Equinix hit with downgrades as AI-driven expansion squeezes near-term growth

Investing.com -- Equinix Inc fell after Raymond James and BMO Capital Markets each downgraded the data-centre operator, warning that a costly plan to double capacity for artificial-intelligence workloads will dent earnings growth and cash generation over the next two years.

The stock was down 8.4% at $754.81 in afternoon trading.

Raymond James cut Equinix (NASDAQ: EQIX) to market perform from strong buy, saying the company is embarking on a multi-year shift that includes annual capital spending of $4-5 billion, about $1 billion above Wall Street’s prior expectations.

This amount of change in a short period of time never comes without challenges, the brokerage wrote, pointing to softer revenue and funds-from-operations (AFFO) growth and a lower return-on-capital outlook through 2026.

BMO likewise moved to market perform from outperform and slashed its price target to $850 from $1,045.

The firm said Equinix’s forecast for 5-9% average annual AFFO-per-share growth from 2025-29, including just 5% in 2026, underwhelmed against rising investment.

It expects leverage to rise to about 4.5 times as the company issues roughly $8 billion of new debt to fund expansion.

Both brokers acknowledged long-term benefits from the spending spree, which is designed to meet surging demand for AI inference and higher-density computing.

Equinix plans to deliver 350 megawatts of new capacity in 2027 and as much as 500 MW a year in 2028-29, while targeting EBITDA margins above 52% later in the decade.

Though RJ said investors may view the strategy as “reactive” until evidence of faster growth emerges, and BMO prefers rival Digital Realty (NYSE: DLR), which it rates outperform, for exposure to the sector in the near term.

Equinix trades at about 19.5 times expected 2026 EBITDA, a slight discount to Digital Realty, but the downgraded brokers see limited catalysts for the shares until revenue and cash-flow trajectories re-accelerate.

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