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] Market Data and Key Metrics Changes - The company saw strong demand across all regions, with North America being the strongest for hyperscale bookings [19][20] - Pricing for new data center leasing reached $244 per kilowatt per month, up 10% from the prior record, reflecting strength within the greater than one megawatt category [16] Company Strategy and Development Direction - The company continues to evolve its funding model, having formed its first US hyperscale fund, which is expected to support approximately $10 billion of hyperscale data center investment [28][30] - The company is focusing on markets with robust and diverse demand, particularly in enterprise service providers and cloud availability zones, while also addressing the needs of hyperscale customers [62][66] 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] Other Important Information - The company opened a new 16 megawatt data center powered by 100% renewable sources, continuing its leadership in sustainable building practices [31][32] - The company has reached 100% renewable energy coverage for operations in Singapore and has installed solar on its facilities [33] 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 of components [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 among hyperscalers and noted that while some customers may slow down, others are pushing forward [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 into Q2 and Q3 [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]