Digital Realty Trust at Global Communications Infrastructure Conference: Strategic Growth Amid Power Constraints

On Wednesday, 17 September 2025, Digital Realty Trust (NYSE:DLR) presented at the Global Communications Infrastructure Conference, offering insights into its strategic initiatives and growth outlook. The discussion, led by CFO Matt Mercier and RBC analyst John Acker, highlighted robust demand driven by AI, while acknowledging challenges such as power constraints in key markets. The company is optimistic about accelerating growth targets and expanding its geographical footprint.

Key Takeaways

• Digital Realty Trust is experiencing strong demand, particularly from AI-related workloads, contributing significantly to its bookings.
• The company is managing power constraints by expanding into new markets like Charlotte and Atlanta.
• Financial guidance for 2025 projects a 6.5% growth in funds from operations (FFO) per share, up from the initial 5% projection.
• The backlog of $850 million is expected to commence over the next three years, with a focus on maintaining positive releasing spreads.
• Joint ventures and fund structures are key to capturing hyperscale opportunities and balancing portfolio composition.

Financial Results

• Digital Realty Trust has projected a 6.5% growth in FFO per share for 2025, an increase from the baseline 5%.
• The company’s backlog stands at $850 million, with significant commencements planned for 2025 through 2027.
• Releasing spreads are anticipated to be between 4% and 6%, with stronger performance in the greater than one megawatt category.

Operational Updates

• Digital Realty Trust has 3 gigawatts of operational capacity and 750 megawatts under construction, with 60% pre-leased.
• The company is addressing power constraints by expanding into Charlotte and Atlanta and managing supply chain lead times effectively.
• Internationally, power and land constraints are present in Singapore and Japan, while France and Frankfurt have favorable conditions for development.

Future Outlook

• AI-related workloads are expected to drive development, with 30% to 70% of bookings linked to AI.
• The company is focusing on North America for AI deployments, while also pursuing opportunities in other regions.
• Digital Realty Trust aims to maintain a balanced portfolio through joint ventures and fund structures, avoiding over-reliance on hyperscale deployments.

Q&A Highlights

• CFO Matt Mercier emphasized the company’s ability to achieve high occupancy rates upon capacity delivery.
• The strategic focus remains on core markets with strong connectivity options, aligning with the needs of major cloud providers.

Readers are encouraged to refer to the full transcript for a detailed understanding of Digital Realty Trust’s strategic insights and financial outlook.

Full transcript - Global Communications Infrastructure Conference:

John Acker, Analyst, RBC: I’m John Acker with RBC. Welcome to our next session. With me for the next 20 minutes of Q&A is Matt Mercier, Chief Financial Officer of Digital Realty Trust. Welcome, Matt.

Matt Mercier, Chief Financial Officer, Digital Realty Trust: Thanks, John. Great to be here.

John Acker, Analyst, RBC: Maybe kind of high level, we’ll hit on a lot of topics. Talk a little bit about your power bank, what it is that you potentially could sell, demand to fill it, and then we’ll get into other topics. Obviously, you’re a global company, so the sizes of those bubbles in your presentation differ by region, but kind of hit the high points of where you’ve got power that you could potentially deliver and sell.

Matt Mercier, Chief Financial Officer, Digital Realty Trust: Yeah, thanks, John. I was just listening to the panel this morning. Obviously, power is a major topic these days in the data center industry. I think we’ve, Digital Realty Trust is in a great position, currently to be able to continue our growth and deliver capacity. Setting the stage a little bit today, we have roughly 3 gigawatts of capacity in operations. That’s across our, call it our consolidated portfolio, as well as looking through our joint ventures and now more recently, the hyperscale fund that we’ve put together. In terms of our development and land bank, we’ve got close to 750 megawatts under construction today. That’s roughly 60% leased, so we’ve got around 40% of that available. Most of that that’s unleased is delivering really in the back half of 2026 and into 2027.

Sitting right next to that, we’ve started construction also on around 600 megawatts of shell, so that’s basically getting us ready for the next wave of data center development that we’ll put into production and really put us in queue for continued deployments that’ll come online also likely in that 2027 into 2028 area, to continue those deliveries and continue our growth algorithm, which I’m sure we’ll get into shortly.

Last but not least, we’ve got roughly 3.5 gigawatts of land capacity available, and that’s spread across our global portfolio, which is augmented with some land banking that we’ve done in Charlotte and Atlanta, call it some extensions of our existing markets, as well as material capacity in Northern Virginia, Chicago, Dallas, and other key markets across the globe, including some of the major flat markets in Asia, as well as flat markets in EMEA, as well as key markets in APAC as well.

John Acker, Analyst, RBC: Talk about 60% pre-commit of your turnkey development under construction. Confidence level in that and getting to 100%, obviously the economics have to work for you based on the demand that you’re seeing, confidence in that remaining 40%, and then confidence in the other gigawatts where it’s maybe just shell or land bank. How do you see demand at a broad level?

Matt Mercier, Chief Financial Officer, Digital Realty Trust: I think it’s safe to say that demand has been and continues to be robust. I’m sure people have heard even more recently the news around what’s been happening in the resurgence of AI-related demand and takedown that’s happening across not only our customer base, but across the industry. Our confidence levels remain very high. We typically, by the time we deliver capacity, we’re 90% plus occupied, if not close to 100% on that delivery. We feel very good about the 40% remaining in our construction pipeline and the leasing prospects behind that, in addition to extending into that 600 megawatts that we’ve got of shell, plus a lot of discussion going on even today around a good portion of the land capacity that we have available. We continue to see very robust demand.

I think most of the customer focus continues to be around the nearest term delivery capacity that’s available, which we have some, again, as I mentioned, towards the end of 2026, even more as you get into 2027 and 2028. That’s a large part due to the significant backlog that we’ve got in place today that’s well north of $850 million as a result of the leasing that we’ve done over the last, call it, 12 months and into 18 months, going back to 2024, where we signed over $1 billion of gross bookings in that year. Continue that into the first quarter of this year, where we signed our largest deal that we’ve done to date. We continue to see robust demand across our pipeline and across our major markets.

John Acker, Analyst, RBC: Maybe sticking a little bit with the power theme, forget about just the pure land bank at the moment, but everything that’s under development, whether it’s shell or turnkey, are you noticing, is it as expected or are there occasionally stumbling blocks, or maybe sometimes things are being alleviated faster when it comes to sort of transmission, capacity to power those sites?

Matt Mercier, Chief Financial Officer, Digital Realty Trust: Yeah, I wouldn’t say that there’s, it feels like sometimes a little bit of a one step forward, one step back. As I’m sure all the participants here heard, power continues to be a material constraint. I would say that on the positive news, we are in Northern Virginia, which is the largest data center market in the world. We are now getting closer to that release of capacity, which I would say is the positive news, given that that was one of the first markets to come under power constraints. We’re starting to see that release of capacity for us and for other participants, again, starting towards the back half of 2026, into 2027 and 2028. That’s the good news. I would say the counter to that is it’s not coming at the sort of the velocity I think that we would all want.

There, we’re starting to see some relief in those choke points. In other cases, there’s markets like even here in Chicago where power constraints are becoming, I would say, slightly, slightly tougher. That’s where we’ve looked to balance and find expansions in markets where we’ve had, call it, a smaller presence to be able to bring on land bank, where we’ve been able to procure power capacity right away. The two markets that I’m referring to specifically are Charlotte and Atlanta. Atlanta is already, call it, becoming or near, near a major market today. Charlotte, I would say, is an emerging market, but one that we’ve had presence in, where we’ve had a downtown highly connected facility that we’re also expanding. It’s a market where there’s significant GDP, there’s significant enterprise concentration led by financial services, as well as energy and manufacturing.

That’s how we’ve been working to augment some of the constraints and finding, I would say, markets that we have a presence where we can expand, expand our connected campus strategy, where there’s somewhat supply constraints that still remain and give us a diversity of demand across our global, our global product set.

John Acker, Analyst, RBC: Anything outside the U.S. to kind of highlight that’s particularly interesting or notable, you know, across APAC or EMEA on the power theme, or is it kind of going as expected?

Matt Mercier, Chief Financial Officer, Digital Realty Trust: I would say generally it’s going as expected. I mean, our largest, I would say our largest two markets in APAC, Singapore and Japan. Singapore is both, I would say, power and land constraints. We continue to work with the local government on how they allocate our power and soon to be a next round, I think, coming out around that. Japan, we continue to find and source land both in Tokyo and Osaka and continue our development plans there. We’ve been able to keep up with power constraints, if any, in that market. We’re continuing to build out in Seoul, which I would say is a market that we haven’t seen power constraints. We’ve gotten a lot of traction in terms of building out our first network neutral facility there, part of expanding our enterprise and connectivity offering across the globe. We feel pretty good about our APAC positioning.

EMEA, I would say, is similar to dynamics in North America. There’s a number of countries, particularly the largest, that continue to remain under some level of power constraint. Amsterdam, I mean, Dublin, Dublin’s kind of the easiest one that’s been in that position for a number of years. Frankfurt, we have a campus that’s under development. We have, I think, multiple years of development capacity there, and we’re able to secure power well ahead of constraints that have been starting in that market, as well as France, which I think probably currently right now is one of the countries with the most available power, given that they’re generally more of an exporter of power, considering the nuclear that they’ve had available to them for the last number of years.

John Acker, Analyst, RBC: Kicking into the earnings, and what earnings means would be FFO per share, you know, kind of algorithm, then you have a backlog that converts, so there’s a schedule around that. There are also renewals, which I think is going to be a tailwind and perhaps an increasing tailwind between now and end of the decade. As you sort of put all of that in the mixer, how does that inform what you’ve obviously formally guided to for 2025? Just qualitatively, how do you think that kind of translates into the medium term?

Matt Mercier, Chief Financial Officer, Digital Realty Trust: Yeah, I would say this year is a pretty good template for what we can expect or some of the key ingredients needed to continue the growth that we’re seeing, even in 2025. We, you know, I had the pleasure two years ago, I think I was here, basically first year in the CFOC and I had to give two-year guidance. That was always an enjoyable experience. At the time I said, for 2025, we expect 5% growth. I think there were some that believed, some that didn’t. Fast forward, here we are today. We guided towards this year, started the year out at 5%. We’ve actually accelerated that since then. We’re now close to 6.5%, based on our last updated guidance for this year for bottom-line growth.

That’s a bit of a, call it an acceleration of what we also talked about in terms of baseline 5% improving going forward. I would say the ingredients there are that we, a couple of things, as you mentioned, starting off, we have a significant development pipeline underway. As I mentioned, 750 megawatts today, 60% pre-leased. A number of the leasing that we’ve done over the last year is creating a significant backlog for us that’s around $850 million today. A little over $200 million of that is going to be commencing over the course of the second half of 2025, $450 million of that into 2026, and then a little over $100 million into 2027. That’s really set us up for, in particular in 2026, continuing this growth algorithm.

On top of that, we’re seeing, because of the overall favorable dynamics around supply and demand, pricing continues to remain robust across the majority of our global markets. We’ve guided towards 4% to 6% releasing spreads. We’re well on target for that this year. I think the thing to point out on releasing spreads for our business is you gotta look at it in terms of our two segments. We have our zero to one and interconnection segment, or call it our retail colocation, which is shorter term contracts, more CPI driven in terms of those renewal spreads. They’re usually in the 3% to 4% area. That usually is the largest weighting within a calendar year of our renewal spreads, so you’re always going to be weighted towards that ultimately outcome.

On top of that, we have our greater than a megawatt, which is where we’re seeing probably the more robust leasing spreads. As you noted, the potential in the future years as those expiring rates start to step down. We see an improving profile for releasing spreads going forward, particularly in that greater than a megawatt category, which roughly on a given year’s 8% to 10% of our roll, with another, call it 20% to 30% coming from our zero to one. Great opportunity to cross our portfolio, positive releasing spreads, great development pipeline in place that’s pre-leased, really setting us up for multiple years of bottom-line growth.

John Acker, Analyst, RBC: I asked about surprises you are seeing or not on the power delivery side. Anything around supply chain, long lead time items that’s notably different, or is it kind of steady state around those sorts of...

Matt Mercier, Chief Financial Officer, Digital Realty Trust: I would say there’s not, hasn’t been really any material change, you know, again, somewhat unfortunately, at least in the near term. Long lead equipment items continue to be, especially ones around electrical. So transformers, switch gears, anything extending into the utility side, those are 12 to 18, sometimes 24 months out. Generators are another one in that category. Significant lead times have to really plan ahead for capacity that you’re delivering within a market. I think the good news is that we’ve been at this delivery of data center capacity of, you know, in the 500 plus megawatts annually for the last several years. We had time during COVID where we were able to modify and sort of perfect our supply chain and our relationships with our vendors to be able to bring that equipment to our various global markets on time.

We feel very confident around our development pipeline, in particular the 750 megawatts that we have underway today, plus the 600 megawatts of shell that we have. In fact, already started looking at pre-ordering for some of the land that we expect to bring online over the next, call it, 12 to 18 months.

John Acker, Analyst, RBC: As you look at the demand signals around AI, cloud, social networking, you have this kind of geographic mix because you are a global company. Andy has said in the past that the vast majority of AI deployments have been in the U.S., and I think a lot of people think that might continue to be the case for the next several quarters at least. You do have development projects underway outside the U.S. How do we think about the regional mix in terms of its revenue contribution to the company a couple of years out? Does it stay the same or does it shift a little bit just based on the delivery timeline that you have?

Matt Mercier, Chief Financial Officer, Digital Realty Trust: Yeah, two, three years ago, the majority of our development was actually in EMEA. That’s now shifted in the last, call it, year to 18 months to where more of our development’s in North America. That obviously coincides with the growth we’ve seen in AI deployments. As we mentioned on pretty much every one of our earnings calls over the last almost two years now, we’ve seen a significant amount of our signings come from AI-related workloads, usually in the range of 30% to sometimes 70% of our quarterly bookings. Put that on average around 50%. As we start to look forward, as that backlog starts to commence and we see the revenue from that, we’ll start to see more of that weighting towards North America, given that’s where a higher weighting of those deployments are going to be landing. We’re still seeing AI workloads in EMEA.

We’ve done some larger deals in London, in Belgium, but they’re just not the same size and don’t grab the same attention and headlines that you’ve seen in North America of late, not only from us, but across the industry.

John Acker, Analyst, RBC: Within North America and within the U.S., there are as many of these gigawatt plus projects just north of the state border here where we are in Chicago and then in places like Texas. A lot of those are in remote areas, particularly some of the Texas ones. Do you feel like you’re missing out, and is there any impact on demand in primary markets as you read about these announcements that others are deploying capital into?

Matt Mercier, Chief Financial Officer, Digital Realty Trust: Yeah, we don’t feel that we’re missing out. I think that goes back to our strategy as a business, which I’d highlight two things. One, we are able to provide the full product spectrum. That goes from multiple megawatts all the way down to single cages and cabinets, satisfying our 5,000 plus customers across 300 data centers and 50 markets. On top of that, we have a view that we’re focused on core major markets where major clouds have developed and where there are availability zones that have come into play, where we have connectivity options available to that wide range of customer base. We see a broad and diverse set of demand that I think stands the test of time and ultimately allows us to be able to pursue what is one of our primary goals, which is continuing that compounding bottom-line per share growth.

We think we have plenty of capacity available in those markets to satisfy demands across our customer set and it puts us in a great position to be able to do that for several years going forward. As our view is, over time, those major cloud markets are going to be the ones where most of the inferencing starts to happen, as you rely on and connect with the major data sources that are available. It starts to feed back to where most of the major GDP and eyeballs are, which is how most of the clouds developed over time as well.

John Acker, Analyst, RBC: Last question. You have a lot of joint ventures, and you got the hyperscale fund. Brookfield, Blackstone, Reliance, Mitsubishi. I’m sure I’m missing a few. You put that, and then particularly on the development side with the fund structure that you’re developing, how should we be thinking about that in terms of some of the earnings math going forward?

Matt Mercier, Chief Financial Officer, Digital Realty Trust: I think first, in terms of maybe just to hit on the why around our joint ventures and our fund strategy. As we’ve seen, the opportunity set here, especially within the hyperscale, what we call the greater than megawatt, is very large. Being able to satisfy that within just the public environment and public capital markets, we’d see to be very challenging. In order for us to capture that, we’ve also tapped into private capital, and that’s through our joint ventures, through the fund that we’ve just established, and being able to bring in some of that capital to match the demand and the return profiles that they’re seeking. On top of that, back to our strategy, we don’t want to be overly indexed towards hyperscale in terms of the portfolio composition for our business.

We’ve made great strides within our zero to one megawatt category, culminating even this last quarter with record signings in that category of over $90 million, coming off of what two years ago was around $50 million a quarter, now approaching more of a run rate of $70 million. We feel very good about that business and creating a stable financial profile and growth algorithm component for us going forward.

John Acker, Analyst, RBC: I’m sure there’s a lot we didn’t talk about, but we are out of time. I want to thank you for the Q&A.

Matt Mercier, Chief Financial Officer, Digital Realty Trust: Thanks, John. Thank you.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.