Sustainable Growth Advisers, LP - U.S. Large Cap Growth on Equinix
Thesis
SGA initiated Equinix after growth reaccelerated alongside AI inferencing and elevated demand for data-center power. Approximately 95% of revenue is recurring and generally supported by contracts lasting two to five years, while historically low churn reflects the mission-critical nature of its services. The firm's interconnection ecosystem creates network effects and meaningful switching costs, supporting premium pricing and durable customer retention. Management has reported strong bookings, healthy interconnection growth, record-low churn, and demand that continues to outpace supply. SGA believes distributed AI applications, expanding digital ecosystems, and growing enterprise connectivity requirements provide a long runway for growth. The manager views Equinix as a high-quality compounder supported by pricing power, recurring contracted revenue, and structural digital-infrastructure demand.
“We continue to view Equinix as a high-quality, long-term compounder.”
Key risks
- AI-driven demand may translate into bookings and deployments more slowly or unevenly than expected.
- Cloud providers and wholesale data-center operators may increase competition in retail colocation.
- Rising power costs and broader inflationary pressures could affect industry profitability.