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Equinix (EQIX) Invests $42M in SY4 IBX, Looks to Expand


Global data center service provider, Equinix Inc. EQIX, recently announced plans to expand its International Business Exchange (IBX) data center, SY4, located in Sydney. Equinix will invest $42 million in this second phase of the project’s development, which will be completed by the end of 2017.

This expansion will enable the company to meet growing demand for data center services in the region. With an area of over 130,000 square feet, the expanded SY4 facility will accommodate about 3,000 cabinets, including 1,500 cabinets from the second development phase.

Equinix now operates 29 data centers in the Asia-Pacific region, including SY4. Worldwide, the company owns 179 IBX data centers across 44 countries.

The investment is part of Equinix’s latest string of expansion initiatives across the Asia-Pacific region. This is in sync with the company’s recent development of data centers in Melbourne, Tokyo and Hong Kong.

The aforementioned expansion will help Equinix offer customers the benefit of its cloud infrastructure, including a secure connection, outstanding scalability and infrastructure dependability.

We believe that the new data center will widen the company’s footprint across the Asia-Pacific region. The facility will help Equinix address the rising demand for cloud services in the region. The increase in demand is also evident from the findings of an independent research firm, Gartner.

According to this technology research firm, total public cloud services market in Asia-Pacific is expected to grow 17.7% in 2017 and reach $10 billion, up from $8.5 billion in 2016.

An increase in public cloud services will boost demand for data centers. Per the Gartner report, the mature Asia-Pacific market covers Australia, New Zealand, Singapore and South Korea.

Shares of Equinix have outperformed the industry on a year-to-date basis. The stock has returned approximately 22.3% compared with the Zacks REIT-Equity Trust industry’s decline of 9.1%.

Bottom Line

Equinix remains positive on growing demand for data centers. Toward this end, the company is expanding its IBX data centers globally and gaining popularity among tech companies, who are seeking data management. Thus, the company expects its total addressable market for retail data centers to witness a CAGR of 8% from 2013–2017 and reach $24 billion. Based on this, Equinix projects a revenue growth rate of 10% through 2017.

Therefore, we believe that the expansion of its data center assets will enable Equinix to capitalize on this opportunity. Moreover, the expansion will help the company strengthen its global footprint and bring in additional revenues.

Nonetheless, Equinix competes with established communications carriers such as AT&T T, Level 3 Communications LVLT and Verizon Communications VZ, which also operate data centers.

Currently, Equinix carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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