The Interconnection Factory

Equinix is a global data center interconnection company.

Last month, Equinix reported Q3-2018 earnings with interconnection revenue coming in at an all time high of $202M, crossing the $200MM mark for the first time.

If you’re thinking this is impressive, you’re right, but this didn’t happen overnight, it’s been a journey that has created a vast and powerful ecosystem.

Compare this to Digital Realty and Coresite, two other data center operators that have focused on interconnection, and report the respective revenues in their earnings.

As of Q3-2018, Equinix interconnection business is roughly 3.2x the size of Digital Realty’s, and 11.5x the size of CoreSite’s respective revenues. It’s hard to make the comparison to CoreSite, but as I mentioned earlier, they are one of the few data center operators that maintain a focus on interconnection and reports the associated revenue.

Even more astonishing, is the below comparison.

Yes, you’re looking at this correctly. I’ve double and triple-checked the data. Equinix is a behemoth that boasts interconnection revenues greater than the total revenues of these four data center operators, individually on a quarterly basis.

At this point, you may be wondering if this is all cross connects. It’s not. Their robust portfolio of interconnection products includes Cross Connect, Metro Connect, Internet Exchange, Equinix Connect, and Cloud Exchange Fabric.

If we look at non-financial metrics available, the number of cross connects sits at 294,400 and Internet Exchange Ports at around 5,152.

Equinix does not make pricing data available publicly, but with some digging, we can find some data points thanks to google search.

Lets play with the numbers, If we just assumed that every single cross connect was single-mode fiber, and was billed at a MSRP rate of $350/Month, simple math tells us that those 294,400 cross connects would generate around $100M of recurring revenue. 

So, where does the other $100M come from? Well, we can see that Equinix says there are 5,152 Internet Exchange ports.

Same story, the pricing data is not public, but we can find some data points.

Again, under a hypotehtical assumption that all of these ports were 10 Gigabit, and billed at the retail rate of $500/Month, the 5,152 ports would generate around $2.5M of recurring revenue.

After adding these 2 together, we’re still left searching for $100M of revenue.

Again, I’m just generalizing this data and speaking hypothetically for the purpose of article, and there are many other factors attributable to the revenue from Interconnection:

  • Cross connect medium (SMF, MMF, Copper, Coaxial)

  • Annual price increases

  • Quantity based discounts

  • Legacy pricing agreements

  • Distribution of Internet Exchange Port Speeds

  • Unpublished Cloud Exchange, Metro Connect, and Equinix Connect metrics

  • FX

  • Etc.

This hardly paints a complete picture, and It’s safe to say there is a lot we don’t know, and we could probably dig deeper into this, but I’ll leave that for another rainy day.

One thing we do know for sure, is that Equinix is an Interconnection Factory.