Digital Realty Trust, Inc. Price & Performance (DLR)

This call will contain certain non GAAP financial information Reconciliations to net income are included in the supplemental package for 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 fourth quarter results. First, we posted a second consecutive quarter of record leasing in our zero to one megawatt plus interconnection segment. Contributing to a record $1,000,000,000 of total leasing completed in 2024. The zero to one megawatt product continues to be a significant focus for Digital Realty and we are encouraged by the growing strength and momentum of our execution. Second, in the quarter, we raised over $2,000,000,000 of new debt and equity [indiscernible] As well as over $500,000,000 of net proceeds from asset sales and JV contributions, boosting our liquidity to over $6,000,000,000 and reducing our leverage to 4.8 times Year end And third, we posted 6% core FFO per share growth in the fourth quarter foreshadowing our expectations for 2025. With that, I'd like to turn the call over to our President and CEO, [indiscernible] Thanks, Jordan, and thanks to everyone for joining our call. 2024 was a breakout year for Digital Realty.

As we capitalized on the surge in demand for data center infrastructure, positioned the company for the opportunity that lies ahead, and continue to execute on the key strategic priorities that we outlined on this call two years ago.

To enhance our long term sustainable growth. Back then, we said that we would strengthen our customer value proposition. And we are doing just that.

The evidence from 2024 lies in over $1,000,000,000 of bookings a convincing new record for us with a few seminal hyperscale transactions and nearly $250,000,000 from the zero to one megawatt plus interconnection category. Another record Not to be upturned by new bookings, we also saw record lease renewal activity in 2024 which also approached $1,000,000,000 with cash rents rolling up 9% on average. We added a record number of new logos during the year. Nearly 600, while expanding our connectivity rich solutions. We expanded the capacity of our total portfolio by over 200 megawatts in 2024, while scaling our development pipeline by over 75% to $7,000,000,000 plus of projects underway that are 70% pre leased in order to serve our customers' growing data center needs. I also talked about innovating and integrating across our unmatched global portfolio. And we've rolled out new products and services such as high density colo two point zero the cooling solution to support densities of up to 50 kilowatts per rack the expansion of service fabric to 38 metros around the world, and private AI exchange an open platform available through Service which enables enterprises to seamlessly integrate their data with AI capabilities and other technology solutions.

By combining these leading edge solutions with our global full spectrum strategy of connected campuses, that offer column, scale and hyperscale capacity Customers can count on Digital Realty to meet all of their data center needs. Finally, we vowed to diversify and bolster our capital sources to expand our capacity to support our customers' growing requirements, improve capital efficiency, and reduce our leverage while increasing the returns to Digital Realty shareholders Digital. We've done this by adding to the menu of debt and equity capital options, Opportunistically recycling capital out of stabilized and non core assets and partnering with a diverse and high quality list of private capital providers. Some of these activities have resulted in short term headwinds to our results, but all of them have enhanced our operating momentum and financial position enabling us to accelerate our bottom line per share growth. But there is still tremendous opportunity to be seized upon as we believe this dynamic in an increasingly global industry. Demand for data center capacity remains robust both for larger AI oriented capacity blocks and to support growth in cloud and digital transformation while data center supply remains tight. Highlights for the fourth quarter include $100,000,000 of new leases signed at Digital Realty Share, driven by a 16% sequential uplift in the zero to one megawatt plus interconnection bookings for a new record of $76,000,000 unsurprisingly greater than a megawatt bookings dip sequentially following last quarter's blowout, though the pipeline remains strong.

Looking inside our zero to one megawatt bookings we experienced strong and balanced growth in both The Americas and in EMEA, with both regions achieving new records in the quarter. We continue to see a growing healthy mix of various size deployments within our zero to one megawatt business, reflecting how our full spectrum strategy enabled digital to provide solutions for large and small deployments along with everything in between. Some customers might simply need a network node to utilize our robust connectivity a central city hub smaller enterprises might choose to locate a somewhat one megawatt deployment for compute or storage requirements in a facility outside of the city center. Interconnection bookings were also strong at $15,000,000 nearly matching last quarter's record. Finally, the strength and breadth of data center demand and the promise of our go to market initiatives are also reflected in our addition of a record 166 new logos. [indiscernible] [indiscernible] Hyperscales drove a portion of this activity with our largest global customers driving record export activity to other regions around the world. EMEA exports were again at record levels with heightened Transatlantic bookings deployments landing in The Americas. Our record bookings in 2024 pushed our backlog of book but not yet build leases up to roughly $800,000,000 at year end, providing strong revenue visibility for this year and beyond.

As Jordan mentioned, we also continue to bolster our balance sheet and diversify our capital sources during the fourth quarter. With support from asset sales, hyperscale development joint ventures, highly successful debt and equity raises. These activities helped to push leverage below five times Matt will provide more details on these activities in just a few minutes. Over the past few weeks, we have seen commitments for data center spending continue to grow. New administration announced a $500,000,000,000 effort to support American based AI development and others around the world are following suit. Earlier this week, I was pleased to join French President, Emmanuel Macron, in Paris, along with U. S. Vice President, J. D. Vance and many other heads of state, The use of AI As I highlighted two years ago, my first earnings call as CEO, technology begets technology. In the past, innovation has typically led to greater efficiencies that ultimately spur incremental demand. At the time, we noted that we are at the precipice of the next wave of innovation, that we thought might drive the next decade of data center demand 2024, we signed data center leases that were 80% higher than the next highest year.

Driven by steady growth in cloud and digital transformation, as well as a surge in AI related use cases. Today, we see a similar dynamic playing out to what we've witnessed in the past. As the rate for renovation remains in full effect, recent efficiency gains appears poised to facilitate the proliferation of AI to the enterprise. We heard from hyperscalves earlier this reporting season and none seem ready to moderate their pace of investment As data center infrastructure remains a critical resource to support AI innovation, Within our sales organization, we continue to see robust demand for data center capacity including large capacity blocks driven by digital transformation, [indiscernible] and AI. AI innovation is current on both the hardware and software side, and Digital Realty is pleased to support and enable this innovation. One of our wins this quarter was Tents Thornton, a developer of scalable AI accelerators for both cloud and edge computing. During the fourth quarter, Tethr leveraged Platform Digital to host their R and D lab in a two megawatt high density colocation suite in a new metro that addresses their stringent engineering and time to market requirements. As they develop their leading edge chips, Tenstor works with a number of partners Consistent with our meeting place strategy, they improved their efficiency by interconnecting with their partners on platform Digital.

So together, we partnered to deploy an AI hosted desktop solution [indiscernible] that included another 10 store partner resulting in another new logo to Platform Digital. That's an example of the network effect of being the meeting place. Other key wins in the quarter include a Global two thousand International Banking Group expanding on platform digital to improve cloud connectivity, and localizing data for hybrid cloud a world renowned research and cultural institution was brought to us by a partner as they upgrade their HPC infrastructure supported biology and physics research workloads by taking the billions of platform digital high density colocation capabilities. And global two thousand insurance and reinsurance provider is expanding their presence on platform digital to take advantage of robust networks and cloud ecosystems. Before turning it over to Matt, I'd like to touch on our global ESG progress During the fourth quarter, Teraco, our South African affiliate, started construction on a 120 megawatt utility scale solar power plant the first time a data center operator will own and utilize a solar power plant to support its data center load. The plant is expected to begin generating power in late twenty twenty six. This project will upgrade existing transmission infrastructure and enable the plant to add renewable energy into the grid and to be distributed to terracos campuses improving its reliability and keeping Terreco on course to meet its clean energy goals.

In Chicago, we signed community solar agreements for a share of three separate solar projects totaling nearly 20 megawatts under the Illinois Science Program this new and local clean energy supply for our data centers in Chicago supports our 100% clean and renewable energy coverage there. Both actions in the fourth quarter added to Digital Realty's leadership. And commitment to renewable energy. We now have more than 150100% renewable electricity. With more than 1.5 gigawatts of contracted solar and wind capacity. But sustainability is not just about renewable energy. We are also excited about our collaboration with Ecolab to deploy an AI driven water conservation solution in 35 of our U. S. Data centers to further enhance our water use efficiency. We expect this solution to reduce water use by up 15% at those sites while also extending the life of our equipment. Finally, Digital Realty was awarded Naverick's leader in the light Award for the eighth consecutive year while our VP of Sustainability, Aaron Binkley will serve as Chair of NAREIT Real Estate Sustainability Council in 2025. [indiscernible] And with that, I'm pleased to turn the call over to our CFO, Matt Mercier. Thank you, Andy. As Andy noted earlier, 2024 was a transformative year for Digital Realty.

Over the past twelve months, we posted record leasing results and increased the capacity under development by over 75% while at the same time reducing our leverage from 6.2 times to 4.8 times. This achievement was a direct result of our strategy to bolster and diversify our capital sources. By recycling Digital, have stabilized slower growth hyperscale and non core assets, and bringing in private capital to support hyperscale development combined with the support of our public shareholders we were able to simultaneously accomplish seemingly incompatible goals. We dramatically ramped development to better serve the needs of our customers while delevering the balance sheet below our long term leverage target and by the fourth quarter meaningfully accelerating our bottom line growth. As we sit here today with more than $6,000,000,000 of liquidity, below target leverage and a broad and diverse array of capital sources, we are positioned to fund the investments that are underway and the attractive opportunities that we continue to see ahead. Like other challenges, this achievement took a tremendous amount of team So I want to thank my fellow Digital Realty teammates for their efforts in 2024. Let's jump into fourth quarter results. We signed $100,000,000 of new leases in the fourth quarter, led by a record $76,000,000 of bookings in our zero-one megawatt plus interconnection segment.

Which exceeded the prior quarter's record by 16%. We also signed $23,000,000 within the greater than a megawatt category which was mostly weighted toward EMEA and APAC following last quarter's outsized strength in The Americas. Pricing in our zero to one megawatt category was strong. Led by transactions in APAC and Americas, while pricing in the greater than a megawatt category reflected the modest sample size and market mix. Importantly, nearly 60% of leases signed in Importantly, nearly 60% of leases signed include annual rent escalators of 4% or greater. Or are linked to CPI which bolsters our objective to drive better long term sustainable growth. Our backlog at Digital Realty's share totaled $797,000,000 at year end, modestly below the third quarter record as $147,000,000 of commencements exceeded new bookings. Looking ahead of the nearly $400,000,000 backlog that scheduled to commence in 2025, about two thirds is slated to commence by mid year with the balance starting in the second half. Looking further out, we are already we already have over $300,000,000 scheduled to commence in 2026 and another $100,000,000 slated to commence in 2027. Setting a strong foundation for multiyear growth. During the quarter, we signed $50,000,000 of renewal leases and a blended 4.7% increase on a cash basis.

Renewals were fairly straightforward and largely consistent with the original 4% to 6% uplift in cash releasing spread in our original 2024 guidance provided one year ago. For full year 2024, releasing spreads were 9%, aided by package deals that we have highlighted on prior calls. Excluding those deals, our full year renewal spreads were still a healthy 5.2% which is consistent with the guidance that we are issuing for 2025. Breaking down renewals by product category, cash renewal spreads in the 0.1 megawatt segment were a healthy April while releasing spreads in the greater than the megawatt segment were up by 3.7%. For the quarter, churn remained well controlled at 2%. In terms of earnings, we reported fourth quarter core FFO of $1.73 per share, up 6.1% year over year reflecting continued Healthy growth in revenue and adjusted EBITDA. Data center revenue growth accelerated to 8% year over year as the combination of strong renewal spreads rent escalators and new lease commencements more than offset the drag associated with more than $1,000,000,000 of dispositions throughout 2024. Adjusted EBITDA increased by 7.4% year over year broadly consistent with our growth in data center revenue. Normalized total revenue and adjusted EBITDA growth were 1013% respectively full year 2024.

Same Digital, cash NOI growth increased by 1.4% over year in the fourth quarter as 2.5% growth in data center revenue was partially offset by higher property operating costs in the quarter. For all of 2024, same capital cash NOI increased by 2.8% which was approximately 200 basis points higher when normalized for the outsized utility margin realized in 2023. Moving on to our investment activity. During 2024, we spent approximately $3,000,000,000 on development CapEx, on a gross basis. Including our partner share, and roughly $2,000,000,000 on a net basis to Digital Realty. In the fourth quarter, given the strong demand for data center capacity, we backfilled all of our deliveries new starts, ending the year with the same six forty four megawatt under construction. More specifically, we delivered 42 megawatts of new capacity [indiscernible] while we added another 42 megawatts of new starts. The overall pipeline is 70% pre leased with average expected yields edging up to 12.1%. Consistent with the third quarter's record bookings almost all the development underway in The Americas today is pre leased with expected stabilized deals ticking up slightly to 13.7%. Some development capacity remains available in both EMEA and APAC, with both currently expecting double digit stabilized deals.

Turning to the balance sheet, we continued to strengthen our balance sheet in the fourth quarter driving leverage below our long term target and substantially enhancing our liquidity. With nearly $3,000,000,000 of fresh capital raised since the September. On the debt side, in November, we successfully issued $1,150,000,000 of one point eight seven five percent five year exchangeable notes and we repaid the remaining $500,000,000 outstanding on our U. S. Dollar term loan. We also raised over $900,000,000 of equity under our prior ATM program during fourth quarter In January, we issued another €850,000,000 of 3.875% notes during 02/1935 and then repaid $400,000,000 gilts at 4.25%. This leaves us with only €650,000,000 in maturing debt through the rest of 2025. Looking further out, our maturities remain well laddered through 02/1935. Our net debt to adjusted EBITDA ratio fell to 4.8x by year end 2024 and today we have over $6,000,000,000 of total liquidity available. Moving on to our debt profile, at year end, our weighted average debt maturity was over four years and our weighted average interest rate ticked down to 2.7%. Approximately 83% of our debt is non U. S. Dollar denominated reflecting the growth of our global platform and our FX hedging strategy.

Approximately 91% 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 establishing our core FFO guidance range for the full year 2025 at $7.05 to $7.15 per share on a constant currency basis. The midpoint represents 5.7% year over year growth reflecting the underlying strength in our business balanced by a meaningful acceleration in development spend. Along with a substantial reduction in our overall leverage. On a normalized and constant currency basis, we anticipate and adjusted EBITDA growth of more than 10% in 2025 reflecting the strong underlying fundamentals of our business. Same capital cash NOI is expected to grow 3.5% to 4.5% on a constant currency basis. As for other guidance items, expect the positive operating environment for data centers to continue. Cash renewals are again expected to be up approximately 4% to 6% as upside is partially mitigated by relatively high expiring rates and are greater than megawatt portfolio. Occupancy should improve by another 100 to 200 basis points. CapEx, net of partner contributions, are expected to rise to between $3,000,000,000 and $3,500,000,000 while gross CapEx will reach approximately $4,500,000,000 dollars with development yields expected to remain in double digits.

And we will also continue to recycle capital with $500,000,000 to $1,000,000,000 of dispositions and JV capital expected this year. This concludes our prepared remarks. And now we'll be pleased to take your questions. Operator, would you please begin the Q and A session? We will now begin the question and answer session.

In the interest of time and to allow a larger number of people to ask questions, callers will be limited to one question.

Our first question today is from David Barden with Bank of America. Please go ahead. Guys. Thank you so much. I really appreciate it.

I guess, I'd like to start maybe if Chris is available, Chris, your perspective, on how again we should be talking about DeepSeq. Andy, you referenced this roughly in some of the prepared remarks at the beginning, but we've historically talked about a framework, tokens to WOTS to Dolls And I guess it would just be great to hear kind of how your conversations with the hyperscalers subsequent to their reporting and their growing their CapEx outlook, how this all fits together to make the outlook for Digital Realty better as opposed to maybe more concerning. Thank you.

Thanks, Dave. I'll hand it Chris in a second to through some of those elements. But I think you hit the nail on the head. We just on the heels of the GameStop news, had the opportunity to listen from several of our top customers and really heard nothing but consistency in terms of yes, this is a great accomplishment, This is a new player in the arena driving more efficiency to the model. But that doesn't take us off the course tremendous investment our top customers need to make on building out their AI infrastructure [indiscernible] More than $300,000,000,000 compounded to prevent rate year over year for several years. And so we've heard that publicly on earnings call by this. [indiscernible] from our team, who've had a lot of contact with our customers over the last several weeks [indiscernible] So I don't think there's a wavering in the the course here of overall demand coming to digital.

But Chris, Digital don't you expand upon some more of the intricacies? Yes, I appreciate the question, David. It's just me, I agree with you that tokens, watts dollars is a good way and a good framework to look at the overall industry. I think we're going to continue to see AI being democratized, not only through software models such as DeepSeq in which they represented the efficiencies, but also with like GPUs and there's going to be step functions that we'll continue to see in the industry, but this shift will drive higher and higher AI utilization to more and more customers. Ultimately creating more and more demand for our facilities. And I would emphasize that a lot of our facilities as we've talked about in the past are AI ready with HD colo and some of the elements that Andy mentioned in his prepared remarks. Will continue to be in a place where can continue to support as inference comes to market or even private AI. And essentially at the end of the day, we believe Jevon's paradox will outpace Moore's Law essentially.

The next question is from Richard Coe with JPMorgan. Please go ahead. Hi. I wanted to ask about the cash renewal outlook. It was 4% to 6% for this year. That's where you started off last year, but you ended up at 9%. Could we see a similar result or would that take a more package deals to get there? [indiscernible] for the question. So, as you noted, last year, we started out our guidance. We were at that at a similar position here for 2025 and our guidance Today, And the reason we outperformed in '24, getting to that 9% was we had packaged deals that we were able to pull forward from out of your expirations into 2024.

Our guidance does not assume that there's any of that within our 4% to 6% number for 2025. And similar to along the lines of discussions we've had in 'twenty four, you're still seeing somewhat of an elevated rate expiry rates in '25 So we're still seeing positive mark to market there, but you're going to be seeing an improving mark to market environment as you go out into outer years. The next question is from Ervin Liu with Evercore ISI. Please go ahead. Hi, thank you for the question. So I wanted to ask about your bookings expectations looking ahead. And I understand that bookings by nature is a very lumpy metric. And that's not something that you necessarily or you guide to but you did do $1,000,000,000 this year or a little bit above that.

Based on what you're seeing in the current pipeline and your 3.5 gigawatts of buildable capacity, do you think this $1,000,000,000 annual bookings rate is repeatable over any future twelve month period? Thanks, Ervin. So I think you really got to divide these into the larger capacity blocks and everything else categories We've obviously got to a record $1,000,000,000 of new signs last year was close to two times on prior record. That has really created a development pipeline now that [indiscernible] just over 12 ROI And you can see from our bookings backlog, it's further rollout in 2025, but then a lot more of it starts hitting our P and L of 2026.

And full year contributions coming thereafter. We are on the larger capacity loss, when you do so much leasing, the next batch of your leasing kind of goes into deliveries that are just further out. And you can see that that our unleased development pipeline the megawatts in there, call it, about 40% of that is coal megawatts. So they're not going to get pre leased all that far in advance. We will have 500 megawatts of shell, either already built and already is fantastic and that will be the next batch. Can see our delivery schedules, they're not going to deliver till end of the year, we're going to 2026. So we're not necessarily in a panicking rush to fill those. We need to make sure that they're recurring those to the right customers and the right outcomes to build driving diverse campus and help our customers wherever possible. And the sooner they deliver, the more pressure they are to those customers. Meanwhile, on the other end of the curve, our zero to one megawatt interconnection category, we were delighted to put up a record in 3Q. We put up another record on $76,000,000 in 4Q that was up 16% quarter over quarter.

Contributing to a record full year. And that is a place where have ample capacity to keep selling into. And put incremental records on in 2025. As well. Good question is from Jonathan Atkin with RBC. Please go ahead.

Thanks. So you've been kind of message in the mid single digits and you also had indicated that you do expect this trend to accelerate. So as we look forward beyond this year, what sorts of acceleration curves should we accelerate? Should we we think about when it comes to core FFO per share given the conversion of your significant bookings to billings over the next several quarters? Thanks.

Thanks, John. I mean, I'll turn it to Matt to give you much of the puzzle pieces. For the call thereafter 2025 But we stand by what we said earlier in the year and I think we feel that in the guidance here, which is call it normalized growth at the top line and EBITDA line in double Digital.

Flowing down to a bottom line mid single digits or even better on a constant currency basis. And Matt can give you some of the possible pieces of how we where we go from there. Off of 2025 into 2026 with acceleration.

Yes. Thanks for your question, John. I mean, this is this is a I think is a good thing. We're We're consistent with what the messaging has been. We're delivering on the mid single digits growth and '25 and we have a view toward we've noted before, continued improvement in growth in years beyond And I think a lot of what we did in 2024 is really set the stage for that improving growth.

When you consider we've got the inventory to do it, we've got 200 megawatts available under development today with 500 megawatts of shelf behind it.

We've got $700,000,000 of backlog set to commence just over the next two years. And as I knew on prior question, we've got an improving mark to market outlook as we look at towards expiring leases, which is part of what you're seeing and also improving same store growth as well. So on top of that, we we put ourselves in a position where we've got $6,000,000,000 of liquidity and below leverage target. So I think all that together into the mixing bowl to put us in a great position to continue to build on what has been improving bottom line growth and '24, '25 and beyond. The next question is from Michael Rollins with Citi. Please go ahead. Thanks and good afternoon. Two topics. First, just digging a little bit more into the under one megawatt business. When you look at the improving performance and the back to back records that you recorded on leasing, do you see that as a rising tide that just lifting all boats including yours? Or do you see digital taking share? And if you can expand on the characteristics within each of those? And then just secondly on the net debt leverage coming down, As you look at the incremental capacity that you have, is this solely directed at organic development opportunities or are you preserving some flexibility for some potential inorganic activity at some point.

Thanks. Thanks, Mike. So I'll hand it over to Colin, but maybe just in reverse order, We're very focused on using our now very ample liquidity and strong balance sheet as well as numerous levers to continue to fund organic development activities. So that is the main priority. When it goes beyond one megawatt, I mean, you're really just seeing this momentum unlock throughout 2024 and I believe it's going to continue into 2025. It was broad based. We have worked in the number one cloud for Americas and EMEA in addition to a number one quarter overhaul. It had diversity of wins, on different size breaks. The price action was strong. On the new signings The price action was also strong, almost 5% on the renewals in that category. [indiscernible] and some of the outlook as well. Thanks, Michael, for the question and appreciate the comments on the quarter and brought it. We are really pleased on zero to one megawatt segment. That's really feel like it's manifesting well our strategy and how it comes off as the full spectrum of offerings to our clients. And I think our clients are really recognizing global reach in core markets and large contiguous blocks really matter.

And we saw that diversity demand across the board. This was one of the larger enterprise segments of the business that we've seen over 50% of the zero to one megawatt bookings came out of the segment. We also had a really strong service provider.

Quarter as well. So again, those two customer types play off each other. So enterprises attract service providers and vice versa. And we're also pleased with our focus on the channel side.

So 2024 is the only mark here for channel, and we expect that to continue into the future.

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

Hey, guys. Thanks for taking the question. So For clarification, as you think about growth for next year, can you talk about sort of organic growth that's 10% plus. I'm just wondering maybe for Matt, if we can think through what's embedded in the 5.8% to 5.9 around FX headwinds potentially lower utility reimbursements and any other factors that may be mitigating some of the reported growth next year? Yes.

So in terms of I mean, you saw we put in terms of our constant currency. So we're looking at from an FX perspective, we're looking at roughly 200 basis points of headwind from a P and L perspective. That winds its way down to a little less than a percent down to core FFO. The other so that all leads into I think what Andy mentioned terms of when you're looking at top line revenue, down to adjusted EBITDA, we're really looking at in twenty five ten plus percent on a normalized basis. And so that normalized basis is really comprised of two main elements. There's FX, which I just mentioned was around call it 200 basis points. And then we're also normalizing for dispositions, joint venture, transactional activity, which we had. Both in what closed in 2024, we had some of that in the fourth quarter.

As well as some in the first quarter, but also what we're expecting to happen in 2025, which is related to the disposition private capital that we have in our guide of $500,000,000 to $1,000,000,000 So I think think long term, we're looking to maintain that call it, top line to adjusted EBITDA 10 plus percent percent growth.

The next question is from Ari Klein with BMO. Please go ahead. Thank you. There's been a lot talk within the industry around inference, particularly post deep seek. And I was hoping maybe you can describe how you see that potential demand around inference evolving and whether you'd expect it to be more beneficial to your zero to one megawatt business? Thanks.

Thanks, Ari. I'll hand it back to Chris. I think at the start, we didn't put in the prepared remarks. That we forgot to call out, I think, is partly with the 38% of megawatts we signed during the quarter And obviously, we had a very much enterprise heavy quarter given the record countries since in the zero and one megawatt interconnection category. So certainly starting to see unfair share of AI coming to the core markets, coming to the enterprise coming to inference But oddly, we're still at the tip of an iceberg in Keeter and I'll let Chris expand upon this. Yes, definitely appreciate the question, Ari.

Definitely early innings of AI.

Right? And so I think a lot of the inference we see today is around augmenting current capabilities. So I think as you see some of these newer feature sets coming through AI, bimodal where you're seeing video and other things coming to market, that's going to drive a higher and higher demand in the overall kilowatts required. So these capacity blocks that Colin was referencing earlier become more and more important. So maybe it doesn't fall in that sub-one megawatt because we're actually seeing that these will be larger capacity blocks, that may be larger than a megawatt. Just to kind of press upon the demand of inference, it will still have more and more I think that's the important piece that we always look at and where we imply our capital is that long term durability of where that inference matures because that's where the actual consumption or monetization of the AI will happen. That's why we're very excited about how that will be maturing over time. I would also be remiss not to mention the other element of this that we're very excited about is private AI. Right. So inference, you'll see that coming from a lot of the hyperscalers bringing their capabilities more market.

But then on the adverse of that, you're going to see a lot of private AI capabilities coming in where that too has an inference element to it, but we're very excited about our AI ready capabilities in our facilities to support that broad spectrum of not only capacity blocks, but power density demands as well.

The next question is from David Guarino with Green Street. Please go ahead. Thanks. I want to go back to that less than one megawatt in leasing activity. Can you just comment maybe on the majority of the deals signed? Were those in legacy assets? Will hopefully provide much needed boost to same store occupancy when the leases commence. Were the majority of those deals signed and maybe the newer construction assets that are catered towards the current deployment requirements today?

I mean, it's it's pretty based. I mean, look at the top markets were Northern Virginia, London, Los Angeles, Frankfurt, Chicago, globally.

I can tell you Los Angeles and Detroit, Chicago, those are not I mean that's good to see Cermak, that's 600 West Seventh, that's even El Segundo, [indiscernible] Our whole blended portfolio, whether in the Docklands or in Logan, we've got We've got we've had much more enterprise play there. We've not been built a new brand new asset a long, long time. Probably till I started Digital close to ten years ago. So into a colo, obviously, oriented use cases across numerous business segments, financial services, insurance, healthcare, we quoted a few along the way. So And then I look at the overall quantity of signings of signing the one and two, call it the first generation or second generation that is pretty consistent. It's a little higher to round up the year. You did bring up the funds in Stifel Rock, you've been seeing we did almost have little self inflicted wound there with I think one of the remnants of the Sixtairo transaction converted from a [indiscernible] lead it back to the vacancies last night or near full customer [indiscernible] But that creates an opportunity. And I know we're actively quoting to refill that capacity, obviously a much better economic outcome along with, call it, meeting our core priorities and building out our enterprise customer base The next question is from Frank Louthan with Raymond James.

Please go ahead. Sorry about that. Thank you. Can you give us an idea going forward, so what percentage of your facilities you're going to set aside for sort of less than a megawatt? Where do you see you see that going? And within that less than a megawatt, what percentage of that floor space are you building that is for high power density versus just regular machines? Thanks.

Thanks, Frank. I mean, not just very recently, but for a long time now, last couple of years, we have been prior see the enterprise colo capabilities network oriented or like a private cloud or high performance computing pushing the power of densities ample run related growth, within our portfolio. There are certain places that are clearly network oriented like a 56 area in Atlanta, for example. But on our campuses, we're building with the modularity and flexibility to span their power needs. So and we're often now moving towards places where we can get to scale and build a sizable building given how much success we've had in the category of various markets to have dedicated for those customers on the same campus as far as dedicated buildings for those customers and have a little bit less mix and match in within up suites within a building. So that's a priority. We've been doing more of that. You're going to continue to see us doing more of that. And that's why that's how [indiscernible] Called 22 ish percent growth in that Simon category. Just this last year, and look for further acceleration next year.

The next question is Jim Schneider with Goldman Sachs.

Please go ahead.

Good afternoon. Thanks for taking my question. Andy, I think at the top of the script, you mentioned the Stargate announcement.

Some of your customers are directly or indirectly involved in that announcement on some of your largest customers in fact. So what conversations have you had with some of these customers since the announcement about their interest in sort of maintaining or expanding their relationship with Digital Realty in the future.

Then maybe you can make a broader comment on high hyperscalers and their willingness to look out even further into the future in terms of pre leasing capacity? Do you think that's kind of on the margin a little bit greater or lesser than it was maybe three months ago? Thanks, Jim. So the startergate announcement, I would say, twofold. Really was [indiscernible] quarters a month ago and also I put it in category of conviction from top customers to continue to deploy significant dollars towards infrastructure. [indiscernible] I don't think that some of that was transparent while we were signing with some of our biggest customers. Just last year, I think I've been previously that of the three quarters where we had record signings during the year, we had a different [indiscernible] signing customer these quarters, so there's diversity And based on what I've seen things go this year, I think we could add a different customer [indiscernible] at any given quarter. As we work into 2025, I will say at the same time, the size of this demand is getting to a place where the spigot of demand is not running at full blast twenty four hours a day, seven days a week, three sixty five days a year.

These packages with more expensive GPUs and infrastructure on larger capacity blocks are going up to the highest level of the big companies boards for approval and they don't do that every other week. So while the Passy, we see it continued up in the right, there's certainly be a week or two a month we'll see a lull and then they came back, which is part and parcel with exactly what we saw transpire in 2024. And I think we're very well positioned to obviously support those customers in some of the large capacity blocks, which you can see we have delivering, call it, significant base capacity in our development pipeline, 500 megawatts of sales, and we just grossed up our land holdings with some near term delivery opportunities to about over three gigawatts of growth. The next question is from Eric Luv Chow with Wells Fargo. Please go ahead. I appreciate it. I just wanted to touch on capital recycling or JV picture for the year. I know you talked about $500,000,000 to $1,000,000,000 Maybe you could maybe touch a little bit on the potential mix of outright dispositions, JVs and then new programmatic fund like structure [indiscernible] about the mix of that this year versus using other sources of capital like issuing equity?

Thank you.

Thanks, Jerk. Well, as Matt you a quick breakdown of the numbers and then flip it over to Greg to give you a quick high level of our strategic capital initiatives. Yes. Thanks, Eric. So I mean simplistically, we're looking at if you just break it down, we're looking at roughly $300,000,000 to $400,000,000 of that is going to be associated with continued efforts around our non core asset disposition and the remainder of that will be targeted towards the continued expansion of our private capital efforts And for that, maybe I'll turn it over to Greg to give a little bit more color.

Thanks, Matt. And thanks, Eric. Look, I think there's a couple of things. One is, Andy and Matt have told investors for some time now as we look to diversify and bolster our capital sources, As you mentioned, The fund is clearly the next logical step in this progression. Think all we'd say at this point is it's going very well. And as we continue to make progress and have more to report, we look forward to talking to you about it. But again, we think it's I think it is the next logical step and like the flexibility associated The next question is from Eric Rasmussen with Stifel.

Please go ahead.

Yes. Thanks for taking the question.

So you laid out mid single digit core FFO constant currency growth in 2025 and it sounds like there's a lot of momentum in the business acceleration beyond that. But what are some of the factors that maybe could derail this thesis as you think about some of the things that might impact the business?

If you look at our components here, Most of the big signings are not flow through to 2025. So any big signs we do from here which we anticipate doing, really building up growth in 2026 and 2027. So our near term execution opportunity goes back to what we've been very successful recently and need to continue in the zero to one megawatt interconnection portfolio that does not have that pre lease window of that scale, continue to execute by commercialization we've delivered tremendous amount of value to our customers. And obviously, we need to make sure the commercials are dramatically rewarding, which is central to our cash mark to market. Continue to expand the value prop through interconnection signings, which is strong fourth quarter. Coming off a record third quarter. But continue on that. [indiscernible] And then obviously, making sure we use these tools that we built over the last eighteen months terms of how we fund this business. In terms of continuing to be able to spend accelerating $4,500,000,000 of gross CapEx but use our own liquidity, retain capital and obviously development private capital partnerships as as well to make sure this all flows to the bottom line like we're guiding in 2025 looking to do better than that in 2026.

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

Good evening. Thanks for taking the question. I guess I just wanted to clarify two things you mentioned.

So one is just the rush or the velocity of deals that tenants are wanting to sign and you're wanting to engage in. Hopefully that continues. But in the larger than one megawatt it's very lumpy like you said. And I'm just wondering the combination of those two does that put like just hypothetically the next two, three years in a different ZIP code of Velocity and size of your bookings? I'm not looking for a number. I'm just trying to think over the next few years versus the last, call it, seven years, And then same question on pricing power. With all this velocity, can you expand a little bit on how you're viewing your own pricing power going forward? Thanks. [indiscernible] unpack in there. Let me try to get succinct. [indiscernible] We see a growing market where we're taking more and more share. And we believe we'll continue to do that with a very compelling value proposition We have the power densities and runways for growth for our customers to land and expand with us. Across 50 metropolitan areas and the connectivity solutions for today and tomorrow for these customers. So I think you're going to continue to see that called stair stepping of improvement blocking and tackling in a positive robust backdrop.

Even before I think the days of inference becoming tremendously robust enterprise happens The other megawatt is certainly going to be lumpy because when you sign 100 megawatt deal, a 50 megawatt deal, in one quarter versus another it swings it. The point I was just trying to make is Based on the deliveries of our inventory, timing there isn't a panicky rush to trade off volume for commercials, right. So we're trying to create to the right customers and the right financial outcomes for those precious capacity blocks because we've seen as each as time goes by, the sooner the capacity delivers, the more value it becomes helpful to those those customers. On the pricing power, I don't have a lot of data points given the composition of where we may want signings in the quarter, but I can tell you in our Most large market, we're still quoting to multiple customers for large capacity blocks.

Call it 200 ish type rates for what is three of you is incredibly valuable to these customers. And the smaller zero one category, I think you can see cash mark to market close to just under 5% and our pricing is helped in there pretty firmly. All the backs have a big step up in volume. In that category.

The next question is from Simon Flannery with Morgan Stanley. Please ahead. [indiscernible] situation with getting power to your new developments Any other items in the supply chain that you're generally able to hit your timelines, hit your cost per megawatts Any color around that would be great.

Thank you, Simon. I mean, supply chain in my opinion, first and foremost, with power, remains incredibly tight. And everybody wants something sooner than it can usually get delivered. [indiscernible] almost all markets. We are using our relationships. We're using our scale. We're being creative to find out ways to sell solutions for this customer forever possible. But [indiscernible] our campuses sooner, we'd be have more demand, because customer need it. The broader supply chain and the physical elements [indiscernible] we have today own and own 3.5 gigawatts or 3.6 gigawatts of land and shell. We're not going to look for that Much of it has been on our balance sheet. Quite a while now. It's not like we just tied it up and after we went to super front end [indiscernible] which puts us in a great position to make sure that we're able to keep delivering Our supply chain is, I think, with the vendors is on the tight side as well. And we'll see what happens the talk of tariffs comes to data center land in terms of impact, but are currently in that outlook.

Is we look like we're pretty well insulated given how we've gone ahead in terms of The next question is from Nick Del Deo with MoffettNathanson. Please go ahead.

Hey, thanks for taking my question. Your development yield in The Americas is almost 14% now. That stepped up pretty nicely last quarter. It should have been the 10% to 11% zone in EMEA and APAC.

Should we expect to see the development yields in EMEA and APAC start to move up and narrow that gap some versus The Americas? Or do you see there being factors that restrain where you can get in those regions?

Next Nick. So I mean, I mean, as a product of The Americas region having the most accentuated for man well outpacing supplies. On the larger capacity blocks. Now we do have a sizable coal footprint in EMEA, which is obviously a higher ROI of our business. But when we look at the megawatt it's those large capacity blocks that right now we're swinging our recent returns. So I believe that you're going to see AI globalize. I don't know if it will be the same extent of growth that you've seen or we'll see in The United States But based on including meetings I was part of this week, dialogue with customers, I think that you're going to see and kind of following the footsteps of cloud and data sovereignty and cloud cloud, you're going to see that go up. And I can tell you that does come to fruition. It's going to come to fruition in markets that have the same issues as United States in terms of power transmission and other supply chain elements.

The next question is from Mike Elias with C. D. Cowen. Please go ahead.

Great. Thanks for squeezing me in here.

Andy, you've done a great job expanding yields and getting to 13.7% yields in The Americas. If I ask you to put your prognostication hat on, where do you see development yields and if part of that spot market pricing for hyperscale data center deals going particularly in light of where the private market is clearing deals. Ivy Klaver would be great. [indiscernible] I'm sure there is a private market competitor that will settle for a lower yield. Than we have in our North America schedule as we speak. I don't we were very blessed that we have numerous private capital partners to have some good intelligence on this. So I don't think they're all that much lower, in terms of returns and they still look healthy and profitable returns. I think we'll be able to outshine that because we're potentially picking our spots We're not just chasing volume. At the detriment of price and return, which has allowed us to keep our returns probably hundred basis points higher than the average Joe data center.

The next question is from Brandon Nispel with KeyBanc. Please go ahead.

Yes. Thanks for taking the question. Quick question for Matt. What type of core FFO contribution do you expect from the JV portfolio in 2025? And then I saw you recently closed Blackstone Phase two, maybe could you give us an update on how you're expecting that JV to impact the JV metrics in 2025? Thanks.

Sure. In terms I'll answer it in terms of like the broader disposition JV Digital. So we're not we're not expecting that to have a material impact on our bottom line core FFO growth. In 2025. That's a mix of call it timing, size and when things might come to fruition, code. So there's some variability there. So we're not on a clearly immaterial impact there. As it relates to, I think, maybe to your point on the broader joint venture private Digital, you've seen I think where you see that come through is you're seeing our fee income line pick up You saw that in the fourth quarter, which was largely tied to closing of our Blackstone Phase two. Two and the fees that we got from that more from the development side. We also closed on a acquisition within our S REIT, so that had some impact with our fee income as well. And as we now have the full Blackstone closed, and we look to expand on that, I think you'll see additional fee income contribute to our 2025 growth, in particular as those assets start to stabilize and we transition from development fees to more, call it, asset management property management type recurring So that's how we're taking a look at that for next year for this year.

That concludes back over to Andy Powers for his closing remarks. Andy, please go ahead. Thank you, operator.

Digital Realty had remarkable 2024. Reflecting strong demand for cloud, digital transformation, [indiscernible] Digital Realty is ready to support these customers' requirements as well as private AI and a potential avalanche of AI inference demand we anticipate around the world. We set a number of new records throughout our business executed our key priorities, position the company for an acceleration of bottom line growth in 2025 and beyond.

I am extremely proud of how our team executed to deliver this year's results. And I'm excited about the future and remain focused on seizing all the opportunity at hand.

I'd like to thank everyone for joining us today. I would like to thank our dedicated and exceptional team at Digital Realty. Who keep the digital world turning.

Thank you.

The conference is now concluded. Thank you for attending today's presentation.