Digital Realty Trust Inc (DLR) — Q1 2025 Earnings Call Transcript

Thank you, operator, and welcome, everyone, to Digital Realty Trust, Inc.'s first quarter 2025 Earnings Conference Call. Joining me on today's call are President and CEO, Andy Power, and CFO, Matt Mercier. Chief Investment Officer, Greg Wright, Chief Technology Officer, Chris Sharp, and Chief Revenue Officer, Colin McLean, are also on the call and will be available for Q and 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 a further discussion of risks related to our business, see our 10-K and subsequent filings with the SEC. This call will contain non-GAAP financial information. Reconciliations to the most directly comparable GAAP measure are included in the supplemental package furnished to the SEC and available on our website. Before I turn the call over to Andy, let me offer a few key takeaways from our first-quarter results. First, we posted strong overall leasing in the first quarter of $242 million, consistent with a record pace set in 2024, and driving our backlog of booked not billed leases to a new record of $919 million. Activity was robust across our primary product segments. Second, core FFO per share growth accelerated ahead of our expectations for the quarter, and with our record backlog, we have strong visibility for the remainder of 2025 and growing momentum for 2026. And third, we further evolved our funding model this quarter, following the successful formation of our first US hyperscale fund, enabling us to meet the growing needs of our customers while scaling our balance sheet and enhancing our returns.

Thanks, Jordan. Thanks to everyone for joining our call. The first quarter of 2025 was fraught with attention-grabbing headlines focused on advances in AI and the potential implications for the ongoing AI infrastructure build-out. But Digital Realty Trust, Inc. continued to execute our full spectrum meeting place strategy and posted strong results. With the strength of our key results, and the visibility provided by a record backlog, we remain confident in our 2025 growth targets and are encouraged by the 40 plus percent increase in our 2026 backlog since the beginning of this year. At 100% share, our backlog of signed but not commenced leases exceeded $1.3 billion at 03/31/2025. Despite the headlines, demand for data center capacity remains strong and our value proposition continues to resonate, evidenced by nearly $400 million of new leasing completed in the quarter or $242 million of new leasing at Digital Realty Trust, Inc.'s share. With healthy contributions from both our major product categories. Leasing in our zero to one megawatt plus interconnection segment was $69 million, our second highest ever behind only last quarter's record. This quarter's total included $15 million of interconnection bookings. The leasing achieved in the first quarter in this segment was ahead of pace relative to last year's record $250 million of leasing, which is a reflection of our team's intense focus and execution on our meeting place strategy. We completed nearly $325 million of greater than a megawatt leasing in the quarter reflecting the demand we are capturing across platform digital. At our share, greater than a megawatt leasing was $102 million. Demand for large capacity blocks remains strong and diverse. Over the past five quarters, we've topped $100 million of leasing volume in the greater than a megawatt category four times with four different customers signing the largest lease in each of those quarters, including this quarter. In fact, the single largest lease in the first quarter of 2025 set a new record for Digital Realty Trust, Inc. in terms of total annualized rent signed. In our experience, hyperscale customer activity is more likely to rhyme rather than repeat. Each customer typically beats to its own drum, so when some slow down, others push forward. Today, we continue to be encouraged by the secular demand drivers of digital transformation, cloud, and AI, which have been in place for the last several quarters and are supported by consistent interest across our portfolio, including large capacity blocks. Reflecting this dynamic, pricing reached a new milestone in the quarter, with the overall rate on new data center leasing at $244 per kilowatt per month, up 10% from the prior record, reflecting strength within the greater than a megawatt category. Looking ahead, our pipeline remains healthy and diverse. Customer and partner interest and engagement were high throughout the quarter and continued into Q2. Customers continue to see significant value in contiguous capacity in core markets that can support multiple use cases, from network optimization to hybrid clouds to artificial intelligence. While it is important to acknowledge the risk posed by elevated uncertainty and capital market volatility, Digital Realty Trust, Inc.’s product pipelines remain near record levels. In the meantime, we continue to focus on serving our 5,000 plus customers in major markets around the world. This quarter, bookings were strongest in North America hyperscale, but we are seeing demand from all regions and for both product types. To meet this growing demand, we increased our development pipeline by another 70 megawatts since year-end, totaling 814 megawatts at a 100% share. Of this total, 63% is preleased with the lion's share of the remaining hyperscale availability focused in Northern Virginia. We continue to see healthy interregion activity across our global platform. In the first quarter, EMEA was the biggest importer with strong activity from all other regions. We also had very strong enterprise export activity from The Americas and APAC, with EMEA as the preferred destination from each region. It is clear that our global full spectrum data center platform is a key differentiator for Digital Realty Trust, Inc. as a key component of our value proposition, as customers may onboard to platform digital with just a cabinet but can then scale to a cage that leverages hyperscale cloud compute and will soon provide access to AI for all customers. During the first quarter, we added another 119 new logos, including a leading global semiconductor equipment manufacturer deploying high-performance computing in pairs to take advantage of the well-developed cloud and network communities, along with an emerging AI community on platform digital. Other key wins in the quarter include a leading high-frequency trading fintech expanding on platform digital to add private AI by increasing their HPC platform to a new market while improving cloud access and business continuity. An Oracle partner is expanding its footprint on platform digital to Zurich to support Oracle's dedicated region integrated solution for private cloud, addressing data localization and data sovereignty. A leading blockchain provider is also expanding to a new metro on platform digital to deploy infrastructure to support decentralized private and public networks. A Fortune 500 payments and transactions company is expanding their global presence on platform digital into The Nordics to meet compliance and data localization needs. And an AI inference and training company, as a new logo, is utilizing the connectivity available on platform digital to provide a scalable solution for their AI inference applications. We continue to expand the reach and connectivity of platform digital during the first quarter with our entrance into Indonesia. We partnered with a leading Jakarta-based carrier-neutral data center platform to create Digital Realty Persama, which will expand its connected campus, offering direct access to a wide array of networks and services, including a direct connection to Indonesia's largest Internet exchange provider. Supported by a young and large population, growing cloud adoption, and access to multiple subsea cables, Jakarta is an attractive expansion location that complements our existing APAC footprint. We also launched our Heracleion One data center in Crete earlier this month, which complements our Athens campus and adds a key connectivity hub in the Eastern Mediterranean, strategically linking Europe with Asia, the Middle East, and East Africa via a dense network of highly connected subsea cables. Also, during the quarter, Digital Realty Trust, Inc. and Console Connect announced a strategic collaboration that will expand the reach of Service Fabric to more than a hundred new third-party data centers, providing access to more than 75 new cloud on-ramps, enriching the global connectivity options available to enterprises across platform digital. In closing out our connectivity-oriented advances, this morning, we announced the addition of three new Azure on-ramps: one in Atlanta, one in Brussels, and one in Vienna. These on-ramps expand our global relationship with Microsoft, as we now host 15 cloud on-ramps across four continents. Moving over to the financing side of the business, after more than a year of hard work across our team, this year, we announced our first US hyperscale data center fund, continuing to evolve our funding model and further expanding the pool of capital available to support the growth of hyperscale data center capacity. The fund offers a unique opportunity for private institutional investors to invest directly in hyperscale data centers alongside the world's largest data center provider. It is dedicated to investing in high-quality hyperscale data centers located across top-tier US metros, including Northern Virginia, Dallas, Atlanta, Charlotte, New York Metro, Silicon Valley. We've seeded the portfolio with five operating assets and four land sites for data center development, and have received very strong interest and limited partner commitments from some of the world's savviest investors, including sovereign wealth funds, pension funds, insurance companies, endowments, and other institutional investors. The investors have done their due diligence, committed capital, and placed their trust in Digital Realty Trust, Inc. We are targeting $2.5 billion of equity commitments from our LPs, and we expect to maintain a 20% or greater interest to ensure alignment. All told, the fund will support approximately $10 billion of hyperscale data center investment, enabling us to serve the robust demand of our customers while enhancing our returns through fees. We received more than $1.7 billion of commitments through our first closing, placing us ahead of schedule relative to our year-end target. And we continue to field investor interest. As Matt will discuss in a moment, our progress puts us well on track to meet our capital recycling guidance for 2025 and to fund growth in 2026 and beyond. Before turning it over to Matt, I'd like to touch on our global sustainability progress. During the first quarter, we opened Friday team, a 16-megawatt data center adaptive reuse of a historic and iconic site while delivering cutting-edge technology solutions with a deep focus on sustainable performance and water conservation. Draw eighteen is optimized for AI and high-performance compute applications with advanced liquid cooling along with the integration of service fabric for enhanced data security and connectivity. Importantly, this state-of-the-art brownfield development is powered by 100% renewable sources, as are all our facilities in EMEA. This sustainable building in Frankfurt continued Digital Realty Trust, Inc.'s leadership in the industry with high-performance green buildings. We added 90 megawatts of third-party certified green data centers in 2024. Also in the first quarter, Digital Realty Trust, Inc. reached 100% renewable energy coverage for operations in Singapore, a top priority in that market, given the country's resource constraints and its Smart Nation initiative. We have installed solar on our facilities over the past couple of years, and in the first quarter, signed a PPA with Tuos Power for Biomass and other regionally sourced renewables to fully cover our load. This further expands the more than 150 data centers around the world that are matched with 100% renewable electricity and adds to our portfolio of 1.5 gigawatts of contracted renewable capacity. And with that, I'm pleased to turn the call over to our CFO, Matt Mercier.

Thank you, Andy. Digital Realty Trust, Inc. continued to post healthy results in the first quarter, as strong leasing pushed our backlog of signed but not yet commenced leases to a new record. While the formation of our first hyperscale fund added a new horse to our funding stable. These milestones enhance our visibility and predictability of earnings growth, improve our returns, and further reduce our reliance on any single capital source while enabling Digital Realty Trust, Inc. to responsibly invest to serve the needs of our customers. In the first quarter, we grew core FFO by 6.1% and posted strong leasing results, increasing the capacity under development by another 26%. Despite delivering nearly 50 megawatts of new capacity during the quarter, it’s a great start to the year. We signed aggregate leases representing nearly $400 million of annualized rent at a 100% share in the first quarter, which was the second highest in Digital Realty Trust, Inc.'s history. At our share, we signed $242 million of new leases in the first quarter. Notable strength across each of our two segments. We completed nearly $69 million of bookings in our zero to one megawatt plus interconnection segment, which marked the second highest quarter for Digital Realty Trust, Inc. following last quarter's record. This activity also exceeded the prior four-quarter average bookings by nearly 10%. We also signed $172 million within the greater than a megawatt category at our share, largely driven by hyperscaler leasing in North America. Consistent with our objective of improving Digital Realty Trust, Inc.'s long-term sustainable growth, more than 85% of our bookings included fixed rent escalators of at least 4% or were linked to CPI. Our backlog at Digital Realty Trust, Inc.'s share totaled $919 million at quarter-end, an increase of 7% above our prior record. As $119 million of commencements were more than offset by our strong new bookings. Looking ahead to the rest of 2025, we expect to see strong commencements in the next two quarters providing momentum into the end of the year and beyond. For 2026, we currently have $440 million scheduled to commence, while another hundred million plus commences in 2027 and beyond, providing strong visibility for multiyear growth. For context, our 2026 backlog is already more than double the backlog we had for 2025 at this time last year. During the first quarter, we signed $147 million of renewal leases at a blended 5.6% increase on a cash basis, consistent with our four to 6% full-year guidance. Renewals in the first quarter were heavily weighted toward our zero to one megawatt category, $127 million of renewals at a 3.8% uplift, while greater than a megawatt renewals were relatively sparse at only $5 million, with a 4.6% uplift. We remain on track to meet our full-year guidance. For the quarter, churn declined and ended at 1.5%. As for earnings, we reported first-quarter core FFO of $1.77 per share, up 6% year over year, reflecting strong same capital operating results combined with new commencements over the past year. On a constant currency basis, we reported core FFO per share of $1.79 in the first quarter. During the quarter, operating expenses were $0.01 to $0.02 lower than expected due to a slower ramp in repair and maintenance spending following an uptick in the fourth quarter, while property taxes benefited from a 1¢ refund in the quarter. Data center revenue was up 7% year over year as 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 twelve months. Adjusted EBITDA increased by 11% year over year, reflecting the growth in data center revenue combined with expense controls. Same capital cash NOI growth was healthy in the first quarter, increasing by 5% year over year on a constant currency basis driven by 5.7% growth in data center revenue. Moving on to our investment activity. During the quarter, we spent approximately $1 billion on development capex on a gross basis, including our partner share, and roughly $700 million on a net basis to Digital Realty Trust, Inc. We delivered nearly 50 megawatts of new capacity, 83% of which was pre-leased, while we started another 219 megawatts of new projects, highlighted by 200 megawatts in Northern Virginia that is 50% pre-leased. At quarter-end, our data center development pipeline increased to $9.3 billion at a 12.5% expected stabilized yield. In addition, as Andy highlighted, we invested approximately $95 million for a 50% interest in Digital Realty Persama, expanding into a highly connected platform in Indonesia. We are also pleased to announce the formation of our first US hyperscale data center fund, which has the potential to support up to $10 billion of data center investments. In the second quarter, Digital Realty Trust, Inc. expects to contribute a portion of five existing operating assets with an aggregated agreed value of more than $1.5 billion to satisfy the majority of our disposition guidance for 2025. Turning to the balance sheet, we have spent the last two and a half years positioning Digital Realty Trust, Inc. for the opportunity that lies ahead. By deleveraging our balance sheet and bolstering and diversifying our capital sources. Leverage is still well below our long-term target at 5.1 times, while liquidity remained robust at more than $5 billion before considering the capital from our new fund. Early in the quarter, we raised €850 million of 3.875% notes which were used to pay off the £400 million of maturing 4.25% gilts, with the balance used to reduce outstanding balances on our credit facility. This leaves us with €650 million of maturity debt through the rest of 2025. Looking further out, our maturities remain well-laddered through 2035. Moving on to our debt profile. Our weighted average debt maturity was four point five years, and our weighted average interest rate ticked down to 2.6%. Approximately 83% of our debt is non-US dollar denominated, reflecting the growth of our global platform and our FX hedging strategy. Approximately 93% of our net debt is fixed rate, and 96% of our debt is unsecured, providing ample flexibility for capital recycling. Let me conclude with our guidance. We are increasing our core FFO guidance range for the full year 2025 by $0.05 to $7.05 to $7.15 per share to reflect our updated FX assumptions for the full year. The new core FFO per share guidance now aligns with our constant currency guidance. It is worth noting that while our constant currency core FFO per share is trending toward the high end of the range through the first quarter, we have chosen to maintain this guidance range given the heightened degree of macro and geopolitical uncertainty today. The midpoint of our core FFO per share guidance represents approximately 6% year-over-year growth, reflecting the underlying strength in our business balanced by a meaningful step-up in development spend and a substantial reduction in leverage year over year. On a normalized and constant currency basis, we continue to anticipate total revenue and adjusted EBITDA growth of more than 10% in 2025, reflecting the strong underlying fundamentals of our business. In accordance with our updated FX assumptions for the year, we are increasing both our revenue and adjusted EBITDA guidance ranges for 2025 by $25 million, while our G&A assumption increased by $5 million. We are maintaining the rest of our guidance assumptions for 2025. This concludes our prepared remarks. Now we'll be pleased to take your questions. Operator, would you please begin the Q and A session?

So I was wondering, as you factor in the trends that you saw in the first quarter, and coupled with some of the recent commentary surrounding hyperscaler demand and the increased uncertainty we've seen over the last several weeks, how do you see the leasing environment over the next several quarters?

Thanks, John. So we're obviously off to a very strong start to the year, both in the enterprise colo segment and also in hyperscale, and including in the hyperscale, the largest signing we had was signed in the month of March, so not that long ago. Now, the backdrop has certainly changed in just the last few weeks, which has created significant market volatility and a fair bit of uncertainty. But despite this, our pipeline of both customer segments remains very robust. So on the enterprise front, even coming off of now a string of several pretty fantastic quarters, our pipeline is at a record level. And on the hyperscale side of the equation, you can see from what we've disclosed that we have a runway of numerous sites with those large contiguous capacity blocks installed at various locations. I could tell you that in just the last several days, quotes for those large capacity blocks have been requested by customers and are going out across multiple markets. I think it's important, though, to remember something that's a differentiating point about our strategy. One, when it comes to the markets, we have and continue to focus on markets with both robust and diverse demand, so enterprise service providers, cloud availability zones for compute, and now AI, serving vocational and latency-sensitive workloads. And those markets have and continue to see supply constraints. Two, we never lost our focus or eye on the ball when it came to accelerating our enterprise and colo execution on multiple fronts. So you've seen that in the customer wins, the new signings, where we're growing as we highlighted in the prepared remarks, all the way to our latest new country entry with Indonesia. And then lastly, when it comes to hyperscale, we focus on places where we believe we can best serve our hyperscale customers. We're not trying to be all things to all hyperscalers. So, be it our tremendous track record for delivery and operational excellence, having these must-have runways for growth, or that boots-on-the-ground experience, this has really allowed us to support those hyperscale customers when they need us most to solve critical capacity problems, often in our core markets when others simply cannot.

I know there's a lot of uncertainty around this question, but if you could, given the current state of things, if prices and tariffs come through your supply chain, when should we expect to see that in your development costs? And how would you mitigate that? Thank you.

Thanks, Richard, for the question. So first off, I think you have to take a step back as it relates to digital in that question because I don't think the answer is going to be all data center providers are going to be created equal in this category. And you heard from us for several quarters, if not years, we have, call it, long-standing vendor and partner relationships with the vendor-managed inventory programs, and the consistency, building and delivering operating in our markets called keeping our folks at work with consistency, which I don't think I could say that I see at a different data center provider. From our standpoint, based on the current facts and circumstances, which we all know are evolving almost minute by minute, we're seeing a very modest, call it less than 5% impact to potential build costs when it comes to digital. That has a lot to do with how we operate our business. That has to do with our supply chains being both very US-focused as well as, if not US, very Canada and Mexico, and governed under current USMCA carve-outs from tariff implications. So not nothing, but very modest numbers. At the same time, we are not sitting idly. We have been even leading up to the chain of events that have unfolded, been proactively getting out ahead of this. Our supply chain team deserves a lot of kudos for that, in terms of ordering components wherever we could to pull forward components that we need to derisk potential incremental volatility or outcomes that could happen on the tariff front. So I don't think you'd see this really unfold in probably until, call it, several quarters when it comes to actual development cycles. Given what you have today on our under-construction sites and actual contractual orders for equipment. And I do think it's going to be pretty modest assuming there isn't a dramatic change of events to what our current understanding of the tariff implications.

Thanks. Can you provide a little bit of color on the land acquisitions in Atlanta and Charlotte? Both of which are markets where you've had a retail presence but not much of a hyperscale one? I think you've previously been perhaps a little bit hesitant to expand into the US market. What makes these attractive, particularly Charlotte?

Sure, thanks, Ari. I'll toss it to Greg to touch on our expansion of our capabilities in those markets.

Yeah. Thanks for the question. All right. Let me start with Charlotte. Look, I think it's not surprising. I think all investors on the phone know that traditional markets are expanding, and, you know, Charlotte meets our criteria in terms of a target market. Let me remind folks that we've operated in Charlotte for a long time. We have a key connectivity hub in what's called Uptown Charlotte. But now we're seeing availability zones coming in from several of the major cloud providers. So as we see this, you know, we're creating this campus that's consistent with our traditional connected campus strategy, by developing a hyperscale campus that's within 10 miles of a highly connected facility. Just to remind folks again, our facility there has roughly 25 networks, significant cross-connect count, and roughly 40 customers. And we've recently been awarded an on-ramp. We look at that and look at the components of what makes a market competitive and attractive. We really do believe Charlotte is well on its way to being a tier-one market. We have a location that's latency-sensitive, so it checks all those boxes that we tend to like. Also, let me remind you, Charlotte is home to a large number of enterprises, especially in the financial services business and many Fortune 500 companies. And one last point, and then I'll get to Atlanta, is that our site in Charlotte has power available on a very competitive basis, so in other words, it's land with, you know, pressure power timelines, if you will. And most of those points we've made all apply to Atlanta as well. We've purchased a parcel of land that will have a mix between hyperscale and colocation. The colocation facility will be within 10 miles of downtown Atlanta, which we love, given our ownership of 56 Marietta. And as you know, when you look at the underlying fundamentals of a market like Atlanta, there's a lot of vacancies that are very low, 1% or less. Power availability is also in place on a very competitive basis. So when we look at that, we think those are both critical markets for us, and we're really excited to have, you know, between those two projects over 600 megawatts of developable capacity.

Hey, guys. Thanks so much for taking the question. My question relates more to hyperscale and I guess in recent weeks and months, we've been reading more about deeper, more efficient AI models, and I guess, also a little bit more questions around revenue use cases tied to AI. I’m wondering whether, you know, less so macro, but more around recalibration of overall CapEx being invested into AI, whether you're seeing or hearing any evolution in how some of your larger cloud and hyperscale customers are approaching CapEx investment plans. Thanks.

Thanks, Matt. Maybe I'll start off briefly and then kick it over to Chris to talk a little bit about the evolution of the infrastructure and some of the deep-seeking early implications. I think, again, I don't think all hyperscale is equal, and I think it comes back to focusing on markets that have diversity of demand. So serving cloud availability zones and AI being incremental use cases to that. I think it also means making sure you're not in places with numerous cloud availability zones. As we shared in the prepared remarks, the flow of business when one customer may be slowing down, others are pushing ahead. I think you've seen that now in the last, call it, five quarters where we've had robust signings. In the four largest of those quarters, the largest lease each time was signed by a different customer. So four different hyperscalers called front of the pack for us at Digital Realty Trust, Inc., and none of those four are actually our top customer. So further emphasizing the diversity of that demand. But, Chris, why don't you speak a little bit to some of the deep-seeking locations as well?

I appreciate the question, Matt. Yeah. So, you know, no one hardware or software advancement is going to win. So no single model, no single vintage of GPU. It's an amalgamation of multiple capabilities coming together in the market. And I think that's what is represented with DeepSeek. It was a pretty substantial step in efficiencies associated with models coming to market. But you're going to see more of these. And I think what's interesting is the capabilities and ecosystems are driving a new utilization, which is unlocking performance across the overall landscape of infrastructure represented in the market today. I think it's important to really emphasize that we're focused on enabling inference because the second part of your question is around the monetization of AI. Inference is where that monetization will happen, and is also associated with private AI deployments coming into the facility as well. So we're always focused on how we can support the interconnectivity in that broader ecosystem of capabilities coming to market, and that's really what's represented in our portfolio and some of the pipeline that we've referenced in the prepared remarks.

Perfect. Thanks so much for taking the question. Maybe just to start off, Andy, you noted in your prepared remarks that you had the largest lease in the greater than one megawatt category. Could you help us frame just the size of that and what portion of that greater than one megawatt was, quote, unquote, AI related? Thanks.

So, Alex, without going into the nitty-gritty of individual customer contracts, let me frame it as this. We did about $400 million in total signings, and at our share, it was at $242 million. So you can get back into portions flowing into builds or operational capacity that we are delivering or managing on behalf of private capital partners. AI overall is about just over two-thirds, I would say, of our signings. So it's a new high watermark in terms of contributions. Again, as you look, all of those signs again were into our traditional core markets that we've been serving for some time. So certainly, customers are pushing their AI needs into the major markets that also have cloud availability zones. If you look at the composition of AI wins, I would say it's more hyperscale driven than enterprise for this quarter in particular. But if you look at the pipeline we have on the enterprise AI use cases, I would say we've seen a step up in size and quality of pipeline. The deal sizes are not major, but they're growing in size as well as power density. So I think that fits well with where our portfolio could help see these customers scale their infrastructure.

Great. Thanks for taking the question and congratulations on the leasing quarter and kudos to you, Greg, for the fund raise. Just a blast from the past here. We're going back to the Teraco and the Ascenty acquisitions that you did. Could you just give us a reminder in terms of Teraco, if there's an option for the remaining stake and what the thought is there? And then also, an update on Ascenty, and if there's anything that's likely to happen there. Thank you.

Yeah. Sure. Thanks, Michael. I appreciate the kind words. Look. First, in the order of the question, let's go to Teraco. In Teraco, there is a put-call mechanism that may or may not take place, which goes on until 02/2026. There is initially a put period for two years, and then if that's not exercised, there's a call period after that. That's roughly the time period there. But, you know, that business continues to perform exceptionally well, and we couldn't be happier with the investment and the management team there. They really do have a dominant position down there in South Africa. With respect to Ascenty, you know, again, Ascenty is going well. Our partnership with Brookfield is great. Chris Torto and his team continue to execute. We're happy that market remains strong. They've made a lot of progress on the enterprise front, which historically has been more of a hyperscale play. But Chris and the team have been working really hard to adopt Andy's strategy here at Platform Digital. They're doing a great job down there, so, look, I would say, and just as with Teraco, we're very pleased with the team, with the assets, the performance.

Just wonder if you can make a couple of comments. One on the backlog comment you made. I just see you talked about record backlog in enterprise. Is the hyperscale backlog also at record? Or has there been any kind of diminishment there? Then can you maybe just sort of talk about the current environment and whether any pause or kind of activity you're seeing in the current quarter would prevent you from sustaining strong leasing quarters into Q2 and Q3? Thank you.

Hey. Thanks, Jim. So just to clarify the pipeline, we did call out record on the enterprise side. I'm not sure if we're at a necessarily record on the other piece of the equation, but I’ll tell you the speed of where the deals have been moving in that category has been exceptionally fast, including, I think our largest signing last quarter may have been done in record pacing for especially a large deal. As I mentioned, we are actively engaging with customers who are requesting new quotes for those large capacity blocks. You mentioned backlog, which I think I should touch on. We do have a record backlog of signed but not commenced contracts totaling $1.3 billion. Our share is just over $900 million. Those are at attractive rates and long-term returns with escalators, call it either CPI or north of 4% or higher. And we just had a call. If you look at the 2026 component, that stepped up about 40% in just the last quarter, which is really going to help contribute to our algorithm of accelerating our bottom line and generating better, long-term sustainable growth per share.

Hey guys, this is Rob on for Frank. Thank you for taking my question. So you might have touched on this a tad earlier, but what would have to change on your end in order to see a leasing spread dip again? And do you potentially see pricing weakening in any of your markets?

Let's maybe just break that down into two components. In the zero to one megawatt side, we had to, call it, close to 4% cash mark-to-market on the new steel signing side, the new signing component, and they call it the second highest quarter in the company's history off the back of a record quarter back to back. We have positive price action in almost every single one of our markets across the board in that zero to one category. So I don't see any lack of momentum continuing there. And on the larger deal side, we also had positive price movement, which can be seen by the overall rates we were able to achieve in that category. The latter, which being more hyperscale, somewhat comes back to supply-demand dynamics. And when you look at where we've concentrated our bets to support those hyperscale customers, we've really focused on places, like I said previously, that have robust and diverse hyperscale demand. Customers need to put those workloads and grow where they have the ability to have large capacity blocks that have future-proof growth, and where supply constraints do not seem to be relieved very quickly. All those ingredients together in the places where we're supporting hyperscalers seem to keep pricing firm on our behalf.

Thanks. This one probably goes to Greg. Given the volatility in interest rates and equity markets we've seen over the past few weeks, have you seen any change in cap rates for stabilized turnkey data centers? And then if you could just comment too, I think you said $1.5 billion of stabilized assets would go to the new fund. What was the cap rate on those? That'd be helpful for modeling.

Sure. Thanks, Dave. Hope you're well. Well, look, the two points are related. But the answer is, and look, you've seen this, and I've seen this over time. Cap rates are impacted not just by interest rates, but also by growth rates. So I think when you look at the data center space today, clearly cap rates have gone up. But I would also say there's been more than an offset in terms of commensurate growth, if you will. So the answer is we have not seen a meaningful change in cap rates. We see that across the board actually in the different transactions we're seeing in the market; they've remained consistent. Again, rates are higher, but I think people are underwriting greater growth now, so that's the offset. As for the cap rate of the assets that went into the fund, that was, you know, call it high fives cap rate, give or take.

Hi. Thank you for the question. So I had another one related to pricing for new leases. I think, you know, positive trends are mostly broad-based, but especially pronounced in The Americas, greater than one megawatt segment at $250 to $257 per kilowatt. Can you just talk about the drivers of pricing strength on some of your new leases? Whether there were any one-offs or, you know, which markets were these new leases in? Any details on this would be helpful. Thanks.

Thanks, Irvin. So the success recently has been very US-focused because you've seen a compounding of demand from traditional enterprise IT, digital transformation, cloud computing demand, AI training, and the budding of AI inference from hyperscalers. That's been a heavily US-focused phenomenon to date. In the last several quarters, we've captured that in a few markets including Northern Virginia, Dallas, and Chicago. This last quarter was particularly Northern Virginia-led. I do think this phenomenon will continue to globalize, just like cloud computing globalized on the back of data sovereignty over time. You're seeing that in numerous countries looking to really invest and grow AI and digital data center infrastructure. So I think that we are well positioned when that globalization phenomenon starts to bud. But it's what I just described that's really driving the accentuation of pricing in the US in particular.

Great. I appreciate you taking the question. You know, Andy, I think you mentioned that your enterprise funnel was at record levels, if I heard you correctly. So I wanted to dig into the enterprise segment in the less than one megawatt, and I suppose there's some in the larger footprint as well. Obviously, there's been a little concern in the past few weeks with all the tariff and macro noise that there could be some delayed decision-making at the enterprise level. So I just wanted to confirm you're not really seeing that at this point. And I think you've talked about growing your less than one megawatt bookings this year versus last. Just wanted to make sure that's still on track. Thanks.

Thanks, Eric. I'm going to turn it to Colin, but the one thing I just wanted to highlight, I can't recall if we mentioned this, it's phenomenal. It's great to be out of the gate strong in that category, in particular, on the backs of two really strong third and fourth quarters. To put up a number in the first quarter in the zero to one megawatt interconnection, let's call it, is 10% above the pacing we did last year. And last year was a great year overall. But I was going to call Colin to provide some color on what results we saw in the pipeline ahead.

Thanks, Eric. Yeah. As Andy highlighted previously, the demand profile continues to be robust and diverse across the regions, in our segments, global large enterprise and commercial. As Andy quickly highlighted, a quick reminder on Q1 second highest booking quarters to date. That’s a third straight quarter, zero to one megawatt performance, strong contribution, large enterprise in particular, that's 53% of the overall bookings. We saw 16 industry subsegments book over $1 million and a strong interconnection performance, which speaks really to the value of our platform. As it relates to the future pipeline, we have the largest zero to one megawatt pipeline on record. Regarding the overall opportunity creation within the global accounts, we continue to see multiple use cases emerge across network and compute enterprise as 55% of the overall opportunity, and the trend is very much hybrid. On the commercial side, as we define it as a billion and below, there's record new logo pipeline performance. So all underscored with a really strong partner contribution, which about 33% of the overall pipeline. Key use cases and characteristics include hybrid cloud, which continues to emerge. Data localization, which is really driving distributed architecture is becoming prime. And we're seeing early stages of artificial intelligence as part of the overall pipeline. So as it relates to the zero to one megawatt pipeline, we're continuing to see demand across all our markets.

Thanks for taking the question. Just maybe breaking up your thought between hyperscale and more cloud or enterprise demand. You talked about the visibility you have in both segments. Historically, cloud is maybe a little bit more economically sensitive, whereas enterprise is obviously very specific. So I'm wondering just in light of your comments last quarter, where you talked about delayed decision-making. How do you see both of those segments in today's environment? And do you still believe this year is likely a record year? Thanks.

Vikram, maybe I will parse through that here. So at a high level, going back to the last piece where you're saying we had a landmark $2 billion in signings. And within that, great composition, both the zero to one and also greater than megawatt categories. Great, I think, 600-ish new customers added to the fold with great vertical segmentation, imports and exports, and all in all, it’s great to be out of the gate now almost pacing where we were in the first quarter. So we’ve got several innings left in this game for this year, but quite pleased with where we are out of the gates. Maybe I'll let Colin talk a little bit more about the enterprise versus the hyperscale cloud in terms of buying cycles and any potential thoughts related to the macro environment implications.

Sure. Yeah. Thanks for the question. As Andy mentioned, hyperscale demand continues to cement around large contiguous capacity blocks. We’re having active conversations in our core markets where we have available capacity. On the enterprise side, you know, the buying cycle typically is a little bit shorter; we haven't really seen any real changes, frankly, quarter over quarter in terms of timeline to make decisions and execute. That's been pretty solid. As it relates to enterprise and cloud compute.

Thanks and good afternoon. Curious if you could discuss the opportunity to try to compress the timeframe to bring new development online, especially where there may be energy constraints. And within that context, if you're able to shorten this timeframe based on the conversations that you're having with the hyperscalers, do you think that would yield more sales sooner, or based on the timeframes that they're on, are you kind of working on a path that's complementary to their current prospects? Thanks.

Thanks, Michael. So compressing timelines is, I think, remains a key attribute to increasing your win probabilities and better outcomes. There's no question about that. And we're we have been doing that, and we continue to do that on multiple fronts. It's obviously a multileg stool to do that. Having the balance sheet that we've got today with $5 billion liquidity, the commitments in hand for our first fund to fund that growth are key attributes required and allow us to move more expeditiously to seize upon opportunities. Having supply chains set up and having folks on site constructing in a continuous fashion is also a key element as well. Additionally, having our development pipeline, let's call it, at $9.5 billion to date, very highly pre-leased, almost 55% overall, with the lion's share of the unleased play in prime markets like Northern Virginia. That allows us to work more nimbly as well. One of the key attributes that Greg touched on a little bit in a prior question is the competitively advantaged land that we have recently acquired. That has the opportunity to serve customers in the near win windows. So it's the most attractive deals that are available, and that’s a big kudos to our team for finding these opportunities and working with utilities and other partners to seize upon them, to help customers in more critical locations.

Hey, thanks for taking my question, guys. You've disclosed working with a leading Neo Cloud customer in a couple of locations. Can you talk about what sort of demand you're seeing from Neo Cloud more broadly and how you're thinking about them from a new business perspective and a credit risk perspective? Thanks.

So that's correct. We have been supporting and expanding our customer base to support the Neo Cloud universe. We are careful, as we are with almost any customer to make sure we're curating our base and campuses with diverse demand in order to preserve and create long-term value for both us and the customers. That has been something that's been consistent with us for some time now. We've seen demand from those customers, called big and small, and we've won our fair share without being overexposed. In some instances, we're in environments in the markets where we're serving customers where we already have other major customers that sometimes beat those Neo Clouds to the punch because they sometimes move faster or want something that is really critical to them, and we would try to help them. We're rooting for the Neo Clouds, we want to expand this hyperscale customer base and allow numerous technology providers to take advantage of the infrastructure we are providing through their GPUs.

Thank you, Gary. Digital Realty Trust, Inc. led off 2025 with strong results in the first quarter, continuing the momentum we demonstrated in 2024. Demand for data center capacity remains resilient and broad-based, given the strong secular growth proliferation of technology across the globe. Digital Realty Trust, Inc. continues to work to support our customers' growing requirements as evidenced by the substantial growth in our development pipeline and the successful evolution of our funding model. We remain focused on our key strategic priorities and expect success to be realized through the acceleration of bottom-line growth in 2025 and increased visibility of better long-term sustainable growth. Scaling our business across the globe is a tremendous effort, and I am extremely grateful and appreciative of our incredibly talented and dedicated team. I'm excited about the future and remain focused on seizing the opportunities at hand. Thank you all for joining us today.