Digital Realty Trust (NYSE:DLR) Conference Transcript

Digital Realty Trust (NYSE: DLR) Conference Summary Company Overview - Company: Digital Realty Trust - Date: September 17, 2025 - Speaker: Matt Mercier, Chief Financial Officer Key Points Industry Context - The data center industry is experiencing robust demand, particularly driven by AI-related workloads, which account for approximately 30% to 70% of quarterly bookings, averaging around 50% [7][24]. Capacity and Development - Digital Realty currently operates approximately 3 gigawatts of capacity and has 750 megawatts under construction, with 60% pre-leased [4][17]. - An additional 600 megawatts of shell capacity is being developed for future data center projects, expected to come online between 2027 and 2028 [5][17]. - The company has 3.5 gigawatts of land capacity available across its global portfolio, with significant expansions in key markets such as Northern Virginia, Chicago, Dallas, and major Asian markets [6][17]. Demand and Leasing - The company has a backlog exceeding $850 million, with over $1 billion in gross bookings signed in 2024 [9][17]. - Confidence in leasing the remaining 40% of the construction pipeline is high, with expectations of 90%+ occupancy upon delivery [7][17]. Power Constraints and Market Dynamics - Power remains a material constraint in the industry, but there are signs of relief in major markets like Northern Virginia, with capacity expected to be released starting in the second half of 2026 [10][11]. - In contrast, markets like Chicago are facing increasing power constraints, prompting the company to seek expansions in areas like Charlotte and Atlanta, which show significant economic potential [11][12]. Regional Insights - In the APAC region, Singapore and Japan are key markets, with ongoing development and power sourcing efforts [13]. - EMEA markets, particularly Dublin and Frankfurt, are also under power constraints, but the company has secured power for its developments ahead of these constraints [14]. Financial Performance and Guidance - Digital Realty has updated its growth guidance for 2025 from 5% to 6.5%, supported by a strong development pipeline and favorable supply-demand dynamics [16][17]. - The company anticipates 4% to 6% leasing spreads, with a distinction between shorter-term contracts and larger megawatt leases, which are expected to yield higher renewal spreads [18][19]. Supply Chain and Equipment - Long lead times for equipment, particularly electrical components, remain a challenge, with some items taking 12 to 24 months to procure [21]. - The company has adapted its supply chain during the pandemic to ensure timely delivery of data center capacity [21][22]. Strategic Positioning - Digital Realty's strategy focuses on core major markets with significant cloud development, ensuring a diverse customer base and capacity to meet demand [26][27]. - The company is leveraging joint ventures and private capital to capture opportunities in the hyperscale segment while maintaining a balanced portfolio [28][29]. Conclusion - Digital Realty Trust is well-positioned for continued growth in the data center industry, driven by strong demand, a robust development pipeline, and strategic market expansions. The company is navigating power constraints and supply chain challenges while maintaining a focus on financial stability and growth.