So, oftentimes, they’re trying — one, they’re trying to move dollars around to ensure that they can fund their digital transformation initiatives. And two, they’re saying, hey, what can we do to get more out of our — more bang for the buck out of our digital dollars we spend or the IT dollars that we spend broadly. And so I think you’re seeing that in terms of — one thing that you’re seeing a lot of people saying, hey, we really have to look at our cloud spend and understand that and determine what the right mix of clouds is and whether or not there are certain workloads that we’ve attempted to lift and shift to cloud, that we may want to think differently about or you’re seeing people saying, hey, are there things that eventually we need to get into a cloud-native sort of — as cloud-native workloads and move them.
And so it certainly is working in all those directions. But I would say I think people are — customers are really working hard to optimize their digital infrastructure. And I think we can be a real resource to them. The network is another area, right? And we talked about Network Edge and customers being very responsive to that product offering. I think that is most commonly in the context of WAN re-architecture and trying to save money on networking and still deliver higher levels of performance. And so I would say I think there is some level of caution out there, but I think that it is one where people are really trying to make room to make the investments in digital and thinking about what is the right long-term architecture, hybrid, multi-cloud distributed and data-centric.
And I think that positions us well to be a trusted partner to them on that journey.
Eric Luebchow: Great. Thanks. And just one quick follow-up. I was curious on the xScale kind of update, a development in Silicon Valley saw. So you made it clear that your desire to expand more into the United States. Maybe as you look at the set of opportunities in the US, is development the best option you see today to attack that opportunity? Or is M&A another lever that you continue to evaluate in the US for xScale?
Charles Meyers: Yes, it’s a great question. I certainly don’t think we would be opposed to that. I think if we believe there were assets that were available under reasonable terms from an M&A perspective and that we could do that, that would likely be a transaction that would be executed through some sort of xScale venture — joint venture vehicle. And so I wouldn’t — we’re not opposed to that. But I do think that probably our immediate focus is on development and we’ll keep you updated on both of those fronts as appropriate.
Eric Luebchow: Great. Thank you.
Operator: And our last question comes from Nick Del Deo with MoffettNathanson. You may go ahead.
Nick Del Deo: Hey, thanks for fitting me in. I guess to follow up on the xScale question in the US I guess, what do you view as different about AI training that makes you want to support those deployments via xScale in the US relative to cloud where you — if I understand it correctly, you didn’t see the opportunity as worth pursuing given how competitive the supply environment is?
Charles Meyers: Yes, I mean I think there’s a couple of things there. One, I do think that the — at the time that we made that judgment and we’re communicating that judgment to the market, I would say that the supply demand characteristics and therefore, the return profile of xScale in the US market was less than stellar. I think that dynamic is changing. I think the supply/demand sort of landscape in the US, both because of sort of traditional AZ demand or hyperscale demand for the form — in the form of hyperscale for AZs and those kind of things, combined with now a meaningful acceleration in demand for training, I think, changes the supply-demand profile. And then I would — and so I do think there is a more attractive market in which to sell.
The other thing that I think is something maybe that we appreciate even more powerfully now is and we talked about this when we did xScale to begin with. We said, look, we need to continue have really well developed and constructive relationships the major players in the digital ecosystem and obviously, the hyperscalers are at the top of that list. And so we continue to work hard to make sure that we can be a partner in meeting their capacity needs and not only on the retail basis, but at least as one of probably a number of providers that they’re going to need to leverage in the xScale arena. And then the last thing that I think is maybe underappreciated is I think it’s also important that we continue to maintain our scale and relevance in the supply chain.
And so we — I think we are very well-positioned there. And I think our procurement and supply chain teams have done an extraordinary job there. And I think part of the reason that they can do that job so well, one is the strength of our balance sheet; and two, is the scale of our operation. And so I think xScale is also a way for us to continue to maintain our position in that regard.
Nick Del Deo: Okay. Are you able to share anything regarding how you’re thinking about returns here or is that premature? And I guess, any progress in terms of line up partner for domestic xScale?
Charles Meyers: Yes, I mean I think that last part is probably premature. But I think the first, I don’t think we see a dramatic shift in the overall return profile. I mean we have seen it already, I think, improved where it was, where I think it was single-digits there for a while. If you were lucky, it was high single-digits, where I think you’re now seeing sort of full return yields and levered returns even above that. And for us, given that we get some advantages in the structure associated with fee streams, et cetera, I think — and it’s still an attractive equity return profile for us. And so I think that — but I think those returns have gone up where you’re seeing cash-on-cash yields that are meaningfully higher, meaningful up into the double-digits and much more attractive now.
So, I do think that, that return profile has improved. It’s going to continue to be a very competitive business, though. It’s — and one that will have a very return — a different return profile than retail, which is, again, why we want to preserve our balance sheet firepower to the extent we can to continue to cultivate our retail business, while at the same time, recognizing the strategic importance of continuing to be active in the xScale market.
Nick Del Deo: Okay. Thanks Charles.
Charles Meyers: Yes Nick.
Chip Newcom: This concludes our Q3 conference call. Thank you for joining us.
Operator: Good bye. And this concludes today’s conference. Thank you for participating. You may disconnect at this time and have a great rest of your day.
