culture. And people want to work for Equinix, especially sellers. They like our product. They like the capability. They like the relevancy. They like how we treat them and care for them. So we're not having a problem in attracting talent and we're certainly not having a problem in losing talent. So yes, we're going to continue to invest in adding to the headcount on the sales force basis while we invest in the channel, as we talked about.

And I guess to that last point, I mean, when you think about the makeup of that 600 number, I mean, I think of direct reps, I think of partner reps, inside reps. I don't know if you include solution architects in that or not. But can you kind of talk about how you think of the -- what are the buckets those go in -- that you kind of think of? And where are you focusing the most in terms of incremental investment?

Yes. I mean, so if you -- I think you mentioned them quite well. You've got channel sales. We have our global accounts organization. We have our strategic alliances organization, which is...

What's the difference between the strategic and global?

Strategic are think of them like Microsoft, AWS, really large strategic partners that have a multifaceted engagement where it's not just about making sure we have their access nodes on our footprint -- our footprint across the world. But it's a sell with sales motion that we're activating in each local market around the world, and that we're selling infrastructure to them as an end customer in support of their own enterprise requirements. So it's a bit more complicated. GAM is 30-some-odd large, large customers, including the large telcos across the globe that we have a bit more of an integrated account team approach to. Then you have field sellers, which is the bulk of the numbers. Those people that are deployed locally in markets going after STAR targets, both enterprise and service provider. You have corporate, which is basically inside sales, which target customers with the revenue threshold is a little lower than it is in the field. And then we have some overlay functionalities like ODT, which is think of that as a cold-calling outbound demand gen organization in support of the field sellers. And so we've got a number of different motions that we invest behind, depending upon the type of segment or customers that we're trying to capture. We'll continue to invest in all of those. I'd say channel, obviously, has been an area of particular focus and will continue, I would say, in the next couple of years. And then we have -- we use GSAs. To answer your question, GSAs are separate. We have about 130 solution architects globally today. And they act, in some cases, like an overlay. So when we roll out a new product like Network Edge, we'll have a subsection of subject matter experts that will be an overlay to the sales force that will go in and engage with customers to help position...

They're not in that 600 number?

What's that?

They're not in the 600 number?

They're not. Yes, the GSA portion is not in that 600 number.

So when I think of these investments that you're making on the go-to-market, which is 1 of the 2 areas you guys have talked about where you make the investment, the other one is product. And you mentioned, for example, you're already at 600 QBRs, which is more than 10% higher than the 530 you exited 2019 at, so you've effectively hit that goal. One of the things I was surprised about when I looked at your 2Q results, and I guess more specifically was your 3Q guidance. And admittedly, this is more of a Keith question, but these are my questions ahead of time, so hopefully, you have some type of answer for it. But you're assuming 200 basis points of margin pressure roughly, to use round numbers, in the third quarter versus the second quarter. I don't quite understand where that's coming from, why that would be. And I was wondering if you would have any -- there's some seasonality on power, maybe that's part of it. But what -- where are -- where is this money going to -- that's still putting some pressure on the margins?

Yes. I mean, I think the first thing to do is to ground yourself with a bit of overperformance that we saw in Q2 that we're suggesting is not going to continue, which is we saw some overperformance based on timing of T&E as we sit here virtually, that should make some sense. We generally like to engage our customers face-to-face and/or attend conferences and/or do channel events, et cetera, and so there's benefit there. There's certainly timing on utilities and other items that positively impacted the quarter. But look, from an investment standpoint, as we go forward, there are aspects of our business, which we talked about upfront, that we're trying to simplify. And so yes, we're investing behind products and deploying products more globally around ECX, Network Edge, et cetera, and we talked about Packet. But we're also, the systems side of the business, making sure that as many customers can self-provide and self-consume and self-manage their sets of service offerings as possible takes investment. And so we're working on automating those capabilities, which obviously takes -- and we'll continue to do that at the behest of our customers.

In January, Equinix announced the availability of ECX Fabric, which you just mentioned, at a third-party data center facility in Belgium. And management at its recent earnings call seemed to open to the idea of extending the reach of ECX Fabric to other third-party data center facilities. What are some of the key pain points the company would need to solve in order to pursue this strategy more meaningfully?

Yes. I mean, look, I wouldn't put too much into this, what I would call a trial that we're just monitoring. It's deployed in Belgium, which is the one you're referencing. We had a unique offering -- opportunity with that company to try this, see what are the dynamics. Does it work? Does it make sense? Will we backhaul key customers that we otherwise couldn't get to Amsterdam or other markets in EMEA? Look, we're just observing. We're trialing. We're going to do these types of things all over the place to just learn. But I wouldn't put more emphasis in it just -- than just that.

My next question is, furthermore, do you believe there's a risk that you could upset some of your network customers as you continue to get more into the connectivity business and provide more products? But there's a question that came across, which I think is a bit more aggressive, but I'll read it anyways. How do your connectivity products compete with your customers? Equinix has imposed some new interconnection rules to impede competitors from accessing your ecosystems. Do you anticipate additional steps to prohibit parasitic coupling? Are there downsides to this strategy?

Yes. No, I think the question is getting to this notion that we've always allowed large fiber accounts to come into our facilities to interconnect, add a patch panel, to offer services to customers in the site and/or to connect to companies and services that are at the site. And we've always offered that. But unfortunately, what we've tried to put some controls around just economically is having our competitors do that and use that effectively as a bypass methodology to access our ecosystems. And so we've always had language out in our contracts around interconnection. Unfortunately, I'd say some providers out there just weren't adhering to those, and so we did. We did have to go and try to do a relook at our interconnection philosophy. In fact, we opened it up and we've made it more accessible to all, including competitors, and we've just made the economics clearer. And so actually, that's -- it's a little -- it's a bit of an interesting perspective because it's more open today than it ever has been.

And I think that goes back to some of the comments I made earlier about telcos and how they feel about pricing in the last 2, 3 years. It seems like that answer kind of ties to that. And then I guess is my last question. In the past, management has noted that to the extent Equinix is successful with its Network Edge offering, it could see MRR per cabinet that are multiples higher than what it sees today. I guess can you help us unpack this comment along with that, what do you think the revenue opportunity tied to Network Edge is?

Yes. I mean, look, it's still a new product. We've deployed it across 9 markets. And we are adding feature function -- basically more capability every week as far as new providers on the platform. But the notion on the economics or yield is such that it's a multi-tenant, multi-customer service offering that effectively would be deployed in a one Performance Hub type of deployment. And so you get more customers against that particular physical deployment. So arguably, you can drive more yield on a per square foot basis over time because it's more of a shared model. And so that's -- we'll see how the economics play out for the service offering. So far, the performance has been good. We're on track to our projections. I think we announced about 50 customers actively on the platform today, we did at the end of Q2. And so we'll keep an eye on how that works. But we like it, and there's all kinds of interesting use cases that customers are using it for, whether it's just to deploy a firewall or just a router or a load balancer or all of the above, we're -- we like what we're seeing.

Great. With that, we're out of time. Thank you so much for being here. Super appreciate it. Enjoy the rest of your summer, and I look forward to catching up with you [ in the future ].

Thanks, Colby. Really appreciate it. Take care.

Yes. Take care.