DLR - NYSE

Good afternoon. And welcome to the Digital Realty Trust, Inc. First Quarter 2025 Earnings Call. Please note this event is being recorded. During today's presentation, all parties will be in listen-only mode. Following the presentation, we will conduct a question and answer session. Callers will be limited to one question and we will aim to conclude at the top of the hour. I would now like to turn the call over to Jordan Sadler, Digital Realty Trust, Inc.'s senior vice president of public and private investor relations. Jordan, please go ahead.

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 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 one 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 and executing across platform digital in the quarter. 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 slower pause 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 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 $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 2Q. Customers continue to see significant value in contiguous capacity in core markets that can support multiple use cases. Network optimization to hybrid clouds to artificial intelligence. While it is important to acknowledge the risk posed by elevated uncertainty, capital markets 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 the major markets around the world. This quarter, bookings were strongest North America hyperscale, but we are seeing demand from all regions and for both products. To meet this growing demand, we increased our development pipeline by another 70 megawatts since year-end 814 megawatts at a % 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. Is 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 is 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

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%. Posted strong leasing, results, and increased the capacity under development by another 26%. Despite delivering nearly 50 megawatts of new capacity during the quarter. A great start to the year. We signed aggregate leases representing nearly $400 million of annualized rent. At a % 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 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 was 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, currently have $440 million scheduled to commence. While another hundred plus million 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. 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 spend 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 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 preleased. While we started another 219 megawatts of new projects highlighted by 200 megawatts in Northern Virginia that is 50% preleased. 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 which will 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 was used to pay off the £400 million of maturing 4.25% gilts. With the balance used to reduce outstandings 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 5¢ 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. 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 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 and 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?

We will now open up the call for questions. In the interest of time and to allow a larger number of people to ask questions, callers will be limited to one question. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question is from John Atkin with RBC Capital Markets. Please go ahead.

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 for a very strong start to the year. Both in the enterprise colo segment and also in hyperscale and including in the hyperscale that 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 certainly created significant market volatility and a fair bit of uncertainty. But despite this, our pipeline of bull 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 installed after locations. I could 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. I think it's important, though, to remember something that's a different differentiating point about our strategy. So one, when it comes to the markets, we have and we 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 we continue to see experiencing 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.

The next question is from Richard Cho with JPMorgan. Please go ahead. I know there's a lot of uncertainty around this question, but

the best you could, given the current state of things, If prices and tariffs kinda come through your supply chain, when should we expect to see that in your development costs? And how would you kinda mitigate that? Thank you.

Thanks, Richard, for the question. So first off, I think you gotta take a step back as it relates to digital in that question because I don't think the answer is gonna be all data center providers are gonna 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 was at a different data center provider. For 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 Mexico and Canada, 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 owes 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 in under construction have called actual contractual orders for equipment. And I do think it's gonna be pretty modest assuming there isn't a dramatic change of events to what our current understanding of the tariff implications.

The next question is from Ari Klein with BMO Capital Markets. Please go ahead.

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

Sure. Thanks, Ari. I'll toss it to Greg to 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 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. Me just remind folks. We've operated in Charlotte for a long time. We have the 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. And, just to remind folks again, our facility there, we have I think it's north of roughly 25 networks, significant cross-connect count, roughly 40 customers. Know, 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 is is is well on its way to be a tier one market. We have a location that's a latency-sensitive location. So it, you know, checks all those boxes. That we we tend to to like. Also, let me remind you, Charlotte you know, is home to a large number of enterprises especially in the financial services business and many of the Fortune 500 companies. And one last point, and then I'll get to Atlanta, is that our site in Charlotte you know, has power available on a very competitive basis. So I guess another way to say it is 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. You know, we're we're we we've purchased a a parcel of land. That's gonna have a a mix between hyperscale and loc colocation. The colocation facility will be within 10 miles downtown Atlanta, which we love, obviously, given our our ownership of 56 Marietta. And as you know, when you look at the underlying fundamentals of a market like Atlanta, you know, there's a lot of the vacancies are very low. 1% or less. Power, you know, same thing. It's the power is 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.

The next question is from Matt Niknam with Deutsche Bank. Please go ahead.

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 deep seek more efficient. AI models, and I guess, also a little bit more questions around revenue use cases tied to AI. And so 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 then kick it over to Chris to talk a little bit about the evolution of of the infrastructure and and some of the deep sea early implications. I think again, I don't think all hyperscale is equal, and I think it comes back to focus on markets that have diversity of demand. So serving cloud availability zones, and AI being incremental use cases to that. I think it also makes sure you're not in places with numerous cloud availability zones. As I as we shared in the prepared remarks, the the the flow of of business when one customer may be slowing down, others are called steaming 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 four of those 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 call 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 you know, are gonna win. So no single model, no single, you know, vintage of GPU It's an amalgamation of multiple capabilities coming together in the market. And I think that's what was represented with DeepSeek. It was a a pretty substantial step in efficiencies associated with models coming to market. But you're gonna 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 know, landscape of infrastructure represented in the market today. I think it's important to really emphasize that we're always focused on enabling inference because the second part of your question is around the monetization of AI. And so inference is where that monetization will happen and also associated with private AI deployments coming into the facility as well. So we're always focused on how can we 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.

The next question is from Waters with Bank of America. Please go ahead.

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

So so, Alex, without going into the the nitty gritty of individual customer contracts, let me frame it as this. So we did about $400 million total signings, %, and our share was at two forty plus. So you can kinda get back into portions flowing into builds or operational capacity that we are delivering or and managing on behalf of private capital partners. AI overall is about just over two-thirds, I would say, of our signings. So a a a a 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 pushing their AI needs into the the the the major markets that also have cloud availability zones. The you look at the composition of AI wins, I would say more hyperscale driven than enterprise 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 a step up in size and quality of pipeline. The deal sizes when that Obviously, not major deals, but they're 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.

The next question is from Michael Elias with TD Cowen. Please go ahead.

Great. Thanks for taking the question and congratulations on the leasing quarter and kudos to you, Greg, for the, for getting the fund rate. 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 kind of what the thought is there? And then also, an update on on Ascenty, and if there's anything that's likely to happen there. Thank you.

Greg, you wanna hit both of us? Yeah. Sure. Thanks, Michael. Appreciate the kind words. Look. First, in the order of the question, let's go to Terraco. In Terraco, there is in 02/1926. There is a there's a put call mechanism that may or may not take place. And then that goes on. You know, it's originally it's a put period for two years. And then if that's not exercised, there's a call period after that. So that's halfway through '26. I may be a quarter or so off. But that's roughly the time period there. But, you know, look, I think, you know, that business continues to perform exceptionally well. And, we couldn't be happier with the investment in 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. You know, partnership with Brookfield's 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 down there. Historically, that was a more of a hyperscale play. But Chris and the team have been working really hard You know, they've adopted, you know, Andy's Andy's strategy here at Platform Digital. And they're doing a great job down there. So, look, I would say and and and just as with Teraco, we're very pleased with the team, with the assets, the performance. So and, you know, that there's there's no there's there's no rights for for or anything like that. So hopefully, that answers your questions.

The next question is from Jim Schneider with Goldman Sachs. Please go ahead.

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 diminution there? Then can you maybe just sort of talk about the kind of current environment and whether you know, any pause or any kind of activity you're seeing in the current quarter would prevent you from sort of sustaining strong leasing quarters into q q two and q three. Thank you.

Hey. Thanks, Jim. So just to I think pipeline just to and I'll I will touch on backlog because I think it's important, or Mac and and amplify that. So 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 are have been exceptionally fast, including, I think, our largest signing last quarter may have been done in record pacing for especially for a large deal. And as I mentioned, that had the end of response to the first question, we are actively engaging with customers who are requesting new quotes for those large capacity blocks. You did ask you did mention backlog, which would probably should touch on as well. I mean, we're we do have a record backlog of signed but not commenced contracts. $1.3 billion in total. Our shares just over $900 million. Those are at attractive rates and returns, long-term contracts. Attractive 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 gonna help contribute to our algorithm of accelerating our bottom line and generating better, long-term sustainable growth per share.

The next question is from Frank Louthan with Raymond James. Please go ahead.

Hey guys, this is Rob on for Frank. Thank you 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 releasing spread dip again? And do you potentially see pricing weakening in any of your markets?

The so let's maybe just well, break that down into into two components. In the in the zero to one megawatt side, we had to call it close call it close to 4% cash mark to markets on the new steel signing side, the new signing component, and they call it 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 can see that by the overall rates we were able to achieve in that category. And that the the latter that 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 has robust and diverse hyperscale demand. Customers need to put those workloads and grow. Where they have the ability to have land large capacity blocks that have future-proof growth, and where supply constraints do not seem to be really being relieved to a great extent rapidly. Which all those ingredients together in the places where we're supporting hyperscaler seems to keep pricing firm on on our behalf.

The next question is from David Guarino with Green Street. Please go ahead.

Thanks. This one probably go 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. Was the cap rate on those? That'll be helpful for modeling.

Sure. Thanks, Dave. Hope you're well. Well, look, the two points are related. But look, the answer is and 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. Right? So I think when you look at 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 change in cap rates that's meaningful. In fact, know, 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. With respect to the cap rate on the it's a little north of a billion 5. Of the assets that went into the fund. That was, you know, call it high fives. Cap rate, give or take.

The next question is from Irvin Liu with Evercore ISI. Please go ahead.

Hi. Thank you for the question. So I had another one related to pricing for new leases. Yeah. I I think, you know, positive trends are mostly broad-based, but especially pronounced in The Americas. Greater than one megawatt segment at two hundred fifty fifty two fifty seven 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 new leases were in. So, you know, any details on this would be helpful. Thanks.

Thanks, Ervin. So the 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 and and the budding of AI inference from hyperscalers. And that's been a heavily US-focused phenomenon to date. We have in the last several quarters, captured that in a few markets including Northern Virginia, Dallas, Chicago. And this last quarter was particularly Northern Virginia led. I do think this phenomenon is will continue to globalize. Just like cloud computing globalized on the back of data sovereignty. Over time. And you're seeing that for numerous countries looking to really invest and and 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 it's what we I just described really driving the the accentuation of pricing in the in The US in particular.

The next question is from Eric Luebchow with Wells Fargo. Please go ahead.

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. So I wanted to dig into the you know, the the the enterprise segment in the the less than one megawatt, and I I suppose there's some in the largest larger footprint as well. Obviously, there's been a little concern to just just in the past few weeks with all the the tariff and macro noise. 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 gonna turn turn it to Colin But the one thing I just wanted to highlight, I can't recall if we mentioned this, It's it's it's phenomenal. It's 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. The, let's call it, is 10% above the pacing we did last year. And last year was a great year. Overall. But I was gonna call in a little bit provide some color on 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 just 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 six 16 industry subsegments book over $1 million and a strong interconnection performance, which speaks really 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, you know, 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, hybrid cloud 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 really across all our markets.

The next question is from Vikram Malhotra with Mizuho. Please go ahead.

Thanks for taking the question. Just maybe breaking up your thought between sort of hyperscale and more cloud or enterprise demand you talk about the visibility you have in both segments from the perspective of historically, cloud is maybe a little bit more economically sensitive where versus maybe on enterprise, it's 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 those segments in today's environment? And and just if if you still believe this year is a is likely a record year. Thanks.

Vikramad. So maybe parse through that here. So at a high level, going back to last piece, were you're saying we we had a a landmark $2,024,000,000,000 dollars in signings. And within that, great composition, both the zero to one and also greater than megawatt. Great, I think, 600 ish new customers. To the fold. Great verticals, segmentation, imports and exports. So all in all, great. And to be out of the gates now, almost pacing where we were on on a on in in the first quarter is is a great start. Now we got we got several innings left in in this game for this year, but quite pleased where we are out of the gates Maybe I'll let Colin talk to 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 really cement around large contiguous capacity blocks. So we're having active conversations you know, frankly, in our core markets where we have available capacity. On the enterprise side, you know, the buying cycle, you know, typically is is a little bit shorter that 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.

The next question is from Michael Rawlings with Citi. Please go ahead.

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

Thanks, Michael. So the compressing timelines is 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. And it obviously, it's it's a multileg stool to do that. Having the balance sheet that we've got today with, call it, $5 billion liquidity, The the commitments in hand for our first fund to fund that growth are key is a key attribute required and allows 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 a key element as well. And having now our development pipeline, let's call it 9 and half billion dollars to date, very highly preleased, call it, almost 55% overall, with the lion's share of the unleased play in in the prime markets of, like, Northern Virginia. That that allows us to call it you know, work more nimbly. As well. And then lastly, these I would one of the key attributes that Greg touched on a little bit in a prior question is the land that's been recently acquired that has been competitively advantaged land. That has opportunity to serve customers in the near win nearest windows. So things that are are most attractive, not that is a big kudos to our team finding these opportunities, working with utility working with other partners to seize upon them, to essentially help customers in more critical locations. Like we have been doing and delivering the results you've seen in the last several quarters.

The next question is from Nick Del Deo with MoffettNathanson. Please go ahead.

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 is more broadly and how you're thinking about them from a new business perspective and a credit risk perspective? Thanks.

So that's that's correct. We have been we have supported we have been expanding our customer base to support, the Neo Cloud universe We are can tell you we're obviously being judicious like we are with almost any customers to make sure we're curating our base and campuses with diverse demand, to preserve and create long-term value for us and the customers That is that and that's that has been something that's been consistent with us for some time. We've seen demand from those customers, called big and small, and and we've I said, won our fair share of that without being overexposed certainly. And 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 NeoClouds to the punch. Because they sometimes move faster or want something that is really critical to them, and we would try to help them. And we try to help all of our customers. So I can't say that the neoclouds have climbed the ranks with us some of our other customers have rapidly climbed. Then last but not least, I some of them, not all, but have been tremendously successful to date. And we're rooting for them. We we wanna expand the hyperscale customer base. We wanna expand all of our customer base and allow numerous technology providers to take advantage of of the infrastructure they are providing through their GPUs and so on.

This concludes the q and a portion of today's call. I'd now like to turn the call back over to President and CEO, Andy Power, for his closing remarks. Andy, please go ahead.

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 at hand. Thank you all for joining us today.