Digital Realty Trust, Inc. (DLR) Presents at Global Communications Infrastructure Conference Transcript

Digital Realty Trust (DLR) CFO Matt Mercier outlined the company's significant capacity and growth strategy, reporting 3 gigawatts (GW) in operations, 750 megawatts (MW) under construction (60% pre-leased), and an additional 600 MW of shell construction, alongside 3.5 GW of land capacity. Driven by robust demand, particularly from AI-related workloads accounting for 30-70% of quarterly bookings, DLR has a backlog exceeding $850 million, supporting an accelerated 2025 FFO per share growth projection of 6.5% and 4-6% re-leasing spreads. The company is strategically managing power constraints in key markets like Northern Virginia and expanding into new regions, while utilizing joint ventures and funds to capture hyperscale demand without over-indexing its core portfolio, despite persistent 12-24 month lead times for critical electrical equipment.

Analysis

Digital Realty Trust (DLR) presents a strong growth outlook, underpinned by a significant development pipeline and robust, AI-driven demand. The company has raised its 2025 FFO per share growth guidance to nearly 6.5%, accelerated from an initial 5%, reflecting high operational confidence. This is supported by an $850 million-plus contracted backlog that provides clear revenue visibility through 2027, with over $450 million scheduled to commence in 2026 alone. The development pipeline is substantial, with 750 megawatts (MW) under construction (60% pre-leased), an additional 600 MW of shell capacity being prepared, and a 3.5 gigawatt land bank. Demand remains exceptionally strong, with AI-related workloads accounting for 30% to 70% of quarterly bookings, giving management high confidence in leasing its available capacity. DLR is strategically navigating industry-wide power constraints by expanding into markets with available power, such as Charlotte and Atlanta, while noting a slow but positive release of capacity in the critical Northern Virginia market beginning in late 2026. Despite persistent supply chain challenges with 12-to-24-month lead times for key electrical equipment, the company is leveraging its scale and experience to manage its delivery schedule. The firm's capital strategy, utilizing joint ventures and a hyperscale fund, allows it to capture massive hyperscale demand without over-indexing its own portfolio, thereby protecting its focus on the highly profitable retail colocation and interconnection segment.

Key Decisions for Investors

• Given the accelerated FFO growth guidance, a multi-year revenue stream visible in the $850M+ backlog, and powerful AI-driven demand, the current outlook supports a constructive to bullish stance on DLR.
• Investors should monitor the lease-up velocity of the uncommitted capacity (40% of 750 MW under construction) and the conversion of the 600 MW of shell projects as key indicators of sustained momentum.
• Closely track developments around power availability in key markets like Northern Virginia, Chicago, and Dublin, as any significant delays could directly impact project timelines and temper the growth trajectory.
• The capital recycling and joint venture strategy is a critical de-risking factor; evaluate the success and profitability of these partnerships as they are integral to funding future growth without over-stressing the balance sheet.