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Date
Thursday, July 24, 2025 at 9:00 p.m. ET
Call participants
President and Chief Executive Officer — Andy Power
Chief Financial Officer — Matt Mercier
Chief Revenue Officer — Colin McLean
Chief Technology Officer — Chris Sharp
Chief Investment Officer — Greg Wright
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Takeaways
Record Bookings-- $177 million in gross new leases signed in Q2 2025, including $135 million at the company's share, with $90 million attributed to the zero to one megawatt plus interconnection category, representing an 18% increase over the previous record set two quarters earlier.
Core FFO Per Share-- Achieved a record core FFO of $1.87 per share, a 13% year-over-year increase and 6% higher than the previous quarter (non-GAAP).
Leasing Momentum-- Zero to one megawatt plus interconnection product set total bookings for the past four quarters exceeded $300 million, up from approximately $200 million in 2023.
Backlog-- Backlog at the company's share stood at $826 million at quarter-end, supporting multiyear growth visibility.
Renewal Leases-- Renewal leases of $177 million were signed at a blended 7.3% cash increase, surpassing the original full-year guidance range of 4%-6% for cash releasing spreads.
Development Pipeline-- Gross data center development pipeline reached $9 billion at quarter-end, with an expected stabilized yield of 12.2% and a land bank of 3.7 gigawatts, providing a capacity runway of 5 gigawatts.
Liquidity and Leverage-- Liquidity exceeded $7 billion, with leverage at 5.1 times and below the long-term 5.5 times target.
US Hyperscale Fund-- More than $3 billion in LP equity commitments received, with the total fund expected to support approximately $10 billion of data center investment from current commitments.
Guidance Raised-- Full-year 2025 core FFO per share guidance increased to a range of $7.15–$7.25, constant currency core FFO guidance raised to $7.10–$7.20 per share, and revenue and adjusted EBITDA guidance increased by $100 million and $75 million, respectively.
Recurring Revenue Growth-- Added 139 new customer logos, indicating expanding wallet share and recurring revenue base.
Sustainability/ESG Progress-- 185 data centers matched with 100% renewable energy, with 75% of global electricity needs from renewables, a 9% increase from the prior year, a 14% year-over-year reduction in North American colocation water use intensity was achieved.
Churn-- Total churn declined to 1%, with negligible churn in the greater than one megawatt segment.
Fee Income-- Approximately $0.03 per share in fee income, driven by large-scale deliveries of data center capacity.
Operating Metrics-- Adjusted EBITDA rose 13% year over year, while data center revenue grew by 11% year over year and same capital cash NOI increased by 4.4% year over year (or 1.8% on a constant currency basis).
Dispositions and Capital Recycling-- $900 million of gross proceeds generated from fund contributions and $65 million from a sale of a non-core Atlanta data center completed subsequently; the company has now exceeded the midpoint of its prior disposition guidance for 2025.
Debt Profile-- Weighted average debt maturity increased to 4.6 years; weighted average interest rate was 2.7%.
Summary
Management provided strategic clarity on sustaining long-term core FFO per share growth by emphasizing a balanced approach between rapid expansion in the zero to one megawatt plus interconnection segment and the future contributions from large-scale hyperscale bookings. The company highlighted its differentiated go-to-market execution, increased cross-regional demand, and effective inventory management ensuring runway for both colocation and hyperscale customers. Executives reported continued success in diversifying capital sources through an oversubscribed US Hyperscale Data Center Fund, which has improved the company's funding flexibility for investment and expansion. EMEA and APAC regions were noted as trailing the US in AI-driven demand, although both saw record participation in interconnection bookings. The company achieved material environmental milestones, including expanded renewable energy usage and water savings, reinforcing its recognized ESG leadership.
President and Chief Executive Officer Andy Power said, our growth has accelerated in 2025 and is poised to continue through 2026 and beyond.
Executives emphasized that more than 70% of bookings included fixed rent escalators of at least 4% or a link to CPI, supporting embedded revenue growth.
Chief Executive Officer Power described utility company requirements for larger upfront commitments as a "net positive to rationalization as stabilization of the industry," indicating improved competitive positioning for established operators.
Sales momentum was not driven by a single deal or region, but benefited from broad, balanced contributions across EMEA, the Americas, and APAC.
Chief Executive Officer Power observed, "the typical enterprise is using a lot more of its AI testing in the cloud service providers than it's doing the private IT infrastructure." suggesting further multiyear runway as enterprise AI adoption matures.
The company's future lease commencements already scheduled represent $241 million for the second half of 2025, $461 million of scheduled lease commencements in 2026, $124 million of leases are already slated to commence from 2027 onward.
Chief Investment Officer Greg Wright clarified that, upon completion, the company will retain a 20% minority stake in both the stabilized and development assets of the US Hyperscale Fund.
Chief Financial Officer Mercier reported that 94% of debt is unsecured and 84% of debt is non–US dollar denominated, supporting capital flexibility and FX risk management.
Industry glossary
Core FFO: Funds From Operations excluding certain nonrecurring items, a key measure of REIT operating performance.
Zero to One Megawatt Plus Interconnection: A product category representing clients leasing up to one megawatt of capacity, including connectivity services.
Colocation: The leasing of data center space, power, and cooling to third-party tenants for their own IT infrastructure.
Hyperscale: Large-scale data center deployments supporting cloud or big-data workloads typically by massive operators.
Commencement: The contractual start of a lease term, after which rent begins to accrue.
Churn: Percentage of revenue lost due to customer terminations or non-renewals over a given period.
Book to Bill: The ratio or time period comparing new bookings to the completion (billing) of signed contracts, important for growth visibility.
LP (Limited Partner) Equity Commitments: Capital pledged by investors in a private investment vehicle or fund.
Cash NOI: Net Operating Income measured on a cash basis, a frequent REIT performance metric.
Stabilized Yield: The expected return on invested capital for a property or pipeline, after it reaches stable occupancy.
Full Conference Call Transcript
Before I turn the call over to Andy, let me offer a few key takeaways from our second quarter results. First, we posted $177 million of new bookings in the quarter at a percent share, including $135 million at Digital Realty Trust, Inc.'s share. Record performance in the zero to one megawatt plus interconnection product set stole the show in the quarter, with $90 million of bookings. Second, core FFO surged to a record $1.87 per share, outperforming expectations for the quarter and contributing to an increase in our revenue, adjusted EBITDA, and core FFO per share guidance for full year 2025.
And third, we continue to extend our runway for better long-term growth, with oversubscribed LP equity commitments for our first US hyperscale data center fund, additional development site acquisitions in key US markets, and a robust balance sheet that is highlighted by more than $7 billion of liquidity and below-target leverage. With that, I'd like to turn the call over to our President and CEO, Andy Power.
Andy Power: Thanks, Jordan, and thanks to everyone for joining our call. As enterprise digital transformation, cloud computing, and AI adoption continue to accelerate, Digital Realty Trust, Inc.'s global platform is uniquely positioned to meet the full spectrum of customer needs while delivering differentiated value. With our twenty-year track record of execution as a data center operator, five gigawatts of development capacity, and more than $15 billion of private capital supported, Digital Realty Trust, Inc. has the wherewithal to service its growing enterprise and hyperscale customer base for years to come.
Over the past two and a half years, we have been focused on driving better long-term sustainable growth in core FFO per share, and we are starting to see the fruits of our labor. A key pillar of our full spectrum strategy is our zero to one megawatt plus interconnection business, which is anchored by connectivity-rich metro campuses. These campuses, typically located near where data is created and consumed, host mission-critical deployments that support hybrid multi-cloud IT, vital network infrastructure, industry-specific latency-sensitive applications, and AI inference, among other workloads. The common thread across these use cases is connectivity, and we have made it a priority to enhance our interconnection capabilities and services across the platform.
Our focus on strengthening the customer value proposition is delivering results. Bookings in our zero to one megawatt plus interconnection product set have seen consistent growth, with momentum accelerating over the past year, even as large AI-oriented leases have been in the spotlight. At the beginning of last year, we set an ambitious goal to double our colocation bookings, and we are well on our way to achieving it. In the second quarter, we signed $177 million of gross leases, including $135 million net share.
Digital Realty Trust, Inc.'s share bookings were led by $90 million in our zero to one megawatt plus interconnection category, a record result that is 18% higher than our prior record set only two quarters ago. Over the past four quarters, we have booked over $300 million in this category, up from approximately $200 million in 2023. This quarter's success wasn't driven by any single deal or even a dominant metro. Instead, leasing was broad-based with equal contributions from EMEA and the Americas, along with a healthy dose from APAC. Importantly, we also delivered record interconnection bookings in the quarter as the momentum we have seen in the zero to one megawatt category is starting to pay off.
As customers have deployed their gear in our facilities and need to support the underlying workloads with connectivity, the bottom line output of this success is our core FFO per share growth. We earned a record $1.87 per share this quarter, a robust 13% increase over last year's results and 6% higher than last quarter. While the rate of acceleration in bottom-line growth this quarter is notable and demonstrates the significant momentum we have in our business, our growth will be best measured in years. With our backlog at $826 million, we have strong visibility through the end of 2025 and beyond. Matt will provide details on the financials in a few minutes.
The demand environment for data center capacity remains strong and broad-based, both geographically and by product type, driven by secular tailwinds in digital transformation, cloud, and AI. Demand for both sub-one megawatt and large capacity blocks continues unabated. In sub-one megawatt capacity, our pipeline is broad and deep across all regions, and as evidenced by our four-month book to bill this quarter, these deals can typically be deployed much more quickly. We continue to position our large capacity blocks to support the growing needs of our hyperscale customers as we work to align development deliveries with the availability of power, and this approach has served us well so far.
In North America, near-term capacity blocks continue to be the most in demand, and we've had great success in placing our near-term development. So most of the discussions that we are having are focused on late 2026 and early 2027 deliveries. In EMEA, demand from AI deployments is growing but is still well behind the US. Consistent with historical trends, the larger capacity blocks in this region tend to be smaller than those in the US. In APAC, hyperscale demand is expanding, particularly in Tokyo and Singapore. Similar to EMEA, AI deployments are growing in APAC but lag in the US.
Another sign of the strong demand environment is the tremendous success that we have enjoyed in launching our US Hyperscale Data Center Fund, the latest evolution of our strategic objective to bolster and diversify our capital sources. Since our last earnings report, we've continued to receive commitments to the Fund from a broad array of global institutions, including sovereign wealth funds, pension funds, insurance companies, endowments, and other institutional investors. We have received more than $3 billion of LP equity commitments to date and are on target for our final closing, well ahead of our target raise and our original schedule.
We are truly humbled that so many of the world's leading investors chose to invest their long-term capital in Digital Realty Trust, Inc.'s inaugural fund. The early success of our US Hyperscale fund improves our strategic position by enabling us to continue to meet the growing and diverse needs of our hyperscale customers without overtaxing our balance sheet. While execution across our colocation and interconnection category will serve as the primary lever for growth in 2025 and 2026, we expect our substantial hyperscale capacity to bolster our backlog and to extend our runway for core FFO growth into 2027 and beyond.
In today's competitive business environment, enterprises need the ability to scale quickly and securely across regions, and that's exactly what Platform Digital enables. Many of our customers start with a single deployment but rapidly expand across our global footprint to interconnect with clouds, partners, and data at the edge. This seamless scalability is not only solving real customer challenges, it's also enhancing our value proposition, evidenced by more customers, lower churn, deeper wallet share, and growing recurring revenue streams. This strategic advantage continues to set Digital Realty Trust, Inc. apart, driving the addition of 139 new logos in the second quarter.
Now, as we announced this morning, we are providing enterprises with additional state-of-the-art services through our partnership with Oracle Solution Centers to further optimize these deployments and accelerate their hybrid IT and AI adoption. Key customer wins in the quarter include a global financial services company expanding its presence on Platform Digital in another metro to solve compliance and data localization challenges. A leading blockchain provider is developing edge nodes in multiple locations on Platform Digital to support decentralized private and public networks. A healthcare services company has expanded its presence on Platform Digital to solve data resiliency and locational challenges.
An autonomous vehicle developer is expanding to two more metros on Platform Digital to take advantage of the available cloud and network ecosystems. A global cloud provider is expanding its presence on Platform Digital by creating a new edge availability zone to support their growing customer base. And having grown up a Star Wars fan, I am particularly delighted to share that Lucasfilms is expanding their presence on Platform Digital, taking advantage of high-performance compute and AI capabilities to solve video rendering, transfer, and editing challenges. Before turning it over to Matt, I'd like to briefly highlight our progress on global sustainability.
In the second quarter, we maintained strong execution against our sustainability goals and were once again recognized by Time and Statista as one of the world's most sustainable companies of 2025, a reflection of our continued leadership in this space. In late June, we published our 2024 impact report, which showcases Digital Realty Trust, Inc.'s ongoing commitment to clean energy, resource conservation, and other sustainable business practices. Among the highlights in the report, we further expanded our renewable energy supplies with 185 data centers now matched with 100% renewable energy, while 75% of our global electricity needs were met with renewable energy in 2024, a 9% increase from the prior year.
We achieved a 14% year-over-year reduction in water use intensity in our North American colocation portfolio by implementing water-free based cooling systems and water conservation projects. We expanded our portfolio of certified sustainable data center developments, adding 1.9 million square feet in 2024 and bringing our global total to a cumulative 15 million square feet. These initiatives reflect our ongoing commitment to minimize Digital Realty Trust, Inc.'s environmental footprint while delivering sustainable growth for all of our stakeholders. And with that, I'd now turn the call over to our CFO, Matt Mercier.
Matt Mercier: Thank you, Andy. Digital Realty Trust, Inc. posted double-digit growth in revenue, adjusted EBITDA, and core FFO this quarter, reflecting the momentum that we've built up over the past year. These results were driven by record lease commencements, low churn, and higher fee income. We achieved these results while substantially increasing our liquidity, maintaining below-target leverage, and also preserving a large backlog and development capacity that provides strong visibility through the second half of the year and beyond. In the second quarter, core FFO jumped by 13% year over year to a new quarterly record while leasing results were highlighted by a notable new record in our zero to one megawatt plus interconnection category.
Looking ahead, we've increased our guidance for 2025, and we expect to exit the year with significant momentum and a sizable backlog. Digging a bit deeper on leasing, we signed leases representing $177 million of annualized rent in the second quarter, bringing the year-to-date leasing to $575 million at 100% share. At Digital Realty Trust, Inc.'s share, we signed $135 million in new leases in the second quarter. Of this, $90 million fell within our zero to one megawatt plus interconnection product set, which exceeded our prior quarterly record by 18%. Relative to the prior four-quarter average, quarterly leasing in this product set was up by 36%.
We signed $45 million within the greater than one megawatt category at our share with leasing spread across our regions. Our top five leases in this segment range from two to twelve megawatts, all at steady to improved pricing. Notably, average pricing in this segment was skewed lower in the quarter by the exercise of an expansion option by a large enterprise customer in North America, which was committed to more than three years ago. Consistent with our objective of improving Digital Realty Trust, Inc.'s long-term sustainable growth, more than 70% of bookings included fixed rent escalators of at least 4% or a link to CPI.
Our backlog at Digital Realty Trust, Inc.'s share totaled $826 million at quarter-end, as a record $228 million of commencements was only partially offset by our new bookings. Looking ahead to the second half of 2025, we expect another $241 million of leases to commence, which are more heavily weighted toward the fourth quarter. For 2026, we currently have $461 million scheduled to commence, while an incremental $124 million is already slated to commence in 2027 and beyond, providing strong visibility for multiyear growth. During the second quarter, we signed $177 million of renewal leases at a blended 7.3% increase on a cash basis, above the high end of our original 4% to 6% full-year guidance.
Renewals in the second quarter were again heavily weighted toward our zero to one megawatt category, with $130 million of renewals at a 4.2% uplift. Greater than one megawatt renewals of $41 million saw a robust 14% cash releasing spread. For the quarter, total churn continued to decline to just 1%, with negligible churning in our greater than one megawatt category. As for earnings, we reported record quarterly core FFO of $1.87 per share, up 13% year over year, reflecting strong upside from hyperscale commencements, better-than-expected progress on zero to one megawatt plus interconnection bookings, and $0.03 of FX benefit. On a constant currency basis, we reported core FFO per share of $1.84 in the second quarter.
During the quarter, we saw an approximately $0.03 benefit in fee income tied to large-scale deliveries of data center capacity, which corresponded with our record leasing commencements. While operating expenses picked back up from last quarter's unusually low levels, the uptick was consistent with our growing book of business, and repair and maintenance expenses remain on pace for a seasonal ramp in the second half of the year. Data center revenue was up by a robust 11% year over year as the combination of strong renewal spreads, rent escalators, and new lease commencements more than offset the drag associated with the dispositions completed over the last twelve months.
The increase in adjusted EBITDA was even greater at 13% year over year, reflecting the growth in data center revenue and higher fee income. Taken capital cash NOI growth was also healthy in the second quarter, increasing by 4.4% year over year, driven by 5.9% growth in data center revenue. On a constant currency basis, same capital cash NOI rose 1.8% in the quarter. Results were influenced by bad debt reserve associated with broader macroeconomic and geopolitical factors and a prior year cash rent payment. For the first half of 2025, same capital cash NOI was up 3.4%. Moving on to our investment activity.
During the second quarter, we spent over $900 million on development CapEx on a gross basis, which includes our partner share, and approximately $700 million on a net basis to Digital Realty Trust, Inc. During the quarter, we delivered a record 96 megawatts of new capacity, 98% of which was pre-leased, while 16 megawatts of new data center projects started construction, leaving 734 megawatts under construction. At quarter-end, our gross data center development pipeline stood at $9 billion and a 12.2% expected stabilized yield. Data center shells under construction increased to 610 megawatts during the quarter, while our land bank grew to 3.7 gigawatts, extending our runway for capacity growth to a record 5 gigawatts.
As Andy noted earlier, we are also pleased with the success we've had with our US hyperscale data center fund, which has the potential to support approximately $10 billion of total data center investment from the existing commitments. In the second quarter, Digital Realty Trust, Inc. contributed a 40% share of the five existing operating assets along with an 80% share of two development sites, resulting in $900 million of gross proceeds to Digital Realty Trust, Inc. Subsequent to quarter-end, we also sold a non-core data center in Atlanta for $65 million. With the fund contribution and the non-core assets completed, we exceeded the midpoint of our prior disposition guidance for 2025.
Turning to the balance sheet, by evolving our funding model, we are able to extend our reach and better serve the needs of our hyperscale customers without overly taxing our balance sheet. Leverage remains at 5.1 times, still well below our long-term target of 5.5 times, while liquidity remained robust at more than $7 billion, excluding the war chest of private capital we have amassed to support hyperscale development. We raised another €850 million of euro bonds at the same 3.875% coupon as we did in January, but slotted this bond into 2034 to maintain our well-laddered maturity schedule.
We used most of these funds last week to pay off €650 million of maturing 0.625% euro bonds, so unfortunately, we'll be facing a 325 basis point refinancing headwind beginning in the third quarter. This finishes off our maturing debt for 2025, with our next maturity arriving in January. Looking further out, our maturities remain well-laddered throughout 2035. Moving on to our debt profile, our weighted average debt maturity increased slightly to 4.6 years, and our weighted average interest rate ticked up to 2.7%. Approximately 84% of our debt is non-US dollar denominated, reflecting the growth of our global platform and our FX hedging strategy. Approximately 94% of our debt is unsecured, providing ample flexibility for capital recycling.
I'll now turn to our guidance. We are increasing our core FFO guidance range for the full year 2025 by $0.10 to $7.15 to $7.25 per share to reflect better-than-expected operating performance and our updated FX assumptions for the full year. We are also increasing our constant currency core FFO guidance range by $0.05 to $7.10 to $7.20 per share, consistent with the better-than-expected operating performance. The midpoint of our core FFO per share guidance represents approximately 7% year-over-year growth, reflecting the momentum in our underlying business balanced by increased development spend and a reduction in leverage year over year.
As a result of the year-to-date outperformance versus our expectations, strong momentum within our zero to one megawatt business, and better-than-expected fee income along with our updated FX assumptions for the year, we are increasing our revenue and adjusted EBITDA guidance ranges for 2025 by $100 million and $75 million, respectively. We are raising our cash and GAAP releasing spread guidance ranges to 5% to 6% and 7% to 8%, respectively, to reflect the performance we have seen year to date. We are also increasing our G&A assumption by $15 million while maintaining the rest of our operating assumptions for 2025.
In sum, Digital Realty Trust, Inc. is extraordinarily well-positioned with ample momentum to continue to drive the business into the future. Consistent with how we framed it here eighteen months ago, our growth has accelerated so far in 2025 and is poised to continue through 2026 and beyond. Visibility surrounding our growth potential over the next several quarters is supported by our robust backlog of signed but not yet commenced leases, while upside will stem from better-than-expected execution within the colocation segment.
Looking further out, we have crafted a comprehensive funding model for our hyperscale business, including the sourcing of private capital to support more than $15 billion of additional hyperscale development capacity, which will help to support our customers' sizable and growing data center infrastructure requirements and extend Digital Realty Trust, Inc.'s runway for growth. This concludes our prepared remarks. And now, we'll be pleased to take your questions. Operator, would you please begin the Q&A section?
Operator: Thank you. We will now open up the call for questions. In the interest of time and to allow a larger number of people to ask questions, callers will be limited to one question. To ask a question, please press star then one on your touch-tone phone. If you're using a speakerphone, please pick up the handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. And the first question will come from Jonathan Petersen with Jefferies. Please go ahead.
Jonathan Petersen: Oh, great. Thank you very much. Do you think is driving the inflection in growth in the zero to one megawatt category? Are we seeing growth in that market overall, or is it mostly Digital Realty Trust, Inc. market share? If it's market share, can you break down maybe break it down for us two or three things Digital Realty Trust, Inc. has changed in its go-to-market strategy to capture more market share?
Andy Power: Hey. Thanks, Jonathan. Maybe I'll tag team this with Colin here. I think this has been a priority for the company that we've doubled down on over the last several years. And now it took a long way to get here. We had to put the puzzle pieces together in terms of a global footprint, have the highly connected destinations, revamp our go-to-market, a whole host of activities that led up to this. And then I'd say it's been a growing market where we've executed and taken some share over the last several quarters, accelerating with records upon records. And then this quarter is certainly a mile up, I think, 18% over the prior record and nearly $90 million.
I know Colin and his team have continued to not rest on their laurels off coming off a strong 2024 and put some incremental changes through the program. So I'll let him speak to some of those more recent activities.
Colin McLean: Thanks, Andy. Jonathan, I appreciate the question and recognizing the progress here. Yeah. We were really pleased with the quarter overall. Nearly $90 million in bookings across the platform, strong interconnect, and a strong number of customers participating. So you asked the kind of why factor of this. I think our platform itself continues to resonate with clients. So the global reach or core markets, enterprises very much value that core market nature of our portfolio. The fact that we offer the full spectrum of offerings, cabinet cage, suite, building, both central as well as up to suburbs, large capacity blocks, which really matter.
In this space, we had particularly strong participation, 300 to 600 kW, 600 kW and above in the enterprise space, and really strong interconnection capabilities both physical and virtual.
Operator: Your next question will come from Jonathan Atkin with RBC Capital Markets. Please go ahead.
Jonathan Atkin: Thanks. Wondering if you could talk a little bit about more broadly interconnection bookings, which I think was a record, anything to comment on this goes at including around pricing as well as how the second half bookings environment is shaping up, and I got a quick follow-up.
Andy Power: I'll take the second part of that, Jonathan. Thanks for the question. I'll hand it to Chris to talk about the interconnection bookings in the quarter, which was a record. I'd say we are continuing the momentum in the second half, especially in that category. So we didn't pull forward empty our funnel for the back half of the year. Off to a good start in just a few weeks. In 3Q.
And have a broad-based set of demand in that category from contributions across all the regions just like the 2Q results penciled with, I believe, is the number one for the Americas region, number one for the Americas region, I think the number two contribution record for landing into APAC. On that, and that's in zero to one megawatt and interconnection. Speaking just to the interconnection results, I like Chris highlights on the high key points.
Chris Sharp: Yeah. Appreciate it, Jonathan. So I think there's three key factors that underpin the growth, the record growth that you see here today. So I think the sustained zero to one megawatt bookings that we've had past year those customers are on a journey. Right? So they deploy new deployments, then they go to bookings, and then that bookings comes in as revenue. As they start to activate more and more services across the platform. So I think that's the critical one that we keep seeing that build over momentum over time. I think the second piece is just the global pricing standardization. So aligning our interconnection value provides clarity and scale to a lot of our customers.
And so you see a lot of that starting to mature into the overall portfolio as well around the globe. So not just the single market, but all the critical environments that we operate in. And I think the third is just the comprehensive interconnection suite. So that's beyond what just Colin talked about is the physical cross-connects, but those virtual services. I think that virtual element starting to mature and grow in a great way where it's not only for cloud, it's starting to be resonating for AI.
But I think one of the other underpinnings that's very unique to Digital Realty Trust, Inc. is just the overall bulk fiber and being able to execute on our pathways product where it's driven by multi-megawatt customers that are on this journey both digital transformation, cloud, and artificial intelligence where they need that bulk capability to interconnect in a very efficient fashion. And so why that's unique to us at Digital Realty Trust, Inc. is just that campus master planning and an integrated infrastructure design. So we look across the entire portfolio of not only space and power but interconnection as well.
Jonathan Atkin: Thanks. And if I could just squeeze one in, the math of project now is the one we've about continuing by both existing people players and new players as well. Financial sponsors and so forth, stopping wealth fund. Gigawatt scale multibillion, Many of these are in remote locations But what do you see as the impact on sector and this overall competitive dynamics?
Andy Power: Thanks, Jonathan. I think your said question is a little cut up there, so I'll just rephrase it. So I think you're saying the big announcement is a big call it big lease signings and gigawatts in various locations. As I think it shows a continued commitment to building out infrastructure for artificial intelligence from numerous diverse players in the landscape. And our strategy is quite differentiated when it comes to that. We are continued focus on major markets with robust and diverse demand. So hyperscale customers, service providers, network providers, and enterprise, not single thread for one-off customer islands necessarily. Those major markets have locational and latency-sensitive sensitivity for the workloads and the data.
They may be elongating and stretching, but there are true supply barriers to these markets. We, time and time, hear from other customers that they have preference for these markets because the fungibility of demand, i.e., they can use it for cloud computing or machine learning. And we're catering to a broad base of these types of customers. So and I also would say, I think a lot of the headlines you're seeing is still a continuation of a long series of early innings when it comes to AI.
And I do that from a looking from an enterprise adoption and use cases that still have not fully come to fruition yet today, which I think will further compound the workloads coming back to these centers of data gravity that we've focused on for years.
Operator: The next question will come from Eric Luebchow with Wells Fargo. Please go ahead.
Eric Luebchow: Great. Thanks for taking the question. I wanted to get your sense for kind of the large capacity block market in hyperscale in the US. I think you talked about power availability kind of moving to late 2026 or early 2027. And just thinking through the timing of the prelease windows if you expect that to kinda snap back in the second half of the year, there to be more and markets like Virginia, Charlotte, Atlanta, or anywhere else where you see opportunity Thank you.
Andy Power: Thanks, Eric. So maybe I'll kick it off and Colin can touch on what he shared last quarter and the update on what we're seeing now from the hyperscale customer base. So we had a total share of $177 million of leasing this quarter, which was our sixth largest quarter in the history of the company. The pro-rata share is less than that, but that's a strategic pivot in our funding model. Building a private capital business around hyperscale means that some of the leases are falling into ventures that we do not own 100% but obviously are operating on behalf of our customers and garner fees and other economics for doing so.
We still see a tremendous runway for growth in that category. As you saw in our current results, we now have a total of five gigawatts of COVID inventory runway from land to shells north of 600 megawatts today in addition to what's under construction and highly pre-leased on the development life cycle. We're very happy with the success of our inaugural fund, essentially oversubscribed, that essentially gives us a call in total $15 plus billion of private capital for hyperscale. To fund that journey. When it comes to the nearest term demands of the customers, they obviously sooner is better. And I'll let Colin talk to some of what he's been talking to those hyperscale customers about.
Colin McLean: Thanks, Andy. You know, we've highlighted before that demand overall is very strong. It continues to be a stronger pipeline is as strong as we have seen. The nature of that is both diverse by customer and global nature. Although, it's probably more tilted towards North America, where we have the larger capacity blocks. Use cases still very much resonate around AI and cloud. Cloud is still very at the forefront of how our customers are calling with us. Overall, and so Andy had mentioned we have about one gigawatt of capacity coming online over the next several years, in particular, in Northern Virginia, our largest market, where you have about 350 megawatts coming online in late 2026 and 2028.
There's very active conversations around this. We saw I highlighted that previously. In our last call. Those conversations are very much at the forefront of what we are participating in. We're working really closely with hyperscale partners to ensure we can provide the maximum value for their use cases. We've mentioned previously the bookings are not always linear, but I can tell you that the pipeline and demand profile continues to very much resonate with our hyperscale partners.
Operator: Your next question will come from Michael Rollins with Citi. Please go ahead.
Michael Rollins: Thanks, and good afternoon. Just wanna go back to some of your comments about the globalization of your footprint. And I'm curious if you could provide some context on, you know, why you're seeing the EMEA and APAC regions trailing behind the US on AI adoption, are there certain catalysts to watch for or just simply timing for demand in those regions to expand and accelerate for AI workloads.
Andy Power: Thanks, Michael. So just to clarify, we had a great global quarter this quarter in particular. So exports overall, i.e., customers headquartered in one country, export into another or another region, was a new record for us. And a very sizable portion of our total zero to one megawatt interconnection signings. And I did call out earlier how we had a number one in EMEA quarter for landings and the number one number two in APAC quarter for landings. On the larger capacity block side, hyperscale and certainly more AI-related, I think we've just seen a preponderance of that activity to be very US heavy.
And I think a lot of that dates or is contributed from the US multinational hyperscale landscape first turned to their home country or home court for rapidly scaling big, big projects. And I don't think that means that the AI will not come to outside the US. I think there's examples of that happening in APAC and more to come in EMEA. And we know for a fact that these other countries and continents are making this a priority in terms of making expedited infrastructure for customers to land on their shores. So and it kind of dovetails with just how cloud rolled out, started with a very US heavy and then went to a more globalized footprint.
So and maybe this more recent administrative action on AI is another incremental fuel to that fire, really making more pervasive for US multinationals to push more of their gear and infrastructure to our campuses abroad.
Operator: Next question will come from Ari Klein with BMO Capital Markets. Please go ahead.
Ari Klein: Thanks. And you talked a little bit about extending the runways for long-term growth, and I'm hoping maybe you can speak to what that growth could look like. This year will be about 7% with some FX benefit. And seems like next year maybe could accelerate. But how are you thinking about what sustainable growth could look like over a longer-term multiyear time frame?
Andy Power: So thank you, Ari. If you remember not that long ago, we put out the guidance for this year, which I think we gave probably eighteen months prior to that guidance. And that guidance was called just over the 5% area, and we've articulated that was not the new bogey. That was really the new floor, and we knew we could accelerate from that. We're obviously having a great first half of the year. In terms of beating our internal expectations. And ultimately raising our guidance to now just shy of, call it, 7% depending if you look above with or without currency adjustments.
I think the way I'd frame it is we're looking to be a consistent compounder in that area. If better, then better than that if we can, but at least in that area, for as long as possible. And the tools in our toolkit, in addition to the levers and funding that I described, are really near term 2025, 2026 is about how we continue this momentum and execution in the zero to one megawatt in the interconnection. The shortest book to build, falling into already built capacity, flows through their bottom line quickly like interconnection signings. And the longer term, the 2027 and beyond, about those hyperscale bookings.
Because the hyperscale bookings are obviously bigger capacity blocks, and they're falling into capacity that's not sitting idle today. So those bookings that we do in HydroScope this quarter, next quarter, and the quarter after that, are all about, call it, the end of 2026, 2027, 2028, and thereafter.
Operator: Your next question will come from Irvin Liu with Evercore ISI. Please go ahead.
Irvin Liu: Hi. Thank you for the question. I wanted to ask about your US hyperscale fund. So once fully funded and developed, what sort of implications will this have on your financial model longer term? So any thoughts on, you know, what the contribution from a fee income perspective and core FFO per share growth perspective longer term would be very helpful. Thanks.
Greg Wright: Sure. Thanks for the question, Irvin. I think as we know we talked about on prior calls, first of all, you know, what is the makeup of the fund and how is it being funded? As you recall, we contributed five stabilized assets, you know, in various markets to provide diversification, which was attractive to investors. In addition to that, now you remember last May, we contributed 40% of those assets to the fund. And the other 40% will come in January of 2026, which keeps us with our 20%.
In terms of the development assets, you may recall, we contributed four parcels of land upfront, which are gonna support seven buildings, again, in these, you know, as Andy mentioned earlier in these tier one, you know, latency-sensitive product diagnostic markets. Places like, you know, Nova, Dallas, Charlotte, Atlanta. So that's what's being contributed today. When you look at our total fund today, I would say about, you know, roughly 70% or so is earmarked, which leaves us with about 30%, give or take, of discretionary capital to go ahead and deploy in developments that haven't already been identified. So that's what the fund is and where it is.
Maybe I'll turn it over to Matt now to discuss your other part of your question.
Matt Mercier: Yeah. Thanks. So Irvin, look, I'd say this in kinda two of breaking into two trying to be simple buckets. Right? So we've got as Greg noted, we've got it to ten billion ultimately to deploy. That's gonna go out over the next, you know, few years. As we continue to develop these data centers. And, you know, we're gonna expect to earn similar returns to what we're seeing, you know, call it today on our balance sheet, as we disclosed in our supplemental. And that development's gonna ramp over time and we'll get our, call it, 20% share of that.
So it'll ramp over the next over the next few years, but it'll be relatively minimal at the start, call over the next year, and then continue to ramp over the next call, three to four. The other main side of that is fees. Right? And the largest portion of the fees is gonna come from our asset management fee, which is based on our committed equity, and that's at a market rate. And that'll come in sooner. So that's gonna give us some of that near-term benefit.
Operator: The next question will come from David Guarino with Green Street. Please go ahead.
David Guarino: Thanks. Maybe sticking on the hyperscale fund. Can you talk a little bit about the strategic rationale for keeping a majority stake in the operating assets but a minority stake in the development assets? And I'm curious, Greg, if maybe that's a fundraising trend you think we'll see across the industry with that structure, or would that maybe just specific to these assets and this deal?
Andy Power: Just to clarify, it's the same ownership stake in both the stabilized assets and development assets. So the end landing is a minority 20% in both the operating and the development, David.
David Guarino: I ask another question? You can go ahead too. What was it meant there? Yeah. And then my I misread that in the presentation then. Yeah. So other one then maybe we'll kinda switch gears. There's been this trend we've seen probably just the last few quarters or maybe the last year or so about utility companies requiring larger upfront commitments. And I'm wondering how's that impacting your construction cost per megawatt and would you view that as a net positive or a net negative for a company as large as Digital Realty Trust, Inc.?
Andy Power: Thanks, David. Listen. I view that as a maturing of the broader industry around data center infrastructure and power. I mean, it's on the back of these utility companies, especially those who are not quite used to seeing prevalent data center demand, carrying numerous inbounds from numerous shops. And they, in my opinion, what they needed to do and have now done is raise the bar for entry, i.e., they made real counterparties that own land, have real commitments to building the infrastructure for their customers. And that often requires security deposits or counterparties of substance. And I think that's a net positive to rationalization as stabilization of the industry.
And given Digital Realty Trust, Inc.'s track record, I think we show up in front of these utilities as a really good partner. We never were an issue on this, and now we can call flush out folks that were maybe in the land flipping game and really try to get to folks that are really dedicated for the long haul in scaling data center infrastructure.
Operator: Next question will come from James Schneider with Goldman Sachs. Please go ahead.
James Schneider: Good afternoon. Thanks for taking my question. It's good to see the momentum in the zero to one bookings category. If that sustains itself, I'm just wondering, given that there's a smaller blocks of space, do you have availability in your existing installations for 2026 such that you could slot in more of that business into 2026 commencements and potentially drive further upside to 2026 financials? Is that a reasonable assumption?
Andy Power: Thanks, James. So we had a record year last year in that category, it was demonstrably higher than the prior year. We're pacing obviously well ahead in the first half of this year and plan to keep that momentum when we set our goals for 2026, albeit being July right now, I can tell you the goals will be another stair step up in that direction. And part and parcel of that is making sure you have the inventory runway for growth. So, yes, we have some certainly supply-constrained markets along the way. Some of our most sought-after markets, but we're in fifty plus metropolitan areas around the world and adding new markets like our recent entry into Indonesia.
And we also have what we've been playing out, and you see a little bit in our same store pool, the repurposing for higher and best use of our footprint. So when a customer that has a multi-megawatt haul expires, we look at that and say, you know what? Maybe we should position that towards our inventory for our colo. So we got able to call self-help in terms of making sure we have homes for our customers to grow.
Operator: Your next question will come from Vikram Malhotra with Mizuho. Please go ahead.
Vikram Malhotra: Thanks for taking the question. So I just wanna dig in more into the zero to one megawatt kind of pay slash capacity. You know, your peers obviously saying they're building boulder. Over the next, you know, five years or three years, building next two years and hoping to lease up. I guess, two parts. One, at your growing the, you know, the booking space, can you just elaborate? Are you taking share? Is it a bigger TAM as you see it?
And then maybe if you can give a sense of, like, on a three-year basis, do you anticipate CapEx having to just ramp up in order to take advantage of what may be a much, you know, bigger time ultimately down the road?
Andy Power: Thanks, Vikram. So I don't want to speak to any specific competitor. Listen, I think there's agreement in the market that this is a very large and attractive addressable market. We've invested for years to essentially have a global platform with the capabilities to give a really compelling value to our customers. And you've seen that from the five thousand customers we have today growing with us and doing repeat business. You see that from the 139 we added just this quarter. You see that in the testimonials of the customers I laid out in our prepared remarks.
And I think if you even just looked at the number one and two in that category, you still see a long tail of business from three and on down the list. That we're certainly taking share from along the way. We made the decision about ten years ago to fully embrace the full product spectrum. Right? Coming from the hyperscaler into the colo and enterprise world, it took a lot of hard work and investment to get to those capabilities. But I think in fully engaging across the full customer spectrum, it pays dividends. It pays dividends when we look for customers that wanna grow into larger footprints with us on our expansive campuses.
It pays dividends when we look for customers that wanna increase their power densities, where we already were serving another larger customer at a higher power density. So I think the trend has been our friend. Along with a lot of investment and hard work, focus execution in that category.
Operator: Your next question will come from Nick Del Deo with Nathanson. Please go ahead.
Nick Del Deo: Oh, hey. Thanks for taking my question. Andy, earlier in the call, you were talking about your strategy of sticking to tier one markets. Your expectation that over time, you'll see demand in those markets compound as enterprise AI adoption picks up. So what's your latest thinking, and what are you hearing from customers regarding, you know, when you think that compounding will really start to kick in? And along those lines, what's your sense as to the share of AI in certain use cases, you know, that are gonna need to be distributed across key metros for latency or other reasons?
Andy Power: Thanks, Nick. So I'm a big believer in what you just outlined or repeated from what I said earlier. But I think the timing is still unknown. I think our success this quarter, last quarter, and several quarters when it comes to the enterprise has been seeing very modest AI contribution. We're still capitalizing on the trends of outsourcing of data center infrastructure, hybrid multi IT, digital transformation, and getting AI ready is more the pervasive theme. Yes. We are doing liquid cooling for trading firms, financial services firms, other industries, pharmaceuticals, but it's just the tip of the iceberg of the potential. And I think it really ties back to corporate enterprise.
I don't think as has gotten anywhere near the level of AI adoption and use cases, especially in a private set. When we look at the data today, it feels like the typical enterprise is using a lot more of its AI testing in the cloud service providers than it's doing the private IT infrastructure. Just like the journey on cloud started that way and came back to hybrid, I think you're gonna see the same trend. And we are well-positioned when that happens. And between now and whenever that happens, we have a lot of business for both our enterprise and our hyperscale customers to do in the core markets where we offer and support them.
Operator: This concludes the question and answer portion of today's call. I'd now like to turn the call back over to President and CEO, Mr. Andy Power, for his closing remarks. Please go ahead, sir.
Andy Power: Thank you, Chuck. First off, as a Texas headquarter company, we want to acknowledge the devastating flooding in Central Texas earlier this month. Our hearts go out to all those impacted, including the family and friends of our former colleague, Mark Walker. Mark played a key role in our investments team and was admired for his pursuit of high standards, intelligence, devotion to his family, and quick wit. He left a lasting impact on many of us. Wrapping it up, Digital Realty Trust, Inc. delivered another strong quarter, building on the momentum from earlier this year.
We saw record performance in our zero to one megawatt plus interconnection business, underscoring the strength of our global full spectrum platform and the demand for data center infrastructure. Our core FFO per share results were at record levels, and our backlog remains strong and well supported by a deep and diverse pipeline that reflects the global demand for data center capacity. We made meaningful progress in evolving our funding model to support this growth while staying focused on our strategic priorities. These efforts are translating into accelerating bottom-line growth and enhancing our visibility into long-term sustainable performance.
Scaling our business globally is a team effort, and I'm incredibly proud of our talented and dedicated colleagues who continue to execute at an exceptionally high level. I'm excited by the opportunities that lie ahead yet remain focused on delivering for our customers, partners, and shareholders. Thank you all for joining us today.
Operator: The conference is now concluded. Thank you for joining today's presentation. You may now disconnect.