Digital infrastructure company Equinix Inc. said today it’s raising a number of key metric forecasts for the full year, betting on higher demand for its data center operations services amid the rising adoption of generative artificial intelligence technologies.

The decision came as the real estate investment trust delivered an encouraging second-quarter financial report that saw it surpass expectations on earnings, with revenue increasing 7% from the same period last year.

The company posted earnings before certain costs such as stock compensation of $3.16 a share, easily beating the Street’s forecast of $2.67 per share. Revenue came to $2.2 billion, matching the consensus estimate. All told, Equinix posted net income of $301 million, up by 45% from the same period last year.

Even more encouraging, Equinix reported funds from operations of $877 million, or $9.92 per share during the quarter, topping the analyst forecast for FFO per share of $8.82

Funds from operations is a key metric for real estate investment trusts that takes net income and adds back items such as depreciation and amortization to get a better picture of the profitability a company delivers to shareholders.

Equinix is a provider of distributed digital infrastructure and colocation services. It owns a number of huge data centers that are scattered across the world, renting out capacity from these facilities to companies that want more control over the infrastructure they use.

It gives its customers a way to do this without making expensive investments in server and storage hardware. It’s rivaled by other data center REITs such as Digital Realty Trust LLC, and also competes against traditional public cloud infrastructure providers such as Amazon Web Services Inc.

The company says it has seen increased demand for its data center services, as more businesses look to incorporate generative AI into their products and transition their workloads to the cloud. Generative AI processing needs high-powered servers to train large language models and these servers should ideally be located in data centers with advanced cooling systems and infrastructure to maintain smooth operations.

That’s exactly what Equinix provides with its recently announced private cloud service. It allows organizations to manage their own Nvidia Corp. DGX supercomputing infrastructure for building custom large language models.

The company is happy to put its money where its mouth is regarding its claims of stronger demand in the remainder of the year. It told investors it’s raising its annual adjusted funds from operations forecast for the rest of the year.

It’s now forecasting a range of $34.67 to $35.30 per share, up from its previous forecast of $34.45 to $35.29 per share. The midpoint of the new range is $34.99 per share, which comes in just above the Street’s forecast of $34.96 per share.

The company also boosted its annual revenue forecast to a range of $8.69 billion to $8.77 billion, though the midpoint of $8.73 billion is just short of the consensus estimate of $8.74 billion.

Additionally, Equinix said it’s raising its forecast for adjusted earnings before interest, taxes, depreciation and amortization. EBITDA is a measure of a company’s operating business profitability only, thus before any effects of indebtedness, state-mandated payments, and costs required to maintain its asset base. Meanwhile, adjusted EBITDA provides a normalized view of that metric that is not distorted by irregular gains, losses or other items.

The company said it’s raising its adjusted EBITDA forecast to a range of $4.06 billion to $4.12 billion with an adjusted margin of 47%, up from its earlier view of $4.04 billion to $4.09 billion and 47%.

Another key metric, adjusted core earnings, was also revised. Equinix said it now sees adjusted core earnings of $4.07 billion to $4.13 billion in fiscal 2014, up from its earlier forecast of $4.04 billion to $4.12 billion. The midpoint of the new forecast matches Wall Street’s target of $4.1 billion.

“As a key enabler of AI and cloud innovations on a global scale, we are excited about the opportunities that lie ahead,” said Equinix President and Chief Executive Adaire Fox-Martin. “Our continuous investment in our platform allows us to meet the increasing demand for our services, whilst our focus on customer value has created interconnected digital ecosystems that are unrivaled in the industry.”

Holger Mueller of Constellation Research Inc. said that it’s clear from the latest numbers that Equinix’s business is looking up.

“It had a good quarter, showing that cloud computing is in growth mode, fueled by the need for more AI compute, and that is just perfect for its business,” the analyst said. “All of its key performance indicators were up, including revenue, profit, earnings per share, in both quarter-over-quarter and year-over-year comparisons. So it’s no surprising that Adaire Fox-Martin is raising the outlook, but he will need to deliver.”

Equinix’s confidence in AI-powered business growth was further underscored by its recent investments. Last month, it revealed it had acquired three data centers in the Philippines in an effort to boost its presence in the Southeast Asia region, which it says is an area with “high growth potential.”

Despite all of the upbeat forecasts, Equinix failed to excite investors, who were perhaps hoping to see a little more confidence from the data center operator. The company’s stock remained flat in extended trading, having slipped by half a percentage point during the regular session.

Photo: Equinix