An American Tower site in Wisconsin, photographed in 2013. Photo: Corey Coyle, Wikimedia Commons, CC BY 3.0. Image resized.
American Tower raised its full-year property-revenue outlook Tuesday as its data center business delivered 16.3% cash revenue growth, giving investors another measure of demand for the physical infrastructure behind cloud computing and artificial intelligence.
The telecommunications real estate company reported third-quarter total revenue of $2.785 billion, up 2.5% from a year earlier. Property revenue increased 4.5% to $2.734 billion, while net income fell 14.4% to $781 million.
The combination reflects a business growing at different speeds. Data centers outperformed, while organic tenant billings across its tower operations rose 1.1%. American Tower earns revenue from infrastructure used by telecommunications and technology customers, rather than selling mobile service plans directly to consumers.
Data centers lift the revenue forecast
Chief Executive Steve Vondran said consistent leasing demand across the global tower portfolio and continued outperformance from CoreSite supported the results. He pointed to wireless connectivity, cloud adoption and AI applications as drivers of demand for digital infrastructure.
The Data Centers segment reported $313 million in quarterly revenue. Its 16.3% cash revenue growth is a segment measure and should not be read as the growth rate for the entire company.
American Tower raised the midpoint of its full-year property-revenue forecast by $55 million because of data center outperformance. It now expects property revenue of $10.785 billion to $10.865 billion.
The change was not a blanket increase in every earnings forecast. The company left the midpoint of adjusted EBITDA unchanged and reduced the midpoint of its net-income outlook by $30 million, primarily because of unrealized losses on equity securities.
Cash-flow measure rises while reported profit falls
Net income attributable to American Tower’s common stockholders fell 10.3% to $766 million, or $1.64 per diluted share. The company said quarterly profit comparisons were affected by approximately $71.5 million in unrealized losses on equity investments, compared with $10.9 million in gains a year earlier.
Adjusted funds from operations attributable to common stockholders, or AFFO, increased 2.4% to $1.335 billion. On a per-share basis, AFFO rose 3.2% to $2.87.
AFFO is a non-GAAP measure used to evaluate the ongoing performance of a real estate investment trust. It makes adjustments to accounting earnings and is not the same as net income, dividends or cash in a shareholder’s account.
Adjusted EBITDA increased 0.9% to $1.832 billion. Cash provided by operating activities declined 4.6% to $1.393 billion, while the company’s free cash flow measure was nearly flat at $986 million.
Changes in non-cash straight-line revenue recognition also weighed on reported growth comparisons. American Tower said the relevant revenue adjustment was negative $24 million in this year’s quarter, compared with positive $27.7 million a year earlier.
New buyback authorization follows quarterly repurchases
American Tower allocated $315 million to share repurchases during the quarter. After the quarter ended, its board authorized another $2 billion for potential future repurchases. An authorization permits purchases; it does not mean that entire amount has already been spent.
The company kept the midpoint of its full-year AFFO outlook attributable to common stockholders unchanged. It raised the midpoint of expected AFFO per share by two cents, primarily because of capital allocation decisions, and now expects $11.04 to $11.16 per share.
Its full-year forecast calls for AFFO attributable to common stockholders of $5.148 billion to $5.203 billion and adjusted EBITDA of $7.248 billion to $7.303 billion.
JBizNews Desk | Boston
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