Digital Realty Trust(DLR) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported strong overall leasing in Q1 2025 of $242 million, consistent with a record pace set in 2024, driving the backlog of booked not billed leases to a new record of $919 million [7][39] - Core FFO per share grew by 6.1% year over year, reaching $1.77 per share, with a constant currency basis reporting $1.79 per share [42][43] - Data center revenue increased by 7% year over year, and adjusted EBITDA rose by 11% year over year [44] Business Line Data and Key Metrics Changes - Leasing in the zero to one megawatt plus interconnection segment was $69 million, marking the second highest ever, while greater than one megawatt leasing totaled $172 million, largely driven by hyperscaler leasing in North America [12][38] - The backlog at the company's share totaled $919 million at quarter-end, a 7% increase above the prior record [39] - More than 85% of bookings included fixed rent escalators of at least 4% or were linked to CPI [39] Market Data and Key Metrics Changes - The company saw strong demand across all regions, with North America hyperscale bookings being the strongest [19][20] - Pricing for new data center leasing reached a new milestone at $244 per kilowatt per month, up 10% from the prior record [16] - The company increased its development pipeline by another 70 megawatts since year-end, totaling 814 megawatts, with 63% preleased [19] Company Strategy and Development Direction - The company continues to execute its full spectrum meeting place strategy, focusing on markets with robust and diverse demand, including enterprise service providers and cloud availability zones [9][63] - The formation of the first US hyperscale fund aims to support up to $10 billion of data center investments, enhancing returns and reducing reliance on any single capital source [28][30] - The company is expanding its global footprint, including new entries into markets like Indonesia and the launch of a new data center in Crete [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in 2025 growth targets, supported by a record backlog and a 40% increase in the 2026 backlog since the beginning of the year [10][39] - Despite market volatility and uncertainty, the company maintains a robust pipeline across both enterprise and hyperscale segments [60][61] - The company anticipates strong commencements in the next two quarters, providing momentum into the end of the year and beyond [40] Other Important Information - The company achieved 100% renewable energy coverage for operations in Singapore and continues to expand its portfolio of green data centers [33][34] - The company reported a weighted average interest rate of 2.6% on its debt, with 93% of its net debt being fixed rate [51] Q&A Session Summary Question: Outlook on leasing environment given recent hyperscaler demand trends - Management noted a strong start to the year with robust pipelines in both enterprise and hyperscale segments, despite recent market volatility [60][61] Question: Impact of pricing and tariffs on development costs - Management indicated a modest impact of less than 5% on potential build costs due to supply chain management and proactive ordering [70][72] Question: Insights on land acquisitions in Atlanta and Charlotte - Management highlighted the strategic importance of these markets, noting existing connectivity and the presence of major cloud providers [78][80] Question: Changes in CapEx investment plans among hyperscale customers - Management emphasized the diversity of demand and noted that while some customers may slow down, others are pushing forward with their plans [88][90] Question: Current backlog status and leasing activity - Management confirmed a record backlog of signed but not commenced contracts, with strong activity expected to continue [112][114] Question: Pricing strength for new leases - Management attributed pricing strength to robust demand from traditional enterprise IT, digital transformation, and AI training, particularly in the US [129][130]