Digital Realty Trust Inc (DLR) 2025 Q4 法說會逐字稿

Good afternoon and welcome to the Digital Realty fourth-quarter 2025 earnings call.

Please note that this event is being recorded.

(Operator Instructions)

I would now like to turn the call over to Jordan Sadler, Digital Realty's Senior Vice President of Public and Private Investor Relations. Jordan, please go ahead.

Thank you, operator. Welcome, everyone, to Digital Realty's fourth-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&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 further discussion of risks related to our business, see our 10-K and subsequent filings with the SEC.

This call will contain certain 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 take-aways from our fourth-quarter results:

First, we posted $1.86 of core FFO per share in the fourth quarter and $7.39 for full-year 2025, up 10% over 2024. Our initial guidance for 2026 implies nearly 8% bottom-line per share growth at the midpoint, despite outperforming our original 2025 guidance by almost 500 basis points.

Second, we concluded our second consecutive year with more than $1 billion dollars of total bookings at 100% share, leaving us with a record backlog of nearly $1.4 billion at 100% share. We also posted another record quarter of 0-1 Megawatt, plus Interconnection bookings, a record year in 2025, as our team demonstrated its resolve to meet our goal to double digital.

Lastly, we ended the year with over $3.2 billion of LP equity commitments to our oversubscribed inaugural close-end fund, marking our official entry into the private markets and evolving Digital Realty's funding strategy to support the growth of Hyperscale data center capacity.

With that, I'd like to turn the call over to our President and CEO, Andy Power.

Thanks, Jordan. Thanks to everyone for joining our call.

2025 was a pivotal year for the data center industry and for Digital Realty. Data centers moved firmly into the global spotlight, as AI adoption accelerated, cloud platforms continued to scale, and power became the industry's primary constraint.

Against that backdrop, the Digital Realty Team delivered exceptional execution. We closed the year with record financial performance, exceeding the full-year guidance we laid out last February and finishing ahead of the targets we set for ourselves across revenue, EBITDA, and core FFO per share.

Just as importantly, the strategy we articulated over the last several years focused on a global, full-spectrum, and connectivity-rich platform and operational excellence with disciplined capital allocation is clearly gaining momentum.

Throughout 2025, demand remained robust across our full product range. Our leasing reflected that breadth. For the second consecutive year in our history, Digital Realty signed over $1 billion dollars of new leases, with a $1.2 billion of bookings in 2025, representing a pace that is nearly 70% above the average bookings achieved over the preceding five-year period.

Our 0-1 Megawatt, plus Interconnection, product set continued to outperform and take share, posting nearly [340 million] of bookings, easily a four-year record; and 35%-plus above 2024 levels, as customers sought proximity, scale, and dense connectivity in the critical Tier 1 markets that we serve.

This segment benefited from the continued expansion of PlatformDIGITAL into 31 countries and 56 markets at year end, as well as the evolution of our product set. Our high-density Colocation offering enables customers to deploy more compute in the same footprint, while maintaining efficiency and reliability.

ServiceFabric adoption also accelerated meaningfully during the year, now enabling access to over 300 cloud on-ramps and more than 700 interconnected data centers, globally, further strengthening the network effects of PlatformDIGITAL. These dynamics help drive a robust inflow of new logos, with nearly 600 added for the second consecutive year.

(inaudible) megawatt bookings got off to a great start early in the year, when we signed the largest lease in the company's history. Momentum continued through the fourth quarter with solid Hyperscale activity across our footprint, particularly in the Americas. On a 100% share basis, Hyperscale leasing exceeded [800 million] in 2025, highlighting the underlying strength and durability of Hyperscale demand.

Also, in 2025, we saw early but encouraging customer adoption of our private AI exchange platform, a growing set of AI-driven networking use cases that enable enterprises to connect the compute, data, and models privately and dynamically across clouds, campuses, and partners.

By leveraging the scale of our Interconnection portfolio, customers are beginning to move beyond static architectures to support low-latency, secure, and cost-efficient AI inference workflows that span multiple environments. With inference expected to scale in 2026, we see continued expansion of these private AI exchange use cases as a durable driver of Interconnection demand.

Building on this momentum, our data and AI strategy is centered on delivering AI-ready infrastructure in the Tier 1 metros, where performance, adjacency, and sovereignty matter most. Our roadmap positions us to meet accelerating inference demand with pre-installed liquid cooling capacity, higher-density deployments, and a unified platform that provides the coverage, capacity, connectivity, and control enterprises require for long-term AI execution.

Finally, we continue to expand our footprint in the APAC region. Last March, we expanded into Indonesia through a joint venture that owns a robust connectivity hub in Jakarta. In January, we announced our continued Southeast Asian expansion, with the acquisition of one of Malaysia's most highly connected data centers. Together, these investments further strengthen our presence in fast-growing APAC markets and extend the reach of PlatformDIGITAL into regions where digital demand is accelerating.

We continue to believe that not all data centers are created equal. Different types of data centers can be thought of as different tools for different jobs. Our portfolio is largely focused in locations that matter most to our customers and their stakeholders.

Interconnection hubs in or near where clouds and data converge create network effects, making the platform more valuable for every participant. The value generated by these network effects, together with our ability to support Hyperscale requirements and higher-power density workloads, underscores the advantage of Digital Realty's Connected Campus approach.

The key to these network effects is Interconnection. Digital has continued to enhance the value that we provide through both physical and virtual products available at our data centers.

Customers can use this connectivity to connect to others within the same data center via Cross Connect or another data center across the globe via ServiceFabric and everything in between. Customers can connect with their business partners in our data centers and expand their connectivity when they add sites or deepen their integration with cloud, data, and AI ecosystems.

The importance of this connectivity grows as enterprise AI and use of inference accelerates. Inference thrives where data and networks meet. Our position in major (inaudible) population and GDP centers, together with our robust and diverse connectivity, makes us particularly well-positioned to host and scale inference workloads, as enterprises continue to operationalize AI.

The introduction of ChatGPT a few years ago and the ensuing race between Gemini, Claude, Grok, and others marked the beginning of a new chapter in the digital age, one defined by the convergence of AI, cloud, data, and Interconnection at a global scale.

Cloud platforms continue to grow at remarkable rates, even at their extraordinary scale, underscoring the depth and durability of this demand. Looking ahead, cloud and AI demand are expected to continue to compound, with AI-specific services growing even faster, as generative and inference workloads become embedded directly into business processes.

We're positioned for the next phase of infrastructure enablement, where enterprise AI demands infrastructure that behaves like the cloud: reliable, secure, and always-on. As cloud and AI demand scale, the combination of power availability and ability to execute have become the defining constraints across global digital infrastructure, shaping the timelines for how new data center capacity comes online.

In most of our core markets, new supply will continue to arrive gradually, as both generation and transmission upgrades continue. Hyperscalers are increasingly making leasing decisions based on who can secure and deliver power capacity on a predictable schedule. As a result, customers are prioritizing operators with verified visibility into the future supply of power and a track record of on-time or, even, accelerated delivery.

Digital Realty continues to leverage its global footprint, 20-plus year track record, and 5-gigawatt power bank to position incremental capacity for development in some of the world's most power-constrained markets.

Before I move on, let me highlight a few recent wins that demonstrate how customers across the globe are using the connectivity in our data centers to deploy critical workloads to create value for their enterprise:

A technology services company and new logo is leveraging PlatformDIGITAL in four US locations to create a distributed AI inference-ready ecosystem to support advanced artificial intelligence workloads for a growing enterprise demand.

A leading technology and communications company is expanding its footprint to two additional European markets on PlatformDIGITAL to enable network-optimized platforms, leveraging the interconnected digital infrastructure to reach customers faster and at scale.

A global industrial technology and engineering company based in Germany and a new logo for PlatformDIGITAL is enabling advanced data analytics and AI initiatives, leveraging the high-performance digital ecosystems available in our Dallas data center.

A leading European AI company and a new logo for Digital Realty is deploying an edge inference node on PlatformDIGITAL, leveraging the network and emerging AI ecosystem available on our Paris campus.

A leading multinational manufacturing company is expanding its footprint on PlatformDIGITAL to enable advanced data and AI workloads, leveraging high-density and interconnected digital infrastructure available on our Seoul campus.

These wins demonstrate the continued momentum of our enterprise offering and the value of deploying critical workloads within our connected global communities.

With that, I'll now turn the call over to our CFO, Matt Mercier.

Thank you, Andy.

As Andy noted, 2025 was a transformative year for Digital Realty. Over the last 12 months, we posted record financial results and saw a meaningful acceleration in top- and bottom-line growth.

In the fourth quarter, Digital Realty, again, posted strong double-digit growth in revenue and adjusted EBITDA, reflecting the momentum in our 0-1 Megawatt, plus Interconnection, business; commencements from our substantial backlog; strong releasing spreads; modest churn; and continued strong growth in fee income.

We achieved these strong results while keeping our leverage below 5 turns and maintaining significant liquidity to invest in data center projects across our 5-gigawatt runway of buildable IT capacity.

Core FFO per share grew by 8% year over year, while leasing posted a top 5 quarter in DLR history, with the 0-1 Megawatt, plus Interconnection, category setting a new quarterly leasing record.

During the fourth quarter, we signed leases representing $400 million of annualized rent at 100% share or $175 million at Digital Realty share.

Demand for data center capacity continues to be robust, both for larger capacity blocks to support growth in cloud and AI; and smaller but also scaling Colocation capacity, which often supports enterprise digital transformation workloads. Data center supply remains tight, especially within our footprint. New leasing activity was particularly strong in the Americas, representing 65% of DLR's share of bookings in the quarter.

Our 0-1 Megawatt, plus Interconnection, products (inaudible) continued its strong momentum, posting a new leasing record of $96 million, 7% higher than the previous record set in 2Q of '25. Over the course of 2025, we've averaged $85 million of quarterly leasing in this category, a reflection of our growing value proposition and the consistency of our team's efforts. Leasing was driven by regional records in North America and EMEA, led by strength in the smaller 0-500-kilowatt deal tranche.

The 0-1 Megawatt, plus Interconnection, product continues to be a significant focus for Digital Realty. We are encouraged by the growing strength and momentum of our execution.

Interconnection bookings approached last quarter's record at $18.9 million. Strength in the quarter was driven by record bookings in EMEA and momentum within our ServiceFabric product. Interconnection booking stepped up noticeably in the second half of 2025, resulting in a 22% increase year over year.

We signed $78 million within the Greater Than A Megawatt category at our share, with continued strength in the Americas. Pricing in this product segment remains strong, averaging over $180 per kilowatt in the quarter. Manassas, Virginia was the top contributor to the Greater Than A Megawatt signings this quarter, while hyperscalers also signed leases in Tokyo, Osaka, and Paris.

Availability across our nearly 800 megawatts in-place portfolio in Northern Virginia remains very limited, with strong demand queuing for the 300 megawatts of capacity we are readying for delivery in the 2027 to 2029 timeframe.

Our total backlog reached a record at year end of nearly $1.4 billion, reflecting the robust data center fundamentals we are experiencing and our ability to capitalize on this demand. Many remain understandably focused on the pro rata share view of leasing that we have historically provided to enhance transparency and modeling but we feel it is important to understand the complete picture.

The total backlog is a better representation of the aggregate demand being captured across PlatformDIGITAL; and, in turn, an important driver of the overall economics enjoyed by DLR shareholders.

While the evolution of our funding strategy has impacted some items on our income statement, bottom-line economics remain paramount. This evolution has enabled us to more than double our fee income in 2025, while expanding our operational reach to better serve our customers.

At Digital Realty's share, the backlog was $817 million at quarter end, as $209 million of commencements exceeded the $175 million of new bookings in the quarter. Looking ahead to 2026, we have $634 million of leases scheduled to commence somewhat (inaudible) throughout this year; and then, another $152 million of leases to commence in 2027 and beyond.

Our backlog provides us with strong visibility and predictability.

During the fourth quarter, we signed $269 million of renewal leases at a blended 6.1% increase on a cash basis. As usual, renewals were heavily weighted towards our shorter 0-1 Megawatt leases, with $175 million of Colocation renewals at a 4.3% uplift. Greater Than A Megawatt renewals totaled $88 million at a robust 8.1% cash-releasing spread, driven by deals in Northern Virginia, Chicago, and Dublin. For the full-year 2025, cash-releasing spreads were 6.7%, surpassing the high end of our guidance range.

As for earnings, we reported core FFO of $1.86 per share for the fourth quarter, up 8% year over year, reflecting strong core growth and continued growth in fee income, offset by seasonally higher expenses. For the full year, we reported core FFO per share of $7.39, just above the high end of our guidance range and 10% higher than 2024.

Same-capital cash NOI growth continued to be strong in the fourth quarter, increasing by 8.6% year over year, driven by 8.2% growth in data center revenue. On a constant currency basis, same-capital cash NOI rose 4.5% in the quarter. For the year, same-capital cash NOI also grew by 4.5%, consistent with our most recent guidance increase.

Before going any further, I want to inform you of some upcoming disclosure enhancements that we expect to make beginning next quarter to better align our reporting with how we manage the business. While we have long provided both power and square footage metrics in our disclosures, we will be transitioning the focus toward power-based metrics.

Key elements of our reporting, including leasing and development activity, are already based on power. We will now bring occupancy in line by highlighting it on an IT load basis.

Based on square feet, same-capital and total portfolio occupancy ended the year at 83.7% and 84.7%, respectively. However, on an IT load basis, same-capital and total portfolio occupancy was approximately 91% and 89%, both improving over 50 basis points year over year.

We believe that this update will better reflect the dynamics of our current business, while providing a clearer and more consistent view of utilization across our platform.

We also expect to make some modest updates to our quarterly supplemental, pruning unnecessary data points. The objective is to retain our industry-leading transparency, better align reporting with how the business is managed, and improve the overall digestibility of the supplemental.

Moving on to our investment activity, we spent $930 million on development CapEx in the quarter, net of our partner share, bringing full-year spend to $3 billion. Recurring CapEx increased to $169 million in the seasonally high fourth quarter.

During the quarter, we delivered about 90 megawatts of new capacity, 75% of which was pre-lease; while we started about 135 megawatts of new data center projects, increasing our total development to 769 megawatts under construction. At quarter end, our gross data center development pipeline underway stood at just over $10 billion, at an 11.9% expected stabilized yield.

For the full year, we delivered approximately 289 megawatts of new capacity, reflecting strong execution across our development pipeline, in support of customer demand, even as labor and supply chains got tighter.

During the fourth quarter, we sold a non-core facility in Dallas for $33 million and acquired land near Portland, Tel Aviv, and Lisbon for future development.

Turning to the balance sheet, we were active, again, in the capital markets during the fourth quarter, raising EUR1.4 billion in a dual-tranche green euro bond offering. The first tranche was for EUR600 million at 3.75% due 2033. The second tranche was for EUR800 million at 4.25% due 2037.

We used a portion of the net proceeds to redeem EUR1.075 billion of euro bonds, carrying a 2.5% coupon that was scheduled to mature in January. The 160 basis points spread between the new and redeemed issues will cause a modest interest expense headwind, starting in the first quarter of 2026.

Our only remaining debt maturity for 2026 is a modest CHF275 million note that matures late this year. Looking further out, our maturities remain well-laddered through 2037.

Leverage remained at 4.9 times, well below our long-term target of 5.5 times; while balance sheet liquidity remained robust at nearly $7 billion. In addition, we maintained approximately $15 billion of dry powder to support Hyperscale data center development and investment through our private capital initiatives.

As a quick update surrounding the fund, by year end, we had closed $3.225 billion of LP equity into our inaugural closed-end fund. We anticipate the final $25 million closing, prior to our next call. In late December, we contributed another 40% stake in the 5 stabilized seed assets into the fund, increasing the fund stake to 80% and resulting in an additional $427 million of net proceeds to digital.

We are excited to move on to the next stage of our private capital strategy, as we work to further support the perpetual capitalization of Hyperscale data centers, alongside Digital Realty's public shareholders. Our balance sheet is positioned to fuel growth opportunities for our customers around the globe, consistent with our long-term financing strategy.

Let me conclude with our guidance. We are establishing a core FFO guidance range for the full year of 2026 of $7.90 to $8 per share. The midpoint represents 8% year-over-year growth, reflecting underlying strength in our business, balanced by a continued ramp in new investment spending that is geared toward extending our runway for growth.

On a normalized and constant currency basis, we anticipate total revenue and adjusted EBITDA growth of more than 10% in 2026. Same-capital cash-on-line growth is expected to grow 4% to 5% on a constant currency basis.

We also expect cash renewal spreads of between 6% to 8%, with upside partly mitigated by the high mix of 0-1 Megawatt leases expiring, together with a portion of fixed rate renewals, and our Greater Than a Megawatt portfolio.

Power-based occupancy should improve by another 50 basis points to 100 basis points from the approximate 89% at year-end 2025.

CapEx, net of partner contributions, are expected to rise to between $3.25 billion and $3.75 billion. with development yields expected to remain in the double digits.

We will also continue to recycle capital, with $500 million to $1 billion of dispositions in JV capital expected this year.

This concludes our prepared remarks. Now, we will be pleased to take your questions. Operator, would you please begin the Q&A session?

Certainly. We will now open the call for questions.

Eric Luebchow, Wells Fargo.

Great. Andy, I think you mentioned early in the call that you're starting to see a pick-up in activity, especially in the Americas with some of the hyperscalers. Maybe you could just give us the landscape of what the bookings conversations look like earlier in the year? Are you starting to see the hyperscalers look a little bit further out for power than they perhaps did in 2025? Maybe just give us a rundown of some of the key campuses where you're starting to see that large footprint demand.

Sure. Thanks, Eric.

We're really happy about how we ended this year, which was a great year, overall; back to back, north of $1 billion of total signings, third highest total signings; fourth quarter, $400 million. Hyperscaler was a big contribution to that.

The same suspects are recurring here:

Northern Virginia, incredibly sought-after capacity. Beyond that, you have the likes of Charlotte, Atlanta, Dallas, as called the top of the list here in the Americas.

Although, in particular, towards the US, I can tell you that we're seeing more globalization of the demand. You can see that in the contributions from Europe having a bigger contribution in Greater Than A Megawatt category.

As the year went on and as we continue to move into 2026, what is quite attractive is the diversity of demand.

As it relates to our numbers, I think, now, we're at seven straight consecutive quarters where our largest signing is from a different hyperscaler or a different customer, excuse me. When we're looking at customers; looking at those larger capacity blocks in those markets I just referenced, I can tell you is (inaudible) you're seeing more customers coming (inaudible) for the same-capacity box.

There's consistent -- looking at the front end, the (Operator Instructions) deliveries are the most popular. But they are looking out a little further on the horizon than they had, certainly, 6 months or 12 months prior.

Michael Rollins, Citi.

Andy, you mentioned earlier the expectation for inference to scale in 2026. I'm curious if you could put some further context around what you're seeing and what that's going to look like, both for the industry and for Digital Realty.

Sure. Thanks, Michael.

I think we're seeing that play out on both our Hyperscale and our enterprise business. Certainly, on the hyperscalers, the desire for the (inaudible) capacity blocks in the cloud zonal markets that I just referenced is certainly becoming more and more of a priority. I can tell you the dialogue on the designs with our customers, the latest evolutions of cloud is a mix of cloud and AI inside the (inaudible) building.

They're looking at cooling -- that's a mixture of air and liquid -- and blending both use cases together in the same locations, which certainly leads towards inference.

I believe we're still a good ways away from what inference -- really, called proliferates -- in a corporate enterprise context that have the same service-level agreements and uptime requirements that cloud exists today.

But, as AI rolls into much more, call it, time-sensitive and critical applications, be it robotics, health and safety, research and science, I don't see why the use of AI is not going to be just as critical as cloud data.

In our enterprise business, we had a fantastic year, capped in multiple records; record fourth quarter. It was up over the prior record two quarters before that. We were, call it, 35% higher in the enterprise category year over year. Great mix of new logos and existing customers.

Now, two quarters doesn't make a trend but I would say the contribution within that 0-1 Megawatt and Interconnection category was, again, call it, just over 18%, nearly 19%.

You're seeing more enterprises coming to Digital Realty and think about AI use cases. But I think this is going to be a long-tail demand to evolve.

Timothy Horan, Oppenheimer.

The Hyperscale has given a pretty incredible guidance for CapEx next year. It looks like the outlook is not going to change much.

What does that mean for the business model? Are you seeing any bottlenecks that are really -- impede your growth, at all, or any changes to bottlenecks? What do you think that means for your pricing power in the next few years?

Thanks, Tim. Maybe I'll let Colin expand on the hyperscaler demand. And then, I'll come back on the bottlenecks.

But what's happening here is less of the waves of one customer ramping and another customer called on the sidelines. There's more consistency and diversity of the customers all seeking capacity.

You're seeing that in the commitments to accelerating their build-out for this infrastructure from their earnings calls.We're seeing it in terms of their interest growing for our large capacity blocks.

But I'll let Colin touch on that. I can circle back to some of the bottlenecks we're seeing in the business.

Thanks, Andy.

Tim, regarding the interest from our Hyperscale partners, you saw a strong contribution in Q4, in terms of performance; our largest booking being nearly 100 megawatts. I can tell you, wherever we have large capacity blocks, whether it's Northern Virginia or Paris or Osaka, Tokyo, Atlanta, or Charlotte, there's keen interest from our Hyperscale partners to deploy the infrastructure.

Really, over 2026 through 2028, we're seeing continued conversations, where we have that continuous blocks of capacity for our Hyperscale partners.

Again, as Andy has talked about multiple times: This is not just AI. This is also zonal cloud deployments that continue to be resilient, as it relates to the demand profile that we're seeing.

Just on the bottlenecks and the cost equation, Tim, there's no question, this race for scaling critical digital infrastructure, support cloud computing, and support AI comes with a cost.

It's a cost of labor. It's a cost in our build costs.

Listen, we pick our spots to where we think we have the greatest value to our customers -- those hyperscalers, in particular. That's based on our track record, our supply chain, our runway for growth. That's been able to garner significant interest and attractive rates and, ultimately, returns.

Richard Choe, JP Morgan.

I just wanted to ask about the recurring CapEx and capitalized leasing costs. It had a big move-up for this year, from [300-ish] last year to over [400]. What's going on there?

Thanks, Richard. I

think you're referring to -- just to be clear, I think you're referring to and then, versus '26 guide. We came in for '25 -- we came in a little bit light, in terms of where we were in guidance towards the low end, despite our typical Q4 pick-up.

And so some of that increase for '26 is a carryover of some of the projects that didn't complete in '25. The rest is basically us looking to continue to build out our space and improve our portfolio for what has been a strong enterprise leasing, as we've talked about for -- as part of the call, in terms of putting up records in our 0-1.

I would say it's all within, I think, around 7% of our revenue, which is, I think, pretty well in line with where the industry is on that metric.

Irvin Liu, Evercore ISI.

Congrats on a nice set of numbers and your outlook.

Just in the context of your Greater Than -- 5 gigawatts of development capacity, any sense on the timing of when we should see this capacity become available for lease? If I'm comparing your development life cycle on page 25 of your supplementals versus a quarter ago, I think the implied availability seems to be consistent on a quarter-over-quarter basis. Should we be expecting a step-function increase in sellable inventory, as we progress through the year?

Thank you, Irvin, for the kind words.

That schedule is consistent like conveyor belt of activity. We are delivering great projects often ahead of schedule for our customers. I think that's another defining reason our customers are picking us in this environment, where it is not easy to bring on infrastructure.

At the same time, we are greenlighting suites into, now, a record [$10-plus billion] of projects underway at attractive double-digit returns. We're activating shells. We're adding all the way to the left of that schedule with incremental land capacity.

And so we are continuing to, call it, replenish as fast as we deliver, if not faster. Something in one column can very expeditiously move to the right column, i.e., activating the new shell on land that is pad-ready or going live with suites and shells that either are completed or underway; and, obviously, leasing and delivery and so on.

I would not interpret anything on that schedule other than we'll continue to accelerate our run rate for growth, for, yes, both our enterprise customers that are a small [amount] of those megawatts but, certainly, our Hyperscale customers that are seeing those large capacity blocks in numerous markets around the world as very attractive.

Ari Klein, BMO Capital Markets.

Following up on 0-1, how much of the strength in that business do you think is from share gains versus underlying demand strength?

And then, curious you expanded the lens a little bit, (inaudible). Does it look any different? Maybe, how are deal sizes evolving? Do you think that increases with enterprise AI adoption or inference?

Thanks, Ari. I'm going to have Colin (inaudible) unpack that answer for you.

I appreciate the question.

Just quick reminder, record quarter in Q4; it's three of the last five record quarters in 0-1.

Strong contributions on the channel side, which is really driving that business forward. Strong contributions from new logos, which was really a big piece of the pie.

As it relates to your question on the demand cycle, as well as taking market share, we are unquestionably taking market share with our focus around execution. We started the year saying this is a big part of our good market. We're successful in that.

Undoubtedly, the ability for us to deliver high, contiguous capacity in a mixed-density environment, where we're seeing more and more enterprises have larger pieces of their pie and high-density oriented solutions, is absolutely a core part of our value proposition.

They also have commented consistently (inaudible) the ability to support the full spectrum of capabilities. So cabinet suite, hall, building is significant across a global scale because that's where they have to serve their needs.

It's really effective, supported by a strong Interconnection story, which we -- again, second highest quarter on record. That's coming together, produces results and consistency that (inaudible) we've seen now quarter over quarter.

And then, Ari, your -- two other pieces of your question:

We're always dissecting the bands here of business. Obviously, the trend has been to larger capacity blocks. You've certainly seen that up in the Hyperscale level. But, also, it's playing out in a smaller level in enterprise, more power density.

All these things, I think, are incremental wind to our sales to take more market share, which has been playing out for some time over the last several quarters.

If you look at just, like, the last eight quarters at, let's call, it 1 megawatt to 3 megawatts, you probably average, like, up to $10 million of GAAP that could fall in that category. But it's ranged. It's been as low as, like, just under $2 million. It's been as high as, called, $15 million or $16 million.

There's always scenarios where an enterprise customer wants north of a megawatt to land with digital. There's definitely been a gradual densification and increase in the size of the deal bands.

Frank Louthan, Raymond James.

Great. Thank you.

If we look out past '26, there's a fair amount of capacity coming on in the industry in '27 and '28. I just wanted to see what your thoughts are on how that might affect your bookings and demand.

And then, how far out have you secured the labor for your capital growth that you have under contract now? Thanks.

Frank, going in reverse order, anything that we're essentially building, we've called -- got some type of security around workforce, supply chain, et cetera. That is certainly the entirety of that $10-plus billion under construction projects, as well as shells that may not be part of that live data hall delivery piece of the equation.

It's the labor. I will confess, it's getting more challenging by the day. I think we're a great partner to work with, given our consistency. We just didn't show up yesterday to build a data center. We've been doing this for years. We try to bundle our work for our customers. We try to make it consistent so they go from one building on our campus to the next. And so I think that makes us a very attractive partner for the vending landscape.

When we look at '27 and '28, we're not seeing a tremendous amount of competitive unleashed capacity. We are seeing that those '27's are pretty exceptional and sought after for our customers, with multiple customers seeking those capacity blocks. I think '28 is going to be at that same level of attractiveness.

The thing to remember here, Frank, is we're probably one of the few in the industry actually taking a little bit more risk in the development of this' and getting pad-ready, long-land, greenlighting shelves, and even greenlighting suites before we have a customer in hand.

Most of all the other private capital folks are waiting for that lease to get signed, right? Because that lease secures the financing and the lion's share of the dollars of the project, right? That is accrued to our benefit because customers have come and said, I need this desperately, can you help me? We're able to deliver that because we didn't wait for them to say, here's the income I leased way, way back in time when you would have had it started.

I think we're still looking at an outlook here that is attractive: demand, rational -- and rationed supply, and great places where we can help our customers.

Nick Del Deo, MoffettNathanson.

Hey. Thanks for taking my question.

There have been a couple of high-profile data center transactions recently. Very attractive valuations, to the extent that we can tell, based on info that's leaked out. Debt securitizations from private players imply really rich valuations, too.

Do you think there's a meaningful disconnect between public and private data center valuations? If you do, are there steps that you can take to narrow or capitalize on any gap? Like, lean on your private capital initiatives harder?

Thanks. Why don't I let Greg give his view on that answer? I've got my own view. We'll see if it's the same.

Sure. Thanks for the question, Nick.

Look, I think there's a couple things you have to look at.

One is the mix of the asset base because where this pricing really becomes distorted, it depends on the asset that's being purchased; how much of it is, for example, land versus cash-generating asset. That obviously is going to skew the multiple.

That's not necessarily a disconnect between public and private market pricing. It can just be the mix of assets, if you will.

But we would agree. We think our valuations continue to be strong. But, look, I think what's driving that, when you look at the underlying dynamics of the business, right now, you're looking at a demand profile that's going to -- expected to increase 2.5 times to 3 times over the next five years. You're looking at a supply environment -- and this is across the globe -- whether it's power, whether it's (inaudible), whether it's zoning, whatever it may be, it's severely constrained.

Those things are gonna drive value for existing product in the market. Look, it's hard to say that there's a big disconnect because you haven't had, for example, one stabilized asset versus another stabilized assets, where you can go back and make those adjustments for risk premiums and the like.

Look, I think it depends on the mix of the assets. Some, obviously, are more expensive than others, depending on where it is, geographically. But most of the differential and multiple has to do with asset mix.

Just to add on to that, Nick, what are we doing about it? Well, that goes back to -- called evolving our financing strategy, our funding strategy, right?

The successfully oversubscribed initial fund on the backs of other private capital partnerships, totaling $15-plus billion of data center investments (inaudible), in addition to our strong liquidity and balance sheet, essentially lets us to call a pull on both private and public capital levers to fund the growth of our customers and our balance sheet for, specifically, Hyperscale.

I think, if you look in totality, we now have called record backlog, $1.4 billion of backlog for our customers. We are executing well above expectations in our 0-1. We just had a record year and have the momentum carrying in.

All those things are now flowing to the bottom line. They flow to the bottom line throughout, quarter by quarter, in 2025; and set us up for a strong 2026.

We want to keep that acceleration going.

Jon Peterson, Jefferies.

Okay. Thank you.

I was hoping you could talk a little more about the investments in Malaysia, Israel, and Portugal. Those look like smaller, more Interconnection-focused facilities. But I know maybe in some of those markets, there's also some larger hyperscaler projects that are going on.

Maybe just talk about the decision-making when you enter a new market on going with more, like, Interconnection-focused Colo versus building larger Hyperscale data centers.

Yeah. Thanks, Jon. This is Greg.

Look, I think, you're highlighting the point that acquisitions remains a key component of our growth strategy across the globe. Two, you've highlighted here, like, we're continuing to execute on strategic APAC acquisitions, for example, in Malaysia.

Well, as you know, we play across the product spectrum. Getting, as we've always said, network-dense, highly connected assets in key markets is a key component of our strategy.

If you take a look at the recent Malaysia transaction, that's a key emerging market strategically located in Southeast Asia. Cyberjaya is about 25 kilometers south of Kuala Lumpur. It's a traditional data center hub.

The asset that we acquired is the most well-connected asset in the market. Not only did we buy the initial asset but we bought expansion land immediately next door that would give us 10 times expansion capacity for the existing assets. That's Malaysia.

Not materially different than what we did in Indonesia. The team's been busy in APAC, here, over the last year, when we went into Jakarta. Slightly different but we went in and we partnered with a group that had one of the most highly connected assets in the market with significant expansion potential.

When we look at that, as you know, buying those assets has always been a key component of our strategy. Again, as you go over until May, same thing, right?

Portugal, it's highly connected assets; terminations from subsea cable landing stations and the like, with the ability to grow.

Israel, same thing, most highly connected asset in the area of (inaudible), which is the most highly connected area of Israel.

Again, there's a similar theme there. That stream plays into how we play across the product spectrum and go for those assets.

Now, finally, the last mark -- and even in the US, if you look at it over the last year, we've had strategic Colo/enterprise acquisitions in Charlotte, in LA, and the like.

Now, obviously, that all touched on Colo and network-dense highly connected assets. That doesn't exclude Hyperscale, right? If you look in the US, as well, over the last year, we acquired multiple land parcels in the US in Tier won markets that's supporting our Hyperscale business in areas.

As Andy and Colin mentioned earlier: Atlanta, Charlotte, Dallas, Portland, Chicago.

I would say, our strategy is consistent with playing across the globe and across the product spectrum.

John Hodulik, UBS.

Hey. Great. Maybe two quick ones.

First, a follow-up to those last comments. Just given how strong demand is for AI computing infrastructure, including, as we just heard tonight, $380 billion just between Amazon and Google alone this year, any updated thoughts on potentially building out some large footprint sites in, say, more remote, power-capable markets? That's number one.

And then, there seems to be a growing list of efforts to reduce the impact of the data center industry on consumer electric rates by either requiring behind-the-meter solutions or deprioritization. Does this change your guys' view on reliance on the grid for power in future developments? Thanks.

Thanks, John. I think some of the names that Greg just ran out at the end of his, call it, world tour of where we're making strategic acquisitions, both to support our Interconnection enterprise customers and our hyperscalers, the theme of, called, cloud zonal markets that are numerous cloud customers, numerous source of demand, is consistent.

That's a Charlotte, up and coming. That's an Atlanta. That's a Dallas, Chicago, Hillsborough; most of which we already had either the leading Interconnection or enterprise footprint and supported some form of Hyperscale and now growing.

They're all getting bigger. Whether it's 200-megawatt land sites, 400-megawatt land sites, they're going to continue to get bigger. That's where I think we have a major role to help our customers where it's tougher; where the stakes are raised for what the utilities are requiring; where the size of the dollars are just getting much bigger and beyond what many can fund.

That ties into your second comment here. We, as an industry, are facing a tremendous amount of, called, (inaudible) or pushback on data centers. I think it's unfair. I think it's not the right -- it's not reality when it pertains to Digital Realty, in particular.

We've been long-term major contributors to the communities that we live, build, and operate in. Our investments in the grid are stabilizing the grid. We often do demand response for those customers in those utilities, which, those hot summer days or those cold winter nights benefit those, also, on those same grids.

We've not given up on the grid utility source. We are thinking -- anything we're thinking about "behind-the-meter" is some form of bridging of some form of duration; and can be various sizes to help the grid, as it brings the reinforcement for transmission, for distribution.

I think, in times like this, we're doing our best to clear up the misconception; make sure our story is told; our impact, whether it is the jobs -- I think it's 6:1 jobs -- come from a data center that benefit the local communities; whether it is a limited use or impact on water -- I think Digital Realty's 300-plus data centers use less than 18 California golf courses worth of water. I think there's close to 16,000 golf courses in just the US.

We need to fix the misconception. But it's when it's times like it's hard like this, this is where our customers value what we do, right? Our value add shines. We're continuing to deliver.

Michael Elias, TD Cowen.

Great. Thanks for taking the question.

A lot of focus on Hyperscale demand but I'd take it a different way and ask about enterprise. Andy, you were talking about the bands -- elongate or widening, in terms of enterprise. One of the themes that came up more recently in industry was enterprise AI demand. More specifically, let's call it, the 5- to 15-megawatt capacity block. Just curious, what are you seeing there? Are you seeing a pick-up in that activity?

Maybe, as part of that, do you think that that is a leading indicator, potentially, in some more inference-specific demand? Thanks.

Thanks, Michael. Let me touch on (inaudible) for a second. I want Colin to really dig in on that.

I think that -- and I was just talking to a CTO of a major financial institution a couple days ago -- lends it to our sweet spot here. We are about building a proactive community of interest or ecosystem for 5,000-plus customers and rapidly growing. That certainly includes the hyperscalers in 30, 40, 50, 60 locations. But it also includes enterprises of all sizes, shapes, and forms around the globe.

We are unlike a lot of the private competition that would rather build one data center and lease the whole thing to one customer because the financing is easier, et cetera. We want to curate our buildings and our campuses with multiple customers that can grow.

We think that's the best way to deliver for all the customers, as well as drive long-term value.

But I'll turn to Colin to talk a little bit about some of that enterprise engagement.

Thanks, Michael. Appreciate the question.

Again, highlighting record performance in Q4 and continued strong pipelines, we have as strong a pipeline in 0-1 as we've seen. That's made up of larger contiguous blocks, unquestionably.

Our enterprise clients are seeing more and more value in contiguous blocks above 500 kW. There's an emerging conversation, to your point, around that 5-megawatt block, as inference starts to emerge.

We feel like that we're well set up for that; again, coming from our heritage and the ability to support mixed entities across the globe, 300-plus data centers.

Those conversations are very active. I would say the ability to deliver that connectivity at scale, as well -- we've announced our private AI connectivity story, which is really helping the narrative, I think, with our enterprise clients, who really value our expertise and how we can deliver that consistently across the globe.

I will add though, just in terms of contributions within 0-1, we saw a really strong continued push under 500 kW in Q4, which, again, speaks to resiliency of our ability to scale up and down the platform, whether it's large footprint contiguous; or smaller, more network-oriented deployments across our portfolio.

Michael Funk, Bank of America.

Yeah. Great. I just have one question, Andy.

Based on the strong releasing spreads that you've reported and you're forecasting for 2026, what is your capacity and interest to go shorter duration on contract and/or maybe shift to higher rates (inaudible) each year for the escalators? Love to hear your thoughts on that.

Thanks, Michael. Maybe I'll let Matt pick that up here.

I can, just at a high level, tell you, we've been pushing on the escalators. We're living in an inflationary environment. We're working through that, right?

I'm not talking on a national stage. I'm talking about data centers are racing to deliver infrastructure. That is inflationary to our cost base and our operating model. But this is critical what we're doing.

We've essentially -- I don't know if we have that set off, top of our hands, but pushing to escalators of, called, minimum 3%, as high as 4%, or just above that CPI-link -- that's certainly something that we've been trying to push through (inaudible) based upon renewals, on new deals, given the broader environment.

Matt, anything else you want to add there?

I think Andy covered -- but just to maybe round out -- and I know your comment (inaudible) is, I think, more directed toward our Greater Than A Megawatt but our 0-1 Megawatt is -- typically, we're closer to market. Those are shorter-term contracts, typically rolling up at inflation or CPI so we generally have an opportunity to do that on a more recurring basis.

And then, for our larger contracts, those don't come up that frequently, in terms of the amount of volume that's earned, just given that they're already long-term leases. Some of those also have embedded renewal options.

But I think we're looking at ways to continue to make sure that we're getting the right price for the value that we're delivering to our customers each and every year, as we look at not only new deals but our renewals.

Vikram Malhotra, Mizuho.

Thanks for squeezing me in. I just wanted to clarify two things.

You've mentioned, like, record pipelines in the 0-1 Megawatt. Maybe you can just expand upon that for the larger segment? If you can just marry that with, like, what's available capacity that you have to leave and bringing on over the next two years in some of your major markets by megawatt, that would be helpful.

Thanks, Vikram.

I think the commentaries (technical difficulty) record pipeline was called across both segments and, obviously, then into totality here. This is coming off the back of, like, a really strong year, when it comes to 0-1, (technical difficulty) up 35% on a year-over-year basis and back-to-back $1 billion-plus years of new signings.

I think the major markets I ran through: hundreds of megawatts in Northern Virginia that are prized possessions for our customers; Charlotte; Atlanta.

Let's not forget, again, this demand is globalized with the hyperscalers. I think you'll see a continuation of demand growing into Europe, South America. Asia has been a great contributor, as well.

We're really delighted to be able to help these customers support their long-term growth here.

Thank you. This does conclude the question-and-answer session of today's program.

I'd like to hand the program back to President and CEO, Andy Power, for any further remarks.

Thank you, [Jonathan].

The fourth quarter capped a very strong year for Digital Realty. We delivered record financial performance for our investors, while executing with the reliability that our customers expect.

We posted another year with over $1 billion dollars of total leasing, including record performance in our 0-1 Megawatt, plus Interconnection, business; and an $800-plus million backlog that provides tremendous visibility through this year and into next.

We continue to expand our footprint and evolve our funding strategy with the successful raise of our inaugural Hyperscale data center fund.

Operationally, we remain in a very strong position to serve our growing roster of nearly 6,000 customers with 3 gigawatts of in-place data center capacity and another 5 gigawatts of development capacity in our core markets around the world.

Digital Realty has never been better positioned. I owe that to my fellow Digital Realty teammates, who have worked hard to deliver these results and have already started 2026 off on the right foot.

Thank you, all. Thanks to all of you who have joined us today for the call.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program.

You may now disconnect. Good day.