How activist Elliott may use its data center know-how to lift returns at Equinix

Company: Equinix Inc (EQIX)

Business: EQUEX It is the operator of 270 data centers in the 75 metro area around the world and provides a collocation and interim connection services independent of the carrier to networks, cloud providers, businesses and hyperskalers. The company’s platform combines a global footprint of the International Business Exchange (IBX) and Xscale data centers, which support a customer’s need to implement, operate and maintain collected distribution. Equinix’s data centers are primarily included in the key end-user markets in the United States, Asia-Pacific and Europe, Middle East and Africa (EMEA).

Stock market value: $ 75,53b ($ 771.75 per share)

Activist: Elliott Investment Management

Ownership: N/A

Average Cost: N/A

Activist Comment: Elliott is a very successful and intelligent activist investor. The company’s team includes analysts from leading technology private capital companies, engineers and business partners – old Technology CEOs and COOs. While evaluating an investment, the company also hires expertise and general management consultants, expert cost analysts and industry experts. Elliott has followed companies for years before investing and has impressive board candidates. Elliott has historically focused on strategic activism in the technology sector and has been very successful in this strategy. However, the activism group has grown in the last few years. The company is doing much more governance -oriented activism and creates value from the level of board of directors of the companies.

What’s going on

Elliott took a position in Equinix.

Behind the curtain

Equinix is the REIT and operator of 270 data centers in the 75 metro area around the world, and provides carriers to networks, cloud providers, businesses and hyperskalers. Companies are increasingly relying on data and the most efficient solution is to use cloud services such as Equinix. High costs associated with the formation and maintenance of internal data centers as well as the fluctuating data needs allow the development of colocation companies such as Equinix. Colocation data centers allow users to rent space for hardware instead of using their own fields for this purpose. In this market, Equinix has differentiated globally via globally interconnected data centers near the top user markets and made their bids sticky to data providers. Nevertheless, between June 24 and June 26, Equinix’s share price fell 17.75%. This decrease responded to the analyst day of the company, in which Equinix announced a discounted prediction for funds set by 5% to 9% to 9% from 5% to 9% from the operations of $ 5 billion to $ 5 billion annually from 2026 to 2029 for 2025 and from 2026 to 2029. Previously, it was a range of 7% to 10%.

This increase in Capex and the decline in Affo caused inexperienced and short -term investors, but for long -term investors such as Elliott Investment Management, the company has announced its position in Equinix because it announced a 0.15% position in the last 13F company. It is important to note that Elliott has a tremendous experience with data centers. Everyone knows Elliott as one of the most productive activist investors today, but what separates the firm here is the experience of data center businesses as an investor, manager and owner/operator. Elliott ran Activist Campaign at Data Center operator Switch In 2021, investor Elliott was a board chair for Jason Genrich, Senior Portfolio Manager. The company ultimately released Switch with a return of 48.33% with a return of 48.33% from 2000 in the same period. However, more importantly, Elliott’s experience and perspective as the owner and operator of the UK -based arc data centers since 2012. This is not a unique experience to the company, but also a point of view that can meet a more friendly relationship here.

Therefore, when the market saw Capex as a release in the cash flow that would not pay for two to three years while the data centers were being built and rented, investors such as Elliott saw this as a response to the increasing demand. In the last few quarters, Equinix made record reservations from the tail winds of artificial intelligence and hyperssscaler growth. Capex, which will provide a return to 20% to 30% with a capital cost of 5%, is perfect for the company’s long -term expectations. Accordingly, AFFO is expected to fall up to 5% next year, which frightens short -term and less known investors. However, as Capex is deployed, it will rise to 8% for the next three years and will eventually return to 9%. This will happen without Elliott’s help. However, there are ways that Elliott can use industry and experience as an activist and operator to accelerate and strengthen these returns. First, Equinix can better transmit plans to the market. Given the reaction of the company’s analyst day, Equinix can clearly benefit from the advanced market communication around the Capex plan, AI strategy and long -term growth forecasts. In particular, although it does not host the Equinix AI model training, it has a unique opportunity to play a central role in AI inference or to distribute AI models to end users. As artificial intelligence ripen, the demand for inference will increase and Equinix is positioned in a way that will benefit as the world’s largest third -party data center provider with deeply interconnected data centers in important end -user markets. There are also opportunities to optimize the cost structure of the company and reduce interest costs. The management has already taken certain steps in this direction and until 2029, 300 basis points aims to grow from 49% to 52% – the highest target has been determined by the company so far. However, this is still an undisputed conservative prediction, because many peers, including the nearest peer digital reality confidence (DRL), have higher margins. In addition, a small financial engineering can reduce the company’s paid interest rate and can be improved in Marj Equinix’s growth per share.

Historically, the Equinix premium commanded one more floor, and his stock performance became almost compatible with DRL. However, since the analyst’s day, Equinix’s returns have reduced DRL about 11 percent and the company is now traded 24 times a little discount Corporate Value/FAVÖK Compared to 29-Times for DRL. On the right path, the company can only use some help in executing and transmitting its plan from an experienced investor like Elliott. Elliott can do this as an active shareholder or with a board seat. We will not be surprised to see that the company was invited to the Board before the next annual meeting in May 2026 because of its industrial experience and management -like perspective.

Ken Squire is the founder and president of the 13D Monitor, a corporate research service on shareholder activism and is the founder and portfolio manager of the 13D Activist Fund, an investment fund investing in the investment portfolio of the activist 13D.