Despite the ongoing slowdowns the cloud providers are seeing, data center owners and operators continue to enjoy ongoing growth.
Across the Q1 2023 earnings season, publicly listed data center operators continue to post increasing revenues and profits.
Equinix’s quarterly revenues hit $2 billion. New data centers were approved in Lagos, Nigeria, and Rio, Brazil, and the company managed to lease the entirety of one of its xScale hyperscale sites in Frankfurt, Germany. The company was vague when asked about rumors it may be looking to sell its data centers in Hong Kong.
Digital Realty saw nearly 20 percent revenue growth year-on-year, and recently bought a plot of land in Osaka, Japan.
American Tower’s data center revenue – based largely on its acquisition of CoreSite – increased 10 percent to more than $200 million.
Iron Mountain managed to secure more than 50MW of new leases in Q1, more than half its target for the year.
DigitalBridge, which owns Vantage, Switch, DataBank, and others, boasted a healthy pipeline and plans to raise billions of dollars this year.
Cyxtera, however, posted another large loss and faced potential bankruptcy over its debt issues.
Digital Realty: Steady revenue growth, acquires land in Japan
Digital Realty reported revenues for the first quarter of 2023 of $1.3 billion; up 19 percent year-on-year and up nine percent from Q4 2022.
Net Income was $69 million, and Adjusted EBITDA was $668 million.
"Our first quarter results demonstrate the inflection we have been anticipating in our operating business, driven by a combination of steady, broad-based demand across our segments and markets, as well as reduced data center availability," said Digital Realty president & CEO Andy Power. "Improving fundamentals, along with continued focus and execution on PlatformDIGITAL's customer value proposition, put Digital Realty firmly on the path toward sustainable, organic core growth."
During the quarter the company signed $83 million in new bookings adding 122 new customers – nearly half of that in the US, and largely even between sub-1MW and more than 1MW – and renewal leases representing $155 million.
The Mitsubishi-Digital joint venture MC Digital Realty acquired a three-acre land parcel in Osaka, Japan, for $7 million, which could support up to 24MW of IT load.
Digital Realty’s Singapore-based REIT Digital Core REIT posted revenue of $26.8 million, Net Property Income of $17.5m, and $8.8m profit for the quarter. The company said it was “keenly focused” on backfilling a vacancy in Toronto from a customer bankruptcy – likely Sungard’s – around two-thirds of the previous customer’s 2023 rental obligation have been filled.
The company also warned that in Northern California, the local utility provider has indicated that incremental power allocations for data center development will be on hold through 2028.
Equinix: Quarterly revenue hits $2 billion
Quarterly revenue for Q1 2023 increased 15 percent to $2 billion.
Operating Income was $384 million, a 36 percent increase over the previous quarter. Net Income was $259 million, while Adjusted EBITDA was $944 million.
Charles Meyers, president and CEO of Equinix, said: "We had a strong start to the year, delivering nearly $2 billion of revenue for the quarter, as our outlook remains positive with the overall demand for digital transformation fueling our conviction around the long-term secular drivers of our business.”
The quarter saw four openings in Frankfurt, Paris, Singapore, and Sydney, and four newly approved projects in Frankfurt, Lagos, Melbourne, and Rio de Janeiro.
The newly approved RJ3 phase 1 in Rio de Janeiro, Brazil, will add 550 racks in Q1 2025; Lagos 3 phase 1 in Lagos, Nigeria, will add 225 racks in Q1 2025; and ME2 phase 3 in Melbourne, Australia, will add 1,500 racks in Q2 2024.
On the xScale hyperscale side, the company fully leased the entire 14MW newly-approved Frankfurt x16 in Germany, set to open in Q4 2024.
The company currently has 166MW in operation across its xScale portfolio of 11 online facilities, 138MW of which is leased; a further 92MW is in development, 57MW of which is leased.
Madrid 3x-1 was set to launch during the first quarter but has been pushed back to Q2. The 8MW Tokyo 13x-1 is also set to launch in Q2.
During the earnings call, Meyers said the company raised pricing in January on more than 7,000 customers across 16 countries, generating approximately $90 million of incremental revenue in the quarter, fully offsetting the impact of higher power costs.
“We're very pleased with how the organization has navigated a volatile energy market and we remain in a strong position, significantly mitigating the impacts of this volatility for our business and for our customers,” he said.
CFO Keith Taylor added that the company raised ‘approximately $580 million of yen-denominated debt’ during the quarter.
Reacting to an analyst question about Equinix reportedly exploring the sale of Hong Kong data center assets, Taylor said: “Hong Kong is a very important asset to us and something that is important to our platform. So we don't think about the business as selling assets, but we do also - we do think about ways - innovative ways to allow us to scale and grow the business.”
American Tower: Steady growth on data center, Edge platform ‘shovel-ready’
For Q1 2023, American Tower’s data center unit posted revenue of $203 million, and an operating profit of $102 million.
Revenues and profit were up around 10 percent on Q1 2022, up from $184m and $91m respectively. Both were up slightly on Q4 2022.
In total the company posted revenue of $2.767 billion, Net Income of $315 million, and Adjusted EBITDA of $1.763 billion.
Tom Bartlett, American Tower CEO, said: “We’re off to a strong start in 2023. In Q1, we saw an acceleration in Organic Tenant Billings Growth, another record quarter of signed new business at CoreSite, and our 11th consecutive quarter of delivering over 1,000 built sites, all of which demonstrates resilient demand across our portfolio of distributed real estate assets as carriers continue to invest in their 4G and 5G networks.”
During the earnings call, Bartlett and CFO Rod Smith said the company would reinvest cashflow from the data center business into capital expenditure for build-out, to the tune of around $360 million.
On the company’s planned Edge compute play, Bartlett said: “We have a number of sites that are shovel-ready at this point, and we’re looking to move on them. We continue to have conversations with all the service operators as well as the hyperscalers and all the cloud players to continue to move forward and figure out that value proposition that we think can be a profitable one for all of us.”
Iron Mountain: Leases 52MW in a quarter
Iron Mountain’s data center business posted Q1 2023 revenues of $112.3 million and Adjusted EBITDA of $50.6m. Revenues were up 15.8 percent on Q1 2022, and up almost $10 million on Q4 2022.
Overall, the company boasted total revenue of $1.31 billion, a Net Income of $66 million, and Adjusted EBITDA of $461 million. Q1 2022 figures were $1.2 billion, $41.7m, and $430m respectively.
“We are pleased to report another quarter of record revenue. Our continued strength, in spite of the turbulent geopolitical and economic times in which we find ourselves, reflects the resilience of our business model and the steadfast commitment of our outstanding team," said William L. Meaney, president and CEO of Iron Mountain.
The company now has 24 facilities online in 19 markets totaling 206MW, up from 21 facilities totaling 191.6MW in Q4 2022.
During the quarter it added 11.5MW to AZP-2 in Phoenix, Arizona, and 0.5MW in New Jersey.
The company added VA-3 to its list of planned expansions, which is set to add 10MW in Virginia in Q4 2023 and 34MW in Phase 2 in Q4 2024.
Iron Mountain signed 49 new or expansion leases – including 22 new companies – totaling 51.8MW, and renewed 147 leases totaling 6.2MW. The company leasing guidance for the year was around 80MW, and around 90 percent of the company's developments are pre-leased.
During the earnings call, Meaney said a single longstanding hyperscale customer had signed two seven-year deals for a total of 44MW (split 40MW and 4MW).
He added that colocation ‘wins’ include an existing US federal home loan customer who sought to expand into a new data center market for disaster recovery options and selected our VA2 data center in Manassas, Virginia.
“The customer was impressed with the tour of our Virginia campus and the custom solution we developed to meet their needs,” he said. “With their positive past experience with our data center services, we've bundled this expanded solution with a renewal at another of our data center sites.”
Other wins include a fleet management company looking to move from an on-premise data center to co-location, and an existing semiconductor chip manufacturer taking more space in Arizona.
DigitalBridge: Planning to raise another $8bn
For Q1 2023, DigitalBridge reported total consolidated revenues of $250.2 million, a seven percent increase from the same period last year.
The company posted a Net Income loss of $292.3 million, down from a $343.7m loss the same period last year. Total company Adjusted EBITDA was $26 million, up 25 percent from $20 million in the same period last year.
In the earnings call, the company said it intends to divest its ownership of DataBank and Vantage Stabilized Data Centers to around 10 percent each.
CEO Marc Ganzi said the company aims to raise $8 billion in new equity and capitalizing, and currently has more than $7 billion of new construction going on.
While the company doesn’t provide detailed breakdowns of each unit, Ganzi said Vantage's EBITDA was $500-600 million, and the whole company could be worth $15 billion. DataBank EBITDA he said is around $220 million and aiming for $300m by the end of this year.
“If I could own 100 percent of DataBank and we were still a REIT, I would keep DataBank, and DataBank would be a fantastic success story,” he said. “But we are not a REIT, we are an alternative investment manager, we continue to use other people's capital to grow our best assets, and DataBank absolutely fits that profile.”
He was also bullish on future demand for data center space: “In the US at DataBank and Vantage, both of those domestic pipelines are up year-over-year significantly, not minorly, I want to emphasize the word significantly.”
He added: “When we were in diligence looking at Switch a year ago back in Q1 of 2022, the entire leasing pipeline was 57MW. Today, that leasing pipeline sits north of 500MW. DataBank, same thing; leasing pipeline up 2x year-over-year.”
On the topic of future acquisitions, Gazni said: “We're not interested in bad businesses where they're trading at a good price or a great price. This is something we actively avoid.”
Cyxtera: Another large loss, bankruptcy threat looming
In its Q1 2023 earnings, the company posted revenues of $196.7 million (up 7.8 percent), a Net Loss of $325.4 million (including a non-cash Goodwill impairment charge of $278.2 million), and Transaction Adjusted EBITDA of $63.3 million (up eight percent).
Carlos Sagasta, Cyxtera’s CFO, said: “Our solid first quarter results underscore the strength of our operations and Cyxtera’s ability to deliver consistent revenue growth. We appreciate the continued patience and support of our suppliers and business partners and look forward to working closely with them to drive our mutual success.”
At the same time, the company announced a new deal with lenders compelling it to seek a buyer or new investor. Failure to do so would see its lender take over the company via an expedited Chapter 11 filing. As part of the deal, it got a $50m lifeline.