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    DLR
    Earnings call· Mar 2025(Q1 FY25)

    DIGITAL REALTY TRUST, INC. DLR

    Apr 24, 2025 Source

    Executive summary

    Digital Realty Q1 FY25 — Record Leasing and Backlog Drive Strong Growth

    Digital Realty delivered a robust first quarter, marked by record leasing volumes and a growing backlog, reinforcing confidence in its growth trajectory. The company's strategic focus on diverse markets and a full-spectrum platform, coupled with the successful launch of its hyperscale fund, positions it to meet strong demand while enhancing returns and capital flexibility.

    Highlights

    5

    • Strong overall leasing of $242 million (Digital share) in Q1 FY25, consistent with 2024's record pace.

    • Record backlog of booked not billed leases reached $919 million (Digital share), providing strong visibility for 2025 and 2026.

    • Core FFO per share grew 6.1% year-over-year to $1.77 in Q1 FY25, exceeding expectations.

    • Successful formation of the first U.S. hyperscale fund, securing over $1.7 billion in commitments towards a $2.5 billion target, evolving the funding model.

    • New data center leasing pricing reached a record $244 per kilowatt per month, up 10% from the prior record.

    Concerns

    2

    • Elevated uncertainty and capital markets volatility pose risks, though demand remains strong.

    • Potential build cost impact of less than 5% due to evolving tariffs, though mitigated by supply chain management.

    Guidance & targets

    6
    CategoryTargetConfidence
    Core FFO per share
    $7.05 to $7.15
    high materiality
    High
    Total revenue growth (constant currency)
    more than 10%
    high materiality
    High
    Adjusted EBITDA growth (constant currency)
    more than 10%
    high materiality
    High
    G&A
    increased by $5 million
    medium materiality
    Medium
    Capital recycling
    majority satisfied
    high materiality
    High
    Renewal leases cash uplift
    4% to 6%
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    0 to 1 megawatt plus interconnection
    Second highest quarter for bookings, ahead of last year's record pace. This activity also exceeded the prior 4-quarter average bookings by nearly 10%.
    Leasing bookings: $69 millionInterconnection bookings: $15 millionBookings vs. prior 4-quarter average: up nearly 10%
    		————
    Greater than 1 megawatt category
    Driven by hyperscaler leasing in North America, with strong demand for large capacity blocks. Over the past 5 quarters, $100 million+ leasing volume achieved 4 times with 4 different customers signing the largest lease.
    Leasing bookings (Digital share): $172 millionTotal leasing bookings (100% share): $325 millionLargest lease in Q1 FY25: new record for total annualized rent signed
    		————

    Operational metrics

    58
    Core FFO per share
    $1.77up 6.1% YoY
    Q1 FY25

    Reflecting strong same capital operating results and new commencements.

    Core FFO per share (constant currency)
    $1.79
    Q1 FY25

    On a constant currency basis.

    Operating expenses
    $0.01 to $0.02 lower than expected
    Q1 FY25

    Due to a slower ramp in repair and maintenance spend.

    Property taxes
    $0.01 refund
    Q1 FY25

    Benefited from a refund in the quarter.

    Data center revenue growth
    7%YoY
    Q1 FY25

    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 12 months.

    Adjusted EBITDA growth
    11%YoY
    Q1 FY25

    Reflecting the growth in data center revenue combined with expense controls.

    Same capital cash NOI growth (constant currency)
    5%YoY
    Q1 FY25

    Driven by 5.7% growth in data center revenue.

    Development CapEx (gross)
    $1 billion
    Q1 FY25

    Including our partner share.

    Development CapEx (net to Digital Realty)
    $700 million
    Q1 FY25

    Net to Digital Realty.

    Investment in Digital Realty Bersama
    $95 million
    Q1 FY25

    Expanding into Indonesia.

    Leverage (Net Debt/Adjusted EBITDA)
    5.1x
    Q1 FY25

    Well below our long-term target.

    Liquidity
    $5 billion
    Q1 FY25

    Before considering the capital from our new fund.

    Debt raised
    EUR 850 million
    Q1 FY25

    Used to pay off GBP 400 million of maturing 4.25% gilts with the balance used to reduce outstandings on our credit facility.

    Maturing debt
    EUR 650 million
    FY25

    Through the rest of 2025.

    Weighted average debt maturity
    4.5 years
    Q1 FY25

    As of quarter end.

    Weighted average interest rate
    2.6%
    Q1 FY25

    Ticked down.

    Non-U.S. dollar denominated debt
    83%
    Q1 FY25

    Reflecting the growth of our global platform and our FX hedging strategy.

    Fixed rate debt
    93%
    Q1 FY25

    Of our net debt.

    Unsecured debt
    96%
    Q1 FY25

    Providing ample flexibility for capital recycling.

    New logos added
    119
    Q1 FY25

    Expanding customer base.

    Facilities with 100% renewable electricity
    150+
    Q1 FY25

    Around the world.

    Contracted renewable capacity
    1.5 GW
    Q1 FY25

    Portfolio total.

    AI-related signings
    over 2/3
    Q1 FY25

    Of total signings, new high watermark in terms of contributions.

    Developable capacity (Charlotte & Atlanta)
    over 600 MW
    Q1 FY25

    Across two new projects.

    Enterprise pipeline (0-1MW)
    record level
    Q1 FY25

    Largest 0 to 1 megawatt pipeline on record.

    Enterprise opportunity (overall)
    55%
    Q1 FY25

    Of the overall opportunity, with a hybrid trend.

    Partner contribution to pipeline
    33%
    Q1 FY25

    Of the overall pipeline.

    Cap rate on fund assets
    high 5s
    Q1 FY25

    For the $1.5 billion of assets contributed to the fund.

    Total signings (100% share)
    $400 million
    Q1 FY25

    Second highest in Digital Realty's history.

    Total signings (Digital share)
    $242 million
    Q1 FY25

    Consistent with record pace set in 2024; Andy Power also referred to this as '$240 million plus'.

    Leasing (0-1MW plus interconnection)
    $250 million
    FY24

    Last year's record leasing in this segment.

    Pricing on new data center leasing
    $244up 10% from prior record
    Q1 FY25

    Overall rate, reflecting strength within the greater than 1 megawatt category.

    Leasing (0-1MW plus interconnection)
    $69 million
    Q1 FY25

    Second highest ever behind last quarter's record.

    Interconnection bookings
    $15 million
    Q1 FY25

    Included in 0-1MW leasing.

    Leasing (greater than 1MW, Digital share)
    $172 million
    Q1 FY25

    Reflecting demand for large capacity blocks.

    Leasing volume >1MW (past 5 quarters)
    4x over $100 million
    past 5 quarters

    With 4 different customers signing the largest lease in each of those quarters.

    Fixed rent escalators
    at least 4% or linked to CPI
    Q1 FY25

    More than 85% of bookings included fixed rent escalators.

    Commencements
    $119 million
    Q1 FY25

    More than offset by strong new bookings.

    Renewal leases signed
    $147 million
    Q1 FY25

    At a blended 5.6% increase on a cash basis.

    Renewal leases (0-1MW category)
    $127 million
    Q1 FY25

    Heavily weighted toward this category.

    Renewal leases (greater than 1MW category)
    $5 million
    Q1 FY25

    Relatively sparse.

    Churn
    1.5%
    Q1 FY25

    Declined and ended at 1.5%.

    New capacity delivered
    50 MW
    Q1 FY25

    Despite delivering nearly 50 megawatts of new capacity during the quarter.

    New projects started
    219 MW
    Q1 FY25

    Started another 219 megawatts of new projects.

    Development pipeline (total value)
    $9.3 billion
    Q1 FY25

    Increased to $9.3 billion at a 12.5% expected stabilized yield. Andy Power also referred to this as 'call it, $9.5 billion to date'.

    Development pipeline pre-leased
    63%
    Q1 FY25

    Of total 814 MW, 63% is pre-leased with the lion's share of the remaining hyperscale availability focused in Northern Virginia.

    Green data centers (third-party certified)
    190 MW
    FY24

    Added in 2024.

    Hyperscale fund equity commitments target
    $2.5 billion
    ongoing

    Targeting $2.5 billion of equity commitments from LPs.

    Hyperscale fund equity commitments received
    over $1.7 billion
    Q1 FY25

    Through first closing, placing the company ahead of schedule relative to its year-end target.

    Hyperscale fund interest maintained by DLR
    20% or greater
    ongoing

    To ensure alignment.

    Hyperscale fund total investment support
    $10 billion
    ongoing

    Fund will support approximately $10 billion of hyperscale data center investment.

    Assets contributed to hyperscale fund
    $1.5 billion
    Q2 FY25

    Aggregated agreed value, which will satisfy the majority of 2025 disposition guidance.

    FRA18 data center capacity
    16 MW
    Q1 FY25

    Opened in Q1, powered by 100% renewable sources.

    Singapore renewable energy coverage
    100%
    Q1 FY25

    Achieved for operations in Singapore through a PPA for biomass and other regionally sourced renewables.

    Tariff impact on build costs
    less than 5%
    future

    Modest impact to potential build costs based on current facts and circumstances.

    Enterprise bookings (0-1MW)
    53%
    Q1 FY25

    Of overall bookings in the 0-1MW segment.

    Industry subsegments with >$1M bookings
    16
    Q1 FY25

    In the 0-1MW segment.

    NewCloud customer base expansion
    —
    Q1 FY25

    The company has been expanding its customer base to support the NewCloud universe, being judicious in curating its customer base and campuses.

    Industry KPIs

    3
    MetricValueDetails
    Pricing per kilowatt$244USD/kW/month
    Interconnection revenue$15 millionUSD
    Bookings leasing volume signed$242 millionUSD

    Orderbook & backlog

    6
    Booked not billed leases (Digital share)$919 million2025-03-31

    up 7% above prior record

    Strong new bookings more than offset $119 million of commencements.

    Signed but not commenced leases (100% share)$1.3 billion2025-03-31

    At attractive rates and returns, long-term contracts, attractive escalators.

    Signed but not commenced leases (Digital share)$900 million2025-03-31

    Just over $900 million.

    Backlog scheduled to commence (2026)$440 million2025-03-31

    up 40% since beginning of year

    More than double the backlog for 2025 at this time last year.

    Backlog scheduled to commence (2027 and beyond)$100+ million2025-03-31

    Providing strong visibility for multiyear growth.

    Development pipeline (total capacity)814 MW2025-03-31

    up 170 MW since year-end

    At 100% share, 63% pre-leased with hyperscale availability focused in Northern Virginia.

    Deals & partnerships

    3
    Jakarta-based carrier-neutral data center platformFormation of Digital Realty Bersama

    Entrance into Indonesia, complementing existing APAC footprint.

    Console ConnectStrategic collaboration to expand ServiceFabric reach

    Enriching global connectivity options available to enterprises across PlatformDIGITAL.

    Microsoft AzureAddition of 3 new Azure on-ramps

    On-ramps in Atlanta, Brussels, and Vienna, expanding global relationship.

    Capital programs

    1
    U.S. Hyperscale Data Center Fundunderway$10 billion
    Spent to date: over $1.7 billion
    Funding: Private institutional investors (sovereign wealth funds, pension funds, insurance companies, endowments)
    Start: Q1 FY25

    Benefit: Support up to $10 billion of hyperscale data center investment, enhance returns through fees

    Targeting $2.5 billion of equity commitments, with Digital Realty maintaining 20%+ interest. Seeding portfolio with 5 operating assets and 4 land sites for data center development.

    Risks & headwinds

    2
    Elevated uncertainty and capital markets volatilityCurrent

    Fair bit of uncertainty

    Mitigation: Maintaining guidance range despite constant currency FFO trending high, focus on diverse demand and strong backlog.

    Potential build cost impact from tariffsSeveral quarters out

    Less than 5% impact

    Mitigation: Long-standing vendor relationships, USMCA carve-outs, proactive ordering of components to de-risk volatility.

    What to watch in Q2 FY25

    5

    Hyperscale fund equity commitments

    next quarter
    Currentover $1.7 billion committed
    Targetprogress towards $2.5 billion target

    Why it matters

    Indicates continued success in evolving funding model and expanding capital pool for growth.

    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.

    Q&A highlights

    6

    How do you see the leasing environment over the next several quarters given Q1 trends, hyperscaler demand, and recent uncertainty?

    Despite recent market volatility, the pipeline across both enterprise and hyperscale segments remains robust. Hyperscale deals are moving exceptionally fast, with new quotes actively being requested. The company's strategy focuses on diverse markets and supporting hyperscalers in critical, supply-constrained locations.

    “our pipeline across both of those 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, we have a runway of numerous sites with those large contiguous capacity blocks in sought after locations. And I can tell you in just the last several days, quotes for those large capacity blocks have been requested by customers and are going out across multiple markets.”

    asked by Jon Atkin · answered by Andrew Power

    2 min read5 chapters

    Detailed Narrative

    01

    AI and Hyperscale Demand Dynamics

    The company noted strong, diverse demand for large capacity blocks, with AI-related signings accounting for over two-thirds of new bookings. Hyperscale customer activity is characterized by individual cycles, where some slowing customers are offset by others pushing forward, ensuring consistent interest. The flow of business means that when one customer may be slowing down, others are steaming ahead, as evidenced by four different hyperscalers signing the largest lease in four of the last five quarters.

    02

    Strategic Market Expansion

    Digital Realty is expanding its presence in key U.S. markets like Charlotte and Atlanta, which are evolving into Tier 1 markets with growing cloud provider availability zones and strong enterprise demand. These sites offer competitive power availability and significant developable capacity, with over 600 megawatts across the two new projects. The company's strategy focuses on markets with robust and diverse demand, including enterprise, service providers, cloud availability zones, and AI workloads.

    03

    Global Platform and Connectivity

    The company expanded its global reach by entering Indonesia through a joint venture (Digital Realty Bersama) and launching a new data center in Greece (Heraklion 1), enhancing connectivity between Europe, Asia, and the Middle East. Strategic collaborations, such as with Console Connect to expand ServiceFabric to over 100 new third-party data centers and 75 new cloud on-ramps, and with Microsoft Azure for three new on-ramps, further enrich global connectivity options.

    04

    Sustainability Initiatives

    Digital Realty continues to prioritize sustainable operations, opening FRA18, a 16-megawatt data center, powered by 100% renewables and optimized for AI with advanced liquid cooling. The company also achieved 100% renewable energy coverage for its Singapore operations through PPAs and solar installations, adding to its portfolio of 1.5 gigawatts of contracted renewable capacity and over 150 facilities matched with 100% renewable electricity.

    05

    Supply Chain Resilience and Tariff Impact

    Despite evolving tariff concerns, the company anticipates a modest impact of less than 5% on potential build costs. This resilience is attributed to long-standing vendor relationships, supply chains focused on the U.S., Mexico, and Canada (benefiting from USMCA carve-outs), and proactive component ordering to de-risk potential volatility. Any impact is expected to unfold several quarters out due to existing contractual orders.

    AI-generated summary of the company’s earnings call. Not investment advice.