Q2 2025 Digital Realty Trust Inc Earnings Call
Good afternoon and welcome to the digital realy second quarter 2025 earnings call.
Please note this event is being recorded during today's presentation. All parties will be in a listen-only mode. Following the presentation, we will conduct a question and answer session.
Callers will be limited to 1 question.
And we will aim to conclude at the top of the hour.
I would now like to turn the call over to Jordan Satler digital realy, senior vice, president of public and private investor relations, Jordan, please go ahead.
Thank you, operator and welcome everyone to digital realities second quarter 2025 earnings conference call.
Joining me on today's call our president and CEO, Andy power, and CFO Matt Mercier.
Chief investment officer Greg Wright Chief technology officer, Chris sharp, and chief, Revenue officer, Colin, McClean are also on the call and will be available for Q&A.
Management will be making forward-looking statements including guidance. And underlying assumptions on today's call. Forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially.
For further discussion of risks.
Related to our business, see our 10K and subsequent filings with the SEC.
This call will contain certain non-gaap financial information.
Reconciliations to the most directly comparable, gaap measure, or included in the supplemental package furnished to the SEC and available on our website.
Before the I turn the call over to Andy, let me offer a few key takeaways from our second quarter results.
Speaker Change: First, we posted 177 million of new bookings in the quarter at 100% share, including 135 million at digital, realy share.
Speaker Change: Record performance in the 0 to 1 megawatt plus interconnection product set stole the show in the quarter with 90 million dollars of bookings.
Speaker Change: Second core ffo surged to a record $1.87 per share, outperforming expectations for the quarter and contributing to an increase in our Revenue adjusted Ava and core ffo per share guidance for full year 2025
Speaker Change: And third, we continue to extend our runway for better long-term growth with oversubscribed LP Equity, commitments for our first US, hyperscale data center, fund additional development site, Acquisitions and key us markets and a robust balance sheet that is highlighted by more than 7 billion dollars of liquidity and Below Target Leverage.
Andy Power: With that. I'd like to turn the call over to our president and CEO Andy power.
Andy Power: Thanks Jordan and thanks to everyone for joining our call.
Digital transformation. Cloud, computing, and AI adoption continue to accelerate.
Andy Power: Digital realities Global platform is uniquely positioned to meet the full spectrum of customer needs while delivering differentiated value. With our 20-year track record of execution, as a data center, operator,
Andy Power: 5 gigawatts of development capacity.
Andy Power: And more than 15 billion of private capital is supported.
Andy Power: Digital realy has the wherewithal to service its growing Enterprise and hyperscale customer base for years to come.
Andy Power: Over the past 2 and a half years, we have been focused on driving better. Long-term sustainable growth in core ffo per share.
Andy Power: And we are starting to see the fruits of our labor.
Andy Power: The key pillar of our full spectrum. Strategy is our 0 to 1 megawatt plus interconnection business.
Andy Power: Which is anchored by connectivity Rich Metro campuses.
Andy Power: These campuses typically located near where data is created and consumed.
Andy Power: Host Mission critical deployments that support hybrid multicloud it.
Andy Power: Vital Network infrastructure.
Andy Power: Industry, specific, latency sensitive applications and AI inference among other workloads.
Andy Power: The Common Thread across these use cases is connectivity.
Andy Power: And we have made it a priority to enhance our interconnection capabilities and services across the platform.
Andy Power: Our focus on strengthening the customer value. Proposition is delivering results.
Andy Power: bookings in our 0 to 1 megawatt plus interconnection products that have seen consistent growth
Andy Power: with momentum accelerating over the past year.
Andy Power: Even as large AI oriented leases, have been in the spotlight.
Andy Power: An ambitious goal to double or collocation bookings.
And we're well on our way to achieving it.
Andy Power: In the second quarter, we signed 177 million of gross leases including 135 million at share.
Andy Power: Digital, realy share of bookings were led by 90 million in our 0 to 1 megawatt plus interconnection category. A record result that is 18% higher than our prior record set, only 2 quarters ago,
Andy Power: Over the past 4 quarters, we have booked over 300 million in this category up from approximately 200 million in 2023.
Andy Power: This quarter success wasn't driven by any single deal, or even a dominant Metro.
Andy Power: Instead leasing was broad-based with Eco contributions from Aha and the Americas along with a healthy dose from APAC.
Andy Power: Importantly, we also delivered a record interconnection bookings in the quarter.
Andy Power: As the momentum, we have seen in the 01 megawatt category is starting to pay off as customers have deployed their gear in our facilities and need to support the underlying workloads with connectivity.
Andy Power: The bottom line output of this success.
Andy Power: Is our core ffo per share growth.
Andy Power: We earned a record. A187 per share. This quarter, a robust 13% increase over last year's results and 6% higher than last quarter.
Andy Power: While the rate of acceleration and bottom line growth, this quarter is notable and demonstrates the significant momentum. We have in our business,
Our growth will be best measured in years.
Andy Power: With our back office and 826 million. We have strong visibility through the end of 2025 and Beyond.
Matt: Matt will provide details on the financials in a few minutes.
The demand environment for Data Center capacity, remains strong and broad-based.
Matt: Both geographically and by product type.
Matt: Driven by secular Tailwinds and digital transformation, cloud and AI.
Matt: Demand for both sub 1 megawatt and large capacity blocks continues unabated.
Matt: For sub 1 megawatt capacity. Our pipeline is Broad and deep across all regions. And as evidenced by 4 month book to build this quarter, these deals can typically be deployed much more quickly.
Matt: We continue to position our large capacity blocks to support the growing needs of our hyperscale customers.
Matt: As we work to align development, deliveries with the availability of power.
Matt: And this approach has served us, well, so far.
Matt: In North America near trunk capacity, blocks continue to be the most in demand and we've had great success in placing our near-term development.
Matt: So, most of the discussions that we are, having are focused on late 2026 and early 2027. Deliveries,
Matt: In Maya demand for AI deployments is growing, but is still well behind the US.
Consistent with historical Trends. The larger capacity blocks in this region tend to be smaller than those in the US.
Matt: In APAC.
Matt: Hyperscale demand is expanding particularly in Tokyo and Singapore.
Matt: Similar to Aha AI. Deployments are growing in APAC. But lag in the US.
Matt: Another sign of the strong demand environment is the tremendous success that we have enjoyed in launching. Our us hyperscale data center fund
Matt: The latest evolution of our strategic objective to bolster and diversify our Capital sources.
Since our last earnings report, we've continued to receive commitments to the fund from a broad array of global institutions, including Sovereign wealth funds, Pension funds, insurance companies, endowments, and other institutional investors.
Matt: We have received more than 3 billion of LP Equity, commitments to date and are on target for our final closing. Well, ahead of our Target, raise, and our original schedule.
Matt: We are truly humbled that so many of the world's leading investors chose to invest their long-term capital in digital realities inaugural fund.
Matt: The earliest of our us, hyperscale fund improves our strategic position by enabling us to continue to meet the growing and diverse needs of our hyperscale customers without overtaxing our balance sheet.
Matt: While execution across our collocation, and interconnection category will serve as the primary lever for growth in 2025 and 2026.
Matt: We expect our substantial hydrocele capacity to bolster our backlog, and to extend our runway for corporate phone growth into 2027 and Beyond.
Matt: Exactly what platform digital enables.
Matt: Many of our customers start with a single deployment but rapidly expand across our Global footprint to interconnect with clouds partners and data at the edge.
Matt: This SEMA scalability is not only sold in real customer challenge challenges. It's also enhancing our value proposition evidenced by more customers, lower churn deeper, wallet, share and growing recurring revenue streams.
Matt: This strategic Advantage continues to set digital Realty. Part driving the addition of 139 new levels in the second quarter,
Matt: Now as we announced this morning, we providing Enterprises with additional state-of-the-art Services through our partnership with Oracle Solutions centers to further, optimize these deployments and accelerate their hybrid it and AI adoption.
Key customers wins in the quarter include.
Matt: A global fee financial services company is expanding its presence on platform digital to another Metro to solve compliance and data localization challenges.
Matt: A leading blockchain provider is develop deploying Edge notes. In multiple locations on platform digital to support decentralized private and public networks.
Speaker Change: The healthcare services company is expanding its presence on platform digital to solve this data, resiliency and location challenges.
Speaker Change: Economist vehicle developer is expended to 2 more metros and platform digital to take advantage of the available cloud and networked ecosystems
a global cloud provider is expanding, its presence on platform digital by creating a new Edge availability Zone to support their growing customer base.
And having grown up a Star Wars fan, I am particularly delighted to say that Lucas Films is expanding their presence on platform, digital taking advantage of high performance compute and AI capabilities to solve video, rendering transfer and editing challenges.
Speaker Change: Before turning it over to Matt. I'd like to briefly highlight on our progress on global sustainability.
Speaker Change: In the second quarter, we maintain strong execution against our sustainability goals. And we're once again recognized by time and statista as 1 of the world's most sustainable companies of 2025.
Speaker Change: A reflection of our continued leadership in the space.
In late June. We published our 2024 impact report, which showcases digital ongoing commitment to clean energy resource conservation and other sustainable business practices.
Speaker Change: Among the highlights in the report.
Speaker Change: We further expanded our renewable energy supplies with 185 data centers. Now match with 100% renewable energy. While 75% of our Global electricity needs were met with renewable energy in 2024, a 9% increase from the prior year.
Speaker Change: We achieved a 14% year-over-year reduction in water usage. Intensity in our North American, collocation portfolio by implementing water freebased. Cooling systems and Water Conservation projects.
Speaker Change: We expanded our portfolio of certified sustainable data center developments, adding 1.9 million square feet in 2024. And bringing our Global total to a cumulative 15 million square feet.
These initiatives, reflect our ongoing commitment to minimize digital realities and environmental footprint.
Speaker Change: While, delivering sustainable growth for all of our stakeholders.
Speaker Change: And with that,
Speaker Change: I now turn the call over to our CFO. Matt Mercer.
Speaker Change: Thank you, Andy.
Matt Mercer: This is a realy posted double digit growth in Revenue adjusted Ava and core ffo. This quarter reflecting the momentum that we've built up over the past year.
Matt Mercer: These results were driven by record lease commencements, low churn and higher fee income.
We achieve these results while substantially increasing our liquidity maintaining below Target leverage and also preserving a large backlog in development capacity that provide strong visibility through the second half of the year and Beyond
Matt Mercer: in the second quarter core ffo jumped by 13% year-over-year to a new quarterly record while leasing results were highlighted by notable new record in our 01 megawatt plus interconnection category.
Looking ahead. We've increased our guidance for 2025 and we expect to exit the year with significant momentum and a sizable backlog.
Digging a bit deeper on leasing. We signed leases representing 177 million of annualized. Rent in the second quarter, bringing the year to date leasing to 575 million at 100% share.
Website, which exceeded our prior quarterly record by 18%.
Matt Mercer: Relative to the prior 4 quarter. Average quarterly leasing in this product set was up by 36%
Matt Mercer: We signed 45 million within the greater than a megawatt category at our share, with leasing spread across our regions.
Matt Mercer: Our top 5 leases in the segment range from 2 to 12, megawatts, and saw steady to improve pricing.
Matt Mercer: Notably average price pricing in this segment was skewed lower in the quarter by the exercise of an expansion option by a large Enterprise customer in North America, which was committed to More Than 3 years ago.
Matt Mercer: Consistent with our objective of improving, digital realities long-term, sustainable growth or than 70% of bookings included. Fixed rent, escalators of at least 4% or a link to CPI.
Matt Mercer: Our backlog at digital realy, share total 826 million a quarter end as a record. 220 million of commencements was only partially offset by our new bookings.
Matt Mercer: Looking ahead to the second half of 2025, we expect another 241 million at leases to commence which are more heavily weighted toward the fourth quarter.
Matt Mercer: For 2026, we currently have 461 million scheduled to commence.
Matt Mercer: While an incremental 124 million is already, slated to commence in 2027 and Beyond, providing strong visibility for multi-year growth.
Matt Mercer: During the second quarter, we signed 177 million of renewal leases.
At a blended 7.3% increase on a cash basis. Above the high end of our original 4 to 6% full year guidance.
Renewals in the second quarter were again heavily weighted toward our 0, to 1 megawatt category, with 130 million of renewals at a 4.2% uplift.
Matt Mercer: Greater than a megawatt renewals of 41 million, saw a robust 14% cash re-releasing spread.
Matt Mercer: For the quarter total churn continued to to decline, to just 1% with negligible churn in our greater than a megawatt category.
Matt Mercer: as for earnings,
Matt Mercer: We, we reported record quarterly core ffo of a $187 per share of 13% year-over-year reflecting strong upside from hyperscale commencements, better than expected progress on zero and megawatt plus interconnection, bookings and 3 cents of FX benefit.
Matt Mercer: On a constant currency basis, we reported core ffo per share of a184 in the second quarter.
Matt Mercer: During the quarter, we saw an approximately 3 Cent benefit in fee income, tied to large scale. Deliveries of Data Center capacity which corresponded with our record Leasing commencements.
Matt Mercer: While operating expenses picked back up from last quarter's, unusually low levels. The uptick was consistent with our growing book of business and repair and maintenance expenses. Remain on Pace for seasonal ramp in the second half of the year.
Matt Mercer: Data center Revenue was up by robust 11% year-over-year at the combination of strong renewal spreads rent escalators and new lease commencements more than offset the drag associated with the dispositions completed over the last 12 months.
Matt Mercer: The increase in adjusted Eva thought was even greater at 13% year-over-year reflecting the growth in data center revenue and higher fee income.
Matt Mercer: Same Capital cash and a high growth was also healthy in the second quarter increasing by 4.4% year-over-year driven by 5.9% growth in data center Revenue.
On a constant currency basis. Same Capital cash, analyze Rose 1.8% in the quarter.
Matt Mercer: moving on to our investment activity. During the second quarter, we spent over 900 million on development capex on a growth basis, which includes our partnership at approximately 700 million on a net basis to digital rielly
Matt Mercer: During the quarter, we delivered a record. 96 megawatts of new capacity 98% of which was pre-leased while 16 megawatts of new data center projects started Construction.
Leaving 734 megawatts, under construction.
Matt Mercer: At quarter end, our gross data center development pipeline stood at 9 billion and eighty 12.2% expected stabilized to you.
Matt Mercer: Data center shells, under construction increased to 610 megawatts during the quarter while our land bank grew to 3.7 gigawatts extending our runway for capacity growth to a record 5 gigawatts.
Matt Mercer: As Andy noted earlier.
Matt Mercer: We are also pleased with the success. We've had to our us hyperscale data center fund which has the potential to support approximately 10 billion of total data center investment from the existing commitments,
Matt Mercer: In the second quarter, digital contributed a 40% share of the 5 operating assets along with an 80% share of 2 development sites.
Matt Mercer: resulting in a 900 million of gross proceeds to digital rielly
Matt Mercer: Subsequent to quarter in. We also sold a non-core Data Center in Atlanta for 65 million.
Matt Mercer: With the fund contribution and the non-core asset sale completed weeks needed the midpoint of our prior disposition guidance for 2025.
Matt Mercer: Turning to the balance sheet.
By evolving our funding model.
Matt Mercer: We are able to extend our reach to better serve the needs of our hyperscale customers without overly taxing, our balance sheet.
Matt Mercer: Leverage, leverage remains at 5.1 times.
Matt Mercer: The well below our long-term Target of 5.5 times while liquidity remained robust at more than 7 billion.
Matt Mercer: Excluding the war chest of private Capital, we have amassed to support, hyperscale development.
Matt Mercer: We raised another 850 million of Euro bonds at the same 3.875% coupon as we did in January, but slotted this Bond into 2034 to maintain our well laddered maturity schedule.
Matt Mercer: We used most of these funds last week to pay off the 650 million euros of maturing 0.625% Euro bonds.
Matt Mercer: So unfortunately we'll be facing a 325 basis. Point refinancing headwind beginning in the third quarter,
Matt Mercer: This finishes off, our maturing debt for 2025, with our next maturity arriving in January.
Looking further out our maturities remaining well laddered throughout 2035.
Matt Mercer: Moving on to our debt profile.
Matt Mercer: Our weighted average debt maturity increased slightly to 4.6 years and our weighted average interest rate ticked up to 2.7%.
Matt Mercer: Approximately 84% of our debt is non US dollar denominated reflecting the growth of our Global platform and our FX hedging strategy.
Matt Mercer: Approximately 94% of our. Net debt is fixed rate and 96% of our debt is unsecured providing ample flexibility for Capital recycling.
Matt Mercer: I'll now turn to our guidance.
Matt Mercer: We are increasing our core ffo guidance range for the full year 2025 by 10 cents.
Matt Mercer: To 7.15 to 7.25 cents, per share to reflect better than expected operating performance and are updated FX assumptions for the full year.
Matt Mercer: We are also increasing our content currency. Core ffo guidance, range by 5 cents
Matt Mercer: To $7.10 to $7.20 per share, consistent with the better than expected operating performance.
Matt Mercer: the midpoint of our core ffo per share, guidance, represents approximately 7% year-over-year growth
Matt Mercer: Reflecting the momentum and our underlying business.
Matt Mercer: Balanced by increased development, spend and a reduction in Leverage year-over-year.
As a result of the year-to-date outperformance, versus our expectations.
Matt Mercer: Strong momentum within our 0 to 1 megawatt business.
Matt Mercer: And better than expected, fee income along with our updated FX assumptions for the year, we are increasing our revenue and adjusted Evita guidance ranges for 2025 by 100 million and 75 million respectively.
Matt Mercer: We are raising our cash and GAP. Releasing spread guidance ranges to 5 to 6% and 7 to 8% respectively, to reflect the performance, we have seen year to date.
We are also increasing our GNA assumption by 15 million while maintaining the rest of our operating assumptions for 2025.
in some,
Matt Mercer: Digital realy is extraordinarily. Well, positioned with ample momentum, to continue to drive the business into the future.
Matt Mercer: Consistent with how we frame it near 18 months ago. Our growth has accelerated so far in 2025 and is poised to continue through 26 and Beyond
Matt Mercer: visibility surrounding our growth potential over. The next several quarters is supported by our robust backlog of signed but not yet commenced. Leases
Matt Mercer: Product segment.
Looking further out, we have crafted a comprehensive funding model for our hyperscale business.
Matt Mercer: Including the sourcing of private Capital to support more than 15 billion of additional hyperscale development capacity, which will help to support our customers sizable and growing data center, infrastructure, requirements and extend digital realities runway for growth.
Matt Mercer: This concludes our prepared remarks, and now, we'll be pleased to take your questions.
Speaker Change: Operator. Would you please begin the Q&A section?
Speaker Change: Thank you. We will now open up the call for questions.
Speaker Change: In the interest of time and to allow a larger number of people to ask questions callers will be limited to 1 question.
Speaker Change: To ask a question. Please press star then 1 on your touchtone phone.
Speaker Change: If you're using a speaker-phone please pick up the handset before pressing the keys. If at any time your question has been addressed and you will like to withdraw your question, please press star then 2 and at this time we'll pause momentarily to assemble our roster.
Speaker Change: In the first question, we'll come from John Peterson with Jeffrey's. Please go ahead.
John Peterson: Oh great. Uh, thank you very much. Uh, what do you think's driving the inflection in growth in the 0 to 1 megawatt category? Are we seeing growth in that market overall or is? It mostly DLR capturing market share? And if it's market share, can you break down maybe Break It Down For Us 2 or 3 things that DLR has changed? And it's go to market strategy to capture more market share,
Hey thanks. John maybe I'll tag team this with Colin here. Uh, listen. I think this has been a priority for the company, um, that we double down on over the last several years.
John Peterson: And now it took a long way to get here. We had to put the puzzle pieces together, in terms of a global footprint, uh, have the highly connected destinations, uh, revamp or go to market a whole host of activities. That's led up to this. And then I'd say it's been a growing Market where we've executed and taken some share, uh, over the last several quarters uh, accelerating with records upon records. And then this this quarter is certainly a milestone up. I think 18% over the prior record and nearly 90 million dollars. Uh, I know, Colin and his team have continued to not rush on their Laurels off coming off a strong 2024 and put some incremental, changes through the program. So I'll let him speak to some of those more recent activities. Thanks Andy, John. I appreciate the question and recognizing the progress. Um, here. Yeah, we we were really pleased with the court overall nearly, you know, 90 million in bookings, um, across the platform. Um,
John Peterson: Strong interconnection, which really speaks to the value of the platform, really strong export quarter across the globe.
Colin: Um, and and strong number of of customers participate. And so you ask the kind of why factor of this. I think our platform itself continues to resonate with clients. So the global reach or cost core markets Enterprises, very much value that core Market nature of our portfolio. The fact that we offer offer the full spectrum of offerings, cabinet cage, Suite building both Central as well as the suburbs large capacity blocks which really matter uh, in this space. We had particularly strong participation 300 to 600 KW and 600 KW, and above, uh, in the Enterprise space and really strong, interconnection capabilities, both physical and virtual
Colin: The next question will come from Jonathan. Atkin with RBC Capital markets, please go ahead.
Jonathan Atkin: Um, thanks. So I wondered if you could talk a little bit about, um, um, more more broadly, interconnection bookings, which I think was a record. Anything could comment on this go that including around pricing as well as how the second class booking for environment is shaping up in the country to follow up.
Speaker Change: Growth that you see here today. So I think the sustained 0 to 1 megawatt bookings. That we've had past year those. Customers are on a journey, right? So they deploy new deployments, then they go to bookings. And then that bookings comes in as Revenue as they start to activate more and more services across the platform. So I think that's the, the critical 1 that we keep seeing that build over momentum over time. I think the second piece is just the global pricing standardization. So aligning, our interconnection value provides Clarity and scale to a lot of our customers. And so you see a lot of that, starting to mature into the overall portfolio, as well around the globe. So not just a single Market, but all the critical environments that we operate in and I think the third is just the comprehensive, you know, interconnection Suite. So that's beyond what just call and talked about is the physical cross connect. But those virtual Services, I think that virtual element is starting to mature and grow. And and, and a great way where it's not only for cloud. It's starting to be resonating for AI, but I think 1 of the other underpinnings that's very unique to digital reality.
Speaker Change: Is is just the overall bulk fiber and being able to execute on our Pathways product where it's driven by, you know, multi megawatt customers that are on this journey, both digital transformation cloud and artificial intelligence where they need that bulk capability to interconnect in a very efficient fashion. And so why that's unique to us at digital reality is just that campus Master planning and an integrated infrastructure design. So we look across the entire portfolio of, not only space and power, but interconnection as well,
Thanks Ken if I could just squeeze 1 in the the master project announcements that 1 reads about uh continuing by by both existing people, uh players and new players as well for example, sponsors and so forth, stop and wealth funds gigawatt, scale multi-billion. Um many of these are in remote locations. Um but what what do you see is the impact on the sector and this overall competitive Dynamics?
Thanks John. I think your second question is a little, uh, cut up there, so I'll just rephrase it. So you just, I think you're saying the big announcement is a big cult. Uh, big lease signings and gigawatts, uh, in various locations. Uh, as I, I think it shows a continued commitment to building out infrastructure for artificial intelligence from numerous diverse players in the landscape. And, uh, our strategy uh, is is quite differentiated when it comes to that. Um, we're we are continued. Focus on major markets with robust and diverse demand. So hyperscale customers, service providers Network, providers and Enterprise not single thread for 1 off customer Islands. Necessarily uh those major markets have locational and latency sensitive sensitivity. For the workloads in the data, they may be elongating and stretching but there are true Supply barriers to these markets.
Markets. Um, we time and time here from other customers uh that they have preference for these markets because the fungibility of the demand, I can use it for cloud computing or machine learning.
Speaker Change: Um, and we're getting to, we're getting to a broad-based, uh, of these types of customers. So, uh, and I also would say, I think a lot of the headlines you're seeing is still a continuation of a long series of early Innings when it comes to AI. Uh, and I do that from a looking from an Enterprise adoption and use cases that still have not fully come to fruition yet today, which I think will further compound, uh, the date, the the workloads coming back to these centers of data gravity, uh, that we focused on for years.
Speaker Change: The next question will come from Eric luchow with Wells, Fargo, please go ahead.
Eric Luchow: Uh, great thanks for taking the question. Um, I wanted to get, uh, your sense for kind of the large capacity block, uh, market and Hyper scale. In the US, I think you talked about power availability, kind of moving to late 2026 or early 27 and just thinking through the timing of, of the pre-release Windows. If, uh, you expect that, uh, to kind of snap back in the second half of the Year there, to be more opportunities and markets like Virginia, Charlotte Atlanta or anywhere else. Um, where you see opportunity, thank you.
Eric Luchow: We do not own 100% but obviously our operating on behalf of our customers and Garner fees and other economics, uh, for doing so, um, we still see a tremendous runway for growth in that category. Uh, as you saw in our our current results. We now have a total of 5. Gigawatts of colored inventory. Runway from land to shells north of 600 megawatts. Today in addition to what's under construction and highly pre-leased on the development life cycle. Uh, we're very happy with the success of our inaugural fund. Uh, essentially oversubscribed, uh, that's essentially gives us a call in total, uh, 15 plus billion of private capital for hyperscale, uh, to fund that Journey.
Eric Luchow: um, when it comes to the nearest term demands of the customers, they obviously sooner is better and all that Colin talked to uh some of what he's been talking to those hyperscale customers about
Speaker Change: No, thanks Andy. Um, you know, we've highlighted before that demand overall is is very strong that continues to be a stronger pipeline is as strong as we have seen. Um, the nature of that is both diverse by customer and and Global nature. Although it's it's probably more tilted towards North America. Um, where we have the larger capacity blocks?
Speaker Change: Um use case is still very much resonate around Ai. And cloud cloud is still very much at the Forefront of how our customers are growing with us.
Speaker Change: Um, overall. And so Andy mentioned, we have about 1 gigawatt of capacity coming online over the next several years. In particular, in Northern Virginia, our largest market where we have about 350 megawatts coming online, in late, 26, and 28. There's very active conversations around this. We, I highlighted that previously, uh, in our last call, um, those conversations are are very much at the Forefront, um, of of what we are participating in. Um, so we're working really closely with our hyperscale partners to ensure. We can provide the maximum value for their use cases. Um, we had mentioned previously, the bookings are not always linear but I can tell you that the pipeline and demand profile continues to very much resonate with our hyperscale partners.
Michael Funk: The next question will come from Michael Funk with Bank of America. Please go ahead.
Michael Funk: Yeah, thank thank you for the question. So, Andy quick, simple question. So, why would releasing spreads move lower from the current level? I know, you just raised the guidance from the year. Why would they be lower in the future?
Speaker Change: I want you to take that. Yeah, thanks Michael. So, um, look part of part of this. Uh, a big reason for that is you can see in the first half of the year, we we had some outperformance in our other category, which really pushed probably about a 100 basis points of that total that we had for the first half of the year in terms of our overall results and as we, uh, you know, so that's
That's why if you strip that out again, we'd be about 100 basis points lower. We're not expecting in the second half for the same amount of that other call. It usually that shell PVB type space, but we are you expecting to continue to see uh continued strength within, not only our 0 to 1 where we put up basically 2, plus 4%, so the last 2 quarters plus, as you as you seen, also, uh, Stronger results and, and improving results was not greater than a megawatt, but the second half. And and the majority of the years is tends to be weighted towards that 0 to 1. So, that's why we're still within that range. But we've pushed up the low end of it.
Richard Cho: The next question will come from Richard Cho with JP Morgan. Please go ahead.
Richard Cho: Given the increasing amount of demand and opportunities that you're seeing.
How long are should we expect the capex development range to stay in this 3 to 3 and a half billion going forward.
Richard Cho: Yeah, thanks. Thanks. Uh, for the question. So look, I think um, as we, you know, we've already increased, if you look back to last year, you know, to this year, we've increased our capex spend, you know, 50% and that's that's even considering just our our share. Um, I think you're starting to see that, you know, we're starting to see us ramp ramp into that, um, little lighter than the first half, but we're expecting that to pick up in the second half and as we've
Richard Cho: As they need it. Build more Colo inventory as they need it and have levers to fund it through our own balance sheet or through our private Capital around, hyperscale initiatives, ensuring that we continue to accelerate that per share uh bottom line growth.
Speaker Change: The next question will come from Frank Lutheran with Raymond James, please go ahead.
Great. Thank you. Um, I wanted to ask about the, uh, the executive order for permitting data center infrastructure. And can you give us some some ideas? I know it's early but at a high level kind of, how do you expect that to help your bookings? And and is that potentially open additional opportunities for you over the next few years with that more streamlined, uh, uh, potential permitting environment.
Speaker Change: And thanks Frank. So
when I look at the the uh what just came out in the last 24 hours or so I I get 2, takeaway 1.
Speaker Change: There's a redo, they're looking to reduce regulatory barriers for domestic us data center, build outs, that's 1 and 2. They're promoting the US AI Tech stack as the dominant Technologies around the world. Both of which I see it's only positive for the industry in this state of demand uh and in particular for digital
Speaker Change: On the first 1, we're talking about streamlining permitting for data centers expanding, and modernizing the power grid. Uh, high security data center for sensitive military, other use cases, uh, helping us in the workforce and pipelines for infrastructure jobs, for AI and data centers included in that, uh, a host of activities, I think will hopefully Grease, the grid skids so that we can bring our infrastructure for our customers on, in a more seamless expedited fashion, just as our customers needed.
And the second 1.
Is really trying to enable some of our top customers to export their capabilities. The full stack for American AI Technologies to allies and partners worldwide. And we at digital are supporting customers, 5,000 customers across 50, plus metros on 6 continents. Now, we've talked a lot about the AI part of that demand being very us heavy recently, but I think the second leg of the stool, uh, could certainly further accelerate the globalization, uh, of these technology Trends and and we're ready for it.
The next question will come from Michael Elias with TD Cowen. Please go ahead
Michael Elias: Great. Thanks for taking the question. Um, 2 quick ones if I can. Uh, first regarding Charlotte, I was wondering if you could give us an update there, specifically around availability of power, and then also how conversations are tracking their and then second, how would you describe your Enterprise pipeline, specifically, within the plus 20 megawatt category. Thank you.
Michael Elias: The Enterprise trust 20 megawatt pipeline that didn't expect that question. Um but
Michael Elias: Greg, why don't you speak to Charlotte uh, and and call him. You want to tag team on the customer lines in addition to the pipeline question. Yep, thanks Michael look, I would say Charlotte. Uh, continues on track as we originally planned from a permitting, uh, standpoint, uh, Power, uh, building and otherwise. So again, we remain, uh, bullish on that market, as you recall, um, you know, we love the fact that it's it's it's uh, integral part of our connected campus strategy, having the network dense, uh, facility downtown with now a large facility that will support, you know, 400 megawatts, you know, within 10 miles of of downtown, I guess they call it uptown in charge. So, I would say, uh, everything, uh, remains on track there. Uh, and you know, I'll let Colin comment on on on customer, uh, you know, demand. But overall, I'd say it's, uh, we're very bullish still.
Speaker Change: Recruiting creeping up. We saw really strong success in 300600 and 600 in a megawatt. The pipeline also reflects that um overall um the uh the the megawatt plus business within the Enterprise space is is a bit more sporadic than I would say. The hyperscale overall would continue to see more conversations on on the hyperscale band. Um with our with our Keen hyperscale clients versus uh versus Enterprise
Michael Rollins: The next question will come from Michael Rollins with City. Please go ahead.
Thank you, good afternoon. Um, just want to go back to some of your comments uh, about the globalization of your footprint. And I'm curious. If you could provide some context on, you know why you're seeing the Amia and APAC regions, uh, trailing behind the US on AI adoption and are there certain catalysts to watch for, or just simply timing for demand in those regions to expand and accelerate uh for AI workloads?
Michael Rollins: Thanks Mike. So just to clarify, um, we had a great Global quarter. This quarter in particular so exports overall, I think customers headquartered in 1 country export into another or another region, uh, was a a new record for us uh, and a very sizable portion of our total 0 to 1 megawatt interconnection signings. And I did call out earlier uh, how we had
Michael Rollins: A quarter for Landings and a number 1. Number 2 of APAC, quarter for Landings on the larger capacity block side. Uh, hyperscale and certainly more AI related. I think you've just seen a preponderance of that activity to be very us heavy. Uh, and I think a lot of that dates or it's contributed from the US multinational, hyperscale landscape first turned to their home country or home court uh for rapidly scaling, big, big projects. Um, and uh, I don't think that means that that the AI will not come to outside the US. I think there's examples of that happening in APAC and more to come into Maya. And I we know for a fact that uh, these other countries and continents are making this a priority in terms of uh, call making expedited infrastructure for customers to land on their Shores. Uh, so and I and it kind of dovetails with just how Cloud rolled out started with a very us heavy and then
Went to a more globalized footprint. Um, so and and maybe maybe this more recent uh, administrative action on AI is another uh, incremental fuel to that fire. Uh, really making it more pervasive for the US multinationals to push more their gear and infrastructure, uh, to our campuses abroad.
Speaker Change: The next question will come from Ari Kline with BMO Capital markets, please go ahead.
Ari Kline: Thanks, thanks. Uh, and you talked a little bit about extending the runway for long-term growth. And I'm hoping, maybe you can speak to what that growth could look like. And this year will be about 7% with some FX benefit and seems like, next year, maybe could accelerate. But but how you think about what sustainable growth could look like over a longer term, multi-year, time frame.
So, thank you are. If you, if you remember not that long ago. Um, we put out the guidance for this year, which I think we gave probably 18 months prior to that guidance. Uh, and that guidance was called just over the 5% area and we we've articulated uh, that was not the new bogey. That was really the the new floor. We knew we could Accelerate from that. Uh, we're obviously having a great first half of the year uh in terms of uh beating our internal expectations and ultimately raising our guidance to now uh just shy of called 7%. Depending if you look above with or without currency adjustments,
Ari Kline: Um I think the way I'd frame it is we're looking to be a consistent comp powder in that area if better if we if better better than that if we can but at least in that area for as long as possible and the tools in our toolkit, in addition to the levers on funding, that I described are really near-term. 2526 is about how we continue.
Ari Kline: This momentum and execution in the 01 megawatt in interconnection, the shortest book to builds, uh, falling into already built capacity. Uh, flows through the bottom line quickly, like interconnection signings,
Ari Kline: And the longer term, the 27 Beyond is about those hyperscale bookings, because the hyperscale bookings are obviously bigger capacity blocks and they're falling into capacity, that's not sitting idle today. So, those bookings that, uh, we do in hyperscale this quarter next quarter and the quarter after that are all about call at the end of 2016 27th, 28th and thereafter.
Irvin Lou: The next question will come from Irvin Lou. With evercore isi, please go ahead.
Irvin Lou: Hi, thank you for the question. Um, I wanted to ask about your uh hyperscale fund. So once fully funded and developed what sort of implications will this have on your financial model longer term? So any any thoughts on what the contribution from from a key income perspective and core ffo for share. Growth perspective, longer term would be very helpful. Thanks.
Irvin Lou: Okay. Why don't you take the first part in terms of the, the how the Fun Works and then Mack talk to SFO contributions? Sure. Uh, thanks for the question, man. I think, you know, we talked about on prior calls, uh, first of all, um, you know how, what is the makeup of the fund and how is it being funded and is you recall? Uh, we contributed, uh, 5 stab that assets, um, you know, in in various markets to provide diversification, um, which was attractive to investors in addition to that. Now, you remember last may we contributed 40% of those assets to the fund and the other 40% will come in in January of 26, which keeps us with our 20%.
Irvin Lou: In terms of the development assets, you may recall, we contributed 4 Parcels of land, uh upfront, uh, which are going to support uh, 7 buildings. Again in these, you know, as Andy mentioned earlier in these Tier 1, you know, latency sensitive product, maksak markets places like, you know, Nova Dallas, Charlotte Atlanta. Uh, so that's what's that's what's being contributed. Uh, uh today, uh, when you look at our total fund today, I would say about, uh, you know, roughly, uh, 70% or so is earmarked, which leaves us with about 30%, give or take? Uh, of of, you know, discretionary Capital to go ahead and deploy and developments that haven't already been identified. So that's what the fund is and where it is. Maybe I'll turn it over to Matt now to discuss your other part of your question. Yeah. Thanks. Uh, so her look, I I'd say this in kind of 2. I'm breaking into 2 trying to be simple buckets, right? So we've got uh, as Greg noted we've got
Up to to 10 billion, ultimately to deploy. That's going to go out over the next, you know, few few years. Um, as we continue to develop these data centers and you know, we're going to expect to earn similar returns to what we're seeing, you know, call today on our balance sheet um as we've disclosed in our as we disclosed in our supplemental and that development is going to ramp ramp over time and we'll get, we'll get our call, it, 20% share of that. So it'll ramp over the next over the next few years but it'll be
Irvin Lou: Relatively relatively minimal at the start call over the next year and then continue to ramp over over the next call. 3 to 4 the other. The other main side of that is, is fees, right? And the largest portion of the fees is going to come from our asset management fee, which is based on our based on the committed equity. And that's that that's at a market rate and that will come in that will come in sooner. So that's going to give us some of that near-term benefit.
Speaker Change: The next question will come from David gorino with Green Street. Please go ahead.
David Gorino: Thanks, maybe sticking on the hyper scale fund, can you talk a little bit about the Strategic rationale, for keeping a majority stake in the operating assets? But a minority stake in the development assets and I'm curious. Greg. If maybe that's a fundraising Trend do you think we'll see a cross the industry with that structure? Or was that maybe just specific to these Assets in this deal?
David Gorino: Jew just to clarify it's the same ownership stake in both the the stabilized assets and the development assets. So the end the end Landing is a minority 20% in both the operating and the development assets. David, if you want to ask another question, you can go ahead too. What what was it? Yeah, I know much about that in the presentation. Then, um, yeah, so other 1 then maybe we'll kind of switch gears. Uh, there's been this trend we've seen probably just the last few quarters, or maybe the last year or so about utility companies, requiring larger upfront, commitments. And I'm wondering how's that impacting? Your construction costs per megawatt and would you do that as a net positive or a net?
David Gorino: Negative for a company, as large as digital rielly.
David Gorino: Thanks Dave.
Speaker Change: Listen, I view that as a maturing of the broader uh industry around data center infrastructure and Power.
Speaker Change: Uh, I mean, it's on the, on the back of these utility companies, uh, especially those who are not, uh, quite used to seeing prevalent data center demand, um, getting numerous impacts from numerous shops.
Building the infrastructure for their customers, um, and that that often requires security deposits or or counterparties of of substance. Um, and I think that's a net positive, uh, to rationalization and stabilization of the industry, uh, and given digital's track record. I think we, uh, show up in front of these utilities as a really good partner. Uh, we never were an issue on this, uh, and now we can call it flush out folks that were maybe in the land flipping game. Uh, and and really try to get to folks that are really dedicated for the Long Haul, uh, and scaling data center infrastructure.
Speaker Change: Next question will come from Jim Schneider with Goldman Sachs. Please go ahead.
Jim Schneider: Good afternoon. Thank you for taking my question. Uh it's good to see you. The momentum is 01 bookings category. Um if that's the same as itself, I'm just wondering, you know, given that there's a smaller blocks of space. Do you have availability in your existing installations for 2026 such that you could slot in more of that business into 2026 commencements and potentially drive further upside to 2026 financials? Is that a reasonable assumption?
Jim Schneider: Thanks. Thanks, Jim. So we we had a record or last year in that category that was demonstrably higher than the prior Year. We're pasting obviously. Well, ahead in the first half of this year and plan to keep that momentum. And when we set our goals for 2026 all be being July right now, I can tell you the goals will be another stair step up in that, in that directory Direction, uh, and part and parcel with that, is making sure you have the invo inventory runway for growth. So yes, we have some certainly uh, Supply constrained markets, along the way, some of our most sought-after markets, but we're in 50, plus metropolitan areas uh, around the world and adding new markets like our recent entry into Indonesia. And we also have, uh, what we've been playing out and you see a little bit, uh, in our, in our same store pool the repurposing for higher and best use our of our of our footprint. So when a customer that has a multi megawatt Hall expires, we look at that. And say you know what?
Jim Schneider: Maybe we should be positioning the up towards our inventory for our Colo, so we are able to call it self-help. Uh, in terms of making sure we have homes for our customers to grow
The next question will come from vicram Mahalo with meizuo, please go ahead.
Vikram Mahalo: Uh, thanks for being the question. So I just wanted to dig in more into the 021 megawatt, um, kind of space, slash capacity, you know, your, your peers, obviously saying they're building Boulder over the next, you know, 5 years or 3 years building next to years and hoping to lease up, um, I guess 2 parts 1 as you're growing the, you know, the booking space. Can you just elaborate? Are you taking share? Is it a bigger tan as you see it? And then maybe if you can give the sense of like on a 3 year basis, do you anticipate capex having to just ramp up in order to take advantage of what maybe a much uh, you know, bigger time, ultimately down the road.
Thanks Madam. So I I don't I don't want to
Vikram Mahalo: Speak to any specific, uh, competitor. Um, but listen, I think there's a agreement in the market that this is a very large and attractive addressable Market. Um, we've invested for years, uh, to essentially have a global platform with the capabilities to give a really compelling value to our customers, and you've seen that from the 5,000. Customers we have today growing with us and doing repeat business, you see that from the 1399, we added just this quarter. You see that in the testimonials of the custard, uh, customers. I I laid out in our prepared remarks, um, and I think if you even just looked at uh, the number 1 and 2 in
Vikram Mahalo: That category you'd still see a long tail of of of of business uh from 3 and on down the list. Um that we're currently taking share from along the way. Uh we we made the decision to about 10 years ago to fully embrace the full product Spectrum right coming from the hyperscaler into the Colo and Enterprise World. It took a lot of hard work and investment to get to those capabilities but I think in fully engaging across the full customer Spectrum, pays dividends it. Pays dividends when we look for customers that want to grow into larger Footprints with us on our expansive campuses, it pays dividends when we look for customers that want to increase their power densities, where we already were serving another larger customer at a higher power density. So I think the the the trend has been our friend along with a lot of investment or hard work, and focus execution in that category.
Speaker Change: The next question will come from Nick Del Dio.
With Nathanson, please go ahead.
Speaker Change: Take my question. Um, Andy earlier in the call you were talking about your strategy of sticking to Tier 1 markets and your expectations that over time. You'll see demand in those markets compound is Enterprise AI, adoption picks up,
so what's your latest thinking and what are you hearing from customers regarding you know when you think that compounding will really start to kick in
Speaker Change: And along those lines. What's your senses to the share of AI inversion use cases, you know that are going to need to be distributed across key metros for uh for latency or other reasons.
Thanks Nick. So
I'm a big believer in what you just outlined or repeated from what I said earlier? Um, but I think the timing is still unknown. I think our success. This quarter last quarter in several quarters when it comes to the Enterprise has been seen very modest AI contribution. We are still capitalizing on the trends of
Outsourcing of data center infrastructure hybrid multi it, digital transformation, and the getting AI. Ready is more the pervasive theme? Yes, we are doing liquid cooling for, uh, trading firms Financial Services, firms other Industries Pharmaceuticals. Uh, but there there it's, it's just the, the tip of the iceberg of the potential and I think it really ties back to corporate Enterprise. I don't think has has gotten anywhere near the pervasiveness of AI adoption and use cases especially in a private Set. Uh, when we
Speaker Change: Look at the data today. It feels like the tip of w**** Enterprise is using a lot more of its AI testing in the cloud service providers than it's doing in private, it infrastructure but just like the journey on cloud started that way and came back to hybrid. Uh I think you're going to see the same Trend and and we are well positioned when that happened and between 1 now and whenever that happens, we have a lot of business with both our Enterprise and our hyperscale customers to do in the core markets where we offer and support them.
Speaker Change: This concludes the question and answer portion of today's call.
Speaker Change: I would now like to turn the call back over to president and CEO Mr. Andy power, for his closing remarks. Please go ahead sir.
Speaker Change: Thank you, Chuck.
Speaker Change: First off.
Speaker Change: As a Texas headquarter company, we want to acknowledge the devastating flooding in Central Texas earlier this month.
Speaker Change: Our hearts go out to all those impacted.
Speaker Change: Including the family and friends of our former colleague Mark Walker.
Speaker Change: Mark played a key role in our investments team and was admired for his pursuit of high standards intelligence.
Speaker Change: Devotion to his family and quick with.
Speaker Change: He left a lasting impact on many of us.
Speaker Change: Wrapping it up.
Speaker Change: Digital realy delivered, another strong Quarter building on the momentum, from earlier, this year.
Speaker Change: We saw record performance in our 0 to 1 megawatt plus interconnection business.
Speaker Change: Underscoring the strength of our global global full spectrum platform and the demand for data center infrastructure.
Speaker Change: Our core FFL per share results were at record levels.
Speaker Change: And our backlog remains strong.
And well supported by a deep and diverse pipeline that reflects the global demand for Data Center capacity.
We've made meaningful progress in evolving, our funding model to support this growth while staying focused on our strategic priorities. These efforts are translating into accelerating bottom line growth and enhancing our visibility into long-term sustainable performance.
Speaker Change: Scaling our business globally is a team effort, and I am incredibly proud of our talented and dedicated policy colleagues who continue to execute and an exceptionally high level.
I'm excited by the opportunities. That lie ahead yet. Remain focused on delivering for our customers partners and shareholders.
Speaker Change: Thank you all for joining us today.
The conference is now concluded, thank you for joining today's presentation. You may now disconnect