Digital Realty Trust Aktie

We're tight on time today with only 35 minutes per session. So I'm going to try to get through as many questions as I can. Michael Funk, I cover the North American telecom data center and tower stocks at Bank of America. Really grateful to have Andy Power, Digital Realty President and CEO here again with us. So Andy, thank you.

Thanks for having me.

Yes. Absolutely. And we have Jordan down here as well, who heads the Investor Relations function. Hopefully, you guys all know both these guys.

So I'm going to try to rip through a bunch of these questions. And I do have some obligatory rapid fire questions, expect to ask at the end. So hopefully, I'll get those in as well. The big news last quarter, Andy, was, well, in my opinion, when you talk about extending double-digit core FFO growth per share into '27 and beyond, right? And that's a higher rate of growth maybe than you previously talked about. So can you walk the key assumptions underpinning that outlook and maybe the biggest variables also that investors should be looking for?

Sure. So it was certainly a milestone in the making. While we had the conviction to come public with it on the earnings call, I can't tell you, it all crystallized in the month of July right before that call. If you look at the milestones in each of our, call it, legs of business, the 3 pillars of growth, colo and enterprise, we capped off the second quarter with, I think, the third straight record in a row.

We were doing $50 million of signings in that quarter for a long time and did eclipse the $100 million in the second quarter and basically had the first year on pace for over $200 million on the hyperscale development front, in roughly 6 months, we've taken our under development total projects from about $10 billion to $20 billion with roughly the same on pre-leasing and returns, call it, 11.5%.

And lastly, well, it's strategic private capital/balance sheet activities. We started the year with an upsized closed-end fundraise. We had obviously gotten the balance sheet over time into a position from a leverage liquidity standpoint. We're making progress on the next legs of those, call it, strategic private capital raising. And I think all those things together is what brought us to a place where we see this flowing to the bottom line, not just this year, but next year and thereafter at that, call it, double digits 10-plus percent bottom line growth, and it helps to have a $2.3 billion backlog of revenue as well.

And I want to talk about the backlog and the bookings next. So last quarter, you had another really strong quarter of bookings, you hit the record backlog that you just mentioned. And then obviously, FFO growth ties into more development, right, which must express greater confidence and the durability of demand, right?

So what are you seeing that's giving you confidence in the durability of demand? And I'll give you an example that another executive private company gave me a few weeks ago at lunch, maybe you can talk if you're seeing the same thing. What he said when asked the same question was that, he said, "Mike, we're delivering capacity today, basically, the usage of power is spiking immediately, much higher than it did historically, and customers also demanding full delivery capacity on day 1 when maybe in the past, they would have asked for x percent in year 1, y percent in year 2 more scaling the capacity." Those are the examples he gave. I don't know if you see similar indicators or if there are others that give you confidence.

Sure. I'll touch on the meat of your question in a second. What I will say, not only just have 3 pillars of growth or a triple threat there. If you unpack that bottom line algorithm, it's built off of a big piece of development, but other levers in that growth as well. If you look at our colo interconnection business, continually growing our platform, more customers, more locations, more cross-connects, ecosystem effects, cash mark-to-markets of 5-plus percent, our hyperscale estate that's already inked in all our expiration schedule has rates going down and has market rates going up. And we've had a great mark-to-market in that quarter and more to come on that front.

And then you turn to the development where we've been able to -- in a world where costs have inflated, you can see we're building $20 billion on 1.4 gigawatts, still be able to push rates to keep those returns at, call it, 11.5%, that's about 63% leased. We had probably 5%, 7% of vacancy, which I'd call colo vacancy in the total development projects.

And that 30% of vacancy, if you look at our track record, those buildings by the time we open those doors are full, right, especially the hyperscale buildings. And that's a product of our markets we chose to focus on are servicing robust and diverse demand, not just cloud or hyperscalers but also enterprise and other service providers, all hyperscalers, all the cloud availability zones, and AI landing in, be it AI inference because it's obviously a higher price point than where you can go anywhere for training workload.

And the supply is being well outpaced by the demand. These customers have -- their end customers are real businesses that need to grow on their cloud in those markets. They need to grow with adjacency, right? So -- and I'm sure we'll talk about this a little bit more. The supply picture is not getting easier for anybody. So we see a lot of customers competing for the same capacity blocks. We see that on the enterprise side of our business, which is a new thing.

We see that on the hyperscale business, which I would say, has been part of why us picking our spots and helping with customers where they need us most has allowed us to generate the output, the rate and the returns. But we've got tremendous conviction on that. And that [ 1.5 ] is a part of a 9 gigawatts of growth on the 3 gigawatt operating base today.

Yes. It's a tremendous number. I want to pivot for a second to your comment about capacity. So I host the call at 11:00 today with Andy Lipman, who is my Washington, D.C. regulatory legislative expert on everything telecom and technology. And the theme of the call was data center regulation moratorium and executive orders, right? It's very topical, even more so after this weekend and AI even kind of raising -- rising to the topic kind of pushback or fear.

One stat he gave us was that 75% of all voters now are opposed to data centers. They probably know what they are, but they're opposed to them, right? And 26 [indiscernible] candidates are now for moratoriums to some degree or another. And even Trump has told Republicans that they can go their own way on data centers as it means winning the races in their own space. And I don't believe moratoriums are terminal. They're temporary, right, because a permanent moratorium would be illegal, at least according to Andy Lipman, you can't have one. But it's certainly going to slow development. And kind of getting back around to the question and supply, can you just talk about the Digital Realty pipeline and what you have in place in terms of permitting, provision power and location that gives you confidence for meeting in-service dates relative to the fear affecting the broader landscape?

So a lot to unpack in there, and I'll get to the major emphasis of your question in a second. But, like, I think it's worth speaking to what everyone probably read over the last several days. Based on everything I'm seeing in the business, albeit new, this is not a pencils down moment on artificial intelligence and the infrastructure that is required to create this. So there may be forms of collaboration and pacing, but these are once-in-a-lifetime technological changes happening and economic drivers and capital behind these companies that -- and this infrastructure is needed, and they're on a race for profitability.

There's also, we are at a place where we don't just do AI, we do digital transformation enterprises. We don't just do AI, we do cloud computing. Both of those 2, I believe, have been restrained by the focus on the fever around AI. And if AI, the piece that I think we are most exposed to, is the interaction, the inference, the private data, that is where the economics of this are going to unfold more than anywhere. So it's the piece that these companies, if they want to survive, they cannot go pencils down as an industry. So I look at what you're saying, and I agree with you. I will wear the scar tissue of being behind the 8 ball as an industry leader around this. But I will tell you, the ground game is a lot different than what you see in the national social media.

And we have shown time and time again in markets where we operate for multiple decades, or markets where we're just going into that our track record, our expertise, our approach, we go in there, we educate them about who we are, what we're going to do. We make sure -- have you want -- would you like to tour a data center. Let me just tell you who our customers are, right? We find locations that are the right locations for this infrastructure. We educate them that -- I know you heard this thing on your TikTok or Facebook about data centers taking water. We have 300-plus data centers. We use less water than 18, 1-8 California golf courses. There are 16,000 golf courses in the United States. So if you have an issue with water, call the golf course companies.

And the list goes on with electricity and other things as well. And to date, we've been very successful in navigating that as we've been scaling infrastructure like we've never seen before. So I don't think all folks are going to be as fortunate as us are going to have the experience that we've had and you hear the dustups and the bad actors and the updates happening. But I think our brand when it comes to this is a brand of trust, reliability, and benefit for all the community stakeholders. And I think that's going to win the day regardless of the political football around the asset class.

And another just kind of bank shot off of that, tighter supply market should enhance the value and even renewal rate that you're seeing in your existing portfolio, right? So I wanted to talk about that a little bit. And looking across your portfolio, which markets or market represent the best or most positive repricing opportunity?

Put aside the amazing Singapore market, which we are...

And I want to come to that in a minute talking about that market.

I'll preempt you on that. We're 6% of the portfolio. We're delighted to have just been awarded a precious 50 megawatt block of IT. Talked about NIMBYism, I'm copying Jordan, NIMBYism at its best is when the country literally says, you get a megawatt, you get a megawatt, and you get a megawatt, nobody else, like that market, our rates of returns are off the charts. Put that one aside for a second. Let's talk the U.S. for a second.

Northern Virginia has been our workhorse and has now eclipsed rates that Santa Clara, which is clearly higher cost of occupancy market put up in my time at Digital. So -- and what you're seeing is, it's not just a one strong market phenomenon. You're seeing a coalescing of all prices because demand is robust. Its diversity is growing, right? There's more companies that are direct users of data center capacity today than there were a year ago, 3 years ago, and the list is growing with this technology, right?

SpaceX is a small customer, but they're investment-grade customer overnight, right? And I think that list is going to expand, creating more competition for the traditional hyperscalers. Supply is wind away and is metered out by physical power infrastructure that takes years, not months. The NIMBYism or the political football makes it harder to do to invest, right? Having conviction around this, the stakes of entering into power contracts, the bar is getting raised dramatically. We can put $0.5 billion of letters of credit or security deposits for power that may not arrive for several years. You can't do that if you're subscale.

So all these things are -- as well as an inflationary backdrop to build costs because everyone is building are pushing rates higher and higher and higher. So luckily, we're supporting something that are the most profitable companies on the planet, right? So they can bear this occupancy cost because just like our workloads are mission-critical, this infrastructure is mission-critical to their futures.

And you mentioned a few things in there, right? So rates are going up, right? Development...

I didn't say rates. Interest rates are so...

No, I mean pricing per kW, that you were talking about. That's what you meant. I should have been more specific. Pricing per KW is going up occupancy side. Development costs are also higher, we're seeing higher borrowing costs. I presume or expect you're probably seeing higher development yields. But are your development spreads also expanding because of those factors in there, which are just kind of build cost movement maybe relative to projected higher borrowing costs. Are you seeing better development spreads?

We've been able to keep our development yields firmly in the double digits for a while, and I think they're going to continue there. And the -- we are beyond just a pure spread investing being. We are -- based on our strategy when it comes to hyperscale, not alone put aside our enterprise business, we basically picked our spots and just don't just go after market share. We try to find places where we can really help these hyperscale customers, and that generates alpha and extra rates -- higher rates and, but those workloads need to be there, and there's numerous customers competing for that capacity.

Yes. And that leads to the next question, Andy. I think 80% of your development is currently in the U.S. Is that right, Jordan, 80% roughly? Okay. So should we expect the next leg of development to remain U.S.-centric? Or those higher returns, more opportunity where customers want to go, is that going to be outside of the U.S.?

It's not a great answer, the answer is both. Like we have a global platform. We have global customers. They're growing in all regions. The U.S. pre-AI was the laggard in the growth rates. The U.S. has now become the leader in the growth rates for infrastructure. And I think it will continue to be that way. But you're going to see a global catch-up phenomenon.

You already saw it in our first half of the year where markets like Tokyo and Brazil in first quarter or second quarter were call it top of the list in terms of contribution. So you continue to see us scaling our business, both inside the U.S. and outside the U.S. In addition to adding -- we've got 7, 8 new markets on the enterprise colo side, including an announcement at the beginning of this week with our entry into Turkey.

Yes. And I want to come back to the enterprise market in a minute because we probably had too much focus or overemphasis on AI-related demand, maybe on that, too. But -- so the inorganic growth, though, right, you acquired the full stake in the Blackstone JV in Northern Virginia. You had the Columbia Capital transaction. Teraco investment, they all broadened your portfolio and profile. So how should we think about future M&A focus and scale?

So this goes back to what I said at the outset. We are really trying to drive the 3 pillars of growth, triple threat. So making sure all this growth then flows through our bottom line, but not be single threaded in any opportunity. And that's because we think that these businesses go better together. Our hyperscale customers are offering the destinations, the on-ramps, the ecosystem that our enterprises consume. Our networks obviously monetize those connection points and that the production facility for the compute and the AI inference goes back to those same 4 walls we're building or expansive campuses.

Those 3 transactions you mentioned hit each one of those sleeves. Teraco, the most highly connected destination I was going to say Africa, but you could say worldwide, it's a top 10 location here. We were able to pick up our stake pursuant to the contractual agreements we had and do so in an accretive fashion to our bottom line. That is one market where we actually have a higher growth in our Teraco business than we have with the mothership Digital Realty. Part of that's due to sizing and timing of capacity coming online. But that was a win in terms of taking about 77% ownership. Kansas City was -- and I'll give you 2-for-1 on hyperscale.

Kansas City was a new market where we are not only getting a 2-gigawatt campus, but 600 megawatts in 2028. My view is Kansas City is going to be a top 7, top 5 hyperscale market in the next several years. I believe when it comes to digital infrastructure in the United States, a lot of that West is moving east due to it's very challenging due to regulation, political climate and environment to build on Western parts of the country. And Kansas City is smack in the middle with tremendous fiber optics, expansive runway of growth. We've had a great partnership with the energy company there. And I think you're going to see some exciting things with what we're doing in that market shortly.

Our Blackstone transaction somewhat straddles hyperscale and also private capital. We are able to work with a great partner to basically take on balance sheet what I believe are probably the best assets built in the last several years in terms of markets, still below market rates, 15-year contracts, triple net lease structures, strong investment-grade rated, AA average rating roughly at an attractive valuation and make it accretive to our bottom line and also create a pipeline of product for the incremental private capital we're building and scaling as we speak.

And Columbia Capital was a way to essentially further accelerate our push into private capital with a partner that we believe could keep us ahead of the game on the AI ecosystem, but also brings a amazing track record for numerous decades, $9 billion of assets under management at the forefront of Cologix, partnered with us on Teraco, partners with us in other businesses, major investor in one of the largest power land bankers in the U.S. So all 3 of these things, call it, hit each one of those legs of growth we're operating under.

Yes. I know it's early days with Columbia. But to your point, I mean, it's adding intelligence, expertise, knowledge, maybe initial visibility. What have you learned so far that might affect strategic decision-making at Digital Realty?

We just literally closed very recently. But what we learned, I think our thesis has grown conviction around it based on we're seeing the synergies of where we work of late. This is something we learned -- they learned from this investment in this type of company that Digital Realty would never invest in, right, not a data center, but it may be an adjunct to AI, an adjunct to cloud, an adjunct to networking, places where I think we can collaborate and invest together as well, opportunities where maybe we don't, Digital Realty, want to invest that much investment because it's a longer buildup to return, but Columbia is in a more total return-oriented private capital vehicle and on the LP front. So they've got hundreds of sophisticated institutional investors that we've already stepped into the RIA, registered investment adviser, status. So I think it's already made us a more attractive provider to the private capital world.

Okay. That's really helpful. And I don't know if I caught it in there or not, but then your thought process on incremental M&A and size?

We've been -- if you look at our story over the last several years, it's been a lot about operationalizing. It's a lot of been about executing when it comes to our colocation enterprise interconnection. It's been a lot about scaling development and capital. But at the same time, we've been making moves that have not been the biggest splashiest deal, and I would call them versions of M&A where we've entered through that pursuit, Indonesia, Malaysia, Lisbon, organically Barcelona, Rome, Crete, Bulgaria, just now Turkey.

So we've expanded our addressable market of our platform now, I think, 57, 58 markets where enterprises need their infrastructure to be. That's been a big piece of that. We've not done any M&A just to get bigger. We don't want to get bigger. We want to get our bottom line growing faster and our stock price higher, right? That's sort of how we operate.

Very, very deliberate. I think you also made the argument that your global portfolio is particularly well suited for AI inference. And there's been a lot of debate over the years where AI inference is actually going to live. And we project inference will go from, call it, 25% demand to 45% demand over the next several years. So a very meaningful component. I'd love to hear more details on why your portfolio is so well suited to attract and to capture inference demand.

So I just look at the options of what this is going to be used for and how it's going to be physically deployed and what I hear from our customers. And things I hear are important, power densities, how you cool it, form factors, footprint sizes, connectivity, proximity to data points, all IoT things around that.

And when I look at our global portfolio of 57 markets, 6,000 customers, and I know where the cloud, actually, compute lives, I know where the networks are homed, I know where the enterprises want to put their infrastructure. I know where we were doing liquid cooling years before people were talking about GPUs. When we were talking about AI, investor days -- 3 investor days ago, whatever it was years ago, where we came at this business from higher power densities, from larger footprints, from serving the most technologically savvy customers out there, I think we have the sweet spot for inference by service providers, inference by hyperscalers, inference by enterprises and whatever vector around this AI ecosystem to come.

Now I'm not going to tell you this is going to all show up on our doorstep tomorrow. This is going to be a long build. But we are -- when we're operating 3 gigawatts and we have 9 gigawatts runway for growth, and it all fits that. It's not 9 gigawatts on the moon or in the middle of nowhere, right? Maybe I shouldn't said the...

Are you making a reference?

I was not intentionally making a reference to anyone.

I think my X is blowing up now.

9 gigawatts in the right markets where the enterprise lives, where the cloud lives, where the networks live, where compute lives, I think we are extremely well positioned for this.

I mean come to your point, I think you're already seeing some rising demand in inference. I mean you're seeing very strong year 1 that you've talked about. I think you've talked about some increase or stronger demand you identify as inference related. So we're already seeing the early stages, I believe.

And we're already seeing the early stages. It's been creeping up in our bookings. Not telling you X, Y number of signings. I tell you 22% of those signings, which was a very granular list was in that category of AI. And if you're signing with us, you're not putting training in the most expensive markets for data matters.

The other thing I'd mention, like global one-stop platform, global businesses, just like the cloud are deploying in multiple countries. And I don't think inference is going to take a different view on private data sets. I would say maybe we're living in a world where AI and private versus public is even more important than the cloud.

And I don't want to go down the rabbit hole, but I mean to make the point, enterprises, large global enterprises generally do want to deal with one provider or as few as possible, right? So that is a difference as well when dealing with a Bank of America or somebody else.

There's thousands of enterprise customers that want one-stop shop for their infrastructure. They want that for their private workloads, they want that for their clouds and they want that for their AI.

Okay. And I'm keeping us on time here, Andy. So I'm running good with the questions. CapEx guidance increased pretty materially last quarter. And one fear I hear from investors is that we're moving from a bookings headline-driven data center marketplace to a development deliverable marketplace, right, actually meeting that RFS stage. So if you're thinking about delivering capacity, what are the greatest constraints? And what is the greatest constraint today, right? I mean power has been out there. Labor has been talked about. Access to capital, I guess, could be one. Or is the one that I haven't listed that you worry about?

To me it's supply chain. It's component supply chain. It could be power equipment, it could be transformers. That's the physical that need to show up.

And what have you done to address -- we talked about in the past, Andy, about how you address...

It's been about scaling. It's about diversifying and going deeper with vendors, with vendor managed inventory programs. We've got warehouses where equipment can sit if it arrives early if we need to. We've standardized our design so we can swing capacity to different markets within country or region. And it's been about being consistent, not here today going tomorrow, but consistently building with these organizations for years and years and years. And it was making sure we're ready for this moment well before we needed to be.

Okay. And I want to get to labor in a second, but just maybe think about modular, which we're talking a lot about recently. We hosted a call with a data center construction expert. He used to lead that for Google or something years ago, one thing she was saying was that the obvious way to address labor shortages, rising equipment cost is basically standardized or production line data center construction, everything from modularization on a pallet level, right, all the way down to a fully modular containerized data center that can roll on the back of a semi, you drop down, you have x number of kW or whatever in place. What is Digital Realty doing with modularization? And how far you think that you can take into your build process to help you reduce cost to build.

That standardization I mentioned includes a sizable amount of standardization around modular builds, ship drop type construction wherever we can to derisk, call it, on-site assembly, weather risk, you name it, including labor risk. But it's not -- this is not a one or all or the other type of scenario. We're not removing the human beings. We're not removing the great construction jobs and engineers, electricians that we will be building our campuses for years and then operating them and spurring other jobs.

But we are also trying to make sure that our supply chain can be as conveyor-belt-like as possible. right? It will make sure these things are purchased, procured, secured before we need them, flowing towards us where with fungibility, Northern Virginia, go to Kansas City, go to Chicago, like we can swing wherever we need to and try to derisk deliveries. And that was a private company's heritage on being able to always continue to push the envelope on that.

I mean you sound more confident than -- I want to say confident, but you mentioned equipment before you mentioned labor, and I've been hearing labor actually first for most other developers. And so how is Digital Realty managing the labor shortage that we hear about or skilled labor doesn't want to travel more than 1.5 hours at the construction site. What are you doing? And what are your relationships allowed you to maybe rank that second if you did?

Sure. So we have a structural advantage here, right? Our markets based on locations sensitive workloads are much more often appealing for workforces, right? You're not necessarily having to leave your loved ones and fly across the country to camp out and build this infrastructure. Even as we've grown out, it's a drive, it's not a plane to get to our locations.

Two, we've been doing business with our GCs and our subs for years and years, and they know and trust us. We don't change on a dime. We've been getting out ahead on the training front and the hiring front. We've got tremendous, call it, early career programs, community colleges, veteran programs, a whole host of activity for both operational and corporate. I think out of our new hires on the operational side, we're probably at like 12% or early career type jobs. We think we got that over to 20% of the thousands we're hiring coming from no previous job experience.

We also -- I mean when you're building a campus with numerous buildings and numerous infrastructure already operating, you're able to derisk that because you don't send all the newbies to the new building at the same time. You spread them out with people that have a lot of expertise, right? So -- and you can only do that if you've got 20 buildings in a market, right? So that's been helpful. We've invested actually in our facilities for our training programs where you can actually come on to a campus, train on the infrastructure and the test environment and then spend the rest of your day on the line. So I'm not saying labor is an issue. We are growing outstripping the pace of talent in the industry. We need to bring more folks into this industry. But I'm very pleased with where we've been excelling on this category.

This is not your first data center build?

No, exactly.

So I promise to keep you on time. And so I have the 3 rapid fire questions that I promised to get in. I think most are yes or no, Andy. So if long-term rates stay higher for longer, which has the biggest impact on your sector, higher refinancing costs, lower transaction activity, or less new supply?

This is -- the supply element, I think, supply.

Okay. Perfect.

It's -- I'm not saying it's going to dimensionally reduce supply, but it's going to be another, call it, arrow in the quiver of pricing power.

Perfect. Over the next 3 years, will third-party capital become a more important source of growth for public REITs than balance sheet capital, yes or no?

For our sector, it has to be. We need a bigger boat.

And I have heard that in other conversations, not even doing the rapid fire. Are your sector...

It's important. We're doing this in a long-term format that is the best thing for our public shareholders at the same time.

And I guess kind of what [indiscernible] sources of capital are you looking at? We've seen some of the recent data center debt deals price wide of price talk and there's some talk of this kind of indigestion and credit capital markets today to absorb more data center debt. Like what are the sources you're looking at?

We are scaling into private equity capital. So LPs, sophisticated institutions, pension funds, sovereign wealth funds, insurance companies that want to invest alongside us as an owner-operator, asset manager...

You mentioned Blackstone earlier. For years, you've been partnering...

We have a great partnership with them, and that partnership is not -- we've had some great milestones have not fully run its course. But this next leg of growth for us is about also building out our strategic private capital.

I have 1 more quickly. So will 2027 same-store NOI growth for your sector be higher, the same, or lower than '26. And that's for your sector, not for Digital Realty.

Higher.

Great. Andy, thank you so much. I appreciate it.

Thank you.

Thank you again for being here with us today. Michael Funk, Bank of America. Really happy to have Jordan Sadler from Digital Realty, we were seeing before we walked in that we're going to have Digital Realty, I think, speaking 3 times in the next 1.5 weeks at Bank of America. So thank you again for being here with us this afternoon for the first of the 3 presentations. I don't know if you had any kind of safe harbor that you wanted to read off first or or anything else

No safe harbor per se, but please do visit our website or Investor Relations website. In the event anybody has any questions about some of the numbers or statistics data we put out here today.

quarter

Okay. Perfect. I appreciate that. So I wanted to start with the core FFO growth because the commentary of the language, it evolved last quarter, right, the way that you talked about the growth rate. And prior to last quarter, this is partly wrong, you can correct me.

But I think the narrative was more like a high single-digit for longer and steady narrative and I'm paraphrasing. And then last quarter, I think you talked about double-digit growth for 2027 and beyond, right?

So leaning more into development-based growth and other factors driving higher growth. what was the genesis of that change in language or communication, if I'm framing that right.

Yes. If I may, I'm going to back it up. A couple of years to maybe tell a little bit of the story to how we got to -- just to give a little bit of a context. And thank you again, Michael, for all that you do and your coverage for us and spreading the word and for having us out here today and setting up meetings with folks.

So just backing it up to February 24, which was the fourth quarter of '23 earnings conference call, where we gave guidance for '24, which was in the low single digits bottom line growth. which was not a super satisfactory number in the context of what was going on in the world.

But you were still coming through negative releasing -- we were coming through -- right, there's plenty of things dragging on us rising rates. Obviously, we're a big impact. we had delevered tremendously 2 turns from virtually 7x at March 31, 2023. And to 5x by the end of the year.

So that 2 turns delevering was definitely impactful in dragging out in '24 as well. So that low single-digit growth number we put out there was not too per satisfactory in a contract or a world where video is seeing explosive growth, and AI was ripping and taking hold and on the earnings conference call, you may recall, Matt gave the sheepishly gave the low single-digits growth guide.

But when asked about the algorithm, what does growth look like longer term, he said, mid-single digits, right? He walked through a construct where in 2025, he was pointing folks to basically 5% growth. and roll forward through '24 and into early at the outset of 25, we ended up giving guidance for the year. That was a little bit better than you had originally forecast, you said we're probably going to do closer to 6% this year, right?

So as a little bit better. Things would come along. Obviously, the environment was helpful. Our leasing go-better -- our leasing spreads got better, to your point. Our development started to come along. Rates certainly weren't helping. But the business was definitely getting better or we were executing, roll forward to the beginning of this year.

We ended up delivering 10% bottom line growth versus the 6% we expected last year. And for this year, we were saying, hey, we think we can do really well again today, sorry, this year, things are really strong. We're building a really nice backlog. We've got momentum in all aspects of our business, which I'll get to.

And we guided to 8% growth, not the double digits number. What happened in between sort of February of this year and our July conference call, as we signed, we had very, very good progress in both 1Q, 2Q signings, very strong signings in the first half of the year. Year-over-year relative to all of the leasing in 2025, we were ahead and that resulted in a backlog at June 30 of $1.9 billion of signed but not commenced leases, including the lease we signed in July, post quarter end that we reported on, which is a $400 million lease, we were at $2.3 billion.

That $2.3 billion equals north of 30% of our in-place data center revenue. So as you look to that signed but not commenced revenue commencing, 31%, 32% on a base of $5 and change billion of data center revenue. You got more than compounded. And that's really where the bulk of this is coming from. And that's what enabled us to sort of reset the course and the cadence for guidance.

And we said it to your point, for -- we said this year, we'll deliver double-digit growth. We'll also do it next year and potentially beyond that.

And I wanted to dissect some of the drivers and the change in guidance. But I would characterize Digital Realty management team has been incredibly prudent and thoughtful the way that you approach the business and underwriting risk. It is part of my interpretation, but I'm an equity analyst, so I always try to create my own narrative, right?

Is that maybe a year or 2 ago, there was less certainty of Digital Realty and the staying power or longevity of the AI demand cycle or maybe specifically where that cycle was moving for development, okay?

It feels to me is that based on what you just said and some of the lease signings and where you are developing a recent site acquisition, that there is greater confidence now at Digital Realty and kind of the duration, sustainability of the AI demand cycle. Is that accurate framing?

It is -- that is absolutely a key piece of the puzzle. We talk about 3 core pillars of growth, right? We talked about the 0 to 1 plus interconnection business, which we've been driving the hyperscale business, which you're speaking to now, right, big leases going into backlog, execution there is imperative and takes that you're signing those, you're derisking future growth.

And then the third piece of the business, which is strategic private capital. which has been -- which is relatively nascent. We've been raising private capital through joint ventures for well over a decade, but we really started down the path towards building a funds business, a co-mingled funds business. a couple of years ago.

We were really successful last year. We raised $3.25 billion of LP equity for our first close-end fund which is going to support north of $10 billion of investment activity at cost and data centers, right? So what did that do? That gave us a checkbook, right?

$10 billion checkbook to fund the hyperscale leasing that we were doing, what we had already done and what we're going to do in the future. We continue down that path on the private capital side. We continue to raise money because we think capital is paramount in a world where there is tremendous demand for capital.

So we're 4.7x levered debt-to-EBITDA the mother ship, but we're also using private capital to fund the development of the hyperscale data center capacity. So we think as long as we have capital and we can sign leases, so we have powered land that we can sign into new development.

Those are the pieces that are going to derisk the future growth. The signed lease, raise capital and lease raise capital.

And are there specific indicators that Digital Realty Cs, and I had lunch with a private data center company, a few weeks ago, and what they said is that they can see through their own monitoring that today versus a couple of years ago when they deliver capacity to a customer that usage however you want to qualify it goes then to 100% overnight, whereas before, it would scale slowly.

So that gives them confidence in the durability of demand. Customers are asking for 100% of contract capacity on day 1 today, where in the past, maybe they would have scaled in that capacity over a number of years. So that company provided a number of examples of what they are seeing internally through their own systems and their contracts that give them confidence.

Do you have similar examples on digital realty that have increased confidence?

Similar anecdote along those lines, and this is just pretty consistent, which is we consistently hear from our customers who are building data centers for as we're signing -- before we sign leases, as we sign in leases, we know that time to power is paramount today.

And so that happens when we're marketing a piece of a potential property or data center, that would be a development. And that happens when we're underway, we're already developing it. They're looking for us to hand off the rooms or the data halls as fast as we can.

Some are even looking for us to accelerate it, right, meaning add resources. We want an extra crew in there. We want to be commissioning at the same time, these folks are fitting out the PDUs, so we double the workers in the room.

And we've seen that in our data centers as we've even been touring them as we're doing fit-outs, we see how active the construction is. And so it's just a function of this time to power that we're seeing in this current environment. And a lot of that is obviously AI-oriented.

And I want to talk about the contracts here in a second, but you just mentioned kind of labor and the workers in the room and maybe think back to NAREIT in December, and I think I met with you and Matt and I kind of last question I asked was what's the biggest risk I think concerning you in 2026?

And the answer was labor? And at that time, maybe it wasn't as obvious how tight labor was becoming in data center development. Today, I think everyone is very aware of that. What does Digital Realty doing to solve the labor shortage, specifically master electricians and plumbers. How do you address that relative to peers?

So look, I mean there's a couple of different things that we're doing. One, we're building in a lot of our existing markets in certain locations. You've been to digital dollars, for example -- this is a site that's been -- we took down the site in 2018. It's essentially been under construction for 5 or 6 years. .

So because it's a gigawatt site with sort of a 10-year build plan, right? So there -- when you pull on to that site, 1 GC's construction office is on the right. The other GCs construction office is sitting on the left, and they have consistent work on that site, these GCs, right, 2 different GCs, so diversity where you're essentially feeding the beast and handing them work somewhat consistently.

So keeping those crews active. That's a big piece of it. So part of building the relationship, building the track record. Sort of multiply that by what we're doing across our development life cycle or across our footprint, right?

We're doing this in 30, 40 markets globally and have been for some time and that's helpful to the overall sort of being able to bring resources to bear where we need them, when we need them.

We get pretty good priority. So that's been helpful. But I think you're also asking what are you actually doing to sort of build up the workforce and to make sure that we have the people we need. And there are lots of things that we're doing from our human resources department from our ops department across sort of all markets and all regions to continue to sort of bring additional people into the data center workforce. So our intern ships are up dramatically.

The number of folks that we're bringing in new from colleges into the data center up significantly. Though interns converting into new hires. And we're adding people on to the platform at a pretty rapid pace as well if you look at our job site, right?

We've got quite a bit of hiring going on, and this has been going on for as long as I've been here, which is roughly 4.5 years. So we're staffing up pretty significantly.

And there are a lot of parts to that question. I'll come back to it later. There's obviously a labor cost component. There's modular as part of your build process to address it. But I wanted to go back to development yield, which I mentioned a few months ago, because the investable data center universe has expanded tremendously in the past 12 months, which is great, right?

Bring more eyeballs to Digital Realty. But I think it also creates greater need for differentiation, right, across the space, at least investors differentiating between the different operators. And in one metric where I do see differentiation is development yield, right? And I think that Digital Realty talks about targeting unlevered development yield is about 8% to 10%, let's say, probably about the right range.

You would at talk about the same thing. Some of the more transitional data set providers talk about unlevered yields of low to mid-teens, right? But I think there are differences beneath the surface here as well that I want you to go into maybe why you're targeting a lower development yield.

And that is maybe ability to control for risk where maybe some companies are taking on more development risk going back to the cost per megawatt or even the cost of capital might be different or more risk and where it comes in versus projected. So why is Digital Realty able to accept the lower development yield?

And I guess in your contracts, how do you control for those risks, right, to have certainty? Yes.

So it's a good -- I appreciate the question. I think the context of it comes relative to maybe some of the smaller or nascent hyperscale developers who are out there, maybe have a little bit of a less -- a smaller portfolio or a track record.

Just a little bit of a different story. We have -- we target 10-plus percent development yields. We have $20 billion under construction today and 11.5% expected initial cash yield. .

When we talk to our and sort of compare versus our large private peers who alongside us, we tend to dominate the third-party hyperscale data center provider market. I think we're pretty consistent with those folks and maybe even probably get a premium relative to...

I agree with you.

And part of that is because they are leveraged -- they're using significantly more leverage than we are. So their levered returns are higher, but they're using 75% to 95% project level.

It might be levered at 12x to 15x.

Correct. Yes. So that's sort of how we see the landscape. When we see some of these other numbers that are being quoted, I think it's really incumbent upon the investor and analysts like yourself to look at -- to compare apples to that -- make sure you're comparing apples and apples.

So are those developments and are those yields on a gap basis? Meaning, are we looking at the average NOI over the life of the lease? Or are you looking at initial stabilized cash, which is the number that we give you. So the number would be 20% higher or so if you were using a GAAP yield.

So maybe your 11.5% would be 14, right? Or what's embedded in the underlying cost that Digital Realty provides versus some of these other folks, right? Are they including land? Do their data centers have generators or redundancy? Are they including contingency in their costs and/or losses until stabilization, right?

Some of the things that we embed in our cost, we would say we have a fully loaded cost estimate that we're projecting a yield. So I think there are differences. So I think in general, we command a premium, and I'll tell you why in the marketplace.

Number one, we have somewhat uniquely low leverage for a hyperscale data center provider. Number two, with that leverage with that balance sheet and with our diverse sources of capital, we have the ability to have patients, right?

In many times, we've already procured the capacity, including not only the land but also the power. We've signed an ESA, right, on our own credit or using our own balance sheet. And we don't necessarily need to go out and get financing, right?

Most of our financing and most of -- we're capitalizing it at the corporate level. through our revolver, cash on hand or equity, et cetera. So we don't need to take a tenant lease and then go get it financed or then -- or bring it to a power provider to get an ESA side.

So I think we're able to have a little bit more patients and for that, we're able to command a premium. But that's -- it depends who you're comparing us to, I think, to some extent.

Sure. And embedded in that question is actually a complement as well that I think you do a better job of controlling for development yield spread as well, right?

So you can target the 9% to 10% because you have greater certainty in your cost of development, right? So I'd love to hear more detail in how you do that. I think the devil is in the details now when we're thinking about contracts and specifically how they are written and how data center developers protect themselves, whether it's upside in development cost or other factors just to ensure some certainty around the development spread.

So can you -- is that something you can address Jordan?

I think generally, we're controlling cost rate. We're underwriting deals, right? We go into -- we buy land, we try and have a low basis from a procurement perspective, you know well that we have had a vendor-managed inventory program for well over a decade, right?

So we've got multiple literation of supply chain issues over the course that we've seen over the last 2 decades, really, right? That experience has brought us to evolve our supply chain team and procurement process to really make sure that we have inventory or capacity available, right, of this equipment that's needed to bring these developments to bear at a good or well negotiated price, right?

So we have very good relationships with our largest vendors, and we're buying at scale, right, across the equipment stack -- so that's obviously pretty helpful. Similar to what I was describing on the balance sheet side, that construct taking equipment into inventory is not necessarily something you see on the private side as much. And so that's also beneficial. And then I would say we just have to have line of sight to capital, which I talked about earlier around the strategic private capital side. So we're locking in.

We know what our cost of capital is. And at the same time, you have to -- we have a robust global design engineering and construction team who is accustomed to sort of wash rents repeat in terms of standardized design, our process and shopping our developments to our GCs and getting a GMP from these GCs and thereby locking in the cost and locking in the spread.

So I haven't even gotten to leasing yet. I'm surprised taking me so long. You talked earlier about the 0 to 1 and the greater than 1 is normal question, #1 or 2 during these sessions. I want to start the 0 to 1 first, though, because I've also heard in conversations with public and private data center operators that they are seeing not just increased demand from say hyperscalers or AI companies, but enterprise is now deploying AI.

And I think Digital Realty spoke about this in recent quarters as well, but there's been a real uptick from what I'm hearing, presumably they'll continue to drive the 0 to 1 activity. So I'd like to hear what Digital Realty seen from enterprise demand? And how much of that is related to AI inference.

So it's a very relevant question. When we speak to our core pillars of growth the first pillar is really the 0 to 1 plus interconnection growth, which is the enterprise and colo.

And that's a sticky -- that's a consistent order after quarter, steady eddy, land-and-expand type of business.

We've set a target of sort of doubling our production a few years ago. Within this business, we were doing 2 years ago, $50 million a quarter of 0 to 1 plus interconnection leasing. This past quarter, which happened to be another record 4 of the last 5 quarters have been records. So we put up $108 million of aggregate leasing in the 0 to 1 plus interconnection leasing.

You and I are doing this long enough to remember when $100 million was a total leasing bogey for Digital Realty and probably even before that, when the numbers were even lower. But -- so we did $108 million of 0 to 1 plus interconnection leasing this quarter. So not only was that a record, but we also had a record level of AI-related leasing or workloads embedded within that.

So it was north of 21%. So that's generally our enterprise segment, enterprise business, we saw a significant uptick there. So what's notable about that is that's probably double the pace or the percentage of the total. So not only is the leasing is up 28% year-over-year in the second quarter, but the percentage has also almost doubled.

So and the really even talked about yet, but it also significantly above expectations coming into the quarter. The releasing but yes, they were on the 0 to 1 side as well as across your overall portfolio. So what's interesting about re-leasing spreads you're right, they were 25% in the quarter, which was almost anomalous type level relative to what we've been doing relative to the sort of the, I don't know, 7% to 8% guide we gave in the year at the outset of the year.

Now we're expecting to do 10 for the year. When you split out that leasing, weighted 5.2% on the 0 to 1 side. Historically, right, the [ steadyeddie ] business as you described, historically, that's a 2%, 3%, 4% increase or type business, we did 5.2%. So we're definitely above the high end of the range. And we are seeing upward pressure on that side of the business.

And a lot of that is being driven by reduced availability and increased or steady demand. So that's on the 0 to 1 side. We saw a very big number on the greater than 1 megawatt. Re-leasing spreads, and those were 67% and those were driven by a handful of leases in APAC that were up for renewal.

I get this question frequently, and it's going to sound like a knock, but it's not. The question I get is, why isn't growth in the industry, not just Realty. why isn't growth news 3 higher if occupancy is so high or supply is so tight.

And that goes back to re-leasing spreads that you're right, this past quarter, I mean, there were tremendous levels. But you've been averaging kind of that high single-digit level and that was the expectation, I think, for the industry. So why shouldn't releasing spreads remain at teens or 20%, if you're 90% occupancy right?

Sellers market why accept anything less than 15%, 20% release my have to say like it go somewhere else -- so why shouldn't they remain at that level?

Re-leasing spreads are like FOMC policy they tend to have like long and variable lags. So the increases tend to look like this, right?

They're sort of gradually higher as the market has tightened as fundamentals have tightened and demand has increased and outweighed new supply or the ability to bring new supply to bear. We've seen re-leasing spreads march higher, but we've -- this quarter, right, it's higher with upside volatility.

So it's been steadily higher. But this quarter was plus 25% on a path towards 10% for the year. So we do expect to see quarters where we're going to have meaningful upside volatility. And that's just along this path of tightening of overall fundamentals.

So when we look at -- you didn't necessarily ask this question, but if you look at our renewal schedule...

I was actually getting you do lay out the rates in your renewals that...

That's correct. So the real upside, right, so the 0 to 1 business, which is 40% of our rent roughly, right? Tends to be a more steady eddy, right, that you're going to see 5% -- 2% to 5% increases each quarter. But the greater than a megawatt business in the hyperscale business tends to be a more volatile business, they are longer-term leases.

And so whatever we're renewing today was probably signed 10 years ago or 7 to 10 years ago. Which was a down cycle...

Which was a downside pricing.

Exactly. So when you look at our renewal schedule today through, let's say, 2032 that's a random number, but about 40% of our hyperscale rents are rolling between today and 2032.

That's 40% of the book. The rates are range from expiring rates range from like about $134 at the low end up to as high as $160, but average really in that 140 range. And we're signing new leases at $160 to $220 in that bucket. So there's a meaningful upside opportunity between now and really the next 5 or 6 years as we see it, if conditions continue to remain as they are.

And so that could provide upside even to grow and you don't have a point estimate for growth. I'm just saying it could provide upside to that low double-digit FFO per share growth.

Correct.

Okay. So something we haven't talked about yet is just the capital recycling, right? So part of the strategy, I believe, at Digital Realty last few years is also to maybe moves from the fully stabilized assets off balance sheet, you've had JVs and things that allowed you to recycle that capital, right, and put it to a higher and better higher and better use.

So number one, I want to hear if that continues to be part of the financing strategy. But then a couple of months ago, I might be in my timing is not exactly right, but you took full control of an asset that was jointly owned, right. Blackstone was also the co-owner.

And I got a lot of questions around the transaction because it seemed like a bit of a versing course from the recycling assets and what the catalyst was, if that was -- if there was a put option in that agreement or what led to it.

So kind of a broad question on capital recycling, but then also the catalyst for the acquisition of the asset.

Okay. So I'll take them separate because they're somewhat discrete. So a few years ago, when Andy took over as CEO, he laid out his sort of key strategic priorities, the third of which was bolstering and diversifying our sources of capital. And that meant sort of reducing our leverage, but also availing the company of meaningful incremental capital sources institutional LPs, retail investors, et cetera, largely through the strategic private capital business, but also through joint ventures.

We did an $8 billion joint venture with our partners at Blackstone, which is the initial phases of which have turned out to be very successful, and I'll get to in a second. Through our strategic private capital business, we see an opportunity to capitalize the super capital-intensive hyperscale side of the business.

That business is growing very, very quickly. The size of those developments, they used to be 30, 40, 50-megawatt developments and now there are multiple hundreds and even gigawatt type developments. That can cost as much as -- I mean, a gigawatt of capacity could cost $15 billion, right?

So how do you capitalize that and then maintain this product mix that we've enjoyed that we've targeted, right? So we're 40% to plus interconnection and 60% hyperscale, which we like very much. We like the growth angle of this and of the 0 to 1 plus interconnection and we very much love the credit and the growth profile of the hyperscale as well, and we believe they belong together.

And we like the diversity that comes from both. We don't want to be 95% on versus the other, which is why we've gone in the direction of this strategic private capital. So we will continue to use private capital to fund the hyperscale side of our business. coming back to the Blackstone transaction. In December of '23, we signed up this 7, which ultimately became an $8 billion JV with Blackstone to develop hyperscale data centers. We made quick work of a handful of properties. We signed a handful of leases.

We started developing them and got to the point got to a point earlier this year, really a few months ago, where there was an opportunity to recapitalize these out of the joint venture. So we and our partner opportunistically show cans and made a deal.

We bought in the remaining 64% interest that they owned in these 3 assets, cost us about $5 billion at just over cap rate for what we viewed as 3 of the best brand new data centers on the planet. We thought that was a very good deal for AA- rated credit with 15-year leases and we're happy to own those on balance sheet.

Longer term, those also can become fantastic fatter and inventory for our strategic private capital business. So they weren't ever going to sit in the Blackstone JV permanently, right, because of the nature of that JV was a development JV.

We needed funding at the time to build those. And what we did in late June was we recapitalized the stable -- the assets that have been essentially fully leased, and we're well underway in terms of development and/or completed. We recapitalize those. And we will continue -- you'll continue to see activity like that.

That's just really movement before you get to the permanent financing.

So related to that question, I think I asked that NAREIT or maybe later as well. So kind of the process of the vehicle then for recycling those assets. Will that continue to be through the JV or the JV so you can collect the management fee or there are some other avenues today, like some like blind pools looking to acquire fully stabilized assets?

Could that be a path to raising capital from selling some assets like the recently acquired?

It could be, I think, we will look to use private capital to be involved in the permanent financing ourselves. So we would rather hold on to these assets in perpetuity with our customers on our campuses, the assets that we built and that we operate, right?

We'd rather hold those long term and invite investor partners in to capitalize some portion of that.

And the nerve has always been that we like collecting the management fee, too. Right? That's always been part of the story.

It helps. Yes, it helps.

Can we talk politics for a few minutes?

For sure.

So every day turn on CNBC, I look up during my work hours and they talked about data centers and moratorium the executive order is 3 to 4 times a day, right? So it's obviously topical. It's top of mind. The National Republican Committee, whatever put out a memo a few weeks ago, specifically mentioning the Ohio [ Gubatorial ] race as a key indicator, right, for nationwide backlash. So both previous pay attention by person.

I'd love to hear Digital Realty's view on these moratoriums or executive orders, the risk that it poses to your development schedule. And if there is a company line on if you believe that this has got dissipated to be reduced post November.

So I mean it's a great question. Obviously, we're seeing the same headlines and the same media and receiving the same e-mails and questions. that you are. So everybody is familiar with data centers these days. They're all the rage. 2 years ago, nobody knew what a data center was besides me and you.

So there's obviously been quite a bit of activism around this. It's part and parcel with the growth and so AI has come along and come on the scene very aggressively, and there's been lots of different narratives around that. And I think data centers for better or worse, have become the physical manifestation of the eye for AI and potential job loss.

And fear related to AI and what the unknown is around it. So there's absolutely some of that. Those have been correlated. And the there's been broad narratives. It's undoubtedly become harder to build data centers. Part of that is there's been a big acceleration in data center construction. We are doing despite the fact that it's become more difficult, we have $20 billion of data center construction underway today versus $10 billion 6 months ago or at the end of 2025.

So we've doubled the amount that's underway.

So it all be completed on time?

That's our track record. In the future, we sure hope so. That's what we've committed to do. So we'll have to see what happens. I can't speak for other players in the market, but that's obviously the goal. In experience as I was describing earlier, our customers are looking for this capacity earlier. Sometimes we're actually delivering it early.

It may cost a little extra and they're paying for it. But we have done that too.

But are there specific -- and I don't want to rush you, but we're a little rush in time. Are there specific regions or developments that you see most of your risk in the political pushback? Anything to call out just to get investor some awareness, so there's not a surprise.

So in terms of what you've seen in terms of moratory or pauses to date. We don't have a lot of development. We don't have any new development exposure not in places like New York or Pennsylvania, right? So we haven't had a lot of exposure there. There was a temporary moratorium put in place in Charlotte.

We have 3 projects underway in Charlotte. They're all vested. And one of them is underway and 2 of them are underway and the third is certainly buildable and approved despite the current moratorium. So there are risks, and it is making it, as I said, more difficult. We feel very good about what we have underway today.

There are certain markets where we've built historically like in Northern Virginia, we're running out of available capacity in a place like water Virginia. We have 50 megawatts available today for lease and probably another 96-megawatt building behind it. But after that, it could be some time.

And you're accustomed to seeing us sign a lot of leases in Northern Virginia. So we've moved to places like Kansas City.

Which we didn't even get to where you recently acquired land and have greater capacity to develop now in Kansas City. Right?

So we're having to be tactical and change where we can cite some of these data centers, but we're still picking our spots, and we expect to continue to be able to make some progress.

Okay. Well, Jordan, thank you so much for coming out. Really appreciate it.

Thank you for having us.

Good afternoon, and welcome to the Digital Realty Second Quarter 2026 Earnings Call. Please note, this event is being recorded. [Operator Instructions]

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

Thank you, operator, and welcome, everyone, to Digital Realty's Second quarter 2026 Earnings Conference Call. Joining me on today's call are President and CEO, Andy Power; and CFO, Matt Mercier; Chief Investment Officer, Greg Wright; and Chief Technology Officer, Chris Sharp; and Chief Revenue Officer, Colin McLean, are also on the call and will be available for Q&A.

Management will be making forward-looking statements, including guidance and underlying assumptions on today's call. Forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. For a further discussion of risks related to our business, see our 10-K and subsequent filings with the SEC. This call will contain certain non-GAAP financial information. Reconciliations to the most directly comparable GAAP measures are included in the supplemental package furnished to the SEC and available on our website.

Before I turn the call over to Andy, let me offer a few key takeaways from our second quarter results. First, we had an extraordinarily productive quarter, reflecting strong execution across our key growth vectors, which translated into meaningful upside versus our expectations across revenues, adjusted EBITDA and core FFO. Core FFO, excluding net promote income, reached $2.13 per share in the second quarter, exceeding our expectations in delivering 14% year-over-year growth. Accordingly, we are once again raising our 2026 core FFO per share guidance range, implying 10% constant currency growth at the midpoint.

Second, bookings in the quarter were impressive overall with record 0-1 megawatt plus interconnection signings that surpassed the $100 million mark. But the real standout this quarter was renewal spreads, which surged to a record 25-plus percent. And just after quarter end, we signed 2 hyperscale leases, further demonstrating the momentum in our greater than a megawatt category.

Third, strong bookings pushed our total backlog to a new record of $1.9 billion at 100% share or $1.4 billion at Digital Realty's share before accounting for the post quarter signings. The backlog was roughly 30% of in-place data center revenue at the end of June, which should support multiple years of double-digit growth.

And finally, we announced 4 strategic transactions across our 4 growth pillars of colo and connectivity, hyperscale and strategic private capital. These transactions strengthen Digital Realty's value proposition and are expected to bolster Digital Realty's runway for growth for years to come.

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

Thanks, Jordan, and thanks to everyone for joining our call. There's a lot of good news to share this quarter, driven by broad-based momentum across our business, our global full spectrum strategy and our team's incredible execution. Our business is firing on all cylinders, and this quarter showcases the strength and scalability of our platform. Over the last several years, we've been planning and executing to deliver full spectrum data center infrastructure solutions to our large and growing customer base. These efforts are clearly bearing fruit. And at the same time, we continue to sow the seeds to deliver the capacity our customers require and to capture the opportunity for which Digital Realty is uniquely positioned. Digital Realty delivered record results in the second quarter of 2026, reflecting continued execution across multiple regions, products and customer segments. We also continue to benefit from the strongest development and leasing pipelines in the company's history, providing confidence in our ability to meet future customer requirements well beyond 2026. Our strategic focus is on our 3 core pillars of growth: colocation and connectivity; hyperscale; and strategic private capital. Together, these complementary components are driving strong performance today and fortifying our foundation for the long term, while enhancing our ability to support the robust demand for digital infrastructure and AI around the world.

Let me begin by focusing on colocation and connectivity, which remains one of the most differentiated aspects of the Digital Realty platform. As AI deployments continue to evolve, we believe customers increasingly value environments that combine power, proximity and connectivity. During the second quarter, we delivered yet another bookings record in our colocation and interconnection business. Approximately 2 years ago, bookings in our 0-1 megawatt plus interconnection business were averaging about $50 million per quarter. We set a goal of doubling that level over time by focusing on the growing importance of highly connected digital infrastructure. During the second quarter, we achieved that objective for the first time, delivering $108 million of bookings in our 0-1 megawatt plus interconnection business and marking a third consecutive quarterly record. This milestone reflects strong demand and continued success in capturing highly connected enterprise and service provider deployments. Today, our customers can access a global community of approximately 6,000 cloud, network, enterprise and service provider customers across more than 300 data centers worldwide. We are also seeing increasing levels of engagement from customers deploying AI-enabled applications. Many AI deployments require organizations to connect data, networks, cloud platforms, and end users in efficient and scalable ways and this dynamic plays directly to the strengths of PlatformDIGITAL.

Turning to hyperscale. Demand for large-scale deployments remains healthy and increasingly global, though the pace and scale of activity vary across regions. Activity during the quarter was led by the Americas with particularly strong contributions from South America, while APAC continues to support a growing pipeline of larger opportunities. We also continue to see customer engagement across Europe, albeit a generally smaller scale, reinforcing the broad-based nature of demand for digital infrastructure. Subsequent to quarter end, we signed 2 additional hyperscale leases in the U.S., representing another $410 million of annualized GAAP base rent at 100% share or $205 million at Digital Realty share. While hyperscale leasing can be episodic from quarter-to-quarter, we remain encouraged by both the breadth of customer activity and the strength of our pipeline. In late June, we announced the acquisition of Blackstone's ownership interest in 3 fully leased hyperscale data centers in Northern Virginia, totaling 288 megawatts of IT capacity.

The transaction accretively increased our ownership in a set of best-in-class facilities that we have designed, constructed and leased and does so at an attractive entry point while continuing to partner with Blackstone on the remaining 400-plus megawatts in our development venture. Also in late June, we announced the expansion into the Kansas City Metro, securing 600 megawatts of utility power that begins to ramp in early 2028 with a long-term runway of up to 2 gigawatts of utility power. The timing of power delivery aligns well with customer deployment requirements and reflects the importance of proactively securing capacity ahead of demand. Kansas City benefits from strong connectivity, supported by extensive long-haul fiber infrastructure, more than 25 network providers and less than 10 millisecond latency to more than 50% of the U.S. population. Combined with its central location and substantial power availability, this market is proving an important hub for AI and cloud workloads with several hyperscaler self-build deployments already underway. Together, these actions enhance our growth trajectory and extend our development runway. Coupled with the strength of our leasing pipeline, they reinforce our ability to support the expanding hyperscale cloud and AI infrastructure needs around the world.

Turning to our strategic private capital business. Digital Realty has employed private capital to fuel the company's growth for over a decade through a series of financial and strategic joint ventures and more recently, the successful formation of our $3.25 billion U.S. hyperscale data center fund that closed earlier this year. Using private capital Digital Realty can scale hyperscale development capacity beyond the limits of our balance sheet to better serve the needs of our largest customers. This approach delivers near-term growth through fee income, expands our product availability and investment capacity and enhances the return on invested capital to DLR shareholders. In June, we entered into an agreement to acquire 100% of Columbia Capital, a 30-plus year leading asset management platform in the digital infrastructure space. The Columbia Capital transaction will meaningfully scale our private capital platform, adding more than $9 billion of fund commitments and a well-established base of hundreds of investors, including sovereign wealth funds, pension funds, insurance companies, endowments and other institutional investors.

Strategically, Columbia Capital expands our expertise and visibility into adjacent sectors that underpin our data center business, including fiber, mobility and enterprise technology, while allowing us to participate in those opportunities alongside third-party capital rather than relying solely on our balance sheet. Columbia's experienced investment team and established portfolio complement Digital Realty's global operating platform and will strengthen investment capabilities to take advantage of the expanding AI infrastructure ecosystem.

Lastly, this transaction will strengthen our earnings profile and position Digital Realty to drive additional long-term value creation. During the second quarter, we continue to see both enterprises and hyperscalers expand across PlatformDIGITAL. A few examples include: a multinational financial firm is growing its PlatformDIGITAL footprint, by deploying private AI inference capabilities to enable data exchange across financial, network and cloud ecosystem partners. A GPU-as-a-Service provider, together with a global AI infrastructure company are deploying in PlatformDIGITAL's new data center in Barcelona to increase networking capacity and reduce costs while creating a distributed inference AI-ready ecosystem to support advanced AI workloads for growing enterprise demand.

A global financial services company chose PlatformDIGITAL to support next-generation AI infrastructure and inference enabled workloads, leveraging interconnected digital ecosystems. And a global cloud computing and content distribution provider is expanding into a new metro by leveraging the leading connectivity propositions available on PlatformDIGITAL.

Before turning the call over to Matt, I'd like to spend a moment on the increased public attention that data centers are receiving and how Digital Realty is doing its part to engage constructively and operate responsibly and sustainably. As an industry, we are becoming significantly more visible. That's understandable. Demand for digital infrastructure continues to grow rapidly and data centers are increasingly recognized as critical infrastructure. Despite the growing role data centers play in our daily lives and the fact that we've been operating as a public company focused on data centers for more than 2 decades. Most people have never visited one and may not fully appreciate the critical role these facilities play in enabling modern society. The reality is that Digital Realty's data centers support nearly every aspect of the modern economy. Every cloud application, video call, online class, financial transaction, AI query, streaming service, healthcare record and social media interaction ultimately depends on digital infrastructure. Whether you're working remotely, connecting with your family across the world, ordering and paying for coffee, food or anything else through an app or online, navigating the globe, using connected devices to track calories, glucose levels or overall wellness, monitoring your home via doorbell cam, keeping track of your finances in the market or running a small, medium or large business, data centers provide the physical foundation that makes those experiences possible. For Digital Realty, that's something to be proud of. Digital Realty data centers increasingly support economic growth innovation, education, healthcare, communication and national competitiveness. They also create high-quality jobs, generate substantial tax revenue for local municipalities that support schools, public safety, support improved resiliency for the utility grid and often serve as a catalyst for broader economic development within the communities where they operate. In our 2 decades of operating data centers, we have seen these benefits firsthand across the markets we serve around the world. As the data center market grows, we believe it is equally important that our industry continues to grow responsibly. At Digital Realty, we are committed to partnering with our customers, communities, utilities and policymakers, and we believe our recently published impact report provides transparency on our performance and serves as a useful scorecard for how we're performing against those objectives.

Let me touch on a few highlights from the report. During 2025, we achieved 93% renewable energy coverage globally, matched 205 sites with 100% renewable and emissions-free energy and expanded our contracted renewable energy portfolio to approximately 1.7 gigawatts. These efforts reflect our commitment to supporting customer growth, while remaining a responsible partner to the communities and energy systems in which we operate. Our data centers also play a constructive role in supporting grid reliability, mitigating risks during periods of peak demand, and helping ensure the grid remains reliable for everyone. In other words, we're not simply consumers of electricity, we also support the resiliency of the broader energy system when it is most needed. From 2023 to 2025, we expanded our portfolio capacity by more than 24% while limiting water consumption growth to just 3% with nearly half of our water source from non-potable supplies. Our 300-plus data centers globally use less water than 18 California golf courses, while there are 16,000 golf courses in the U.S. alone. We are proving that digital infrastructure can scale sustainably while using resources more efficiently.

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

Thank you, Andy. Digital Realty delivered double-digit growth across virtually every major operating and financial metrics during the second quarter, reflecting continued momentum in our colocation and interconnection business, substantial commencements from our growing backlog, exceptional re-leasing spreads, modest churn and increasing fee income. We achieved these results while continuing to invest with conviction in future growth, expanding our development and investment platform and simultaneously maintaining leverage at 4.7x at quarter end, well below our long-term threshold. Overall, the strong operating environment and our favorable positioning continued to translate into better-than-expected results. We are seeing the strength reflected not only in current earnings but also in our growing backlog and expanding development pipeline, which have improved visibility into future revenue and earnings growth.

Turning to leasing activity. We posted another strong quarter of bookings across our platform highlighted by record signings in our 0-1 megawatt plus interconnection business and robust demand across our hyperscale product set. In the 0-1 megawatt plus interconnection category, we generated a record 108 million of bookings during the quarter, representing an 11% increase over the prior record set last quarter. Leasing activity in this segment was strong across all 3 regions, though EMEA achieved a new quarterly record. In contrast to the first quarter, the smallest power bands were the most prominent driver in 2Q with record levels of activity in our sub 300-kilowatt band. The 0-1 megawatt business continues to provide an attractive combination of near-term revenue conversion, pricing power and recurring growth.

Interconnection bookings of 20.5 million in the quarter also marked a new record, up 18% from the prior year as these bookings benefit from the overall growth in our 0-1 megawatt category. The greater than 1 megawatt product category also saw healthy leasing activity in the quarter, led by the Americas, including a record contribution from Sao Paulo. Customer engagements remain robust across this vertical and we continue to source and action capacity throughout our global portfolio. Subsequent to quarter end, we signed 2 additional hyperscale leases, representing approximately $410 million of annualized rent or $205 million at Digital Realty share.

Renewal activity was exceptional during the quarter. We signed over $261 million of renewals with cash re-leasing spreads over 25%, reflecting the growing supply-demand imbalance in certain markets, the embedded value within our portfolio and our ability to capture pricing as contracts roll. Combined with the modest churn and strong new leasing activity, these spreads should continue to support attractive organic growth. Renewals in the 0-1 megawatt category accounted for 55% of total renewals and we're also a strong contributor with 5.2% cash mark-to-market. Greater than 1 megawatt renewals accounted for 44% of the total and delivered a remarkable 66.7% mark-to-market. Renewal strength was strongest in the APAC region with outsized spreads realized in Singapore. These renewals highlight the continued imbalance between supply and demand for premium data center capacity and underscore the attractive repricing opportunities that are periodically presented to us in our most highly constrained markets. While the second quarter reflects an exceptional renewal outcome, it also provides a compelling illustration of the value embedded within our lease expiration schedule and the pricing opportunities available in our most supply constrained markets.

Moving to the backlog. Our total backlog reached a new record of $1.9 billion at the end of the second quarter, further enhancing our visibility of future revenue growth. This excludes the benefit of the new $410 million of hyperscale leases signed in July. At Digital Realty's share, the backlog increased by 75% since the beginning of the year to a record $1.4 billion. This backlog now represents approximately 30% of our in-place data center rent, highlighting the potential growth that will unfold in the coming years as developments are successfully delivered.

During the quarter, we commenced $208 million of annualized rent, marking our third strongest commencement quarter on record. Looking ahead, commencements will accelerate meaningfully as $635 million of annualized rent is scheduled to commence in the second half of 2026, with 45% starting in the third quarter and 55% in the fourth. Looking into 2027, we have $480 million scheduled to commence with another $312 million already slated for 2028 and beyond. These future commencements reflect continued strong execution across our leasing, development and delivery platforms, enhanced by the strategic transactions completed during the second quarter. With the substantial portion of future revenue already under contract, we entered the second half of 2026 with a high degree of confidence in our growth outlook and a strong foundation for continued earnings growth into 2027 and 2028.

As for earnings, we reported core FFO of $2.65 per share for the second quarter, including a $0.52 benefit from net promote income. Excluding net promote income, core FFO was a record $2.13 per share, up 14% year-over-year, reflecting strong execution, elevated commencements, growing fee income associated with our strategic private capital platform and seasonally low repair and maintenance expenses. Core FFO also included $0.02 of upside from FX and a $0.07 per share net benefit from business interruption insurance proceeds from lost rent related to an incident in Singapore. Let me provide some additional detail. As noted, we benefited from 2 significant sources of upside in the quarter. First, we received $113 million of proceeds or $94 million net of tax associated with an insurance recovery from an event and claim made in 2024. This recovery reflects the final settlement and most significant portion of that claim that was recognized during the quarter.

In terms of financial statement geography, the $113 million recovery was recognized in interest and other income whereas the related $19 million tax liability was recorded as income tax expense. Of the $94 million net gain, approximately $67 million was related to property damage and therefore, excluded from core FFO. The remaining $27 million or approximately $0.07 per share represented the business interruption component or payment for lost rent, which was included in core FFO. The $0.07 was contemplated in our full year guidance. The timing was imprecise.

Second, Digital Realty realized roughly $200 million of promote income associated with the Blackstone transaction this quarter, reflecting the value creation generated through the development and lease-up of the 3 joint venture assets. The $188 million or $0.52 per share recognized in our core FFO reconciliation is net of $14 million of related expenses. The gross promote income was recognized in fee income and therefore, included in total revenue, whereas the related expenses are reflected in other expenses. While promote income is new to Digital Realty, it should be viewed as a value creation-oriented gain, reflecting successful outcomes for our JV partners and investors that may be realized periodically over time. The promote demonstrates the value creation potential from combining our development capabilities and operating platform with our strategic private capital business. Given the potential for additional promote income in the future, it is judged as core FFO. However, since this promote was not reflected in our 2026 guidance, we have presented core FFO results both including and excluding it's impact.

Looking forward to the third quarter, we expect reported core FFO excluding promote to moderate slightly as strong commencements are partly balanced by the seasonal ramp in net utility and R&M expenses, a pickup in CapEx spending and asset recycling activity as well as elimination of the $0.02 FX benefit we enjoyed in 2Q.

Same capital cash NOI growth strengthened further in the second quarter, increasing 8.9% year-over-year, driven by 8.2% revenue growth and disciplined expense management. On a constant currency basis, same capital cash NOI increased 7.2%, reflecting higher occupancy, robust renewal spreads and strength in interconnection.

Moving on to investment activity. We invested $1.1 billion in development CapEx during the quarter, net of our partner share, bringing year-to-date capital spending to $2 billion. We also completed a handful of meaningful land acquisitions in the quarter in Kansas City, Marseille and Atlanta that expanded our future development capacity along with the acquisition of operating and development assets in Malaysia. These activities reflect our continued focus on disciplined capital allocation, expanding capacity in markets where we see the strongest customer demand and positioning the platform for future growth. During the quarter, we delivered 76 megawatts of new IT capacity, approximately 60% of which was pre-leased. At the same time, we commenced development of 312 megawatts of capacity including significant available inventory in Northern Virginia and Marseille to support future customer deployments. These development starts reflect both the strength of customer demand and our confidence in the opportunities we see across the platform. As a result, our development pipeline expanded to 1.4 gigawatts under construction at a total cost of $20 billion, representing a 100% increase during the first half of 2026. Pro forma, the hyperscale leasing completed in July. The development pipeline is now 63% pre-leased at an 11.5% average expected stabilized yield. More than 80% of our active development pipeline is located in the Americas, reflecting outsized demand from hyperscale cloud and AI-oriented workloads. While Northern Virginia remains our largest development market, we also have significant activity underway in Charlotte, Atlanta and Sao Paulo and expect to begin construction in Kansas City during the second half of the year, further expanding our capacity in markets where we see the strongest long-term demand. Collectively, these projects provide both near-term deployment opportunities and substantial runway for future growth.

Turning to the Blackstone transaction. We paid $1.2 billion in cash and issued 12.3 million shares valued at approximately $2.3 billion for Blackstone's blended 64% equity interest, 3 fully leased hyperscale data centers in Northern Virginia, totaling 288 megawatts of capacity. We also assumed our partner share of a $725 million loan and the remaining CapEx necessary to finalize the construction and fit-out of these assets.

From a timing perspective, we expect the first 2 facilities to fully stabilize during the first half of 2027, with the third expected to stabilize during the first half of 2028. Despite closing on these assets pre-stabilization, we are still raising full year 2026 guidance by another 1.5%. We also expect this transaction to be accretive to core FFO per share in both 2027 and 2028 to help support our outlook for multiple years of double-digit core FFO per share growth. In addition to this transaction, we also announced our plans to acquire a 16% interest in Teraco for roughly $650 million of DLR common stock and Columbia Capital for approximately $485 million, which are expected to close in the second half of the year.

Turning to the balance sheet. The second quarter was highlighted by a continued multiyear trough in leverage as debt-to-adjusted EBITDA remained at just 4.7x at quarter end despite completing nearly $6 billion of net new investment activity during the quarter. Notably, leverage falls below 4.6x when adjusting for the timing of the Blackstone JV transaction, which closed on the last day of the second quarter. Over the past 12 months, leverage has declined by approximately 0.4 turns, reflecting the strength of our operating performance, increased retained capital and tactical equity issuance to support our expanded opportunity set. We maintain approximately $6 billion of liquidity today and ample incremental borrowing capacity below our long-term 5.5x leverage threshold. We also continue to expand our strategic private capital platform as we build investment capacity to support the significant hyperscale opportunity ahead of us. Along with the dry powder that remains with our hyperscale development joint venture, we estimate that we have over $12 billion of remaining capacity to support hyperscale data center development. Taken together, these initiatives strengthen our ability to support customer demand, fund our expanding development pipeline and capitalize on future growth opportunities while maintaining financial flexibility and balance sheet strength.

Let me conclude with guidance. We are raising our 2026 core FFO per share guidance, excluding net promote income by $0.15 at the low end and $0.10 at the high end to a new range of $8.15 to $8.20 per share, reflecting the continued strong execution across our data center portfolio and our high visibility for the remainder of the year. The midpoint of the updated range represents double-digit growth over 2025, which would mark our second consecutive year of double-digit core FFO per share growth. We also expect cash renewal spreads of 9% to 11%, up another 250 basis points from last quarter, driven by strong performance year-to-date with a healthy outlook for the remainder of the year. Same capital cash NOI growth of 4.25% to 5.25% on a constant currency basis, up 25 basis points. CapEx, net of partner contributions is expected to increase by $750 million from last quarter to $4.25 billion to $4.75 billion, driven by our recent leasing success and the strong demand outlook. And we are also continuing to recycle capital to fund this new investment and have added another $500 million to our dispositions and JV capital guidance. Importantly, our current backlog of contracted commencements, development pipeline and recent strategic transactions give us increased confidence in our ability to extend our double-digit core FFO per share growth runway into 2027 and beyond.

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

[Operator Instructions] Our first question comes from the line of Eric Luebchow with Wells Fargo.

Maybe we could just touch on your comment, Matt, about double-digit FFO growth for multiple years to come, and you could kind of just help us walk through some of the puts and takes. First of all, obviously, the Blackstone, Teraco, Columbia Capital deals, you talked about meaningful accretion starting to next year. So if you could walk through any of the accretion math for us there. And then it certainly sounds like given the success you've had in leasing year-to-date, that CapEx is going to be meaningfully higher next year. So just if you could kind of talk through the balancing act between accretion on deals, continued growth and then capital funding to hit that double-digit growth target, that would be helpful.

Yes. Thanks, Eric. Look, I think, look, we've set the stage in terms of our growth algorithm that you're seeing happen this year with our guidance raise that's now putting this 10%, last year, delivering 10%. And really, we're -- ultimately we're executing across several growth levers to stack up these multiple years of 10% growth. And again, taking some examples. We got renewal execution this quarter that gives us an opportunity to drive higher value out of our operating portfolio in a very supply-constrained environment. We continue to execute on our hyperscale leasing, which is building a deeper multiyear backlog. We're also setting another record in our 0-1 and interconnection demand, which is driving more -- not only more immediate revenue growth, but also improving our long-term revenue base. And then you add the private capital, which is giving us an ability to fund additional capacity while also generating fee income. So it's all these things coming together that you've seen this year that, again, goes back to giving us confidence in our ability to extend that double-digit core FFO growth per share into not only this year, but into '27 and beyond.

And our next question comes from the line of Nick Del Deo with MoffettNathanson.

Looking out over the next several years, how should we think about the evolution of your asset mix, kind of split between network dense colo, on balance sheet, hyperscaler large footprint facilities and assets held in various off-balance sheet vehicles. You're obviously pushing hard in all 3 areas. I'm kind of curious as to how that is going to shift if we look out 3 years or 5 years or whatever you think the appropriate time frame is.

Thanks, Nick. So as you can see, these items are all firing on all cylinders here. So first and foremost, colo connectivity, that's been a part of, call it, rolling out incremental inventory in our core markets. We've also added numerous markets in the recent quarters, be it entering into Malaysia or Indonesia or in Europe going to Lisbon. We had a great signing into our Barcelona data center that we built from the ground up on the enterprise colo front. Rome is coming up as well as Milan. And so entering more markets, more places for enterprise customers to land as well as our connectivity customers and then within that, increasing of our addressable market execution. So 3 consecutive quarters in a row of records in the 0-1 megawatt category. This quarter was certainly a milestone of 20% year-over-year. But if you literally go back 2 years ago in this quarter, we're about 2x in the productivity and signings in that category. And all that activity, by and large, is really on balance sheet. So increasing our mix in that category. As we add new customers, 142 new logos this quarter, expand new -- to new markets and new services with existing customers. At the same time, we've also been able to expand and support our hyperscale customers. They're off to a great start to the year with, call it, really $1.4 billion of signings including the $400 million signing we signed in the first days of July, which is already eclipsing basically what we did for the entirety on a total signings basis of last year, and we're just at, call it half time of 2026. That hyperscale, obviously, hasn't even hit our P&L because a lot of those signings go into our development pipeline. And we are looking at raising private capital to essentially create recycling vehicles. And a great example of that was our inaugural U.S. hyperscale fund with $3.25 billion upsized, call it, $10 billion of total dry powder and spend just by itself, and we seeded it at about $1 billion of assets. So you can see the playbook. We're supporting the full customer spectrum and using the private capital as a lever for -- to call it, better funding our capital base and supporting our customers.

And our next question comes from the line of Michael Rollins with Citi.

I'm curious if you could help us appreciate the timing for the development pipeline that you have, how much power has been, like, fully committed to you guys and is coming on for each of the next few years. Just to understand like how much is left that you have to sell and over which periods? And then also, you mentioned the strength of the fee income and the opportunity going forward. Is there a simple algorithm you can walk us through on how that fee income should scale for Digital Realty over the next few years?

Thanks, Mike. I'll touch on the development first, and then I'll hand it off to Matt to kind of walk through some of the sequencing in the fee income, which you can see has been ramping over the last several quarters, and we'll continue to do so as asset management fees, property management fees, construction fees come online for various projects in these vehicles. But going to development. So today, as of 6/30, we have about north of $20 billion of projects under development at full share. That's a 11.5% ROI. The leasing we did just in early July was actually into that $20 billion, and that raised the pre-leasing of that capacity to call it 63-and-change percent pre-leased. That is, call it, 1.4 gigawatts. Obviously, all powered, ready to go. We're building the buildings and leasing into them. If you look at that, that's about a 45% expansion of the -- just over 3 gigawatts we operate today. So big needle-moving capacity, highly preleased, strong returns, great customers, diversified over numerous markets. As you can see, and a very strong contribution to growth of new units coming online. That 1.4 of, call it, growth capacity is within an overall envelope of now, it stands at 9 gigawatts of growth runway for Digital Realty's customers around the world, which we recently added to with some of the markets that we had in the prepared remarks. The nearest term segments of, call it, let's just call it the what's up next and our customers are talking to us about, we're in active dialogue on --- it's probably, call it, close to 1.5 gig of the '27 and 2028 deliveries. So that's certainly on the forefront. But this is something that is also a moving target. If you look at just 90 days ago at our first quarter results, we signed the largest lease in history of the company, 200 megawatts, and that was into the Charlotte market, where we essentially have, call it, closed on the land roughly 18 months prior. So we're continuing to support the runway of growth for our customers and build that development pipeline, which ultimately drives that backlog of revenue that Matt walked you through. Matt, do you want to talk about the fee income?

Yes. Mike, on the fee income. So I think maybe a good place to start, which I think Andy hit on is when you look at the major components of our fee income, we've got management fee income, development, call it construction fee income. And then we have fit-out fee income, which can be more episodic. But the first 2, I'd say, are -- generally, we're starting to hit more of a recurring phase as we expand our private capital business. In the second quarter, when you normalize for the promote, we're around -- we were around $45 million, a little bit above that of fee income. When I think about what is going to drive that going forward, it's going to be roughly the, call it, $10 billion, $12 billion of capital that we have available to deploy within those -- within that private capital structure. I expect that probably goes out over the next, let's say, call it, 1 to 2 years as we start to bring those assets online from a construction standpoint that's going to drive our development income, and then that's going to transition to more of an operating management fee income. So I think we've got some runway to continue that even within the private capital vehicles today. And then add on top of that for future private capital initiatives that we may pursue as well.

Our next question comes from the line of Madison Rezaei with Bernstein.

As the AI build-out broadens beyond the sort of traditional cloud majors, are you signing leases with a wider set of who we would consider hyperscale counterparties, thinking sort of neoclouds, AI native platforms, sovereign guys. Or are you still concentrating that greater than 1 megawatt book in the same short list of IG names? And I guess, to the extent you're broadening this out, how are you underwriting the contracts given that sort of giant spread in credit profiles?

Thanks, Madison. So when it comes to more diverse, often less than a megawatt network-oriented deployments or enterprises that want to use private AI and call it the broader service provider ecosystem, that's AI, which was a strong contributor. I think it was the -- our 0-1 megawatt category had the largest dollar volume of AI-related wins this quarter, roughly 20% of that $108 million. We are certainly supporting that, and we view that as additive to essentially our ecosystem on multiple markets, driving demand, driving connectivity and attractiveness to our platform. When it comes to, I think, the heart of your question, the larger footprint capacity blocks. By and large, we have really supported the more traditional strong investment-grade credit names customers. Now we've done that in a more curated fashion with real diverse customer hyperscale demand. I can tell you over the last 10 quarters, our top signing was from 6 different top hyperscalers. All in that, call it, strong investment-grade category names with multifaceted businesses, often cloud computing being a big piece of it in addition to AI. They landed across 6 different markets across those 10 quarters. And in fact, the largest signing this quarter in 2Q '26, that is a top customer of ours, but that top customer of ours hadn't been at the podium for our largest signing in probably 7 quarters back. So I would say sticking to supporting the more traditional hyperscale customers when it comes to really large footprints but doing it in a really -- making sure numerous customers can grow on our campus fashion.

Our next question comes from the line of Jonathan Atkin with RBC Capital Markets.

Yes. Related to that, and then leading into my question, but just as you think about customer credit and doing business with LLMs and a broader array of neoclouds, are you in principle open to it? Or are you looking through -- looking for like a look through into the underlying customer is, thoughts on that philosophically? And then as you look at your sales pipeline, any new trends to call out around demand verticals, types of workloads that are contributing to what you see as your near-term sales pipeline?

Thanks, John. I'll tackle the first one, and then I'll ask Colin to touch on the sales trends because I think there's lots of good data and news to report on that front. Really, your question is more hypothetical than reality for us. Like I said, we are supporting the network nodes, the smaller deployments, enterprises doing private AI on digital and those in a very diverse and -- fashion across numerous markets, but nothing of any sizable concentration, single site or single customer. So when you look at that, call it, $1.4 billion of signings in, call it, first half plus days of July, that's all really the more traditional hyperscalers. So we haven't -- we've not been booking any material extent that some of those hypothetical scenarios you mentioned. Colin, why don't you pick up on the trends?

Great. Thanks, Andy. I appreciate the question, Jonathan. Yes, just Andy highlighted, we're really pleased with our 0-1 megawatt and our 1 megawatt progress in supporting the customer needs. A little bit of color, 0-1, again, the third straight quarter of record bookings, [ 4 to 5 ], where we're really taking market share, we're seeing that demand profile really across geographies and use cases. So that overall demand funnel has become much more durable. A couple of key trends to highlight. While certainly, AI gets the headline and as Andy mentioned, it's certainly a growing part of our overall pipeline of bookings. Digital transformation and cloud just continues to be very resilient. So you're seeing quite a bit of data localization, sovereignty, greater emphasis on repatriation, private and public cloud are really standing out. I also want to highlight interconnection becoming a greater part of the overall solution proposition. To note, we had record bookings for interconnection in the quarter, ServiceFabric, which really helps build up the platform strategy around self-service capabilities becoming more consistent conversation with clients as we stitch together solutions. And for us, we're seeing greater sales motion, the channel centric orientation of the way that we're delivering value to our clients. So we had a record channel quarter, nearly 40% of our bookings across the platform. And last but not least, really strong new logo contributions. Now -- we're now up to north of 6,000 customers who are participating in PlatformDIGITAL.

And our next question comes from the line of Jon Petersen with Jefferies.

Great. I wanted to ask a bit about Kansas City. So I guess the first part of the question is, you talked about the 600 megawatts. So maybe can you help us out on timing of how quickly you could potentially sign a lease and deliver capacity there. But more broadly, that's a new market for you guys. I'm curious how -- if we should take that as a read-through that DLR is broadening your definition of markets you'd be interested in and whether some of these more secondary market locations or what you might have historically considered secondary market are now core opportunities?

Thanks, Jon. I'm going to have Greg hit on to that -- hit on that one. But I mean, I would say, albeit new, very analogous to what we just saw in our expansion in the Charlotte market, which bore fruit very quickly. But Greg, why don't you speak to Kansas City, please?

Yes. Thanks, Jon. Thanks, Andy. Jon, look, I think when we look at this market, like any market, we did a lot of work around it before we went into it. Focusing on things like digitization metrics. When you look at it, you see it's centrally located within the U.S., which enables low latency and connectivity. I think you can cover half of the country within a very low latency metric. There's plenty of fiber, as Andy mentioned in his prepared remarks. And when we look at this market, our belief is that this is going to quickly become the seventh largest data center market in the U.S. So as we look at this, as Andy said, it's very analogous to Charlotte. But we're seeing very strong customer demand here. And it's really becoming what I would say is really a hyperscale hub or maybe a Midwest hub for both AI and cloud workloads. So as we look at it, we're excited about it. In terms of the ramp to power you asked about, the ramp is starting in '28 and it's going linear from there on out. And we're talking about over 1,400 acres here, which we're going to ultimately provide over 2 gigawatts of power. So we're very excited about this market, and we think our customers are, too.

Our next question comes from the line of Michael Ng with Goldman Sachs.

I wanted to ask about the very strong cash rental rate renewals in the greater than 1 megawatt. I think you talked a little bit about some of the outsized spreads realized in Singapore. I was just wondering if there was something unusual about that market, perhaps leases expiring at a kind of unusually lower rate? Or is this really just a function of supply/demand tightness and we could see cash rental rate renewals at this magnitude in other places in the future?

Yes. Thanks, Michael. So I think there's -- there are probably 2 things. So first off, though, I would say the overall theme here is that this is an example of a very supply-constrained market in high demand and where customers continue to want to be as high connectivity and we have an ability on a few different leases to be able to price that according to market. In fact, one of them was actually a customer that had a fixed renewal rate and term, but they wanted a longer term. So that enabled us to negotiate to where the market was. But I think this is an example of something that I've talked about or we've talked about for probably the last several quarters, if not years, and that as a result of this overall supply-demand imbalance, we see an improving mark-to-market opportunity throughout our operating portfolio. Even further noted by the fact that our expiring rates continue to drop over the next several years, while market rates continue to march up. So while we might not see this every quarter, especially at this outsized percentage, I would say we definitely see a healthy opportunity to reprice our contracts going forward on a regular basis.

Our next question comes from the line of Richard Choe with JPMorgan.

I wanted to follow up on the kind of connectivity and interconnection part. What are you seeing in terms of connectivity and interconnection needs with AI inference or maybe agents? And how does that also -- or it's probably early days, but how does that apply to maybe the private AI deployments that you are seeing? And how do you think that might change as that evolves?

Thanks, Richard. I'll tag team this with Chris. I mean, really excited about the contribution from interconnection, a record by itself, up 17% year-over-year, north of $20 million. We've just had a great string of quarters now and records in that category. And it's definitely been a combination of what was touched on before about ServiceFabric being a larger contributor where our value is really shining there. I think we had demonstrable increases in customer adoption on ServiceFabric and then usage even, call it, 2x the customers added. And then AI, which you hit on. And maybe I'll let Chris talk to some of the elements going on there.

Yes. So appreciate it, Richard. There's a couple of things playing out here. And I think your question is spot on that we're kind of early innings, right, where there's been a lot of build-out in transition into inference, which in 2026, there's more inference tokens being produced than actual training. And that next step is agentic. And that agentic requires a different type of capability, which is bidirectional. And so what's nice is a lot of the product offerings that we have across that full spectrum of digital transformation, cloud, AI and private AI, we have the ability to meet them with the right product offering. So a lot of the early innings has been around [ both ] fiber. And so this is where a lot of these big build-outs have been coming in and have been represented in some of our record bookings this quarter. But what you're also starting to see is exactly what you're pointing out is the monetization of this inference. So the consumption of agentic in these inference capabilities and ultimately, services being delivered to customers which is what's represented inside of our broad ecosystem of the enterprise hyperscaler and AI, all meeting in a very unique place. And so what that ultimately represents to our customer base is a unique environment that matches the ability to deliver power, which is absolutely a critical component, all married with interconnection. And so it's both of those elements coming together, which really represent a unique value proposition that our customers are very excited about being able to execute in a very short time frame. And I think that's what Colin alluded to in the supply/demand and what we're seeing in our customer base, being able to pre-engineer these capabilities with both power and interconnection is allowing us to meet a very unique value proposition in the market.

Our next question comes from the line of Joseph Osha with Guggenheim.

Further to this question of strength in renewal spreads, just looking at your disclosures, it seems to me like the math actually gets better not worse in '27 and into '28, if I just look at the magnitude of rolling leases and the price. So I just wanted your reaction to that, it seems like the comps get easier, not harder next year. And just as a related question, I'm wondering if some of this political activity in New York State and Loudoun County, Manassas, might potentially provide an additional tailwind to pricing in those regions?

Thanks, Joe. I mean I think you're spot on. The -- we do have the attractiveness of the mark-to-market opportunity increasing in a backdrop where our expirations are stepping down, but also market rates continue to be on the run. And we've been putting up new records in [indiscernible] various markets, even on our largest lease contracts in terms of a rate standpoint. I do agree with you, the broader backdrop we're living in is that it's becoming more and more challenging to deliver the critical digital infrastructure that we provide to our customers, which makes our installed base and our capabilities even more precious and valuable to those customers. And that is the world we're living in. We're doing our best to make sure the broader communities we operate in, understand our value and contribution and the criticality of the workloads we're supporting. And it also probably goes back to our team at Digital and our experience for multiple decades now solely focused on delivering this digital infrastructure for our customers and call it, raising -- continue to raise our game as the challenges come our way.

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

Thank you, operator. Digital Realty's momentum accelerated in the second quarter with record core FFO per share, supporting another increase to our full year guidance. Strong operating performance, a record backlog and healthy customer demand gives us increasing confidence in our ability to deliver double-digit earnings growth in 2027 and beyond. We delivered record 0-1 megawatt plus interconnection bookings and generated strong hyperscale leasing in the quarter that continued into July, which drove our backlog to a new all-time high, derisking future growth. We also announced a few meaningful and strategic investments that will strengthen our 3 core pillars of growth. Collectively, these actions will enhance our ability to serve our customers, fund future growth and create long-term value for our shareholders. These outstanding results are a team effort, and I am incredibly proud of our talented colleagues around the world who continue to execute at a high level. I'm excited about the opportunity ahead and confident in Digital Realty's ability to deliver value for our customers, partners and shareholders. Thank you all for joining us today, and thank you to our dedicated team -- a dedicated and exceptional team who keeps the digital world turning.

The conference has now concluded. Thank you for joining today's presentation. You may now disconnect.

All right. We are going to go ahead and get started shortly if everyone can please take their seats. All right. Thanks so much for joining. I'm Matt Niknam, comm infrastructure analyst at Truist. Very pleased to be hosting Digital Realty President and CEO, Andy Power.

Thanks for having me.

Great. So maybe just to get started, Andy, if you can talk a little bit about what you're most focused on, top priorities for Digital Realty as we head into the second half of the year.

Sure. So I think the themes are consistent with our strategy, which is about delivering the commitments to our customers, partners and investors and really threefold. One is strengthening our customer value proposition; two is about innovation; and three is about evolving our capital sources. And I think what we've been doing last year and now in the first half of this year, and we'll continue on is, call it, firing on all of those 3 cylinders. On the capital -- or excuse me, customer value prop off a great 2025 out of the gate strong with numerous records. Our enterprise colo business has some fabulous new logo additions, record contribution to 0-1 megawatt across regionals. The partners were a great contributor of those wins, and that velocity and fundamentals continue into the months we're working on right now. On the innovation front, I'm just coming off in the last few weeks the launch of our Digital Realty Innovation Lab in London.

We now have those across Northern Virginia, Tokyo and London, more regions to open up where customers can really have a live test bed for their AI and workloads inside our facilities, see liquid cooling happening, see our numerous partners and their equipment and really bring it to life. So really proud of that innovation and more to come on that front. And then lastly, on the evolving capital front, really a massive third leg to our stool. We've been building on that for years in terms of private partnerships, delighted that we had our first closed-end fund that we upsized and capped off with, call it, $10 billion of firepower in that vehicle in addition to an attractive fee component that's now flowed through our P&L and scaling for our strategic private capital business. All of which is compounding at the bottom line, 10% last year. One quarter reported and already raised guidance and trending to north of 9% this year with a backlog of gross $1.8 billion of revenue for multiple years of growth as well.

Excellent. So I was going to ask you about the demand backdrop. And I feel like it is -- and I hate to put words in your mouth, but firing on all cylinders across the board. But why don't we just maybe delve into that before we jump in to AI.

Those were my words, so you didn't put them in my mouth.

Excellent. Are there areas where maybe there's a little bit more outsized strength, whether we think about hyperscale, enterprise colo, are there geographies maybe where you're seeing a little bit more momentum, if we can talk about that a little bit?

So if you look at the 2 major categories where customer demand, you have, call it, the enterprise side of the business, and we've just been able to continue to execute and put up new records quarter after quarter. That's a business that we are doing, call it, $500 million a quarter, $200 million [ $2,000 million ] a year, and now we're like just approaching $100 million a quarter, trending towards $400 million a year in a very short order, taking share, expanding existing customer relationships, adding new customers and our value proposition, especially in these times when power densities, AI and new infrastructure form factors are coming to bear. The enterprises are coming to us more and more. And it's been an unwavering commitment to digital transformation, both public and private cloud and also early days of AI for those customers across regions in terms of originating where the customers are headquarters and where they're landing with us on our platform.

On the hyperscale side, we've been very fortunate to do business with numerous of the incredible hyperscale customers who we've been servicing for many, many years and really not be single threaded on any given one. So support all of them in numerous markets. We just had the largest lease signing in the history of the company, which was a customer that probably hadn't signed that big of a lease with us for many years, quite honestly. I think it was a AA-rated hyperscaler AI inference landing in a relatively new expansion market with us in Charlotte, which was exciting. So you're seeing real tremendous, not just robustness of demand, but real diversity of demand, whether it's different types of hyperscalers or industry verticals on the enterprise front.

Excellent. So let's maybe delve into some of those drivers. So AI, obviously, notable driver of booking strength in recent years. You've recently noted seeing this going from pilot to production. So maybe you can help us understand how meaningful AI has been as a percent of your recent bookings across hyperscale and colo? And maybe as a second parter for that, how does the evolution from training to inference oriented workloads impact your business?

Sure. So we've been reporting out on those stats, both on an aggregate and also on our enterprise segment basis. And in aggregate, it's been anywhere from, call it, 1/3 to 50% and then kind of the high 70-ish percent, especially when you land a big deal for AI inference like we did last quarter. On the enterprise front, for a while, I would say it's high single-digits contribution, creeping into the teens and now we put up a record contribution, call it, 20-ish percent last quarter. So it is growing. It is certainly a topic. I don't think you can totally silo these workloads because an enterprise that is thinking about AI is thinking about that with hybrid cloud and its digital transformation, and these workloads are certainly interconnected.

On the hyperscale side, for a hyperscaler to come to us to a market that has numerous cloud availability zones, numerous enterprises, it is certainly thinking about that next growth of AI. Inference is really why they're coming to us to actually get to real production workload environments. But I still think on both of those categories, we've got tremendous TAM or runway of opportunity, but this is going to take years to fully come to fruition. And I just look at the evolution of these workloads of the term inference to answer inference to agentic inference and actually getting infused in everyday life as a consumer, as a business I still think this is going to be a multiyear build-out and necessity for the industry.

Great. You talked a little bit about breadth of demand. I think it's a really interesting point you've been highlighting over the last few years. Can you talk a little bit about the diversity you're seeing across your larger customers? And whether this dynamic enables you to be a little bit more selective in terms of evaluating new builds and leases?

So the -- I think that is more germane to our hyperscale business because in the enterprise business, we're approaching 6,000 customers. We're adding 130, 140, 150 customers every quarter. And we want all these customers to be growing on our platform, and we're making sure we have the runway for that growth consistently for these customers. On the hyperscale side, we have obviously some tremendous pieces of infrastructure that these customers -- numerous of these customers need. And our goal is to make sure they all have a fair opportunity to get what they need, wherever they need it and when they need it. We're always in the business of cultivating really diverse connected campuses to make it more of a place where numerous customers can grow, expand and not really be single threaded to one customer necessarily.

That doesn't always work out perfectly. Sometimes a customer wants the whole building, and we'll certainly find a way to make that happen for them. But it's -- we're in a time when you've seen pretty across-the-board commitment from all the top hyperscale customers, the likes of the Microsofts, Amazon, Googles, Oracles, Metas, et cetera. You also have new AI labs in the game who have used those same companies for their infrastructure are looking at different ways of procuring capacity as well. often in partnership with vendors or some type of support. But we're essentially trying to make sure these precious sizable critical capacity blocks in the market they need them, get delivered on time, ready for these customers, and these customers have a chance to grow on our platform.

Great. Let's talk a little bit about why customers choose digital. It's a pretty competitive space, a lot of folks -- a lot of competitors that you face. Why -- what differentiates Digital Realty platform digital relative to peers? And ultimately, why do customers choose you?

So there's 2 major reasons based on the category, but there's a doting light on this. We've solely as a company, only been doing this business for north of 2 decades. So we have a deep relationship, our CD ratio, we don't overcommit. We make sure we deliver. That's in how we build, how we operate, health and safety. When things -- when there's an issue, we make sure we show up and deliver for our customers and the customers know it. And that's for our enterprise customers, and that's for our hyperscale customers, right? If you peel the onion back on both of those segments, in the enterprise category, we are a tremendous global platform, 55 markets, 6 continents. We've got the connectivity these customers need.

We essentially have the form factors and sizing and power densities and liquid cooling capabilities. We were talking about AI and how to make that infrastructure come to life 2017, well before anybody was talking about. So that's why I think enterprises are gravitating to our story more and more often. On the hyperscale side, in addition to that, call it, table stakes element, they know that we are going to be able to deliver for them where they need it most, right? That is from a location standpoint, that's from a runway of inventory growth. That's from a -- we give you a schedule, and we deliver 6, 9 months ahead of that, not the other way around, right? And we also work with the customers. If they're thinking about they want 50% liquid cooling, 50% air, how it modulates.

We're going to try to give them as much flexibility as we can until the decision for the delivery time would be impacted, and then we have hard conversations and we'll help them make the right decisions. So on the hyperscale side, we pick our spots. We don't just chase market share for the sake of it. We don't -- we try to figure out places where we have something that is really helpful to those customers. We have some type of angle, some type of edge, whether it's a hard-to-do business part of the world, some place where we are just so far ahead of the game in terms of our inventory runway, some depth of operational on-the-ground experience where the team just loves working with our people. And that's where we excel with those hyperscale customers, and we don't try to be all things to them.

Great. Colo and interconnect. So effectively the enterprise business. You've invested in the business pretty consistently over the last decade to the point where you're now delivering almost $100 million a quarter in bookings. What's working? Where are you taking share from? And are there opportunities to further scale this business?

So this was not necessarily an overnight success. This was a product of tremendous investment getting after this early days, scaling to global numerous markets, investing in our go-to-market, our systems, everything that's needed to make sure that we're an easy bud for the enterprise to consistently scale their infrastructure, for their cloud, for their AI, for their digital transformation. On top of that, it just came down to execution in the last few years, making that the guideline of the company, making sure that we have the runway for the customers, and we don't go dark for those customers.

In terms of share, we're winning business when the customers, we're -- people are often focused on one piece of the industry and forget that we still are helping enterprises move out of -- data centers are closing down servers out of office buildings, out of carriers. There's a massive addressable market where we and the largest provider right ahead of us are still a very small part of. So we are winning that business. We're taking share from a list of smaller subscale regional one-off and kind of left by the wayside providers that are, call it, behind us in the competitive order. And I believe we're taking share from the competitors that's in front of us who has a nice pricing envelope ahead of us. So I think it's across the board. I think we are doing this not as a finished product.

We weren't built as a colo company 20 years ago and had everything perfect and ironed out. We did this through inorganic activities, M&A, joint ventures, bringing it all together. And we've been on this, call it, AI-ready road map for our systems and our inventory and our go-to-market and our process for several years because we had to integrate. That second leg to our stool is integration and innovation. So we've been winning and taking share with the wind in our face a lot of times. And I'm really excited that we're on the cusp of unlock here where we're going to be infusing that technology and unlocking it in the years to come more and more to accelerate that go-to-market and take even greater share in already a massive addressable market where there's plenty of opportunity for numerous providers to win.

It's growing. I think where agentic AI is going, there's a lot more on the come. Power and grid connectivity, still bigger constraints, and we read about it all the time. As we think about your 3 gigawatts of installed capacity, 6 gigawatts of future capacity, and I think within that, it's about a 1.2 gigawatt development pipeline. How do you ensure you have adequate power availability to meet future demand? And maybe, again, what sets you apart versus peers?

So I like that your framing that, and -- but let me just give you some incremental stats. So today, we operate 3 gigawatts, 5 data centers. 6 you mentioned is future growth, not flowing through our P&L, much of which we're building or a chunk we're building, that's 1.2. So 1.2 over 3 is a 40% expansion in our, call it, megawatts of operation, of which there's no revenue from. That's a $16.5 billion gross share of data centers. That is up, call it, 60% from 12/31/25. So big acceleration in our development. The amazing part of that, the pre-leasing is still up in the call it, north of 60%. The yields are still north of 11.5%, all regions double digits. And as you mentioned, that 1.2% is only a small part of 6. That 6 is stuff that we've owned for many years, right, that we're activating and coming online, lots coming online in '27, '28, '29 and '30. So we've been at this game early, so it gives us that runway for growth. But then we've also used our own ingenuity.

And like that Charlotte transaction I mentioned on the leasing side, the largest in history of the company, we just bought that land 18 months ago. So activating, finding places in markets that we see real long-term durable value with our connected campus strategy, we've got the downtown Charlotte highly connected Internet hub with essentially enterprise customers. Working with our utility partner in that region to essentially bring power faster to that site. That lease, I just mentioned is really the first half of that transaction. So -- and that playbook we've been doing in Atlanta, in Dallas, markets outside the U.S. as well. So we've been also be able to add to that runway of growth. And what we've been adding is not the last megawatts we'll be delivering in that runway. We're bringing stuff in that's strategically important to our customers and is delivering on our development into our P&L in the near future.

So we hit a little bit on power in terms of a constraint. There's also, I think, a growing conversation around nimbyism, labor shortages, ultimately contributing to more delays in projects. Are you seeing these dynamics affecting your business at all?

The facts on the ground is that the -- this has become a tremendously hot-button issue, unfortunately, and unfairly, in my opinion. And I can't help myself on my public service announcement around data centers. When you really look at the facts about our energy use, where energy prices are increasing versus staying flat or decreasing, data centers are actually value add to these grids where we just went through a hot week on the Northeast. And I can tell you, we are doing demand response in Northern Virginia and given the greater break, which is additive to all the electricity folks consuming in that market. We are making massive investments in substations and transmission. We are essentially helping the grid all along the way. Water is one of my favorite ones that is being bandied about. I can tell you, digital has got 300-plus data centers around the world. That's less than 18 California golf courses worth of water. There are 16,000 golf courses in the United States alone. That's less than half that are in the world. The jobs for a data center is 4.5 jobs outside the data center.

And if you ever go to a data center market like Loudoun County, you'll notice they got the best roads, schools, teachers, sports fields just because the tax dollars were contributing to make that happen. And people in those markets are very appreciative. And what we're doing is helping on the national campaign, the PR campaign, but making sure our people are on the ground connected to the communities and showing up with transparency in the town halls, going there and telling what we're about before we do anything, right, making sure that our story of how we do it the right way, where we build into the right locations, how we're helping on the grid, how we're helping with the community. And that's paid us dividends. Our work in growing in Charlotte or growing in Atlanta or growing these other markets where we're newer to the market, we would never have the runway of inventory we have today if we weren't, call it, on the ground winning the hearts and minds of those folks.

Let's pivot to pricing. It's been a bigger tailwind for the industry the last several years. How would you classify the current pricing backdrop across key markets. And we're seeing a little bit more in the way of cost inflation particularly around IT and the supply chain. Is that driving any maybe incremental pushback you're seeing as it relates to pricing updates on lease renewals?

We are firmly in a territory where prices are continuing to grind higher, and it's well founded based on the cost to build this infrastructure, it's obvious and very clear supply-demand dynamics. There's markets where including the factors we just talked about, the supply is being curtailed, and it's going to be curtailed for long durations of time. And we've seen -- I mean, we've had some record rates along the way in a greater than a megawatt category. You've seen most of the leaders in the market, whether you're in Northern Virginia or Silicon Valley, call it 200 or north of 200 rates in some of those markets.

Other markets are coalescing higher. And the customers understand that for their business to get their infrastructure online to make sure they're winning their cloud customers, which is a tremendously profitable business, call it, $0.5 trillion growing at 30-plus percent, I believe being curtailed, its growth is being stifled by AI, quite honestly that they need that infrastructure, and that's the cost for -- to make it happen. So I don't see the pushback. And when you have a list of customers, I just rattled off earlier, all needing this stuff, it's obvious that this is what it costs to operate and to scale global technology.

We talked a little bit about IT inflation. But broadly speaking, if we think about inflation into labor materials, how has that impacted your cost to build on a dollar per megawatt basis? And combined with that dynamic of higher for longer rates, how is that changing the way you evaluate new opportunities in target development yields?

We are -- going to the latter part of your question, we are very focused on ensuring that our yield objectives are being met in an obviously inflationary backdrop. There's tremendous tightness. Land values have inflated. There's tightness in supply chains, there's tightness for labor. And when these customers have tremendous urgency, there's no slack in the system to drive cost or be patient, quite honestly. And you can look in our financial supplement, that development pipeline going back several quarters was hovering, call it, closer to $10 million, $11 million a megawatt, and now it's certainly closer to 14 million a megawatt, right? And that is a known factor.

I think we've probably done better than most of our competition. The -- you just get there via scale. We've got tremendous partner relationships on the vendor side. We're consistent with our GCs and subs. We're consistently building. We're not here today gone tomorrow. And the funny part is people thought, well, if I go find a cheaper cost of living market, maybe that will be a way. The opposite is happening because these projects that we have not entertained that are in the middle of nowhere, they had to bring all the labor into that town and made it much harder to staff and operationalize. So there's no free lunch in scaling this type of infrastructure at this velocity.

You talked a lot about balance sheet, delevering, adding a lot of arrows in the quiver as it relates to funding mechanisms. Can you talk a little bit about some of the recent success you've had here and maybe how you evaluate and prioritize the various funding sources?

So I look at the financial formula around digital is really like a triple thread or a 3-legged stool. We've got this amazing colo interconnect business, service enterprise, taking market share, adding new customers, growing relationships. We have a hyperscale business that has an installed base with a very attractive mark-to-market that is actually growing as we speak. And obviously, the lion's share of our $16.5 billion development at 11.5% is a lot of hyperscale in there. But that third leg that you touched on is we had to build over time, evolved our capital structure and really have numerous arrows in our quiver. And that was a backdrop that everything kept getting bigger and bigger and bigger, and I don't think that's going to stop. There's no small data center projects anymore. The utilities when we go to procure power are requiring hundreds and hundreds of millions of dollars, if not $0.5 billion or more of letters of credit to security deposits for an electrical service agreement to deliver power years in the future.

The proverbial 2 guys in a pickup truck that tied up dirt are done. That they're getting shaken out of this industry. And it's a good thing because we are in an AI arms race and technology arms race here where we can't mess around and we need real folks that can deliver like Digital Realty. We had to evolve on the capital structure side. We've always done that in our balance sheet now, call it, 4.7x lowest AFFO payout in the history of the company but also having these private capital arms and now in a fund format where we are the strategic private capital business. We are the asset manager that essentially, when we look at these massive projects, we can invest with balance sheet, we can invest with joint venture partner we have or we can invest with funds under our management. And we're looking on continuing to scale that business, which makes us more efficient in our capital deployment, driving more revenue earlier into our P&L, be it development fees, asset management fees, property management fees and allows that all that good stuff I mentioned, all the 3 legs of that stool flow to our bottom line faster.

In terms of leverage, I got to sneak in a CFO question or 2, just given your prior role. How do you think about optimal leverage for the business? Is there an appetite to go higher as the business sees improved returns at all?

I don't think we've changed our stripes on being committed to fairly conservative leverage and whether it's 5, 5.5 or even sub 5. I think that we are very focused on positioning ourselves for growth right now. And we -- all these things can exist. We can be raising billions of dollars of our first fund that could spend $10 billion, and we can have $30 billion of assets under management for private capital via joint ventures and funds. And we can also use our currency along the way to build that $16.5 billion and take that development even higher. I mean you look at how that development has ramped and maintained great returns, high pre-leasing, supporting our enterprise colo business, supporting our hyperscale customer business and have a balance sheet right now that can continue to play offense when it comes to those development opportunities. We're kind of trying to make sure we can eat our cake and have two in this backdrop of demand.

I'm going to skip to last just in the interest of time because I really want to hit the core FFO per share. You guys have done really an amazing job, I'd say, sort of delivering both top line but bottom line growth the last several years. How do you think about Digital's core FFO per share growth prospects in upcoming years with the strong supply/demand and pricing backdrop we discussed?

So we are -- we've inflected and that inflection is continuing. And we are essentially coming off a year of 10% bottom line growth. We are 1 quarter reported, already increased our guidance north of 9% for the year, trending towards the high end of that feels like -- so again, feeling closer to that double digits with a $1.8 billion revenue backlog with inventory blocks that are going to -- yes, colo is going to continue to fill the front end of that, call it, growth algorithm. But these bigger inventory blocks that we're signing now is going to make that $1.8 billion go higher, make that development go higher and also make that derisking of '27, '28, '29 happen sooner and sooner and sooner. So we're about being a consistent compounder because we want to drive our per share growth and our stock price higher.

Excellent. Anything we didn't ask about that you would want to impart on the audience before we end?

I don't think so.

Excellent. All right. Andy, thank you so much.

Thank you.

I appreciate it.

Thank you, operator, and welcome, everyone, to Digital Realty Trust's First Quarter 2026 Earnings Conference Call. Joining me on today's call are President and CEO, Andy Power; and CFO, Matt Mercier. Chief Investment Officer, Greg Wright; Chief Technology Officer, Chris Sharp; and Chief Revenue Officer, Colin McLean, are also on the call and will be available for Q&A. Management will be making forward-looking statements, including guidance and underlying assumptions on today's call. Forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. For a further discussion of risks related to our business, see our 10-K and subsequent filings with the SEC. This call will contain certain non-GAAP financial information. Reconciliations to the most directly comparable GAAP measure are included in the supplemental package furnished to the SEC and available on our website. Before I turn the call over to Andy, let me offer a few key takeaways from our first quarter results. First, we delivered the second highest bookings quarter ever for Digital Realty, underscoring the diversity and durability of demand across our platform. We signed the largest megawatt lease in company history while simultaneously setting another quarterly record in the 0 to 1 megawatt plus interconnection category. Second, 0 to 1 megawatt signings boosted our 2026 outlook, while the greater than a megawatt leasing increased our total backlog to a total $1.8 billion or $1 billion at Digital Realty's share, providing strong visibility for our growth into 2027 and 2028. Third, our development pipeline increased by over 50% sequentially to 1.2 gigawatts under construction and is now 61% pre-leased at an 11.4% average expected yield, mainly driven by successful leasing and our continued efforts to position capacity to support our customers' growing requirements.

And finally, we exceeded our earnings expectations, posting core FFO of $2.04 per share for the first quarter, delivering strong double-digit year-over-year growth. Given strong execution across our product offering, visibility from our backlog and confidence in our operating outlook, we are raising our 2026 core FFO per share guidance range, implying 9% growth at the midpoint. With that, I'd like to turn the call over to our President and CEO, Andy Pa.

Thanks, Jordan, and thanks to everyone for joining our call. Digital Realty got off to a record start in the first quarter of 2026, a clear continuation of the momentum we built throughout 2025. Demand for digital infrastructure remains robust, execution across PlatformDIGAL remains crisp and our strategy continues to resonate with customers who are navigating increasingly complex power, performance and connectivity requirements as well as mission-critical on-time delivery challenges. We continue to gain market share in our 0 to 1 plus interconnection product category while providing needed hyperscale capacity in our greater than a megawatt category on an expanding playing field. As the global economy continues to digitize, data center infrastructure has moved from being a supporting layer to being foundational. AI adoption is accelerating compute intensity, cloud demand remains resilient and enterprises are continuing to embrace technology to improve productivity and efficiency across their core operations. At the same time, power availability, labor and supply chain risks and community concerns have become meaningful constraints on our industry, creating a widening gap between theoretical demand and deployable capacity. Against that backdrop, only a limited number of providers can deliver fit-for-purpose capacity, future scalability and deep connectivity across multiple metros and regions with the certainty that customers require. Customers are coming to Digital Realty seeking capacity close to users and clouds to interconnect within and across markets and the ability to scale as requirements evolve, particularly as AI-driven workloads move from experimentation to production. This demand environment translated into strong leasing activity during the first quarter, reflecting both the breadth of customer needs and the value of our global platform.

We signed over $700 million of new leases in the quarter or $423 million at our share, representing Digital's second highest leasing quarter and nearly 70% above our next highest quarter. Strength was broad-based in the quarter with another record of $98 million of leasing within our 0 to 1 megawatt plus interconnection product where proximity, connectivity and access to relevant enterprises and service providers matter most. Notably, a record 21% of 0 to 1 megawatt bookings were AI-oriented requirements. We continue to increase our market share in this category while growing our customer base with [indiscernible] new logos added in the quarter.

During the first quarter, we continue to see both enterprises and hyperscalers continue to spread across PlatformDIGITAL. A few examples include: a global biotech company is optimizing its AI infrastructure on PlatformDIGAL to enable AI modeling, factory design and diagnostics for safety and reliability. A global social and AI platform is expanding on PlatformDIGITAL with a new AI inference node to serve a regional customer base and also expanding edge capabilities across global metros, while deploying a new subsea cable interconnection node. A multinational pharmaceutical company is deploying its AI infrastructure on PlatformDIGITAL to meet growing R&D, infrastructure and computing needs. A leading technology services company is leveraging PlatformDIGITAL to create a distributed in AI-ready ecosystem to support advanced AI workloads for growing enterprise demand. A global cloud computing and content distribution provider is expanding their footprint on PlatformDIGITAL by leveraging the market-leading connectivity available to support edge PoP expansions.

And a technology services company chose PlatformDIGITAL to enable cloud-based platforms by leveraging their available connectivity, security and architecture to support their future growth. These deployments highlight the strength of PlatformDIGAL in supporting increasingly distributed connectivity-intensive workloads, enabling customers to deploy, connect and scale critical infrastructure across our global interconnected platform. The momentum in our interconnection-led product set is being reinforced by the continued expansion of our global connectivity footprint.

In Europe, we expanded our footprint in the quarter by entering Sofia Bulgaria through the acquisition of Telepoint, one of Southeast Europe's most important emerging interconnection hubs. This addition deepens our presence along the Eastern Mediterranean connectivity corridor and complements our existing markets in Southern Europe. At the same time, recent land acquisitions in Portugal and Milan position us to extend this connectivity-rich capacity along critical subsea and terrestrial routes, complementing existing assets in Marseille, Athens, Creek and our soon-to-be opened facility in Barcelona, reinforcing our ability to serve customers that require low latency access, geographic diversity and scalable interconnection across the region.

In APAC, we are taking a similar approach to expanding connectivity in strategically important markets. Our entry into Malaysia will add a highly network-dense facility in Sibergayia that complements our established presence in Singapore, Jakarta and other key regional hubs. This expands our customers' ability to deploy infrastructure close to end users while maintaining seamless connectivity across markets and provides a clear path for future scalability as requirements continue to evolve. Taken together, these investments reflect a consistent strategy globally, building interconnected campuses in the right locations to support customers as their IT architectures are infused with AI-oriented workloads become more distributed, more latency sensitive and increasingly connectivity-driven.

Switching gears to the greater than a megawatt category, we signed the largest single lease in Digital Realty history this quarter, a 200-megawatt AI inference-oriented lease with a AA-rated hyperscaler in Charlotte. This was a milestone transaction for Digital Realty, representing the largest lease in our history and our first hyperscale deployment in this market, validating our hub-and-spoke expansion strategy in Charlotte and complementing the connectivity hub we have long operated and are currently expanding in Uptown. The breadth of our greater than 1 megawatt activity in the quarter was also notable as signings in this category exceeded the level achieved in the prior 3 quarters, even when excluding the record lease. We signed 10-plus megawatt leases in each of Dallas, Sao Paulo and Tokyo during the quarter, highlighting the accelerating pace at which large AI workloads are moving into scaled production environments and the continued global appetite for compute.

Given record low vacancies in most of our existing data center markets, we continue to target land and power opportunities adjacent to our connected campuses, allowing us to support large-scale deployments while remaining connected to core cloud and connectivity networks. To meet those needs, we are expanding our ability to deliver hyperscale capacity where land, power and certainty of execution matter most. In the first quarter, we demonstrated the ability and expertise necessary to source, position and then lease hyperscale IT capacity for development in less than 18 months. Building on this success in Charlotte, we have a second 200-megawatt building that will follow Building 1, and we launched construction on another 200-megawatt development site in Atlanta.

We also have in position today or are preparing substantial capacity for development in Dallas, Northern Virginia, Hillsboro, Sao Paulo, Frankfurt, Paris, Tokyo, Osaka and Seoul. Given the significant development starts in the first quarter, our development pipeline scaled by more than 60% to $16.5 billion at 100% share at strong double-digit unlevered returns. While this marks a historic ramp in our ongoing activity, we remain disciplined and well positioned to continue to meet this opportunity. As we think about our ability to support our customers' long-term growth needs, the combination of land holdings, power availability, supply chain execution and capital all matter, and each must be sourced in a deliberate and scalable manner. Over the last several years, we have been strengthening each of these disciplines so that we can continue to deliver capacity reliably, particularly as projects become larger, more capital intensive and thereby more complex to execute. That same discipline has guided the evolution of our capital strategy.

In early 2023, we announced a plan to diversify our capital sources by utilizing more private capital, including joint ventures in our plans. We then involved that approach with our first U.S. hyperscale closed-end fund, significantly expanding the pool of capital available to support hyperscale development while preserving alignment through our retained ownership and management role. During the first quarter, we continued to scale our strategic private capital platform, shifting to broaden our foundation to support the capitalization of stabilized hyperscale data centers.

The objective is straightforward: to align long-duration institutional capital with the long-lived nature of our assets and our customers' digital infrastructure needs. By continuing to diversify, evolve and expand our capital sources, we are enhancing our ability to secure land, power and equipment to scale development responsibly and to deliver capacity when and where our customers need it, while continuing to drive attractive risk-adjusted returns for our shareholders. And with that, I'll now turn the call over to our CFO, Matt Mercier.

Thank you, Andy. As Andy outlined, the first quarter reflected strong demand across our platform, combined with disciplined execution, resulting in record quarterly financial results. In the first quarter, Digital Realty again posted strong double-digit growth in revenue and adjusted EBITDA, reflecting continued momentum in our 0 to 1 megawatt plus interconnection business, commencements from our growing backlog, healthy re-leasing spreads, modest churn and a favorable FX environment. We achieved these strong results while maintaining significant dry powder to expand and invest in our now 6 gigawatt development pipeline and simultaneously reducing our leverage to a multiyear low of 4.7x at quarter end. Overall, the strong environment and our favorable positioning are translating into better-than-anticipated execution and results, and we are continuing to lean into the opportunity we are seeing with discipline. During the first quarter, we signed leases representing $707 million of annualized rent at 100% share or $423 million at Digital Realty's share. This represented the strongest leasing start to the year in Digital Realty history. And as Amy noted, demand remains robust across our product categories.

New leasing was particularly strong in the Americas, which represented over 75% DLR's share of bookings in the quarter, while we also posted a new quarterly leasing record in the APAC region. Our 0 to 1 megawatt plus interconnection product set continued its strong momentum, posting $98 million of new signings, marking a third quarterly record in the past year and reflecting a 40-plus percent increase in 0 to 1 bookings versus first quarter 2025. The 0 to 1 megawatt plus interconnection category was driven by a record pace in the Americas region and a meaningful step-up in the largest capacity band within the product category, reflecting an acceleration of larger enterprise deployments. Further highlighting this strength, we also saw a new record level of activity in the 1- to 3-megawatt leasing band in the quarter.

Interconnection bookings remained strong at $18.6 million, 24% higher than a year ago. The APAC and North America regions led this growth, driven by demand for our bulk fiber and service fabric products. The record lease signing in Charlotte was the biggest contributor to the $280 million of Americas leasing performance in our greater than a megawatt category. Pricing in this product segment remained healthy, averaging $181 per kilowatt in the quarter, validating the expansion of our hyperscale product in this market. The total backlog at the end of the first quarter reached a new record of $1.8 billion, reflecting the robust data center fundamentals we are experiencing and our ability to capitalize on this demand.

At Digital Realty share, the backlog reached a new record of $1 billion at quarter end as $423 million of new bookings exceeded the strong $204 million of commencements in the quarter. Looking ahead, we have $544 million of leases scheduled to commence somewhat ratably throughout this year with $247 million of leases to commence in 2027 and another $242 million commencing in 2028 and beyond. While the successful execution of our 0 to 1 megawatt plus interconnection segment is helping to accelerate near-term growth, our scaling backlog is improving our visibility over the long term, helping to support strong, sustainable growth.

During the first quarter, we signed $193 million of renewal leases at a blended 5% increase on a cash basis. Renewals were heavily weighted toward our shorter-term 0 to 1 megawatt leases, which represented over 80% of our total renewal activity with $157 million of colocation renewals at 4.3% uplift. Greater than a megawatt renewals dipped to just $32 million in the quarter at a 74% cash re-leasing spread, driven by deals in Vienna, London and Silicon Valley. As for earnings, we reported core FFO of $2.04 per share for the first quarter, up 15% year-over-year, reflecting the ongoing benefit of strong data center leasing and development-related lease commencements, along with increased fee income associated with our growth in our strategic private capital platform.

Same capital cash NOI growth continued to be strong in the first quarter, increasing by 7.9% year-over-year as strong data center rental revenue growth was balanced by elevated operating expense growth. On a constant currency basis, same capital cash NOI rose 2.5% in the quarter, largely reflecting the above-trend operating expense growth versus the prior year period. Given the conflict in the Middle East, energy costs and supply chain risks are once again in the spotlight. While Digital Realty does not maintain a meaningful presence in the Middle East and has limited direct economic exposure, we recognize that many of our customers may be directly or indirectly impacted by rising input costs.

In terms of direct exposure, approximately 90% of our utility expense is reimbursed by customers, meaning fluctuations in energy prices largely flow through rather than directly impacting our bottom line. For the remaining 10%, primarily consisting of smaller colocation deployments, a large majority of our electricity is hedged forward through 2026 and beyond, while most of our contracts provide the ability to adjust pricing, giving us flexibility to respond to changing market conditions.

As a result, while energy is critical operationally, Digital Realty's direct earnings exposure remains limited and manageable. As we previewed on this call last quarter, we enhanced our supplemental report this quarter to align with how we manage the business. We have now fully transitioned the occupancy metrics of our operating portfolio toward power-based metrics, removing legacy metrics focused on square feet from our supplemental earnings disclosure. Now the operating portfolio KPIs are consistent with the metrics we use to report new leasing and data center development. We also made some other enhancements to our quarterly supplemental by streamlining our debt reporting metrics, the new and renewal leasing pages and occupancy analysis page.

The objective was to continue to provide industry-leading transparency while making our disclosures easier to digest. Moving on to our investment activity, we spent $910 million on development CapEx in the quarter, net of our partner share. During the quarter, we delivered 63 megawatts of new capacity, 84% of which was pre-leased, while we started about 464 megawatts of new data center capacity that was nearly 50% pre-leased, increasing our total development to 1.2 gigawatts under construction. At quarter end, our gross data center pipeline under construction stood at approximately $16.5 billion, up more than 60% from year-end, reflecting the strong leasing activity executed by our team and the momentum we continue to see in our sales funnel.

Consistent with last quarter, nearly 80% of this volume is situated in the Americas region, reflecting the demand for AI-oriented workloads from our largest customers. Notably, while Northern Virginia remains our largest development market for the moment, the Dallas and Chicago markets were eclipsed by both Charlotte and Atlanta as we activated multi-hundred megawatt developments in each of these markets.

Accordingly, we continue to invest in our platform through organic new market entries that enhance our global productivity offering as well as meaningful existing market expansions that are designed to meet our customers' long-term capacity and connectivity requirements. Along these lines, in the first quarter, we bolstered our hyperscale capacity with the acquisition of an 873-acre strategic land parcel in the Greater Atlanta Metro that is expected to support a gigawatt data center campus and a 30-acre land parcel in Hillsboro that is expected to support 160 megawatts of IT capacity, adding to the 85-megawatt assemblage that we announced in this market last quarter.

In addition, as we have previously announced, during the first quarter, we made 3 strategic market entrances in Milan, Italy, Sofia, Bulgaria and Cyberjaya, Malaysia, each of which bolsters our global connectivity footprint. Year-to-date, we've also sold small noncore facilities in Boston and Atlanta.

Turning to the balance sheet. The first quarter was highlighted by a multiyear low in our leverage as debt to adjusted EBITDA dipped to 4.7x at quarter end, supported by meaningful adjusted EBITDA growth and a further ramp-up in retained capital as our AFFO payout ratio fell to 64%. This decline in leverage, despite the continued ramp in our development pipeline is intentional and deliberate, consistent with our key strategic priority of bolstering and diversifying our capital sources that we laid out 3 years ago.

In March, we put the finishing touches on our USD 3.25 billion hyperscale data center fund, leaving us with approximately $10 billion to support hyperscale data center development and investment. and we continue to bolster our strategic private capital platform as we build investment capacity to support the massive hyperscale data center opportunity that we continue to see before us. In addition, we maintain substantial incremental dry powder within our $8-plus billion hyperscale development joint venture, which has been highly successful to date and remains ahead of plan.

Our balance sheet is positioned to fuel growth opportunities for our customers around the globe, consistent with our long-term financing strategy. Let me conclude with guidance. We are raising our 2026 core FFO per share guidance range by $0.10 to $8 to $8.10 per share, principally reflecting better-than-expected execution across our data center portfolio early in the year. The midpoint of the updated guide represents 9% growth over 2025, reflecting underlying strength in our 0 to 1 megawatt plus interconnection business, balanced by the continued ramp in our investment spending that is geared towards supporting our hyperscale customers and extending our runway for growth. We also expect cash renewal spreads of 6.5% to 8.5%, up 50 basis points from last quarter.

The stronger greater than the megawatt renewal prospects are balanced by the larger contribution from 0 to 1 megawatt leases renewing. Tower-based occupancy is still expected to improve by 50 to 100 basis points from year-end 2025, same capital cash NOI growth of 4% to 5% on a constant currency basis. CapEx net of partner contributions are poised to increase by another $250 million at the midpoint to a range of $3.5 billion to $4 billion. And we also continue to expect to recycle capital with $500 million to $1 billion of dispositions and JV capital slated for later this year. This concludes our prepared remarks. Now we'll be pleased to take your questions. Operator, would you please begin the Q&A session?

[Operator Instructions] Our first question will come from the line of Eric Rasmussen from Stifel.

Congrats on the strong results, especially leasing. Maybe you could just comment on the economics that you're seeing with AI deals versus prior hyperscale deals. Maybe comment on pricing escalators. And maybe just one last with the -- as AI demand continues to show strength, what's the portfolio look like with training versus inferencing? And at what point do you think we might be at an inflection?

Thanks, Eric. So speaking to economics, I don't think we're seeing a dramatic difference between the use cases -- and I think that specifically goes to the markets where we're supporting these use cases that kind of have cloud, hyperscale use cases, compute or likely more likely AI inference than training given the proximity to data GDP population. The economics really are coming down to a robust and diverse demand backdrop in markets where it continues to be challenging to bring on supply.

Fortunately, we've been very well positioned there, and you've seen those fall through to our results with robustness in rates. On the bigger end side of the equation, our hyperscale contracts are, call it, 15 years and escalators are certainly 3% or maybe even higher in certain scenarios. Going to your second question, maybe I'll tag team this with Chris a little bit. I think we are obviously supporting hyperscale use cases for cloud computing.

We had a large AI inference was our largest lease of the quarter for the hyperscaler, but we're also seeing budding use cases in the enterprise. Not only did we have a record quarter to start the year off a second record at the end of last year, but we picked up further AI being, call it, 21% in that 0 to 1 megawatt. And I honestly think we're just getting going here based on the actual enterprise adoption and where this could certainly take us on a broad base. And I think our portfolio is well situated. But Chris, if you want to maybe speak to the inference inflection point?

Yes. No, absolutely. I appreciate the question. But demand has definitely converted from pilot to production. We've seen that both in Andy's prepared remarks and just referencing the 200-megawatt build that is inference. And then what we also see in the enterprise segment is customers are migrating to larger committed capacity blocks. I think that's a key element to be successful in bringing that type of scaled inference to market. And -- our portfolio, we've been talking about for some time now is workload agnostic, right? We can provide low latency, metro proximity dense interconnection, which is absolutely a requirement for this inference inflection.

And I think one of the points I think everybody would appreciate on this call is as agents come to market, it's a demand multiplier. And so that represents to us a 5 to 30x more tokens per task and that's the fundamentals of what AI is delivering. That is going to really drive another inflection point, not just on the training to inference, but then as agents and Agentic comes into the market, we're very excited about that. And I think the last piece I would just say is the economics associated with private AI, where you really start to see a change in the consumption of being able to own the infrastructure and then rent the spike, if you will, that's going to represent another material savings that what we saw with cloud and cloud hybrid kind of connectivity and multi-cloud.

And so we're at the inflection point of multiple kinds of trends coming into the market, but very excited about our portfolio, not only supporting the hyperscaler and the large portions, but also that enterprise demand as well.

Our next question will come from the line of Frank Lutthan from RJF.

I wanted to talk to you about the expansion of the land bank. Can you give us an idea of the additional gigawatt that you've secured? How many locations is that? And what is sort of the time frame that the power is available for it in the regions, that would be great.

Thanks, Frank. So I'll have Greg work you through the great work the team has been doing. But I mean, just to set the table here, we're talking -- our underdevelopment now is called up dramatically, call it, 60%, $6.5 billion while maintaining the pre-leasing. So bringing forth capacity for customers from the enterprise to the hyperscalers -- and that at the same time, we're now increasing our growth capacity up to 6 gigawatts. So we're call it active in the near term and building for long-term growth. But Greg, why don't you walk through some of the highlights there?

Yes. Thanks, Frank. Look, this asset is one contiguous piece of parcel. It's large. It's, call it, north of 870 acres, Frank, but it's all contiguous. It's in the greater Atlanta metropolitan area. In terms of power, we're still working through things with the power company, and we'll give you additional guidance on that later, but we're looking at a couple of different alternatives there on the power front. So I would say stay tuned on that front.

But when we look at where it's located, Look, we do think it's a product-agnostic market where you're seeing availability in the zones and the like heading up that way. So we feel very fortunate. We work this site for quite some time, but we really think it is a rare large-scale parcel of land. We also, during the quarter, obviously acquired land in Hillsboro in Portland as well to support hyperscale development. So look, it was a very active quarter as you can see.

Our next question comes from the line of Matt Niknam from Truist Securities. .

Congrats on the quarter. I had a question about the commencement lag for new leases signed. So I know it was about 19 months this quarter, it's a little over 2x what you've seen in recent periods. And I'm curious if this is primarily due to a record lease that was signed or is the extension -- are you seeing extensions driven by utility power delivery delays in bigger markets? Are customers just booking capacity even more in advance? I'm just trying to get a better sense of what drove that. .

Yes. Thanks, Matt. This is also, Matt. So I think you nailed it effectively. I mean this is driven by is what was our largest lease this quarter and our largest lease in the company history. That project was essentially just started, as you can see that it showed up on our development life cycle, over 200 megawatts that will be delivering over a phase period starting starting next year into '28. So I think we feel great about that project. And again, that's -- given that it just started, that's why you're seeing a slightly elongated period of time between signed and commenced.

Our next question comes from the line of Vikram Malhotra from Mizuho. .

So I might worry about that. I just wanted to check on the 0 to 1 megawatt segment, you've had really strong strength. I remember at our conference last year, you had sort of talked about a run rate to $90 million -- given the strength, I'm sort of wondering, is there a pathway now to $100? And can you extrapolate and remind us like what does that mean for the interconnection business to flow through? .

Vikram, maybe I'll tag to this with Colin. So we are very pleased with the continued momentum to get out of the gates in the first quarter, which obviously can have some seasonal low given various activities and put up another quarter upon a prior quarter. This quarter it was up 40% year-over-year, and we're coming off a record 2025 in itself was up 35%. Interconnection was a major contributor for that. Not a top quarter contribution for interconnection but a top 5 and there's a lot of good pieces to this. I have Colin speak a little bit to what's next because I think what you'll hear from them is we're not anywhere near done yet. .

Thanks, Andy. And Vikram, thanks for the question and the acknowledgment. Yes, we're pleased with our execution of really in how this manifests itself in the enterprise space. So strong bookings, record 3 of the last 4 quarters and that's really across our platform. Our resiliency in core markets continues to remain strong. We had a strong booking quarter in Silicon Valley and Chicago, in Frankfurt and then seeing multiple industries show up in a keen way across pole. So our value proposition of being an open neutral global platform is really taking shape in the enterprise space, both in the bookings, which you clearly saw and the pipeline and the use cases that are showing up consistently across the board, hybrid multi-cloud, which is the de facto standard for deployment, data localization, sovereignty and AI, as Andy highlighted, that's becoming an emerging part of our portfolio of conversations, north of 20% bookings for this quarter.

And we're getting to show that off in teen ways like the Digital Realty Innovation Lab, which we just launched another one in Japan. We're really pleased about that. And so the success and the response we're getting from customers and partners like we're really pleased with. .

Our next question will come from the line of Michael Elias from TD Securities.

And also congratulations on the quarter. This one is a bit of a 2-parter part for Andy and then also for Sharpe GPT. In the past, I believe, Andy, your commentary had been that while they were fixed price renewal options, in the larger contracts. If there was a change in design, the renewal option was less relevant. One of the things that we're seeing is some of the largest hyperscalers are signaling intentions for hybrid design, i.e., AI, and cloud design in a single data center. -- maybe for Sharpe. To the extent we see that, do you think that means that we'll see kind of the existing set of cloud data centers essentially have it go through a change in design and if that is the case, then for Andy, do you think that increases the long-term opportunity set to replace contracts .

Thanks, Mike. So I mean Chris can expand a little bit on the design dynamics. But just a refresher when markets were not at this position of supply demand dynamics, we essentially had contracts, some inherited with preventing us to get to the full mark-to-market potential upon renewal. And we handicapped how many of those would actually be hit as we move through those expiration schedules. And what we've seen over time is the odds continue to move in our favor on those essential caps. And some of that is often the customer just changing normal configurations, one in different durations of renewal. But in the backdrop of a rapidly changing design with a mix of GPUs and CPUs in both and percentage of liquid cooling to air cooling, and just the pervasiveness of growth, more often than not, we're seeing the customers even with an advantageous renewal option not take advantage of that and say, "Hey, let's work together. And that is obviously an opportunity for us to bring those rates to market more and more often.

This quarter, -- we have good results in that category, no question, but it was a small sample set. And you can see we raised the outlook a little bit for our cash mark-to-market because we think we're going to be seeing even stronger cash mark-to-markets largely driven from that category come through the back half of this year. And then, Sharp, do you want to add anything about the what you're seeing on the forefront design changes?

Yes, 100%. I think I appreciate the question, Michael, you referenced to the silicon and the advancements of the silicon. It's across the entire stack. It's not just about the GPUs, it's about the CPU. There's even equipment coming to market for inference, particularly. So there is a broad spectrum of infrastructure that's kind of driving that demand and I tell you there's two key underlying things that we've always been watching in the market for some time now. Modularity has been one that I've had the opportunity to talk with you all about for some time now, which all us to densify that power and cooling according to that workload. And so I think that's a key element that we've been working with our HD colo program and being able to retrofit and kind of pre-engineer the ability to go up to 150 kilowatts a rack in a roughly quick period of time. .

And then I think the second thing is, AI, it's additive to cloud today because I think what you're realizing now is cloud is comprised of a lot of data assets and AI absolutely requires that data. So we're seeing a lot of additional demand with AI infrastructure trying to be proximate to those availability zones, which is where Greg is talking about some of these expanded hub-and-spoke land banks that we're being bringing to market. A lot of that is being married together in a contiguous way. And I think the last piece I would say is that all has to be engineered from the start for bulk connectivity, right? Beyond the 4 walls of the data center, it's about a connected campus, which we pioneered in this industry for some time now that's what's representing, I think, a unique footprint for our customers, not only to get benefit out of the leases they have today. But as they renew those, some of the new designs we're bringing to market for them tomorrow.

Our next question will come from the line of Jon Petersen from Jefferies. .

And congrats on the great leasing quarter. I wanted to talk about organic growth. So the constant currency cash NOI growth was 2.5% this quarter. I think you mentioned that operating expenses were a bit higher which I think people need your reaction is going to be energy cost, but you talk through that and how it's not at. So can you talk through what the operating expense line items are that are -- I mean, maybe pulling down organic growth to be a little slower than we might expect?

Yes. Sure, John. So I mean, it was largely a result of a low operating expense comp in the prior year same quarter. So and that was driven by R&M and labor largely. And we expect that to start to smooth out as you go through the next 3 quarters kind of in line to what we were talking about on our renewals, so as you can see, we've -- despite that being at 2.5% in the first quarter, we're still talking about being, call it, 4.5% or 4% to 5% for the year. for our guidance. We haven't moved that at all. So the first quarter came in as we expected as per our budget, and we expect an increasing or accelerating same-store growth as you go through the next 3 quarters. .

Our next question will come from the line of Eric Luebchow from Wells Fargo. .

There have been a lot of reports recently around data center delays and projects getting pushed out. So maybe can you talk about any incremental constraints around the supply chain, whether it's utility power, equipment, labor availability, local community pushback, anything that's maybe extending construction time lines at all?

And then second, maybe you could talk about how these supply chain constraints are kind of translated into market rent growth. Are you still seeing positive momentum there? And do you still think market rents are growing above development cost inflation? .

Thanks, Eric. So just taking in reverse just the punch line, we're still seeing market rent growth outpacing inflationary pressure in build costs. And circling back to some of the reasons for that. We are at a point where you're just seeing incredible demand and competition over supply chain, labor, certain parts of the country, having shortages of skilled labor electricians. There's just -- we, as an industry, are moving at an incredible pace to deliver critical digital infrastructure. And obviously, that puts pressure on the cost, but seeing rates ahead of that -- at the same time, some of these things are making our value add and be able to have the 20-plus year track record and consistency of building and operating in our markets shine in the eyes of our customers and all constituents, so our execution, our say-do ratio is something we pride ourselves in a digital and I think that shines through time and time again.

And we're working through every step of the way with all the constituents utility partners that may have delays on their deliveries on how we can get creative and certainly making sure that we're navigating when the stakes are credibly highlight this that Digital Realty's value prop is shining. And then obviously, that flows through to the value we've delivered to our share of customers and ultimate shareholders .

Next question will come from the line of Michael Rollins from Citi. .

So I was thinking about some of the opening comments about the diversity of leasing. Of course, you have the 200-megawatt lease, but you said there was also multiple 10-plus megawatt leases and record 1- to 3-megawatt leases. So I'm curious as you look at the AI composition of the over 1 megawatt leasing, how far down the size level is AI going right now? And what does that mean for them trying to fill any remaining capacity that's available in your portfolio now that you have the new disclosures on utilization on power versus the square footage.

And if I could just squeeze in 1 other pick thing, just a clarification on the guidance. So it looks like core FFO per share on a constant currency basis was 11% year-over-year. And given the commencements that you're planning for this year, in the midpoint of guidance, I think you mentioned it was 9%. Why does for FFO per share need to slow on average for the remaining 9 months of the year, which is what you did in the first quarter on a constant currency basis. .

I'll have Matt hit your -- the guidance question, and I'll come back to the diversity of demand we're seeing in AI implication. .

Yes. Mike, thanks. So look, I think first off, we're obviously -- we put ourselves in a great position. We're coming out an exceptional start to the year, record 0 to 1 one of the highest -- second high signings in greater than 1 megawatt, really putting us in place to be able to improve our our guidance this early in the year. And as you noted, we are expecting a step down, call it, in the second quarter, starting to rebound in the third and ending on a high note, giving us -- putting us in a position to really continue this overall growth into 2017 and beyond.

A couple of reasons I mentioned one kind of related to same store as well. In the first quarter, our OpEx we expect our OpEx to start to ramp in the second and third quarter. Second, we expect to continue our investments first tied to our increase in our development spend as well as the potential for other land to continue our growth run rate. And then we have -- we still have capital recycling that we plan to do, which is also in our guidance, all this having an impact in terms of the trend of our quarterly core FFO. But I think the punchline is we've increased our guidance and expect close to 9% growth for the year. .

And Mike, go to your first part of your question, call it, diversity of demand. So we put up total signings just shy of our prior record that was not that long ago, north of $700 million. And not only that, but it was that in total is, call it, 70% higher than our third place, call it next or next highest quarter. Super pleased to sign the largest lease in the company's history to AA-rated hyperscaler AI inference. But you step right behind that. And as we mentioned, we also signed 10-plus megawatt leases in Dallas, in Sao Paulo, in Tokyo, speaking of that diversity of demand. .

If you go to the other end of the spectrum on size, record 01-megawatt interconnection off of record the prior quarter. Within that, the AI contribution stepped up to call it 21%. So you're seeing AI in the 10 to 100 megawatts, and you're seeing AI in the less than a megawatt category. And I'm kind of just quickly skipping over what's in between. We are rapidly call it, filling capacity at both vacant and also what we have under construction. As you saw not only did our development pipeline step up dramatically the $6.5 billion, but the pre-leasing remained constant, which is quite a feat, but also I looked at the biggest vacancy capacity we have in our stabilized portfolio going back to John's question a second ago. And a lot of that vacancy is already pre-leased. It just hasn't commenced yet hence hasn't showed up in that call just north of 90% occupancy that we report.

So I would say we're attacking this on both ends of the spectrum, call it trying to continue to raise the bar in 2026 and also build that record backlog now $1.8 billion that's going to deliver in '27 and even in '28.

our next question will come from the line of Irvin Liu from Evercore ISI. .

I would also like to extend my congrats on the strong bookings. Andy, you brought up a second 200-megawatt building in Charlotte and another 200-megawatt facility in Atlanta. With these developments in mind, can you just give us a sense on how you think you're greater than 1 megawatt bookings will trend for the balance of the year? .

Thanks, Erin. So we're really excited of everything we got going on for digital in Charlotte. And it's a really strategic move because we long operated the interconnection hub supporting enterprise customers in downtown Charlotte or I guess, uptown Charlotte. And we've been recently expanding that and what's quite astonishing is like 18 months ago or less, we literally announced what we just leased into 200 megawatts. The first half of that campus budding the Charlotte airport, so we got another 200 megawatts that we've -- I would view as very attractive to our customer. That's under construction and then in Atlanta, we talked a little bit about a larger project.

But before that, we have, call it, the other 200 megawatts, call it 2028 delivery, great location, that campus will have an extension of our coal interconnect footprint, but also be priced for the hyperscale customers looking to grow their cloud availability zones, the right AI inference in that market. Those are just 2 snapshots. I can tell you to left of that development cycle, whether it's shells or land, things we're working on. There's numerous other markets where we're, call it, well positioning for incremental demand even for the large hyperscale use cases, and we kind of rattled through that in the prepared remarks be it Northern Virginia. This is actually a light Northern Virginia leasing quarter. You can kind of see that in the weighted average rates but we got, call it, 275 megawatts that I don't think there's lease yet, but it's priced in Northern Virginia in the call '27-'28 timing category.

Dallas is a similar story and then leaving the states quickly going over to Frankfurt Pairs, Amsterdam, Seoul, Tokyo, Saka and down in Sao Paulo and Julesburg. There's numerous markets with larger capacity blocks, which we kind of illustrated in the -- on the map on one of the slide decks -- so we think that we're going to be able to continue to build upon this record pipeline for the company we have and continue to derisk that growth algorithm for years to come.

Next question will come from the line of Timothy Horan from Oppenheimer. .

A lot of moving parts. Can you give us what you think your total inventory of space and power is both leased and what's on the development? And what do you think you can kind of grow that out? Or do you have a target where it could be 5, 10 years from now? .

Sure. So speaking in gigawatts, Tim, we just shy or roughly 3 gigawatts is operating today, all right. On top of that, not operating, we have another 6 gigawatts that we own today. Within that 6 gigawatts under construction from anywhere from moving dirt to opening doors and commissioning, there's 1.2 gigawatts. So that means fairly near term, that's a 40% expansion, 1.2 over 3 gigawatts to our, call it, installed base today. And as you'll -- you've seen that 1.2 just went up to 1.2. It's pretty highly preleased 60-ish percent pre-leased. We're leasing to that, and we're also active in more development as we speak. So we think that there's a pretty darn good runway. And I can tell you, our investment team is also busy adding along the way. .

Our next question will come from the line of Ari Klein from BMO Capital Markets. .

It looks like the cost per megawatt in the Americas development pipeline increased about $14 million from $12.5 million per megawatt. Wondering if you can talk about that. And then also, there seems to be a lot more nimbyism and local pushback. When you look at the 6 gigawatts of future capacity any of that which you'd characterize as in markets that may be tougher to deliver in? Or just in general, how you're approaching dealing with that? .

Thanks, Arie. I mean, I touched on this a little bit on the cost per megawatt. I mean you're seeing, obviously, inflation in build costs and it's a product of land values have risen over time. there is a significant amount of construction and tightness on supply chains and you also have a little bit designed moving more to, call it, higher price designs with call it more liquid cooling infrastructure.

So those are all influencing the basis per megawatt, the good thing is given the ban in supply backdrop, we are able to have great market rates exceed those inflationary pressures to at least maintain rates or returns, I should say, and you could see that we were able to call it now a record under development, still have, call it, close to 11% overturns on our investment. Going to your second question around broader reaction or industry reaction to data center digital infrastructure and what digital is doing about it. That is just a reality of the times we're living in right now. We've obviously seen this [indiscernible] over last several quarters. And it is a burden is on ourselves as a leader in this industry to make sure our value proposition to all stakeholders as well articulated, well advanced, and our doors are open to the communities.

I think I'm very proud of digital's heritage and history and what we do every day of being dedicated community members on all fronts and active in those communities with the jobs that we have inside our data centers. I think we need to continue to make sure the message is clear. When it comes to electrification, we are investing our own dollars to make the grid more reliable and sustainable. And when those hot summer nights happen in your neighborhood, we go back to our, call it, backup generation to take pressure off the grid. And we're supporting the customer base has been quite public and vocal about making their support to lower the cost of folks electricity.

Two, we've long been big real estate taxpayers and I think that makes some of our communities where we operate in, have the best roads, schools, the most teachers and sports fields. But the new news is we're a big job driver, too. If you look at the stats for not just digital, but the industry, we have enough jobs that's more than, call it, the top 15 automakers in the United States as an industry point, most people wouldn't think about that on its space. And that's -- in addition, those are the permanent jobs in addition to the engineers, electricities that are building the data centers today. So -- and then lastly, what Digital Realty is about is mission-critical workloads, things that are keeping called the device is running, the financial systems and following health care systems operating, research happening, those mission-critical workloads for cloud computing for AI inference, that's where we're about -- but again, I think repetition doesn't spell the payer. And I think digital really needs to continue to have that leading voice on this topic everywhere we are.

Thank you. That concludes the Q&A portion of today's call. I'd now like to turn the call back over to President and CEO, Andy Power, for closing marks. Andy, please go ahead.

Thank you, operator. Digital Realty saw a record start to 2026, with core FFL coming in better than we expected and translated into a full year guidance raise. We posted record 01-megawatt plus interconnection bookings in our combined with strong greater than megawatt leasing, including our largest lease to date. This activity pushed our backlog to a new all-time high, improving our visibility for long-term growth. At the same time, we grew our footprint of highly connected assets in the Mediterranean and APAC regions, while adding land for hyperscale development, underscoring our commitment to serve our customers' needs across our global full spectrum platform. We also scaled our development pipeline to new heights, and we've done all this while bringing our leverage down to multiyear lows. These outstanding results are a team effort and I'm incredibly proud of our talented and dedicated colleagues who continue to execute at a high level. I'm excited by the opportunities that lie ahead, we remain focused on delivering for our customers and shareholders. Thank you all for joining us today .

The conference has now concluded. Thank you for joining today's presentation. You may now disconnect. Everyone, have a great day.

Okay. We will go ahead and get started. My name is Cameron McVeigh. I cover communications infrastructure here at Morgan Stanley. And it's my honor to welcome Matt Mercier, CFO of Digital Realty. Welcome, Matt.

Thank you. Great to be here.

And before we get started, I'll read this. For important disclosures, please read our Morgan Stanley research disclosure website. If you have any questions, please reach out to your Morgan Stanley sales representative.

Okay. And we will get started. So Matt, Digital Realty reported strong fourth quarter and full year results in February. There was a record 0 to 1 megawatt bookings and a near-record backlog. I guess as you think about the past year and the year ahead, what would you identify as the one or two main drivers behind recent results? And what are your key priorities for 2026?

Yes. I mean -- so first, yes, so thanks for the setup. I mean we came into '25 with roughly guiding to a little bit over 5% bottom line core FFO growth. We ended up the year basically almost 300 basis points above that. And I would say the setup for '25 is very similar to kind of where we're setting up for '26 and partly why you're seeing a congruence in terms of where we started our initial guidance close to 8% for 2026. And the key drivers, I would say, are: one, continuing our momentum on our 0 to 1 megawatt interconnection business, which I'm sure we'll dive into more. We've seen great growth and execution across that segment for a number of reasons in terms of our -- the number of markets that we're in, our connectivity profile and capabilities and product set. And as a result, we grew the signings as an example, there over 30%, interconnection bookings over 20%.

So we see that as a very stable, sticky connectivity-rich business that we're seeing overall demand increase from an enterprise perspective. And we see long-term tailwinds in terms of not only continued digital transformation from that same enterprise base, but also, I think, near- and long-term scaling for AI, in particular, inference, which from our standpoint, we're still in quite the early innings. So I think that's a foundational layer of our growth. In addition, we also did well on signings that we did in late '24 and through '25, we had over $1 billion in overall bookings at our 100% share. That led to a very healthy backlog of over $600 million in revenue that we've got expected to commence in '26.

So again, kind of derisking the majority of our revenue profile for '26 and therefore, supporting that overall bottom line growth per share. And then I think all those things, largely the favorable supply-demand dynamics are proving to be, call it, a pricing tailwind, favorable pricing dynamics throughout both of those segments, leading to improved mark-to-market story, which is benefiting our same-store portfolio. So I think all those things together are what's giving us conviction for continued bottom line growth that we put up for '26, but also continuing that in '27 and beyond. As we've said, that's a clear and key focus for us in sustaining that momentum on bottom line growth.

Great. That's helpful. And just a follow-up on the '26 guide with -- it's about 8% growth at the midpoint on a core FFO per share basis. When you think through the key building blocks here, what do you think could drive you to the high end of this guide?

Sure. I mean it's a couple of those components that we just talked about. So I'd say the two that probably have the most near-term, call it, revenue through to bottom line impact are: one, outperforming on our 0 to 1 megawatt and interconnection business. So those signings generally have a shorter sign to commence lag generally in like the 1 to 3 months, right? So the more that we can outperform in that, that should accrue to further in-year revenue growth as well as longer-term growth, but has a near-term impact.

And then I would say two would be outperformance on, call it, mark-to-market renewals, and that could be both within our 0 to 1 as well as our greater than a megawatt category. As again, we're -- I would say we're in a favorable supply-demand dynamic where pricing continues to be in our favor. There's broad-based constraints to bringing on capacity. So that should continue for an extended period of time. And I would say those are probably some of the 2 near-term items that would be levers for us to outperform within at least the current year.

Got it. That's great. Now I wanted to ask about the power-based occupancy. It was guided to improve 50 to 100 basis points at the end of the year. So I think around 89% or so. I guess what's driving this transition to reporting power-based metrics? And how should investors interpret occupancy progression given the shift?

Sure. Yes. So for those who maybe -- I'll add a little bit more color for those who may not have heard us talk about this on the last call. So for almost through our history, we've reported occupancy more on what you would call more of a real estate-oriented basis, which is on square footage. But if you look at a lot of the other metrics and key metrics that we report on, whether that be leasing, development capacity, like almost all of our other key metrics are power-oriented based on per kW generally metrics.

So we just thought it was time given how much power is a part of the overall dynamic and the overall marketing messaging around our space to align all those things together and really make some consistency across those key metrics, which are pricing, signings, development deliveries and therefore, utilization/occupancy. So that was the main impetus behind that change to create more consistency and uniformity in how we look at our business and what really drives our business.

In terms of what that -- the relative change in occupancy, which is kind of why we've guided towards more of this relative versus absolute within our occupancy guidance is really not any different. I mean part of the -- the other part of the reason for that change is that we've been seeing increasing densities within our space, right? So you can have the same amount of power or more power within the same amount of space. So again, -- and creating that consistency within those metrics is, I think, is what we talked to not only our investors about that they thought largely would be helpful. So -- but that doesn't really -- the relative change, like we guided last year toward basically a similar 50 to 100 basis points occupancy. We were basically right in the middle of that. We're guiding to another 50 to 100 on top of that this year. That relative change is consistent whether you're measuring it based on power or square footage.

Great. I wanted to shift a bit to AI inference. And in the past, you described the 0 to 1 megawatt plus interconnection business as the most strategic priority. The last quarter set a new record in terms of bookings. And so what's driving the momentum? And how do you see the segment evolving with both AI inference and edge case workloads?

Yes. So I mean, we're -- again, to set the stage a little bit. I mean, we're seeing AI come into play. I mean we -- part of our strategy is that we're able to satisfy a broader spectrum of workloads all the way from multi-megawatt hyperscale up to giga scale type deployments down to single cent cabinets through our global portfolio. Over the last 2 years, we've seen -- we started to talk about more about kind of AI, AI-related workloads in terms of signings as a percentage of our bookings. For the last 2 years, more of that was oriented towards our greater than a megawatt, where we saw training come into play more early on, more prevalent.

So we've talked about, on average, we've seen roughly 50% of our bookings, again, going back the last, call it, 1 to 2 years within that greater than a megawatt category be within training. And so that's where we started to see more of that workload start early.

Inference, we've seen pickup, but I would still say we're in the early stages of that. So as a comparative, last year, we talked about within our 0 to 1 megawatt in interconnection, which is more of that kind of retail colocation enterprise type workload, which more people associate kind of that where that inference might land.

Last year, meaning -- I mean, 2024, we had maybe mid-single digits in terms of like the percentage of those bookings that were AI-oriented. And we categorize that based on discussions with customers, types of chips they're deploying, the level of density they need. And we saw that -- we did see that increase. So last year, 2025, we saw roughly 20% of those -- of the bookings within that category were driven by AI had some level of inference workload.

So a minority, but a growing percentage of that share. And I think we'll see that continue to pick up into '26. It still feels early from our side. We're still seeing where they're looking for -- enterprise customers are still utilizing the large language models from the larger hyperscale and companies that are really focused on that technology. And where we're seeing more of the inferences in financial services, health care, some level of content. So companies that are, generally speaking, look to get ahead of the curve and have the resources and the wherewithal to be able to deploy AI specifically within their stack, whether that be for their own customer use cases or internally for trading algorithms or other needs.

So I think it's an early -- we're in the early innings, I think, of what we see as AI inference, but we see the potential as that continues to roll out as we expect to see more enterprises adopt some level of what we saw and how we saw cloud rollout over its many years, where it started really with the same customer base, the hyperscalers are driving the majority of the cloud in the early days. You then had enterprises that started to adopt their own private cloud, and now you're kind of in a position where hybrid is like the preferred architecture. We see that same thing rolling out in some level for AI, where you've got same large hyperscalers and some new companies driving the large language models, the training, which has some level of inference embedded within it.

You're seeing a very small cohort of enterprises that are driving their own enterprise-level AI and inferencing. And we think over time, you're going to see private AI and then some level of convergence into a hybrid AI rollout, which is why we're setting ourselves up in a portfolio that can satisfy both those large training deployments all the way down to more inference -- smaller inference workloads, whether that be 100 kW, 800 kW, 4 megs or 50 megs.

Got it. That's great. And I guess with this broadening enterprise AI adoption, how important really is latency? How often does it come up within customer conversations? And how do you think you're positioned in a latency-sensitive world?

For -- so where we're seeing more clear workloads in the enterprise -- and I should say that, that also is -- we're not only seeing inference happen from enterprise-oriented customers, but the same companies, hyperscale companies that are taking hundreds of megawatts on -- that are training, they're also taking similar to how they do with cloud, smaller deployments within our 0 to 1 segment more in our highly connected facilities for inference-related workloads.

So I think the theme is that latency continues to be an important factor for not only enterprise deployment of cloud and AI, but also for hyperscale deployment. So they still feel that it's important to be, for the most part, as close to the eyeballs as possible, so major core markets, as close to as many networks as possible so they can transact and transmit across a number of telecom providers and also being as close to as many different customers as possible.

So curating these sites and campuses that have multiple customers that they can then connect with. So that all comes back to why we've been focused on creating a portfolio that is highly interconnected across 50-plus major metropolitan markets, adding capabilities within our interconnection ecosystem through service fabric, bringing partners onto that fabric to enable further differentiation as well as value to our end customers because ultimately, we believe whether it's for cloud workloads or AI-oriented workloads that are still relatively new, especially within the inference, but expected to grow that we can satisfy that and we can bring value to our customers over time.

Great. Okay. And on that point, I wanted to touch on liquid cooling. And just curious if you could provide an update on the rollout of liquid cooling solutions, both in new and existing capacities. And I guess, how important is liquid cooling from an AI inference basis?

Yes. So right now, I would say the majority of liquid cooling needs that we're seeing is more targeted to our newer deployments. So -- and again, you would say most of that is probably more oriented towards training, but there's likely some level of inference happening in those deployments as well. So we're seeing more liquid cooling, 50 to 150 kW type rack levels that we can satisfy, particularly in our new sites and new developments. We're seeing some level of liquid being requested in some of our existing facilities, which we have the ability to handle and be able to retrofit for.

So we've done high-performance compute type deployments within our existing facility. We have the ability to do that broadly across roughly 30 markets that we have today. We've done it today in, I think, 14 of our sites. I think it helps that we've had sites that were built when water cooled chillers were still in vogue. So we're able to tap into that.

But I think also there's a level of workload today that's still able to be satisfied with air-cooled air-cooled technologies, particularly at least what we're seeing on the inference side, where the densities haven't quite reached that, call it, 50 kW average that we're currently seeing from a -- or 50 kW and above training. I think even hear Ecomax talk about it's in the 10 kW, that's all relatively manageable within an air-cooled environment.

Got it. Okay. On sovereign AI, it seems like that has been recently highlighted as a growing theme. How significant is it an opportunity to capture the government demand globally?

Yes. I think we see that, again, as a growing area and need, especially internationally, and we've actually captured some of that today. Where we see most of that is it typically doesn't come directly from government. They're typically working through, in some cases, a hyperscaler or an intermediary. So we -- that's where we see most of it through a partnership that governments have with some of the -- even the larger hyperscale or other partnerships.

So I think the benefit that we have is take our EMEA portfolio. We're in -- not only are we in all the flat markets, but we have a presence through the majority of the countries through -- within the EU, take that through to APAC, where we have a strong foothold in Singapore. We have capacity in Tokyo, Osaka, Seoul, Australia. So we have an ability to satisfy workloads at a country level, which is where you're starting to see that more sovereign level being requested.

So I think our ability to be able to have capacity available in multiple global markets and the ability to partner with a number of different hyperscale as well as sovereign, whether that be cloud or sovereign AI needs, puts us in a position to be able to satisfy those demands across our global portfolio.

That's great. I wanted to ask on pricing. And when you think across your customer demographic, how do you think about the price elasticity across the customer base? And then secondly, how do market rates currently look for when leases come up for renewal?

Yes. I mean it's -- look, the pricing is largely a supply-demand typically equation through most of our core markets. So right now, we're in a phase -- in a cycle where that is -- the demand is high, supply is constrained, and we have a favorable pricing environment at the moment. We've seen -- we've largely seen -- when you look at it from a couple of different angles, like our mark-to-markets continue to improve. So that's -- we talked about this a little bit, I think, earlier in terms of last year, we had a little over 6% mark-to-market on our global portfolio. That's a mix and a weighting between our 0 to 1, which is typically more inflationary, 3% to 4% because the contracts are more 3 to -- I'm sorry, 2 to 3 years in term. So they're always usually close to market. So they're escalating more like an inflationary type rate even when they come up for renewal.

And then where we're seeing sort of the higher mark-to-market is in our greater than 1 megawatt portfolio, which was north of 10% last year and essentially expecting a very similar type of setup, like I mentioned before, coming into 2026 in terms of the guidance that we set forth.

Now I think as you look at sort of broader pricing dynamics across our global portfolio, I think you're seeing, call it, spillover effects. 1 to 2 years ago, you saw significant increases in pricing in Northern Virginia as an example, as that was one of the first markets that saw a very heightened level of demand versus basically a supply constraint that happened almost overnight due to power transmission issues. And now we're starting to see that spill over, I think, into a number of our other core U.S. markets where we're seeing mid- to high single-digit type annual increases in the U.S. markets.

Go over to Europe, and you're seeing roughly kind of mid-single-digit type increases is not quite the same heightened level of demand versus supply challenge, but still healthy demand, constrained supply. And then you move to APAC, like a market like Singapore that's highly constrained, very competitive in terms of mark-to-market pricing, still highest set of demand. So we see really good mark-to-markets within that market, in particular, in APAC as well as others. But Singapore, I think Singapore stands out.

I would say the one other thing I'd add to that is as we look out, in particular, from a mark-to-market perspective and the opportunity at digital, like we see an improving mark-to-market profile as our expiring rates that we're comparing against markets start to step down in '27 and '28, '29. So I think that gives us kind of continued confidence in being able to have pricing power given the supply-demand dynamics and having that as a lever to support our continued bottom line growth going forward, definitely.

Okay. On the international market theme, you've entered several new markets recently, Malaysia, Portugal, Israel, Indonesia all in the past year. Can you walk us through your decision framework for a new market entry and how these markets fit the global interconnection strategy?

Sure. Yes. So I would say the common themes that you've seen, and we even announced another acquisition this morning, site, a highly connected site in Bulgaria. But I think the common themes you see then all the ones you mentioned, Indonesia and Malaysia, I think there's a couple of highlights. One, in particular, we've been looking to grow our presence in APAC. That's just as a region, finding sites capacity where we can grow there. APAC is roughly, call it, 10% of our revenue today. We'd like to continue to grow that region. We see a very healthy demand dynamic and want to expand that as an overall portion of our overall portfolio and customer in a number of markets. So that kind of hinges some of those new market entries.

Two, continuing to build our overall connectivity platform globally. So all these sites have been largely some of the more connected sites within those markets, giving us a strong, I think, solid base for not only enterprise customers, but that path to continue as AI continues to roll out throughout the globe, having those connectivity points of presence and networks, we think, is going to be very important.

And then third is we have expansion capacity that typically we've been able to procure as part of those acquisitions. So both being able to continue to drive our enterprise 0 to 1 signings growth, but also having potential capacity for larger-scale deployments within those regions to is creating a broader connected campus ecosystem within each of those markets. So those are the kind of the key things that we look for in terms of expanding within new markets globally.

That's great. Okay. I wanted to hit on power. It's a growing theme that a lot of investors are interested in. How does Digital think about using grid connections in utility providers versus behind-the-meter power solutions, about fuel cells or turbines? Where do those bridging solutions fit into the general strategy?

Yes. I mean, so I think first and foremost, like our view, and I think -- and I believe this is a broader industry view, and maybe not everybody, but from who we speak to, I think it's a general consensus, if you will, that at the end of the day, long-term utility grid power is the best primary source. So that's, again, from our standpoint, from customers we talk to, other industry participants, developers, operators. But as we've seen, we're in the grid is -- the grid hasn't necessarily kept up with the needs. So you mean ourselves as well as our customers and other developers, we're looking at ways to bring and bridge ultimately the power capacity divide that exists today.

But we see that, again, more as a bridge versus a permanent solution. And we are looking at a number of our larger markets where it makes sense because of the investment that we need to have, the regulatory approvals, the partnerships we need in order to bring a site online that and bring on a developer and a partner that understands and knows how to do this since it's not our core business.

We do see a need to try to bridge that capacity in the near term and put us in a position to be able to continue to bring on capacity in some of these more highly constrained markets like a Northern Virginia or Dallas in the U.S. So we are -- we as well as others are looking at bridging capacity, whether that be gas or fuel cells that we can bring to bear and be able to bridge and kind of rotate as power comes online to new -- to the next set of incremental sites.

So that -- those are things that we are looking at. None of those solutions are easy. You still got to get -- it's another complexity within the overall development and procurement process, but it's a necessary thing given the power constraints we have in a number of markets in finding these bridging solutions to be able to bring capacity online sooner and be able to rotate that through to the next set of development sites that we have or able to bring online in those markets.

Got it. And on that point, there have been headlines around grid operators implementing some of these stricter requirements to access the grid for various data centers. Is this -- I guess, how do you view this? Is this a headwind or because you're scaled with access, more of a tailwind?

I mean I would say -- and I believe you're speaking more to like there's either financial or other commitments that grids are looking to just to maybe clarify for whether that's take-or-pay, deposits, guarantees, the -- because there's a lot of operators out there who have -- and developers who have come and said, "I need this much power and either not taking it, and that's created some of the concern, congestion.

So I think from a Digital standpoint, while I don't necessarily love it because it's incremental potential financial commitment that we have to put up, I think because this is one of many areas where an investment-grade balance sheet, I think, is a strategic advantage because, one, typically, that means we have to -- if we do have to post anything, we're able to negotiate a lower amount. If we do have to put up anything, typically, we can do it at a lower cost.

And I think it just gives us some incremental leverage and bargaining power with major power suppliers, probably first and foremost, because we're -- we've already been doing business with a lot of the utility providers in most of the markets throughout -- in particular, in the U.S., but also throughout Europe and Asia, just given that we've been in business for over 20 years. So we've shown that we've not only -- we're procuring the power that we've asked for, we're utilizing it like we've said. So I think overall, it's a benefit for us, both from an operational perspective and already having established relationships with most of these utility providers. And two, I think, ultimately, from a financial perspective, given that we're an investment-grade counterparty versus some others who aren't able to put that up.

Great. I'm going to open it up to audience Q&A, but -- so think of a question. But before I do, I wanted to ask, on the earnings call, you called out a minor interest expense headwind related to newly raised debt. How should we think about market appetite for raising incremental capital, just both from a credit and equity market perspective?

Yes. I mean, so there's probably a couple of different angles on that one. But I think, one, we've, in essence, put to bed the headwind that we talked about. I mean it's still a headwind, but we had done that refinancing in late November, early December in terms of euro bonds that we had coming -- maturing in January. So we got ahead of that. Granted, still a headwind from an overall bottom line because we're taking out 2% debt and essentially refinancing it at a little over -- basically right around 4%. But that's in our guidance, already taken care of. So kind of check that one off the list, at least for 2026.

I would say, in addition, this is another, I would say, advantage of being a public company. So we have access to multiple pockets of capital, both public bonds, hybrid securities, asset level financing. And we have great relationships with a number of banks in our bank group to help support us. And so I think from -- that's an advantage, I think, of being in the public sphere versus some of our maybe private competitors who are, in essence, probably overly reliant on asset level type financing and therefore, even more -- have to be even more diligent, if you will, on the type of customer and credit quality that they're able to finance in this environment where we have potentially a little bit more flexibility.

Now don't get me wrong, that's not to mean we're very conscious about our -- the quality of customers we have. When you look at our top 20 customers, the majority of those are high credit quality customers. But I think it gives us really goes back to that we have a broader diversity of customer base and ability to finance across different types of products.

Great. Okay. We have a couple of minutes left, if there's any audience Q&A. If not, I did want to ask about hyperscalers if you think about this year, they've announced these massive CapEx plans, which creates some worry maybe around bottlenecks on power, construction, equipment. How do you manage supply chain risk? And what is elevated hyperscaler CapEx mean for pricing power?

So I think first, like when you -- probably something to note, like when you look at the what is almost half or more than half, like what is it, $600 billion-ish area, well over $0.5 trillion, which is crazy when you say it out loud, that hyperscalers are spending. Not all of that is going into building data centers. Actually, a good majority of that is actually going into the CPUs, DPUs, servers and equipment that are actually going to move into a data center.

So I think that's -- it's important to kind of distinguish what level and figuring out how much is in each category, that's a little bit of more art than science, but I think it's good to keep that in mind. And from a Digital Realty standpoint in terms of what that means, that just means -- I don't think it's any different really from how we've approached it historically, meaning we've lived through the pandemic. We've seen long lead equipment lead times elongate. We've gotten ahead of that. For a number of years, that's really not gotten any better. So we've been on top of it for a long time.

We look ahead in terms of what we need to procure given the megawatts that we expect to deliver, working with our partners to strengthen that -- those supply chains. So that's something we've been doing for a number of years, something we'll continue to do as we deliver even more and more megawatts into our operating portfolio.

And has that -- and I'm not sure exactly where you're going with the pricing part, but I would say we have seen increases in the cost of that long lead equipment over the last couple of years, but we've also seen a corresponding increase in the pricing that we're able to achieve on that deployed or related to the deployment of that capital and keeping and/or improving the overall yields that we're getting on our development pipeline.

Great. And we are out of time. Matt, thank you so much. Yes. I appreciate it.

Thank you. Hopefully, that one Great. Good to see you.

Thanks again.

Good afternoon, and welcome to the Digital Realty Fourth Quarter 2025 Earnings Call. Please note that this event is being recorded. [Operator Instructions]

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

Thank you, operator, and welcome, everyone, to Digital Realty's Fourth Quarter 2025 Earnings Conference Call. Joining me on today's call are President and CEO, Andy Power; and CFO, Matt Mercier. Chief Investment Officer, Greg Wright; Chief Technology Officer, Chris Sharp; and Chief Revenue Officer, Colin McLean, are also on the call and will be available for Q&A.

Management will be making forward-looking statements, including guidance and underlying assumptions on today's call. Forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. For a further discussion of risks related to our business, see our 10-K and subsequent filings with the SEC. This call will contain certain non-GAAP financial information. Reconciliations to the most directly comparable GAAP measure are included in the supplemental package furnished to the SEC and available on our website.

Before I turn the call over to Andy, let me offer a few key takeaways from our fourth quarter results. First, we posted $1.86 of core FFO per share in the fourth quarter and $7.39 and for full year 2025, up 10% over 2024. Our initial guidance for 2026, implies nearly 8% bottom line per share growth at the midpoint despite outperforming our original 2025 guidance by almost 500 basis points.

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

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

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

Thanks, Jordan, and thanks to everyone for joining our call. 2025 was a pivotal year for the data center industry and for Digital Realty. Data centers move firmly into the global spotlight, as AI adoption accelerated, cloud platforms continue to scale and power became the industry's primary constraint. Against that backdrop, the Digital Realty team delivered exceptional execution. We closed the year with a record financial performance exceeding the full year guidance we laid out last February and finishing ahead of the targets we set for ourselves across revenue, EBITDA and core FFO per share.

Just as importantly, the strategy we articulated over the last several years focused on a global full spectrum and connectivity-rich platform and operational excellence with disciplined capital allocation is clearly gaining momentum. Throughout 2025, demand remained robust across our full product range and our leasing reflected that breadth. For the second consecutive year in our history, Digital Realty signed over $1 billion of new leases with a $1.2 billion of bookings in 2025, representing a pace that is nearly 70% above the average bookings achieved over the preceding 5-year period.

Our 01-megawatt plus interconnection product set continued to outperform and take share, posting nearly $340 million of bookings, easily a full year record and 35-plus percent above 2024 levels as customers sought proximity, scale and dense connectivity in the critical Tier 1 markets that we serve. This segment benefited from the continued expansion of Platform Digital into 31 countries and 56 markets at year-end as well as the evolution of our product set. Our high-density colocation offering enables customers to deploy more compute in the same footprint while maintaining efficiency and reliability.

ServiceFabric adoption also accelerated meaningfully during the year, now enabling access to over 300 cloud on-ramps and more than 700 interconnected data centers globally, further strengthening the network effects of PlatformDIGITAL. These dynamics help drive a robust inflow of new logos with nearly 60 the second consecutive year. Greater the megawatt bookings got off to a great start early in the year when we signed the largest lease in the company's history.

Momentum continued through the fourth quarter with solid hyperscale activity across our footprint, particularly in the Americas. On a 100% share basis, hyperscale leasing exceeded $800 million in 2025, highlighting the underlying strength and durability of hyperscale demand. Also in 2025, we saw early but encouraging customer adoption of our private AI exchange platform, a growing set of AI-driven networking use cases that enable enterprises to connect to compute, data and models privately and dynamically across clouds, campuses and partners.

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

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

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

We continue to believe that not all data centers are created equal. Different types of data centers can be thought of as different tools for different jobs. Our is largely focused in locations that matter most to our customers and their stakeholders. Interconnection hubs in newer clouds and data converge create network effects, making the platform more valuable for every participant.

The value generated by these network effects together with our ability to support hyperscale requirements and higher power density workloads underscores the advantage of Digital Realty's connected campus approach. The key to these network effects is in a connection. Digital has continued to enhance the value that we provide through both physical and virtual products available at our data centers.

Customers can use this connectivity to connect to others within the same data center via a cross-connect or another data center across the globe via service fabric and everything in between. Customers can connect with their business partners in our data and expand their connectivity when they add sites or deepen their integration with cloud, data and AI ecosystems. The importance of this connectivity grows as enterprise AI and use of inference accelerates.

Inference thrives where data and networks need and our position in major population and GDP centers, together with our robust and diverse connectivity makes us particularly well positioned to host and scale inference workloads as enterprises continue to operationalize AI.

The introduction of ChatGPT a few years ago and the ensuing race between Gemini, [ Claude ], Grok and others, marked the beginning of a new chapter in the digital age, one defined by the convergence of AI, cloud, data and interconnection at a global scale. Cloud platforms continue to grow at remarkable rates even at their extremity scale, underscoring the depth and durability of this demand.

Looking ahead, cloud and AI demand are expected to continue to compound with AI-specific services growing even faster as generative and inference workloads become embedded directly into business processes. We're positioned for the next phase of infrastructure enablement where enterprise AI demands infrastructure that behave like the cloud. reliable, secure and always on. As cloud and AI demand scale, a combination of power availability and ability to execute have become the defining constraints across global digital infrastructure, shaping the time lines for how new data center capacity comes online.

In most of our core markets, new supply will continue to arrive gradually as both generation and transmission upgrades continue. Hyperscalers are increasingly making leasing decisions based on who can secure and deliver power capacity on a predictable schedule. As a result, customers are prioritizing operators with verified visibility into the future supply of power and a track record of on-time or even accelerated delivery. Digital Realty continues to leverage its global footprint 20-plus year track record and 5 gigawatt Power Bank to position incremental capacity for development in some of the world's most power-constrained markets.

Before I move on, let me highlight a few recent wins that demonstrate how customers across the globe are using the connectivity in our data centers to deploy critical workloads to create value for their enterprise. In technology services company and new logo is leveraging PlatformDIGITAL in 4 U.S. locations to create a distributed AI inference ready ecosystem to support advanced artificial intelligence workloads for a growing enterprise demand.

A leading technology and communications company is expanding its footprint to 2 additional European markets on PlatformDIGITAL to enable network optimized platforms leveraging the interconnected digital infrastructure to reach customers faster and at scale. A global industrial technology and engineering company based in Germany and a new logo for PlatformDIGITAL, is enabling advanced data analytics and AI initiatives, leveraging the high-performance digital ecosystems available in a Dallas data center.

A leading European AI company and a new logo for Digital Realty, is deploying an edge in first node on platform digital, leveraging the network and emerging AI ecosystem available on our Paris campus. And a leading multinational manufacturing company is expanding its footprint on PlatformDIGITAL to enable advanced data and AI workloads, leveraging high-density and interconnected digital infrastructure available on our sole campus. These wins demonstrate the continued momentum of our enterprise offering and the value of deploying critical workloads within our connected global communities.

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

Thank you, Andy. As Andy noted, 2025 was a transformative year for Digital Realty. Over the last 12 months, we posted record financial results and saw a meaningful acceleration in top and bottom line growth. In the fourth quarter, Digital Realty again posted strong double-digit growth in revenue and adjusted EBITDA, reflecting the momentum in our 0 to 1 megawatt plus interconnection business, commencements from our substantial backlog strong re-leasing spreads, modest churn and continued strong growth in fee income. We achieved these strong results while keeping our leverage below 5 turns in maintaining significant liquidity to invest in data center projects across our 5 gigawatt runway of buildable IT capacity.

Core FFO per share grew by 8% year-over-year, while leasing posted a top 5 quarter in DLR history with the 01-megawatt plus interconnection category, setting a new quarterly leasing record. During the fourth quarter, we signed leases representing $400 million of annualized rent at 100% share or $175 million at Digital Realty share. Demand for data center capacity continues to be robust, both for larger capacity blocks to support growth in cloud and AI and smaller but also scaling colocation capacity, which often supports enterprise digital transformation workloads.

Data center supply remains tight, especially within our footprint. New leasing activity was particularly strong in the Americas, representing 65% of DLR share bookings in the quarter. Our 0 to 1 megawatt plus interconnection product set continued its strong momentum, posting a new leasing record of $96 million, 7% higher than the previous record set in 2Q of '25. Over the course of 2025, we've averaged $85 million of quarterly leasing in this category, a reflection of our growing value proposition and the consistency of our team's efforts.

Leasing was driven by regional records in North America and EMEA, led by strength in the smaller 0 to 500-kilowatt deal tranche. The 0-1 megawatt plus interconnection product continues to be a significant focus for Digital Realty, and we are encouraged by the growing strength and momentum of our execution. Interconnection bookings approached last quarter's record at $18.9 million.

Strength in the quarter was driven by record bookings in EMEA and momentum within our ServiceFabric product. Interconnection bookings stepped up noticeably in the second half of 2025, resulting in a 22% increase year-over-year. We signed $78 million within the greater than the megawatt category at our share with continued strength in the Americas. Pricing in this product segment remained strong, averaging over $180 per kilowatt in the quarter. Manassas, Virginia was the top contributor to the greater than the megawatt signings this quarter, while hyperscalers also signed leases in Tokyo, Osaka and Paris.

Availability across our nearly 800 megawatts in-place portfolio in Northern Virginia remains very limited. With strong demand queuing for the 300 megawatts of capacity we are ready for delivery in the 2027 to 2029 time frame. Our total backlog reached a record at year-end of nearly $1.4 billion, reflecting the robust data center fundamentals we are experiencing and our ability to capitalize on this demand. Many remain understandably focused on the pro rata share view of leasing that we have historically provided to enhance transparency and modeling, but we feel it is important to understand the complete picture.

The total backlog is a better representation of the aggregate demand being captured across PlatformDIGITAL and in turn, an important driver of the overall economics enjoyed by DLR shareholders. While the evolution of our funding strategy has impacted some items on our income statement, bottom line economics remain paramount. This evolution has enabled us to more than double our fee income in 2025 and while expanding our operational reach to better serve our customers. At Digital Realty share, the backlog was $817 million at quarter end, as $209 million of commencements exceeded the $175 million of new bookings in the quarter.

Looking ahead to 2026, we have $634 million of leases scheduled to commence somewhat ratably throughout this year and then another $152 million of leases to commence in 2027 and beyond. Our backlog provides us with strong visibility and predictability.

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

As for earnings, we reported core FFO of $1.86 per share for the fourth quarter, up 8% year-over-year, reflecting strong core growth and continued growth in fee income, offset by seasonally higher expenses. For the full year, we reported core FFO per share of $7.39, just above the high end of our guidance range and 10% higher than 2024. We Same capital cash NOI growth continued to be strong in the fourth quarter, increasing by 8.6% year-over-year, driven by 8.2% growth in data center revenue. On a constant currency basis, same capital cash NOI rose 4.5% in the quarter. For the year, same capital cash NOI also grew by 4.5%, consistent with our most recent guidance increase.

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

Key elements of our reporting, including leasing and development activity are already based on power, and we will now bring occupancy in line by highlighting it on an IQ load basis. Based on square feet, same capital and total portfolio occupancy ended the year at 83.7% and 84.7%, respectively. However, on an IT load basis, same capital and total portfolio occupancy was approximately 91% and 89%, both improving over 50 basis points year-over-year.

We believe that this update will better reflect the dynamics of our current business while providing a clear and more consistent view of the utilization across our platform. We also expect to make some modest updates to our quarterly supplemental pruning unnecessary data points. The objective is to retain our industry-leading transparency, better align reporting with how the business is managed and improve the overall digestibility of the supplemental.

Moving on to our investment activity. We spent $930 million on development CapEx in the quarter, net of our partner share, bringing full year spend to $3 billion. Recurring CapEx increased to $169 million in the seasonally high fourth quarter. During the quarter, we delivered about 90 megawatts of new capacity, 75% of which was pre-leased while we started about 135 megawatts of new data center projects, increasing our total development to 769 megawatts under construction.

At quarter end, our gross data center development pipeline underway stood at just over $10 billion at an 11.9% expected stabilized yield. For the full year, we delivered approximately 289 megawatts of new capacity, reflecting strong execution across our development pipeline in support of customer demand, even as labor and supply chains got tighter. During the fourth quarter, we sold a noncore facility in Dallas for $33 million, and acquired land near Portland, Tel Aviv and Lisbon for future development.

Turning to the balance sheet. We were active again in the capital markets during the fourth quarter, raising EUR 1.4 billion in a dual tranche green Eurobond offering. The first tranche was for EUR 600 million at 3.75% due 2033 and the second tranche was for EUR 800 million at 4.25% due 2037. We used a portion of the net proceeds to redeem EUR 1.075 billion of euro bonds, carrying a 2.5% coupon that was scheduled to mature in January. The 160 basis point spread between the new and redeemed issues will cause a modest interest expense headwind starting in the first quarter of 2026. Our only remaining debt maturity for 2026 is a modest CHF 275 million note that matures late this year.

Looking further out, our maturities remain well laddered through 2037. Leverage remained at 4.9x, well below our long-term target of 5.5x, while balance sheet liquidity remained robust at nearly $7 billion. In addition, we maintain approximately $15 billion of dry powder to support hyperscale data center development and investment through our private capital initiatives. As a quick update surrounding the fund, by year-end, we had closed $3.225 billion of LP equity into our inaugural closed-end fund, and we anticipate to file $25 million closing prior to our next call. In late December, we contributed another 40% stake in the 5 stabilized seed assets into the fund, increasing the fund stake to 80% and resulting in an additional $427 million of net proceeds to digital.

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

Let me conclude with our guidance. We are establishing a core FFO guidance range for the full year 2026 of $7.90 to $8 per share. The midpoint represents 8% year-over-year growth reflecting underlying strength in our business, balanced by a continued ramp in new investment spending that is geared towards extending our runway for growth. On a normalized and constant currency basis, we anticipate total revenue adjusted EBITDA growth of more than 10% in 2026. Same capital cash underlying growth is expected to grow 4% to 5% on a constant currency basis.

We also expect cash renewal spreads of between 6% to 8% with upside partly mitigated by the high mix of 0 and megawatt leases expiring together with a portion of fixed rate renewals in our greater than the megawatt portfolio. Power-based occupancy should improve by another 50 to 100 basis points from the approximate 89% at year-end 2025. CapEx net of partner contributions are expected to rise to between $3.25 billion and $3.75 billion, with development yields expected to remain in the double digits. And we will also continue to recycle capital with $500 million to $1 billion of dispositions and JV capital expected this year.

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

[Operator Instructions] And our first question for today comes from the line of Eric Luebchow from Wells Fargo.

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

Sure. Thanks, Eric. So we're really happy about how we ended this year, which was a great year overall, back to back north of $1 billion of total signings, third highest total signings fourth quarter, $400 million and hyperscaler was a big contribution to that. We the same suspects are keeping recurring here. So Northern Virginia, incredibly sought after capacity. Beyond that, you have the likes of Charlotte, Atlanta, Dallas, as called the top of the list here in the Americas, although in particular towards the U.S. I can tell you that we're seeing more globalization of the demand, and you can see that in the contributions from Europe having a bigger contribution greater than megawatt category.

As the year went on and as we continue to move into 2026, what is quite attractive is the diversity of demand. As it relates to our numbers, I think now we're at 7 straight consecutive quarters where our largest signing is from a different hyperscaler or a different customer, excuse me. And when we're looking at customers, looking at those larger capacity blocks in those markets I just referenced, I can tell you is you're seeing more customers coming call for the same capacity box. There's consistent -- looking at the front end, the nears deliveries are the most popular, but they are looking out a little further on the horizon than they had certainly 6 months or 12 months prior.

And our next question comes from the line of Michael Rollins from Citi.

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

Sure. Thanks, Michael. So I think we're seeing that play out on both our hyperscale and our enterprise business. Certainly, on the hyperscalers, the desire for the capacity blocks in the cloud zonal markets that I just referenced is certainly becoming more and more of a priority. I can tell you the dialogue on the designs with our customers, the latest evolutions of cloud is a mix of cloud and AI inside the [ St. Loza ] building. So they're looking at cooling, that's a mixture of air and liquid and using -- blending both use cases together in the same locations, which certainly leads towards inference.

I believe we're still a good ways away from what inference really called proliferates in a corporate enterprise context that have the same service level agreements and uptime requirements that cloud exist today. But as he rolls into much more, call it, time-sensitive and critical applications, be it robotics, health and safety, research and science, I don't see why the use of AI is not going to be just as critical as cloud data.

In our enterprise business, we had a fantastic year capped in multiple records, record fourth quarter. It was up over the prior record 2 quarters before that. We were, call it, 35% higher in the enterprise category year-over-year. great mix of new logos and existing customers. And now 2 quarters doesn't make a trend, but I would say the contribution within that 0 to 1 megawatt and interconnection category was again, call it, just over 18%, nearly 19%. So you're seeing more enterprises coming to Digital Realty and think about AI use cases. But I think this is going to be a long tail demand to evolve.

Our next question comes from the line of Timothy Horan from Oppenheimer.

The hyperscale has given a pretty incredible guidance for CapEx next year. and it looks like the outlook is not going to change much. Are you seeing any -- what does that kind of mean for the business model? Are you seeing any bottlenecks that are really kind of impede your growth at all or any changes to bottlenecks? And what do you kind of think that means for your pricing power in the next few years?

Thanks, Tim. So maybe I'll let Colin expand on the hyperscale or demand, and then I'll talk to the -- come back on the bottlenecks. But I mean what's called happening here is less of the waves of 1 customer ramping and another customer called on the sidelines, and there's more consistency and diversity of the customers all seeking capacity. And you're seeing that in the commitments to accelerating their build-out for this infrastructure from their earnings calls, and we're seeing it in terms of their interest growing for our large capacity blocks. But I'll let Colin touch on that, and I can circle back to some of the bottlenecks we're seeing in the business.

Yes. Thanks, Andy. Tim, regarding the interest from our hyperscale partners, you saw a strong contribution in Q4 in terms of performance our largest booking being nearly 100 megawatts. And I can tell you, wherever we have large capacity blocks, whether it's Northern Virginia or Paris or Osaka, Tokyo, Atlanta, or Charlotte, there's keen interest from our hyperscale partners to deploy the infrastructure. So really over 2026 through 2028, we're seeing continued conversations where we have that continuous blocks of capacity for our hyperscale partners. And again, as Andy has talked about multiple times, this is not just AI, this is also zonal cloud deployments that are -- that continue to be resilient as it relates to the demand profile that we're seeing.

And just on the bottlenecks and the cost equation, Tim, there's no question this race for scaling critical digital infrastructure support of cloud computing and support AI comes with a cost. And it's a cost saver, is the cost of -- in our build costs. And listen, we pick our spots to where we think we can really have the greatest value to our customers, those hyperscales in particular, and that's based on our track record, our supply chain, our runway for growth, and that's been able to garner significant interest and attractive rates and ultimately, returns.

Our next question comes from the line of Richard Choe from JPMorgan.

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

Yes. Thanks, Richard. I think you're referring to -- just to be clear, I think you're referring to and then versus 26 guide. So we came in for '25 -- we came in a little bit light in terms of where we were in guidance towards the low end. So despite our typical Q4 pickup. And so some of that increase in -- for '26 is a carryover of some of the projects that didn't complete in '25. And the rest is basically us looking to continue to build out our space and improve our portfolio for what has been a strong enterprise leasing as we've talked about for as part of the call in terms of putting up records in our 0 to 1. And I would say it's all within, I think, around 7% of our revenue, which is, I think, pretty well in line with where the industry is on that metric.

And our next question comes from the line of Irvin Liu from Evercore ISI.

Congrats on a nice set of numbers and your outlook. Just in the context of your greater than 5 gigawatts of development capacity, any sense on the timing of when we should see this capacity become available for lease if I'm comparing your development life cycle on Page 25 of your supplementals versus a quarter ago, I think the implied availability seems to be kind of consistent on a quarter-over-quarter basis. So should we be expecting a step function increase in sellable inventory as we progress through the year?

Thank you, Irvin, for the kind words. So that schedule is consistent like conveyor belt of activity. So we are delivering great projects often ahead of schedule for our customers. And I think that's another defining reason our customers are picking us in this environment where it is not easy to bring on infrastructure. And at the same time, we are greenlighting suites into now a record $10-plus billion of projects underway at attractive double-digit returns. We're activating shells and we're adding all the way to the left of that schedule with incremental land capacity.

And so we are continuing to, call it, replenish as fast as we deliver, if not faster and something in one column can very expeditiously move to the right column, the activating the new shell on land that is pad ready or going live with suites and shells that either are completed or underway. And obviously, leasing and delivery and so on. So I would not interpret anything on that schedule other than we'll continue to accelerate our run rate for growth for yes, both our enterprise customers that are small out of those megawatts but certainly our hyperscale customers that are seeing those large capacity blocks in numerous markets around the world as very attractive.

Our next question comes from the line of Ari Klein from BMO Capital Markets.

Following up on 0 to 1, how much of the strength in that business do you think is from share gains versus underlying demand strength? And then curious you expanded the lens a little bit, it to 20 3. Does it look any different? Or maybe how are deal sizes evolving? And do you think that increases with enterprise AI adoption or inference?

I'm Going to have Colin unpack that answer for you. .

I appreciate the question. So just quick reminder, record quarter in Q4, it's 3 of the last 5 record quarters in 0 to 1. Strong contributions on the channel side, which is really driving that business forward. Strong contributions from new logos, which was really a big piece of the pie. So as it relates to your question on the demand cycle as well as taking market share, we are unquestionably taking market share with our focus around execution. We started the year saying this is a big part of our good market and we're successful in that. Undoubtedly, the ability for us to deliver high -- contiguous capacity in a mixed density environment where we're seeing more and more enterprises have larger pieces of their pie and high-density oriented solutions is absolutely a core part of our value proposition.

They also have commented consistently the ability to support the full spectrum of capabilities. So cabinet suite, hall, building is significant across a global scale because that's where they have to serve their needs is really effective, supported by a strong interconnection story, which we again, we second highest quarter on record. So that's coming together produces results and consistency that an we've seen now quarter-over-quarter.

And then, Ari, your 2 other pieces of your question. I mean, we're always dissecting the banks here of business. And obviously, the trend has been to larger capacity blocks. You've certainly seen that have been the hyperscale level, but also it's playing out in a smaller level in enterprise, more power density. All these things, I think, are incremental wins to our sales to take more market share, which has been playing out for some time over the last several quarters. If you look at just like the last 8 quarters, at, let's call it, a megawatt to 3 megawatts, you probably average like up to $10 million of gap that could fall in that category, but it's ranged.

It's been as low as like just under $2 million. and it's been as high as called $15 million or $16 million. So there's always scenarios where enterprise customer wants north of a megawatt to land with Digital. And there's definitely been a gradual densification and increasing the size of the deal bands.

And our next question comes from the line of Frank Louthan from Raymond James.

So if we look out past '26, there's a fair amount of capacity coming on in the industry in '27 and '28. I just wanted to see what your thoughts are on how that might affect your bookings and demand? And then how far out have you secured the labor for your capital growth that you have under contract now?

So Frank, so going in reverse order, anything that we're essentially building, we've called got some type of security around workforce, supply chain, et cetera. So that is certainly the entirety of that $10-plus billion under construction projects. as well as shells that may not be part of that live data haul delivery piece of the equation. And it's the labor -- I want to ask, it's getting challenging -- more challenging by the day. I think we're a great partner for -- to work with given our consistency. We just didn't show up yesterday to build a data center. We've been doing this for years. We try to bundle our work for our customers to try to make it consistent so they go from one building or campus to the next. And so I think that makes us a very attractive partner for the vending landscape.

When we look at '27 and '28, we're not seeing a tremendous amount of competitive unleased capacity. We are seeing that those 27 are pretty exceptional and sought after for our customers with multiple customers seeking those capacity blocks. And I think '28 is going to be at that same level of attractiveness. The thing to remember here, Frank, is we're probably one of the few in the industry, actually, call it, taking a little bit more risk in the development is and getting pad-ready, long land, greenlighting shells and even greenlighting suites before we have a customer in hand.

Most of all the other private capital folks are waiting for that lease to get signed, right? Because that lease secures the financing and the lion's share of the dollars of the project, right? That is accrued to our benefit because customers have come and said, "I need this desperately. Can we help me, and we're able to deliver that because we didn't wait for them to say, here's the income my lease way, way back in time when you would have had it started. So I think we're still looking at an outlook here that is attractive demand rational and ration supply and great places where we could help our customers.

And our next question comes from the line of Nick Del Deo from MoffettNathanson.

There have been a couple of high-profile data center transactions recently. Very attractive valuations to the extent that we can tell based on info that's leaked out. And debt securitizations from private players imply really rich valuations too. Do you think there's a meaningful disconnect between public and private data center valuations? And if you do, are there steps that you can take to narrow or capitalize any gap like lean on your private capital initiatives harder?

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

Sure. Thanks for the question, Nick. Look, I think there's a couple of things you have to look at and one is the mix of the asset base because where this pricing really becomes distorted. It depends on the asset that's being purchased. How much of it is, for example, land versus cash-generating asset and that obviously is going to skew the multiple. So that's not necessarily a disconnect between public and private market pricing. It can just be the mix of assets, if you will.

But we would agree. We think our valuations continue to be strong. But look, I think what's driving that, when you look at the underlying dynamics of the business right now, you're looking at the demand profile that's going to -- expected to increase 2.5 to 3x over the next 5 years. and you're looking at a supply environment, and this is across the globe, whether it's power, whether it's nimbyism, whether it's zoning, whatever it may be, it's severely constrained. So those things are going to drive value for existing product in the market.

So look, it's hard to say that there's a big disconnect because you haven't had, for example, one stabilized asset versus another stabilized assets, we'd go back and make those adjustments for risk premiums and the like. So look, I think I think it depends on the mix of the assets. Some obviously are more expensive than others, depending on where it is geographically. But most of the differential in multiple has to do with asset mix.

And just to add on to that, Nick, what are we doing about it? Well, that goes back to, call it, evolving our financing strategy, our funding strategy, right? So the successfully oversubscribed initial fund on the backs of other private capital partnerships, totaling $15-plus billion of data center investments and already in addition to our strong liquidity and balance sheet, essentially lets us to call it public private and public capital levers to fund the growth of our customers and our balance sheet for -- and specifically hyperscale.

And I think if you look in totality, we now have, call it, record backlog, $1.4 billion a backlog for our customers. We are executing well above expectations in our 0 to 1. We just had a record year and have the momentum carrying in. And all those things are now flow to the bottom line. They flow to the bottom line throughout quarter-by-quarter in 2025 and set us up for a strong 2026, and we want to keep that acceleration going.

And our next question comes from the line of Jon Petersen from Jefferies.

I was hoping you could talk a little more about the investments in Malaysia, Israel and Portugal. Those look like smaller, more interconnection-focused facilities. But I know maybe in some of those markets, there's also some larger hyperscaler projects that are going on. So maybe just talk about the decision-making when you enter a new market on going with more like interconnection-focused colo versus building larger hyperscale data centers?

Yes. Thanks, Jon. This is Greg. Look, I think -- look, you're highlighting the point that acquisitions remain a key component of our growth strategy across the globe. And 2, you've highlighted here, like we're continuing to execute on strategic APAC acquisitions, for example, in Malaysia. Well, as you know, we play across the product spectrum and getting these. We've always said, getting network dense, highly connected assets, in key markets is a key component of our strategy.

So if you take a look at the recent Malaysia transaction, right, that's a key emerging market, strategically located in Southeast Asia. Cyberjaya is about 25 kilometers south of Kuala Lumpur. It's a traditional data center hub. And the asset we acquired is the most well connected asset in the market. And not only did we buy the initial asset, but we bought expansion land and media on the next store that will give us 10x expansion capacity for the existing assets. So that's Malaysia.

Not materially different than what we did in Indonesia. I mean the team has been busy in APAC here over the last year. When we went into Jakarta, slightly different, but we went in and we partnered with a group that had one of the most highly connected assets in the market with significant expansion potential. So when we look at that, that, as you know, buying those kinds of assets has always been a key component of our strategy.

And again, as you go over to EMEA, same thing, right? Portugal, it's highly connected assets, terminations from subsea cable landing stations and the like with the ability to grow. Israel, same thing, most highly connected asset in the area of Petah Tikvah, which is the most highly connected area of Israel. So again, there's a similar theme there. And that stream plays into how we play across the product spectrum and go for those kinds of assets. Now finally, the last market, and even in the U.S., if you look at it over the last year, right, we've had strategic colo/enterprise acquisitions in Charlotte, in L.A. and the like.

Now that's all on -- obviously, all touched on colo and network dense highly connected assets. that doesn't exclude hyperscale, right? If you look in the U.S. as well. Over the last year, we acquired multiple land parcels in the U.S. in Tier 1 markets that's supporting our hyperscale business in the areas, as Andy and Colin mentioned earlier, Atlanta, Charlotte, Dallas, Portland and Chicago. So I would say our strategy is consistent with playing across the globe and across the product spectrum.

And our next question comes from the line of John Hodulik from UBS.

Maybe 2 quick ones. First, a follow-up to those last comments. Just given how strong demand is for AI compute infrastructure, including, as we just heard tonight, $380 billion just between Amazon and Google alone this year. Any updated thoughts on potentially building out some large footprint sites and say more remote tower capable markets? That's number one. And then there seems to be a growing list of efforts to reduce the impact of the data center industry on consumer electric rates by either requiring behind-the-meter solutions or deprioritization? Does this change your guys' view on the reliance on the grid for power in future developments?

Thanks, John. So I think some of the names that Greg just ran out at the end of his call World Tour where we're making strategic acquisitions, both to support our interconnection enterprise customers and our hyperscalers. The theme of called cloud zonal markets that are numerous cloud customers, numerous sources of demand is consistent. That's a Charlotte up and coming, that's Atlanta, that's a Dallas, Chicago, Hillsboro, most of which we already had either the leading interconnection or enterprise footprint in support of some form of hyperscale and now growing. They're all getting bigger.

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

That ties into your second comment here. We, as an industry, are facing tremendous amount of, call it nimbyism or pushback on data centers. And I think it's unfair, and I think it's not the right -- it's not a reality when it pertains to Digital Realty in particular. We've been long-term major contributors to the communities that we live build and operate in. Our investments in the grid are stabilizing the grid. We often do demand response for those customers in those utilities, which those hot summer days or those cold winter nights benefit those also on those same grids.

We've not given up on the grid utility source, and we are thinking -- anything we're thinking about behind the meter, is some form of bridging of some form of duration and it can be various sizes to help the grid as it brings the reinforcement for transmission for distribution. I think in times like this, we're doing our best to clear up the misconception, make sure our story is told our impact, whether it is the jobs. So I think it's 6 to 1 jobs come from a data center that benefit the local communities, whether it is a limited use or impact on water.

I think Digital Realty's 300-plus data centers use less than 18 California golf courses worth of water. I think there's close to 16,000 golf courses in just the U.S. So we need to fix at the misconception. But it's when it's time, it's hard like this. This is where our customers value what we do, right? Our value-add shines, and we're continuing to deliver.

And our next question comes from the line of Michael Elias from TD Cowen.

A lot of focus on hyperscale demand, but I'd take it a different way and ask about enterprise. Andy, you were talking about the bans along or widening in terms of enterprise One of the themes that came up more recently in industry with enterprise AI demand, more specifically, let's call it, the 5- to 15-megawatt capacity blocks. Just curious, what are you seeing there? Are you seeing a pickup in kind of activity? And maybe as part of that, do you think that, that is a leading indicator potentially in some more inference specific demand?

Thanks, Michael. Let me touch on for a second and I want to call in to really dig in on that. I think that -- and I was just talking to a CTO of a major financial institution a couple of days ago. I think that lends it to our sweet spot here. We are about building an attractive community of interest or ecosystem for 5,000-plus customers and rapidly growing. That certainly includes the hyperscalers in 30, 40, 50, 60 locations, but it also includes enterprises all sizes and shapes and forms around the globe. We are -- unlike a lot of the private competition that would rather build on data center and lease the whole thing to 1 customer because the financing is easier, et cetera. We want to curate our buildings in our campus with multiple customers that can grow -- we think that's the best way to deliver for all the customers as well as drive long-term value. But I'll turn it to Colin to talk a little bit about some of that enterprise engagement.

Thanks, Michael. Appreciate the question. So just again, highlighting record performance in Q4 and continued strong pipeline. So we have as strong a pipeline in 0 to 1, as we've seen, and that's made up of larger contiguous blocks in questionably. So our enterprise clients are seeing more and more value in contiguous blocks above 500 kW. And there's emerging conversation to your point around that kind of 5-megawatt block as inference starts to emerge. So we feel like that we're well set up for that, again, coming from our heritage and the ability to support mixed densities across the globe, 30-plus data centers. So those conversations are very active.

I would say the ability to deliver that connectivity at scale as well. We've announced our private AI connectivity story, which is really helping the narrative, I think, with our enterprise clients who really value our expertise and how we can deliver that consistency consistently across the globe. I will add those in terms of contributions within 0 to 1. We saw a really strong continued push under 500 kW in Q4, which again speaks to resiliency of ability to scale up and down the platform, whether it's large footprint contiguous or smaller, more network-oriented deployments across our portfolio.

And our final question for today comes from the line of Michael Funk from Bank of America.

Yes, I just have one question, Andy. So based on the strong re-leasing spreads that you've reported and you're forecasting for 2026, what is your capacity and interest to go shorter duration on contract and/or maybe shift to higher rates each year for the escalators? I'd love to hear your thoughts on that.

Thanks, Michael. Maybe I'll let Matt pick that up here. I think just at a high level, I can tell you we've been pushing on the escalators. And it's -- we're living in an inflationary environment. We're working through that, right? And I'm not talking on a national stage. I'm talking about data centers are racing to deliver infrastructure and that is inflationary to our cost base and our operating model. But this is critical to what we're doing. And we've essentially -- don't know if we have that set off top of your hands, but pushing to escalators of, call it, minimum 3% as high as 4% or just above that CPI linked. So that's certainly something that we've been trying to push through our base upon renewals, on new deals, given the broader environment.

Matt, anything else you want to add there?

I mean, I think Andy covered, but I mean just to maybe round out and I know you're commentary is, I think, more directed toward or greater than 1 megawatt, but our 0-1 megawatt is typically we're closer to market. Those are shorter-term contracts, typically rolling up at inflation or CPI. So we generally have an opportunity to do that on a more recurring basis. And then for our larger contracts, those don't come up that frequently in terms of the amount of volume, the churn, just given that they're already long-term leases. Some of those also have embedded renewal options. But I think we're looking at ways to continue to make sure that we're getting the right price for the value that we're delivering to our customers each and every year as we look at not only new deals, but renewals..

And our next question comes from the line of Vikram Malhotra from Mizuho.

I just wanted to clarify 2 things. I guess you've mentioned like record pipelines in the 0 to 1 megawatt. Maybe you can just expand upon that for the large segment. And if you can just marry that with like what's available capacity that you have to leave in bringing on over the next 2 years in some of your major markets by megawatts, that would be helpful.

Thanks, Vikram. I mean I think the comment is, call record pipeline is called across both segments and obviously then into totality here. And this is coming off the back of like a really strong year when it comes to 0 1, up 35 -- and we lost there for a second. Up 35% on a year-over-year basis and back-to-back $1 billion-plus years of new signings I think the major markets that ran through hundreds of megawatts in Northern Virginia that are prized possessions for our customers, Charlotte, Atlanta.

And let's not forget, again, this demand is globalizing with the hyperscalers. I think you're going to see a continuation of demand growing into Europe, South America and Asia has been a great contributor as well. So we're really delighted to be able to help these customers support their long-term growth here.

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to President and CEO, Andy Power, for any further remarks.

Thank you, Jonathan. The fourth quarter capped a very strong year for Digital Realty. We delivered record financial performance for our investors while executing with the reliability that our customers expect. We posted another year with over $1 billion of total leasing, including record performance in our 0 to 1 megawatt plus interconnection business and an $800-plus million backlog that provides tremendous visibility through this year and into next.

We continue to span our footprint and evolved our funding strategy with the successful raise of our inaugural hyperscale data center fund. Operationally, we remain in a very strong position to serve our growing roster of nearly 6,000 customers with our 3 gigawatts of in-place data center capacity and another 5 gigawatts of development capacity in our core markets around the world.

Digital Realty has never been better positioned, and I owe that to my fellow Digital Realty teammates who have worked hard to deliver these results and have already started 2026 off on the right foot. Thank you all, and thanks to all of you who have joined us today for the call.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Good afternoon, and welcome to the Digital Realty Third Quarter 2025 Earnings Call. Please note, this event is being recorded. [Operator Instructions]

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

Thank you, operator, and welcome, everyone, to Digital Realty's Third Quarter 2025 Earnings Conference Call. Joining me on today's call are President and CEO, Andy Power; and CFO, Matt Mercier. Chief Investment Officer, Greg Wright; Chief Technology Officer, Chris Sharp; and Chief Revenue Officer, Colin McLean, are also on the call and will be available for Q&A.

Management will be making forward-looking statements, including guidance and underlying assumptions on today's call. Forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. For a further discussion of risks related to our business, see our 10-K and subsequent filings with the SEC.

This call will contain certain non-GAAP financial information. Reconciliations to the most directly comparable GAAP measure are included in the supplemental package furnished to the SEC and available on our website.

Before I turn the call over to Andy, let me offer a few key takeaways from our third quarter results. First, we posted $1.89 in core FFO per share, a quarterly record and 13% higher than the third quarter of last year. Constant currency core FFO per share was $1.85, 11% higher than last year. Other profitability metrics surged as well with AFFO per share and adjusted EBITDA up 16% and 14% year-over-year, respectively. These strong earnings results were comfortably ahead of expectations, resulting in our third quarterly guidance increased so far this year.

Second, we have strong visibility to continued growth given our near-record backlog and crisp execution. Our backlog grew to $852 million, with the lion's share slated to commence through the end of next year, while organic growth continues to accelerate as demonstrated by 8% same capital cash NOI growth year-over-year.

Third, we continue to execute across the full product spectrum and our footprint with over $200 million of bookings at 100% share, near record 0-1 megawatt plus interconnection bookings in the quarter with a leading power bank of 5 gigawatts of IT load to support our customers and Digital Realty's future growth.

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

Thanks, Jordan, and thanks to everyone for joining our call. As digital transformation, cloud and AI continue to grow, our ability to deliver scalable connected infrastructure across key metros worldwide is more critical than ever.

PlatformDIGITAL's global reach and full spectrum product offering are key differentiators, enabling us to support the evolving needs of cloud providers, enterprises and service partners around the world.

Over the past 2 years, the data center industry has experienced unprecedented demand fueled by the digitization of enterprise business processes, the expansion of cloud and the ongoing proliferation of AI, resulting in complex hybrid IT architectures.

Demand for scalable connected infrastructure remains robust across a wide range of customer segments from global cloud platforms to regional service providers and multinational enterprises. Meeting this demand within our markets, however, is becoming increasingly challenging. Power availability, permitting challenges and infrastructure constraints are making it harder to bring new supply online at the pace our customers require.

Digital Realty's established presence in the world's leading metros, deep relationships with utilities and local governments and proven development track record give us a distinct advantage in navigating these challenges and delivering capacity efficiently and reliably where and when our customers need it.

In an attempt to help frame how we see the abundance of data center infrastructure announcements we are all seeing in the market, I want to make a few comments. It is clear that the world is engaged in a full-scale technology race with a handful of key players aiming to build the most advanced AI models or perhaps even AGI.

3 years post launch, ChatGPT holds the title of the fastest-growing app and is already among the most highly used applications in the world with more than 800 million weekly users. Several others, including Meta, Google, Baidu and xAI have also developed AI with meaningful scale.

With each passing week, we continue to see massive investment announcements and partnerships aimed at scaling the infrastructure necessary to support the world's most powerful AI training models.

Given the scale of these announcements, the ongoing development and proliferation of AI offerings, the opportunity still appears to be in the very early innings. The preponderance of gigawatt campus announcements to date have generally fallen outside of the major metro markets in Digital Realty's strategic footprint as model builders and their providers have urgently sought locations that offer readily available and abundant power as power is the limiting factor for scaling AI.

The anticipated pace and scale of these developments are largely unprecedented. Given our experience and track record in the space, we are intrigued as several new market entrants have launched the development of massive and complex remote campuses, often to support a single use case, workload or customer. These facilities hold the promise of developing life-changing technologies, and we are optimistic about their prospects.

Training workloads geared toward developing the AI models can be described as latency tolerant as the development of the AI takes precedent over the utilization of the technology, at least for now.

Now based on conversations that we are having with our customers and industry participants, Al as well as what we are seeing in our broad portfolio, we are increasingly confident that connectivity will become increasingly important over time as model success drives implementation and usage requiring lower latency, inference oriented deployments.

Digital Realty has landed a meaningful share of AI-oriented deployments over the last 2 years. Since mid-2023, AI has averaged more than 50% of our quarterly bookings, and we continue to expect that the 5 gigawatts of IT load that we have in our power bank will be significantly weighted toward AI workloads over the next several years.

Critically, our data center capacity is situated in and around the world's most highly connected cloud zonal markets with the highest concentration of population and GDP, and we currently maintain 5 gigawatts of large continuous capacity blocks situated across 40 of our strategic metros across the globe. It's harder to build in these locations for a growing list of reasons, and we expect this capacity will continue to be highly sought after as new applications and use cases continue to evolve.

Our conviction in our portfolio and in our markets continue to be evidenced through our daily engagement with our 5,000-plus customers.

Digital Realty continues to see a robust pipeline of demand from AI-oriented use cases. And even without a record hyperscale lease like the one we signed in March of 2025, 50% of our bookings were related to AI use cases in the third quarter.

In Q3, we again delivered strong operational and financial performance, underscored by record interconnection bookings, near record new logos and the second highest level of bookings ever in our 0-1 megawatt plus interconnection product set.

Core FFO per share set a record $1.89 and a robust 13% above last year's third quarter. These strong earnings were driven by 10% operating revenue growth and continued expansion of our high-margin fee income together with disciplined expense management, resulting in the third consecutive guidance increase this year.

Bookings in the third quarter were $201 million at 100% share or $162 million at Digital Realty share. Like last quarter, our 0-1 megawatt plus interconnection category was a strong contributor to our leasing strength with $85 million in new leases, along with a healthy $76 million of greater than a megawatt lease image.

Leasing was globally diversified, broadly consistent with our existing rent roll with notable activity in the Americas, in EMEA and in APAC. We also added a near record 156 new logos.

Interconnection leasing of $20 million marked a second consecutive record quarter, which was 13% higher than the last quarter's record, underscoring the growing recognition of our connectivity-driven value proposition. Interconnect and leasing was buoyed by strength in our AI-oriented fiber offering, reflecting an increased demand for high volume movement of data amongst customers as well as momentum in our Service Fabric product. Matt will provide more details on our results in a few moments.

While there's been significant market focus on large-scale AI deployments, Digital Realty's pull of highly sought after larger contiguous capacity blocks are slated to come online in late 2026, 2027 and beyond. We remain actively engaged with hyperscale customers on our largest future leasing opportunities, and we continue to see strong momentum in our colocation and connectivity product offering.

Enterprise demand for data center infrastructure continues to grow as organizations transition away from traditional on-prem IT environments toward more flexible cloud connected architectures available within Digital Realty data centers. This shift is driven by the need to improve scalability, reduce costs and enable faster innovation. Enterprises are increasingly deploying workloads in colocation and hybrid environments to gain proximity to cloud platforms, partners and end users while maintaining control over mission-critical applications and data.

Digital Realty's full-spectrum product offering, combined with our global footprint allows us to support this transition, provide the infrastructure and connectivity enterprises need to modernize their IT strategies accelerate digital transformation and AI implementation.

We're seeing these trends play out across our customer base as enterprises increasingly turn to Digital Realty to support the evolving -- their involving infrastructure needs. Whether it's enabling real-time data exchange across global operations, integrating with multiple cloud platforms or deploying AI workloads at the edge, our customers are leveraging platform digital to solve complex challenges and accelerate their digital transformation.

Let me share a few examples that illustrate how our platform is helping enterprises unlock new capabilities and drive meaningful business outcomes.

In September, I was honored to join the CEO and CEO of Oxford Quantum Circuits for an important milestone during their recent deployment of New York's first Quantum AI computer in our JFK 10 data center. Oxford Quantum Circus is taking advantage of Platform Digital's colocation and connectivity capabilities to expand their AI capabilities at scale, solving for efficiency and resource constraints. A leading global technology company chose PlatformDIGITAL to deploy their global presence, taking advantage of liquid cooling capabilities required for their HPC AI environments.

A leading health care analytics and technology solutions company is expanding its Geographic presence on PlatformDIGITAL to solve data localization and sovereignty challenges. A leading higher education research institute is taking advantage of PlatformDIGITAL's liquid cooling capabilities required for their HPC and AI deployment. A leading European technology and network provider is expanding on PlatformDIGITAL, deploying a sovereign cloud solution in the U.S. to support their customers' compliance needs. A global payments provider and new logo for Digital Realty chose PlatformDIGITAL to deploy infrastructure in multiple markets to utilize network and cloud ecosystems while solving for scalability and compliance requirements. And a multinational financial services company is expanding on PlatformDIGITAL, taking advantage of Digital Realty's leading financial and network ecosystems.

Before I turn it over to Matt, I'd like to briefly highlight our progress on global sustainability. In the third quarter, we received the EcoVadis Gold rating, the prestigious international recognition for business sustainability. This recognition places us in the 97th percentile of all companies assessed, highlighting our position among the top sustainability performers worldwide.

We expanded our renewable energy commitment in Illinois by signing additional contracts that support high-impact local community solar projects being developed by Soltage. These locally sourced solar energy projects will help support local power grids and benefit residents in the communities in and around our data centers.

Additionally, in the third quarter, we announced long-term renewable energy agreements with Current Hydro to procure 500 gigawatt hours of clean baseload hydro power from 3 projects along the Ohio River. These agreements highlight our commitment to sourcing new firm 24/7, carbon-free energy in the regions where we operate, enabling us to support our customers' needs.

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

Thank you, Andy. For the second consecutive quarter, Digital Realty posted double-digit growth in revenue, adjusted EBITDA and core FFO per share, reflecting the momentum in our business, driven by commencements from our substantial backlog strong releasing spreads, modest churn and growing fee income. We achieved these record results while reducing our leverage and maintaining significant liquidity to invest in data center projects across our 5 gigawatt runway of buildable IT capacity.

In the third quarter, core FFO per share grew by an attractive 13% year-over-year to a new quarterly record while leasing results were highlighted by their geographic and product breadth as well as continued strength in the 0-1 megawatt plus interconnection category.

Looking ahead to the fourth quarter, we increased guidance for the full year once again and expect to begin 2026 with significant momentum in the sizable backlog which extends our runway for long-term growth.

As Andy touched on, we signed leases representing $201 million of annualized rent in the third quarter, bringing year-to-date leasing to $776 million at 100% share. At Digital Realty share, we signed $162 million of new leases in the third quarter, which is well distributed across our 3 reasons.

Our 0-1 megawatt plus interconnection product set continued to demonstrate the strong momentum we have been highlighting, posting $85 million of new bookings in the quarter, led by record bookings in the Americas and strength in EMEA.

We also posted record AI bookings in this segment this past quarter, demonstrating the continued emergence of AI-oriented demand among our enterprise customers.

Interconnection bookings also marked a new record, vesting last quarter's record by 13%. Pricing in the 0-1 megawatt plus interconnection category was strong, led by leasing in one of our most highly connected facilities in the U.S. Over the past 4 quarters, we've leased a robust $319 million in this product set.

We signed $76 million within the greater than the megawatt category at our share while leasing spread across our regions but notable strength in EMEA. Pricing in the greater than megawatt product was strong, averaging over $200 per kilowatt in the quarter and reflected activity in our top 3 performing markets, Silicon Valley, Amsterdam and Singapore.

Building on our leasing momentum, our backlog at Digital Realty share increased to $852 million at quarter end, with $137 million of commencements more than offset by our new bookings. Looking ahead to the fourth quarter, we expect another $165 million of leases to commence with another $555 million scheduled to commence throughout 2026. Our large backlog provides us with strong visibility and predictability for the next several quarters.

During the third quarter, we signed $192 million of renewal leases at a blended 8% increase on a cash basis. Renewals in the third quarter were again heavily weighted toward our 0-1 megawatt category with $138 million of renewals at a 4.2% uplift.

Greater than the megawatt renewals of $49 million saw an exceptional 20% cash re-leasing spread, driven by deals in Singapore, Chicago, Northern Virginia and New Jersey. Year-to-date, cash renewals averaged 7%. For the quarter, total churn remained low at 1.6%.

As for earnings, we reported record core FFO of $1.89 per share, up 13% year-over-year, reflecting strong upside from commencements and positive re-leasing spreads continued growth in fee income and an FX benefit versus last year. On a constant currency basis, we reported core FFO per share of $1.85 in the third quarter or 11% growth year-over-year.

Data center revenue was up 9% year-over-year, but adjusted EBITDA was even greater at 14% year-over-year, driven by the growth in data center revenue and higher fee income.

During the quarter, operating expenses continued to increase, reflecting both the growing scale of our business, rising employment costs and seasonal effects. As we head toward the end of the year, we expect to see the typical seasonal increase in repairs and maintenance expenses along with the seasonal decline in utility expenses and related reimbursements.

Same capital cash NOI growth was strong in the third quarter, increasing by 8% year-over-year, driven by 7.8% growth in data center revenue. On a constant currency basis, same-capital cash NOI rose 5.2% in the quarter. For the 9 months, same capital cash NOI grew by 4.5% on a constant-currency basis, which prompted us to notch our full year guidance range up to 4.25% to 4.75%.

Moving on to our investment activity. During the third quarter, we spent over $900 million on development CapEx when including our partner share and approximately $700 million on a net basis to Digital Realty. During the quarter, we delivered about 50 megawatts of new capacity, 85% of which was pre-leased. While we started about 50 megawatts of net new data center projects leaving 730 megawatts under construction.

At quarter end, our gross data center development pipeline stood at $9.7 billion at an 11.6% expected stabilized yield. Our runway for future growth including land, shell and ongoing development stands at roughly 5 gigawatts of sellable IT load. For clarification, IT load difference from the gross utility feed figures being tiered by newer entrants to the data center development world as utility feed must also be used to cool a data center and to provide redundancy.

During the third quarter, we pruned a few small noncore facilities in Atlanta, Boston and Miami for a total of $90 million. And earlier in October, sold a noncore facility in Dallas for $33 million. We redeployed $67 million of that capital into land in Chicago and Los Angeles to bolster our development capacity.

Turning to the balance sheet, leverage fell to 4.9x, well below our long-term target of 5.5x while balance sheet liquidity remained robust at nearly $7 billion. which excludes the $15 billion of private capital we have arranged to support hyperscale development and investment through our joint ventures and new U.S. hyperscale data center fund.

Our next debt maturity is EUR 1.1 billion notes at 2.5% in January 2026. Beyond that, we have a smaller CHF 275 million note at 0.2% that matures in the second half of next year. Looking further out, our maturities remain well laddered through 2035.

Let me conclude with our guidance. We are increasing our core FFO guidance range for the full year 2025 by roughly 2% at the midpoint to a new range of $7.32 to $7.38 per share to reflect better-than-expected operating performance and updated FX assumptions for the full year. We are also increasing the midpoint of our constant currency core FFO guidance range by 2% to $7.25 to $7.30 per share.

Despite our enthusiasm and outperformance in the quarter, we expect fourth quarter core FFO per share to be tempered by seasonally higher repairs and maintenance expenses, headwinds from a noncore asset sale and lower interest income associated with lower rates and cash balances.

The midpoint of our increased core FFO per share guidance represents approximately 10% year-over-year growth, reflecting the momentum in our underlying business and the benefit of the weaker U.S. dollar year-to-date.

On a constant currency basis, core FFO per share growth is expected to be over 8% at the midpoint, reflecting a 200-plus basis point improvement from the growth that we forecasted at the beginning of this year.

Supporting the bottom line improvements in guidance, we are increasing the midpoint of our revenue and adjusted EBITDA guidance ranges for 2025 by $75 million a piece. We are raising the midpoint of our cash and GAAP re-leasing spread guidance ranges to 6% and 8%, respectively, to reflect the continued strength in market fundamentals. We are also increasing our constant currency same-capital cash NOI growth assumption by 50 basis points at the midpoint to 4.5%. Lastly, we are increasing the midpoint of our G&A assumption by $7.5 million for full year 2025.

In summary, we are very proud of our third quarter performance and the continued momentum across our platform. The strength of 0-1 megawatt plus interconnection product set, combined with disciplined execution across our 5 gigawatt power bank and a growing backlog positions us well to deliver durable growth through the rest of 2025 and 2026. We remain focused on executing our strategy to deliver the capacity that our customers require and to maintain the financial discipline to drive long-term value for our stakeholders.

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

[Operator Instructions] And your first question today will come from Aryeh Klein with BMO Capital Markets.

I guess maybe just with the guidance increase on the core growth of 9.5% this year, I realize you're not providing 2026 guidance and there is some FX benefit, but can you just talk to the puts and takes for next year and the ability to stay or even accelerate from current growth levels while balancing development and investment requirements?

Thanks, Sorry. I'll have Matt hit on that.

Yes, Aryeh. So look, I think I'd start off with, obviously, we're proud of the results this year and the beat and raise that we put them now for a few quarters, which is resulting in where we are today on a constant currency basis, which is around 8.5% for the year.

And looking ahead into 2026, we're on the path to start on a strong footing, looking at continuing to target 10% top line growth, that's supported by our healthy backlog that we've got of over $550 million and the robust fundamentals that continue to support our business.

I'd say some of the things to note that are you could say or some of the headwinds that we'll see in the first very early in 2026, we do have about $1.5 billion of debt maturing in January that's at roughly 2.5%. We're also planning to contribute the remaining 40% of the $1.5 billion of stabilized assets to our relatively new North America hyperscale fund. And given the expectation for rate cuts into 2026, which you would usually say is going to be a benefit. But for us, we have relatively considerable cash holdings, that's going to result in likely some lower interest income. All that said, we feel like we have been on a great path here in de-risking our 2026 plan and feel good about continuing our growth going forward.

Your next question today will come from John Peterson with Jefferies.

I was hoping you could talk a little bit more about what you're seeing from hyperscalers in terms of demand in the major metro markets. I think in your prepared remarks, Andy, you mentioned their focus on gigawatt campuses. But are you starting to see examples of any latency-sensitive hyperscaler AI applications coming to DLR markets that you can speak of?

Thanks, John. I'll kick this off and then ask Colin to speak to what we're seeing on the customer dialogue with the hyperscalers, so obviously, we're off to a strong start to the year or 3 or 4 quarters. This quarter, on a total share, we're at the fourth largest quarter, north of $200 million of signings. I think what's been unique or great about it is in the major markets where we're supporting their growth, be it cloud computing and AI. We've seen tremendous diversity of demand. So I think the last 7 quarters, our top signings, single signings was with a different customer. So tremendous diversity of demand. In fact, our 2 largest signings this quarter were 2 customers that hadn't signed big deals with us in a while. We're continuing to ready significant capacity blocks that are coming in the most prized locations are more strategic to our customers' locations. And I'll let Colin speak to some of the dialogues he's having on those capacity blocks.

Thanks, Andy. Yes, John, appreciate the question. Q3 bookings, obviously, diverse in nature across our 3 regions. And in terms of conversations with our hyperscalers, I'd say it's a robust dialogue that's leading to the largest pipeline and record for us. So our large contiguous footprint continues to have real value. So they're seeing interest in dialogue for us across our 5 gigawatts that we have across our markets that we identified previously.

So our customers are now starting to look really hard into our '26 and '27 deliveries, which are coming online, in the near term. And so that's really producing, I think, some real interest to continue discussions really across AI, but also cloud continues to be a consistent dialogue that we're having with our clients.

And your next question today will come from Mike Funk with Bank of America.

Yes. So Andy, can you address the 2026 expirations and how you're thinking about the capacity to increase the re-leasing spreads on those?

Sure. Thanks, Mike. So I think we're continuing to see more of the same what we've seen for now several consecutive quarters. If you kind of cut it into the 2 main categories, we call discussed the business in, we're continuing to see strong pricing power in the less than a megawatt category. I think our cash mark-to-market were 4.2% or 4.3% in the quarter we think that pricing is going to hold and stay in that territory.

And then the bigger stuff you can see, we start to see continued step down, not just 2026, but for a few years, a step down, I think, until about 2029 in our expiring rates. I think they get as low as like 12-ish, and you can see from our new signings in the bigger deal category, we're obviously signing a healthier market rates than that.

And I think we're working the way through that and moving customers to market and the value of the capacity blocks we're offering. And that's a product of our portfolio, our value-add, but some of that's just a product of the supply/demand dynamics in these markets that are extremely tight. And the backdrop around it is the tightness of these markets feels like it's going to be continuing for some time.

And your next question today will come from Eric Luebchow with Wells Fargo.

And just curious on the kind of the large capacity blocks. If you could talk about kind of the diversity of hyperscalers you're talking to. There's a lot of and/or intents, whether it's neo clouds, the model developers, the chip companies? Or are you kind of focusing on the big 4 or 5 that you have historically? And then maybe if you could also just touch on CapEx, I mean, to the extent you start to win some of these larger requirements. How should we think about funding it in the managed funds between cash on the balance sheet could that kind of raise the CapEx expectations above the $3 billion to $3.5 billion level?

Thanks, Eric. So I'll hand the funding piece to Matt and even talk to the numerous levers we've now assembled here through our successful hyperscale fund or joint venture partnerships, the balance sheet liquidity, if you add it all up, it seems to a significant amount of liquidity and dry powder to fund the growth of our platform.

But on the customer front, by and large, the bigger the capacity block, the higher the credit quality the larger the size of the counterparty and the more established the business. We are certainly supporting some of the neo clouds, but I would say our work with them, and it's been in, not in the big, big deal arena. We supported them in, call it, megawatt, 2-megawatt type edge type locations and smaller capacity blocks. So when you think about those, call it, the big and nearest term the 25, the 50s, the 100s or even larger, I think the dialogue we're having is with a diverse array of, call it, more traditional hyperscale customers that are called the household names in our top customer roster.

Yes. Eric, on the funding. So as you noted, we're we guided this year at 3% to 3.5%. We're trending on target with that. And while we haven't given specific guidance for next year. What I can tell you is that I expect our -- in particular, at our gross level, we're going to be spending more in 2026.

Now I'd say a broader portion of that is going to be within our private capital groups. But I still expect that when you come down to even our share level that you'll see a slight increase or an increase to what we're spending this year as we start to really hit kind of a sweet spot in terms of projects that we have underway to be able to deliver incremental capacity, especially in the back half of '26 into '27.

And your next question today will come from Michael Rollins with Citi.

Just off the topic of how much you're putting into the JVs and off-balance sheet partnerships relative to what you're doing on your own? How are you thinking about the mix going forward? And are there opportunities to revisit what the right target leverage should be for digital to take more projects on balance sheet and create that more of that accretion for shareholders.

Thanks, Michael. So the metal speak to target leverage, but I don't think we've changed our stripes on that. And one great thing about call it, tapping in these sources of private capital, including our oversubscribed $3-plus billion hyperscale fund in the U.S. is we can deploy different leverage quantities at different project levels alongside that private capital to generate the returns suitable for the project.

This is a reminder. This is called an evolution of our funding model here, right, and started down the road of joint ventures, one-off stabilized assets and then moved on to development. And then our first inaugural fund is a combination of both, and it's really the beginning of the scaling of our strategic private capital initiatives. And that's in the backdrop of we see a demand landscape that is just quite tremendous, right? You look at the numbers of the gigawatts that are stated to be needed to call it continue the growth of digital transformation to continue the rollout of cloud computing and to really even get off the ground AI and built and commercialized. And yet we being an $80-plus billion company still believe that having that private capital business, especially dedicated around hyperscaler is allows us to fuel our growth for our customers and balance that in terms of generating an accelerating bottom line per share growth for our shareholders at digital. So I think it's kind of a best of both worlds allowing us to do more with our platform and fund effectively.

Yes. Maybe, Michael, I'll just add briefly, Look, I think our target leverage 5.5% is a good place to be in terms of balancing our overall cost of capital and where we are today and where we seek to fund in the future. Maybe I'd also add, look, we're at 4.9 today, and so that gives us some ability to go up in and potentially go down when necessary based on the capital market environment so that we can continue to fund what is larger builds going forward and a pretty good demand profile that we have.

And your next question today will come from David Guarino with Green Street.

Andy, I just wanted to clarify on the comments you made given these multi-hundred megawatt deals in tertiary markets. Is that something where you'd reconsider chasing that sort of demand, whether it's on balance sheet or through the fund? Or is the playbook to continue sticking the primary markets for Digital Realty?

Thanks, David. So I think the comment was trying to get a few themes that are hopefully apparent but want to provide our thoughts on: one, it's certainly showing an incredible conviction for the infrastructure needed to launch this technology. And as you go through these lists of announcements, you're still seeing numerous mega announcements that are just talking about training, right? Not even really evolving to inference or certainly commercialization and the use of AI use cases. You're also seeing a diversity of players in that arena, which I think is healthy. It's not necessarily single threaded to just only 1 major player building that infrastructure.

When it comes to digital, I think we've had great success being across the full product spectrum, call it, from supporting our growing enterprise business all the way to our hyperscale customers. We focus on markets. We received not just diversity and robustness of demand but locational and latency sensitivity to the workload. So the answer to your question is we're certainly keeping our eyes on. I can tell you our team is across tremendous amount of these opportunities. I think our intersection of that would be much more akin to our strategy. Like I said earlier, these cloud availability zone markets, the Northern Virginia, the Santa Clara's the Frankfurt's and around the world, they are tight markets and they may be tight for a long time. And I think the adjacencies to those markets make the most sense is because we want to be investing in infrastructure that we believe in for the really, really long term. And so that's how we're thinking about it today.

Your next question today will come from John Hodulik with UBS.

Andy, quick question on the [indiscernible] side. Given the constraints you're seeing in terms of accessing the grid? Any odd to moving to behind-the-meter power solution in some of your new projects?

Thanks, John. So it was not that long ago, we made a bigger announcement in, actually in South Africa, where we're building solar in a market, which is akin to that same concept. And that's obviously a market that is an incredibly fragile grid. So we're able to really extend our moat in that market with our platform in a supplemental power that is essentially behind the meter. I can tell you we're looking at this in numerous markets and the context is much more in a bridge fashion.

We don't -- we're uncertain how long that bridge may be, but we hear from our customers the preference in the long run for utility given the diversity of the power sources, the redundancy of that, but we're happy to help our utility partners with bridge solutions. And you think about that in some markets that have been challenged with shortages, delays in power sources.

And your next question today will come from Michael Elias with TD Securities.

Just building on that point, I'm curious, when I think of your portfolio, you obviously have very valuable capacity in Northern Virginia at Dulles, is it feasible for you to bring gas to that site to expedite the delivery of additional buildings? And then maybe as part of that, just on the M&A side, there are a lot of companies out there that may have some facilities leased, but they have some land banks. How are you thinking about the M&A opportunity in this landscape.

[indiscernible], Michael. So just touching brief, we're just thinking about all the markets where there's shortages or delays or frustration around the power infrastructure. So it's not just a 1 site, not just 1 submarket or market, we're thinking about that trying to make the solution work. And we're trying to do it in a thoughtful manner, right? We want -- we are long-term committed, have been in these markets for many years. We'll continue to be in these markets. We want to be good stewards to the community, to our customers. But it's not just 1 any given market. It's numerous markets where this could be a tool in our toolkit to accelerate infrastructure deployments.

I'll turn it over to Greg to kind of give us thoughts on the M&A market.

Yes. Thanks, Andy. Thanks, Michael. Michael, I'd say our strategy today is consistent with where it has been. And we continue to see what opportunities in the market that's going to provide us with the best risk-adjusted returns. So today, we're looking at buying land and developing. We're looking at buying buildings it's strategically significant. And we look at buying companies that strategically significant or there's industrial logic to it. So I would say we haven't changed anything in terms of our strategy. And I would say in today's market, we have opportunities across all 3 of those growth probes, if you will, and we continue to assess them.

Your next question today will come from Irvin Lu with Evercore ISI.

Andy, I wanted to ask about the 5 gigawatts of future development capacity. Can you help us understand the timetable or the time line needed for this developable capacity to be, become available for lease? How much of this is available for lease, if any? And any sort of customer conversations that you had related to this capacity?

Sure. Thanks, Irvin. So I'll touch on the most, call it, front of the queue, capacity box, and then I'll let Colin touch on the customer dialogue. But they are -- they do go a little bit kind of together is that what we've seen is there is a continuous focus on the here and now. And we saw this as we've navigated our way through 2024 and put up $1 billion-plus of new signings includes some large capacity blocks. And as we got closer and closer to deliveries of power and of our infrastructure and data centers, the interest continued to ratchet up. And we were able to intersect that with a great diversity of customers at attractive rates and ultimately, returns given how valuable these locations are, these are strategically important to our customers. These are often in the locations where our customers are landing major customers inside their facilities, be it cloud or other services that are highly profitable to them and they're unique in that nature.

And just like what transpired a year ago, I think the seasonal as mature of this as we approach the "late '26 vintage" or the 2027 vintage or 2028 shortly thereafter, the attractiveness becomes more and more attractive to those customers and that uses and the dialogue can we'll touch on. That is playing out, excuse me, in Northern Virginia, be it Manassas, Digital Dulles or call it adjacent to our existing Loudoun campus, that's playing out in Charlotte in Atlanta, in Dallas and Santa Clara, that's playing out outside the U.S. in the major, call it, flat markets in Europe or in the major Tokyo Sacomarks in Asia, and I'm just rattling off a few. So there's numerous markets that have those called the near-term larger contiguous capacity and vintage that the customers are seeking. But go ahead, Colin.

Yes. Thanks, Andy. I think we're very much in that window of prioritization that Andy talked about. This leasing activity for 2026, 2027, 2028 is very much here now. I highlighted before the largest pipeline that we've had on record. By the way, that also suggests a lot of momentum on the 0-1 as well, which we saw in our bookings number. But the conversations across this large capacity blocks that Greg secured for us across North American in the flat markets is really becoming a consistent conversation in the core markets, which as Andy talked about, these cloud zonal areas are resilient to having consistent demand pop up. So we're pleased with the conversations and the pipeline that we've generated.

And your next question today will come from David Cho with JPMorgan.

It's Richard. Just wanted to follow up on that. Given that the long lead times in the industry for capacity, both building and demand for it, as we look since most of your 2026 capacity is sold out, as you kind of look for the development table in 2027, how big can that be relative to '26 given that you've been kind of planning this for a while and seeing the demand pipeline?

Yes. These are big capacity blocks. And the concept is the customers really just almost want to get going with the build, right? They don't need to be powered on with the entire 100 megawatts or 200 megawatts and a date certain in 2026 or 2027. It's just they want the ramping to start commencing, which is a product of power delivery of the site and obviously our delivery alongside it, which we're trying to time out. So I don't -- this is a sizable now to that 5 gigawatts when they add it all up. I mean just those markets I just wrote off across North America and a handful outside the U.S. or call it, hundreds and hundreds of megawatts by themselves. And I didn't really touch on our capabilities and call it Latin America or in South Africa when you add to those numbers.

Your next question today will come from Jim Schneider with Goldman Sachs.

Relative to some of the larger capacity hyperscale AI deployments you talked about is prospects for commencement in '26 and '27. Can you maybe talk about some of the technical requirements underpinning those. I think we know that Rubin and generations beyond from NVIDIA are going to require 800-volt architectures plus liquid cooling, and that's assuming it's something that's not present in most of your existing capacity today. So how are you thinking about planning both your new facilities for that? And are you thinking about potential for retrofitting any of your prior for your existing facilities to accommodate those new requirements?

Thanks, Jim. So Chris, I'll talk to that. Chris, why don't you start off in terms of what we've done so far, being, call it, AI ready, coolant ready. And then I mean if you don't touch, I can about just recent anecdotes of, we've had churn and customers. We're doing air cool swiss to liquid with the next generation just kind of -- to answer Jim's question.

Yes. No, I appreciate the question. And I love the way you're thinking about it with like new and old because that's exactly the way that we have different tool sets and different capabilities that we're looking to deploy, but we've been a partner of NVIDIA's for many, many years with our DGX precertified program. We're one of the leading partners there. We continue to work with them on even, you said it right, like not the chipset today, but what's going to be out there 2 and 3 years out. And so we're always looking at that.

And the power distribution piece for the rest of the people on the call an 800-volt, we've been across that for some time now on different types of electrical distribution capabilities that are going to be required, and that's a lot for the new build. And we're always looking at evolving our modular designs, right? And that modular design is not only in our new footprint, but it's been deployed for many, many years in our existing footprint. So we're always looking at how we bring liquid and quite frankly, our architecture for these new builds allows us to align to the densification of that chipset in a very granular fashion.

And so for a part of the retrofit, been talking about it for a while called HD Colo. And so the HD Colo capability is something that we've really been working on, and it's available across 30 metros, 170 facilities and you can deploy it in roughly 14 weeks.

What that allows us to do with our customers is to densify up to 150 kilowatts. And that will support the Rubin. It will support a lot of the Grace Black wells. So we have a lot of runway in our existing facilities to align when our customers need us to. And so we're always watching exactly how that's going to be coming to market. I think you might have seen some of the press releases and some of the customer announcements around our Digital Realty Innovation Lab.

Why that was built is to allow us to bring all of our partners together inside of an environment where the data center, unfortunately, today is the point of integration. And so we're trying to pre-engineer and set a bunch of standards so that our customers are able to get outcomes out of this infrastructure as they bring it to market. So as you understand, we've really been ahead of the curve with a lot of these partners and making sure that we can build a kind of outcome for our customers on a global basis.

And your next question today will come from Frank Louthan with Raymond James.

Can you walk us through what is your average size deployment that you're seeing for enterprises now? And do you think that you're gaining share in that, and then can you give us an idea of what percentage of your new bookings are for AI inferencing workloads?

Thanks, Frank. So I'll try to tackle this in a few parts. So we, overall, of our total signings, we have about 50% was AI-related. This quarter in particular, just the 0-1 megawatt. So predominantly enterprise oriented. We did see a new high watermark of north of 18% of those signings being, call it, AI-related so we're high-performance compute. So -- and that number in that category by itself has probably hovered closer to single digits or high single digits for some time. So we are seeing a pickup in that. You're seeing certain sectors, financial services, manufacturing, certain customer types, I would say, moving closer to proof-of-concept and evolving.

I still believe this word inference is beyond nascency, quite honestly, based on the fact that the adoption of this in a commercialized call it, corporate private data center data site setting is, we're not even scratching the surface of what we can do with this technology, right? I believe the B2C applications are way out running what that's going to happen on enterprise, so I don't think -- I think our data centers in our markets that are supporting the cloud and enterprise will ultimately be the home for that in applications, but I think we still got a good runway to get there, especially when people are just putting out press releases that are talking about training today because if it's a press release now, it's not a data center for a good while.

On average size, we did see, I'd say, size of deals or catching up or getting a little bit bigger than the enterprise size. They're definitely getting a little more power dense, which is playing into our wheelhouse. And we've been supporting 4 enterprises liquid cooling well before we were talking about ChatGPT or GPUs. So we have a lot of experience in that.

And then lastly, when it comes to taking market share, the answer is yes, in my opinion.

And your next question today will come from Joe Osha with Guggenheim Partners.

My question is pretty simple. If I look at the spreads on the 1 megawatt plus side, it's 2 back-to-back quarters now double-digit in the most recent ones almost 20%. And are we just seeing maybe a temporary artifact there? Or is this kind of the new normal with those spreads being at that level going forward?

Yes. Thanks, Joe. Look, I think you're seeing -- starting to see like what we're expecting as we start to look forward and we see the the rates that start to drop down over the next several years, as Andy mentioned earlier. I mean this, I would say, this year was a relative, or year-to-date, it's been a relatively light year in terms of renewals within the greater than 1 megawatt. We'll start to see that pick up in '26 and '27 as you look at our expiration schedule. But we've also had this year, even this quarter, in particular, you'll see that, the average rate, if you look at this quarter was, I think, north of 18, which reflects the markets that we were in. And despite that, we were still able to get higher rates and robust re-leasing spreads.

So I think we're -- again, we're in a robust supply constrained market. And we think looking forward, our mark-to-market opportunity is in a good position.

Your next question today will come from Cameron McVeigh with Morgan Stanley.

Just wanted to ask about future CapEx spend. And do you envision CapEx spend going forward? Do you expect it to be geared more towards retrofitting existing data centers for denser deployments or maybe expanding new capacity? And then secondly, do you see this incremental CapEx or to capture more growth in the 0-1 segment or the 1 plus segment going forward?

Thanks, Cameron. So I think Matt touched on this a little bit. I mean, I think, just to paraphrase, we believe, given the opportunity and the conversion of our, call it, shells or delivery of our suites under construction, shells in the data centers and colo holes and land in the shelves and ultimate data centers, CapEx can likely to reflect higher on both the total and our share basis. So that's based on really success driven.

And when it comes to where the money is going, by and large, the dollars are going towards new capacity. The new capacity is well outpatient. We're still doing a great job maintaining retrofitting where necessary our existing fleet. But the dollars for building a new data center are dwarfing the dollars needed that we need for our portfolio.

And when it comes to the types of CapEx that, yes, the dollar amounts are certainly bigger when you call it slant towards bigger deals, 1,500, 200-megawatt deals. But we've made this strategically the priority at this company to make sure that we don't go dark for our enterprise colo customers and 50-plus in growing metros around the world.

And those enterprises are landing with us with private IT for the digital transformation, hybrid cloud, and they're then connecting to our top cloud customers. So that virtuous cycle, we're building for all the customers that land and expand with digital is part of our value prop.

And your next question today will come from Maher Yaghi with Scotiabank.

Great. I wanted to ask you, I mean, since February, you've increased guidance and signed many new contracts. Certainly, we've seen the number of projects in construction in the U.S. overall increased significantly. But when I look at your development CapEx guidance, it has not changed. I'm not suggesting you should spend more, but do you think the drive to build bigger and bigger campuses is moving projects to private developers and reducing your tariff what you typically might get.

And the second question is, could you qualify maybe the credit quality of the new mega projects that are being built, do you see the returns being commensurate with taking on much bigger projects with a lower customer count that might not have the same cash flow level that your traditional Fortune 500 companies might have currently?

Sure. So a lot to unpack in there for, I think that's our last question. I'll try to hit it. So our development, we're posing about in total on the development life cycle. So maybe the dollars going out the door, we're only, call it, pushing towards the high end of our guidance, which is a decent range of guidance. But we're definitely leaning towards bigger, and it's not a static thing for us, right? Projects are delivering. We have, I think, record commencements last quarter. We have sizable commencements this quarter, meaning projects are moving off that schedule, and new products are getting added to that schedule.

We've been intersecting as addressed in a prior question, this primarily in the major markets where we saw diversity of demand from enterprise to hyperscale where also locationally in latency-sensitive workloads. We've not necessarily to chase that out to the one-off locations, but we're very much cognizant of those opportunities and see in a world where the markets where we're having a distinguished position and are expanding and stretching. And I think that's where you'd likely see us next to support those types of customers' growth.

For us -- I can't speak to others, but for us, when you talk like these large-scale locations being in our major markets or otherwise, we are aligned with making sure the counterparty risk fits the project. So certainly leaning towards the larger, call it, $1 trillion type companies that are investment grade. And that doesn't mean we don't do business with what I would say the neo clouds, but we've not been involved with major one-off projects to those names to date.

That concludes The Q&A portion of today's call. I would now like to turn the call back over to President and CEO, Andy Power, for his closing remarks. Andy, please go ahead.

Thank you, Nick. Digital Realty delivered another strong quarter, building on our momentum throughout this year. We saw continued strength in our 0-1 megawatt plus iX business with record interconnection bookings, underscoring the strength of our global full spectrum platform. Our backlog grew and now sits at 20% of data center revenue. Our pipeline is at a record level and we are well positioned for better long-term sustainable growth.

This is a special time in our industry. Demand has never been stronger. We've positioned the company to meet the challenges of this moment with a strong and growing value proposition, enhanced innovation and an evolved funding strategy that enables us to better meet the needs of our customers while improving our overall returns.

I'm incredibly proud of our talented and dedicated colleagues who continue to execute at an exceptionally high level, and I thank you all for your hard work.

I'm excited by the opportunity that lies ahead and remain focused on delivering for our customers, partners and shareholders. Thank you all for joining us today.

The conference has now concluded. Thank you for joining today's presentation. You may now disconnect.

So, I'm Jon Atkin with RBC. Welcome to our next session with me for the next 20 minutes of Q&A is Matt Mercier, Chief Financial Officer of Digital Realty Trust. Welcome, Matt.

Thanks, Jon. Great to be here.

So maybe kind of high level, we'll hit on a lot of topics but talk a little bit about your Power Bank what it is that you potentially could sell demand to fill it and then we'll kind of get into other topics, but obviously, you're a global company. So, the sizes of those bubbles in your presentation kind of differ by region, but kind of hit the high points of where you've got power that you could potentially deliver and sell.

Yes. Thanks, Jon. Just listen to the panel this morning. Obviously, power is a major topic these days in the data center industry. And I think we -- Digital Realty is in a great position currently to be able to continue our growth and deliver capacity.

So, setting the stage a little bit today, we have roughly 3 gigawatts of capacity in operations. That's across our, call it, our consolidated portfolio as well as looking through our joint ventures and now more recently, hyperscale fund that we've put together.

In terms of our development in land bank, we've got close to 750 megawatts under construction today. That's roughly 60% leased. So, we've got around 40% of that available, most of that that's unleased delivering really in the back half of '26 and into '27, sitting right next to that, we've started construction also on around 600 megawatts of Shell.

So that's basically getting us ready for the next wave of data center development that will put into production and really give us -- put us in Q4 continued deployments that will come online also in that -- likely in that '27 into '28 area to continue those deliveries and continue our growth algorithm, which I'm sure we'll get into shortly.

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

So, talk about 60% pre-commit of your turnkey developments under construction. So, confidence level in that in getting to 100%, obviously, the economics have to work for you based on the demand that you're seeing confidence in that remaining 40 and then confidence in the other gigawatts where it's maybe just shell or land bank, how do you see demand at a broad level?

Well, I mean, I think it's safe to say that demand has been and continues to be robust. I'm sure people have heard even more recently the news around what's been happening in the -- I'll call it, the resurgence of AI-related demand and take down that's happening across not only our customer base but across the industry.

So, I mean, our confidence level remains very high. We typically, by the time we deliver capacity, we're 90-plus percent occupied, if not close to 100% on that delivery. So, we feel very good about the 40% remaining in our construction pipeline and the leasing prospects behind that.

In addition to extending into that 600 megawatts that we've got of Shell, plus a lot of discussion going on even today around a good portion of the land capacity that we have available. So, we continue to see very robust demand. I think most of the customer focus continues to be around the nearest term delivery capacity that's available, which we have some, again, as I mentioned, towards the end of '26, even more as you get into '27 and '28.

But that's the large part due to the significant backlog that we've got in place today that's well north of $850 million as a result of the leasing that we've done over the last, call it, 12 months and into 18 months going back to '24, we're -- we signed over $1 billion of gross bookings in that year, continue that into the first quarter this year where we signed our largest deal that we've done to date. And we continue to see robust demand across our pipeline and across our major markets.

So maybe sticking a little bit with the power theme, forget about just the pure land bank at the moment, but everything that's under development, whether it's Shell or turnkey, are you noticing? Is it as expected? Or are there occasionally stumbling blocks or maybe sometimes things are being alleviated faster when it comes to sort of transmission capacity to power those sites?

Yes. I wouldn't say that there's -- it feels like sometimes a little bit of a one step forward, one step back, as I'm sure all the participants here heard power continues to be a material constraint. I would say that on the positive news, we are in Northern Virginia, which is the largest data center market in the world.

We are now getting closer to that release of capacity, which I would say is the positive news given that, that was one of the first markets to come under power constraints. So, we're starting to see that release of capacity for us and for other participants, again, starting towards the back half of '26 into '27 and '28. So that's the good news.

I would say the -- the counter to that is it's not coming at the sort of the velocity, I think that we would all want. But we're starting to see some relief in those choke points. And we're -- in other cases, there's -- there's markets like even here in Chicago, where power constraints are becoming, I would say, slightly tougher. So that's where we've look to balance and find expansions in markets where we've had, call it, a smaller presence to be able to bring on land bank where we've been able to procure power capacity right away.

So, the two markets that I'm referring to specifically are Charlotte and Atlanta. Atlanta is already, call it -- becoming near a major market today. Charlotte, I would say, is an emerging market, but one that we've had presence in where we've had a downtown highly connected facility that we're also expanding. It's a market where there's significant GDP, there's significant enterprise concentration led by financial services, as well as energy and manufacturing.

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

Anything outside the U.S. to kind of highlight that, that's particularly interesting or notable across APAC or EMEA on kind of the power theme? Or is it kind of going as expected?

I would say generally, it's going as expected. I mean, our largest -- I would say, our largest two markets in APAC, Singapore and Japan, Singapore is both, I would say, power and land constrained. So, we continue to work with the local government on how they allocate out power and soon to be a next round, I think, coming out around that.

Japan, we continue to find and source land, both in Tokyo and Osaka and continue our development plans there. So, we've been able to keep up with power constraints, if any, in that market. And we're continuing to build out in Seoul, which I would say is a market that we haven't seen power constraints, and we've gotten a lot of traction in terms of building out our first network-neutral facility there, part of our expanding our enterprise and connectivity offering across the globe.

So we feel pretty good about our APAC positioning EMEA, I would say, there's similar to dynamics in North America. There's a number of countries, particularly the largest that continue to remain under some level of power constraint. So, Amsterdam -- I mean, Dublin. Dublin is kind of the easiest one that's kind of been in that position for a number of years.

Frankfurt, we have a campus that's under development. So we have, I think, multiple years of development capacity there. And we're able to secure power well ahead of constraints that have been starting in that market as well as France, which I think probably currently right now is one of the countries with the most available power, given that they're generally more of an exporter of power considering the nuclear that they've had available to them for the last number of years.

So, kicking into kind of the earnings and what earnings means would be FFO per share, kind of algorithm, then you have a backlog that converts, so there's a schedule around that. And then there's also renewals, which I think is going to be a tailwind and perhaps an increasing tailwind between now and end of the decade. So, as you sort of put all of that in the mixer, how does that inform what you've obviously formally guided to for 2025. And then just qualitatively, how do you think that kind of translates into the medium term?

Yes. I would say this year is a pretty good template for, I think, what we can expect or some of the key ingredients needed to continue the growth that we're seeing even in '25. So -- we -- I had the pleasure 2 years ago. I think I was here, basically first year in the CFOs and I had to give 2-year guidance. So that was always -- that was an enjoyable experience.

But at the time, I said for '25, we expect 5% growth. I think there is some that believe some that didn't. Fast forward here we are today. We guided towards this year, started the year out at 5%, and we've actually accelerated that since then. We're now close to 6.5% based on our last updated guidance for this year for bottom line growth.

So that's a bit of a, call it, an acceleration of what we also talked about in terms of like baseline, 5% improving going forward. And I would say the ingredients there are that we -- a couple of things, as you mentioned, we -- starting off, we have a significant development pipeline underway, as I mentioned, 750 megawatts today, 60% pre-leased. And a number of the leasing that we've done over the last year that's creating a significant backlog for us, that's around $850 million today.

A little over $200 million of that is going to be commencing over the rest of the course of the second half of '25. $450 million of that into '26, and then a little over $100 million into '27. So that's really set us up for in particular, in '26 continuing this growth algorithm. On top of that, we're seeing because of the, we'll call it, the overall favorable dynamics around supply and demand.

Pricing continues to remain robust across the majority of our global markets. We've guided towards 4% to 6% re-leasing spreads. We're well on target for that this year. I think the thing to point out on re-leasing spreads for our business is you got to look at it in terms of our two segments.

So we have our 0 to 1 and interconnection segment, call it our retail colocation, which is shorter-term contracts more CPI driven in terms of those renewal spreads. So they're in the -- usually in the 3% to 4% area. And that usually is the largest weighting within a calendar year of our renewal spreads. So you're always going to be weighted towards that ultimately outcome.

On top of that, we have our greater than a megawatt, which is where we're seeing probably the more robust leasing spreads. And as you noted, the potential in the future years as those expiring rates start to step down. So we see an improving profile for re-leasing spreads going forward, particularly in that greater than a megawatt category, which roughly, on a given year is 8% to 10% of our role with another 20 -- call it, 20% to 30% coming from our 0 to 1. So great opportunity across our portfolio, positive re-leasing spreads great development pipeline in place that's pre-leased, really setting us up for multiple years of bottom line growth.

So I asked about surprises you are seeing or not on kind of the power delivery side. Anything around supply chain, long lead time items that's notably different? Or is it kind of steady state around those sorts of?

I would say there hasn't been really any material change, again, somewhat unfortunately, at least in the near term, long-lead equipment items continue to be -- especially ones around electrical, so transformers, switch gears, anything extending into the utility side, those are 12 to 18, sometimes 24 months out. Generators are another one in that category, significant lead times have to really plan ahead for capacity that you're delivering within the market.

I think the good news is that we've been at this delivery of data center capacity in the 500-plus megawatts annually for the last several years. We had time during COVID, where we were able to modify and sort of perfect our supply chain and our relationships with our vendors to be able to bring that equipment to our various global markets on time.

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

So as you look at the demand signals around AI, cloud, social networking, you have this kind of geographic mix because you are a global company. Andy has said in the past that like the vast majority of AI deployments have been in the U.S., and I think a lot of people think that might continue to be the case for the next several quarters at least.

But then again, you do have development projects underway outside the U.S. How do we think about the regional mix in terms of its revenue contribution to the company a couple of years out. Does it stay the same? Or does it shift a little bit just based on the delivery time line that you have?

Yes. So 2, 3 years ago, the majority of our development was actually in EMEA. That's now shifted in the last, call it, a year or 18 months to where more of our developments in North America that obviously coincides with the growth we've seen in AI deployments. And as we've mentioned on pretty much every one of our earnings call over the last almost 2 years now, we've seen a significant amount of our signings come from AI-related workloads.

So usually in the range of 30% to sometimes 70% of our quarterly bookings. So put that on average, around 50%. So as we start to look forward, as the backlog starts to commence and we see the revenue from that, we'll start to see more of that weighting towards North America, given that's where a higher weighting of those deployments are going to be landing.

But we're still seeing AI workloads in EMEA. We've done some larger deals in London, in Belgium, but they're just not the same size and grab the same attention and headlines that you've seen in North America of late, not only from us but across the industry.

So within North America and within the U.S., there are as many of these gigawatt plus projects just north of the state border here where we are in Chicago. And then in places like Texas. And so a lot of those are in remote areas particularly the -- some of the Texas ones?

And do you feel like you're missing out? And is there any impact on demand in primary markets as you read about these announcements that others are deploying capital into?

Yes. We don't feel that we're missing out. So I think that goes back to our strategy as a business, which I'd highlight two things. One, we are able to provide the full product spectrum. So that goes from multiple megawatts all the way down to single cages and cabinets, satisfying our 5,000-plus customers across 300 data centers in 50 markets.

On top of that, we are -- we have a view that we're focused on core major markets where major clouds have developed and where there's availability zones that have come into play where we have connectivity options available to that wide range of customer base. And we see a broad and diverse set of demand that, I think, stands the test of time and ultimately allows us to be able to pursue what is one of our primary goals, which is continuing that compounding bottom line per share growth.

So we think we have plenty of capacity available in those markets to satisfy demands across our customer set and puts us in a great position to be able to do that for several years going forward.

As our view is, over time, those major cloud markets are going to be the ones where most of the inferencing starts to happen as you rely on and connect with the major data sources that are available and it starts to feed back to where most of the major GDP and eyeballs are, which is how most of the cloud is developed over time as well.

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

Yes. Well, I think first, it's -- in terms of maybe just to hit on sort of the why around sort of our joint ventures and our fund strategy. So as I think we've seen the opportunity set here, especially within the hyperscale, what we'd call the greater than megawatt is very large.

And so being able to satisfy that within just the public environment and public capital markets, I think we seem to be very challenging. So in order for us to capture that, we've also tapped into private capital, and that's through our joint ventures through the fund that we've just established and being able to bring in some of that capital to match the demand and the return profiles that they're seeking.

I think on top of that, we also, again, back to our strategy is, we don't want to be overly indexed towards hyperscale in terms of the portfolio composition for our business. We see -- we've made great strategy within our 0 to 1 megawatt category, culminating even this last quarter with record signings in that category of over $90 million.

Coming off of what 2 years ago was around $50 million a quarter, now approaching more of a run rate of $70 million. So we feel very good about that business and creating a stable financial profile and growth algorithm component for us going forward.

I'm sure there's a lot we didn't talk about, but we are out of time, and I want to thank you for the Q&A.

Thank you.

Mike Funk, the Head of Telecom and Infrastructure and Com Software Research here at the bank. Really happy to be part of the REIT conference again. So thank you to the REIT team for inviting us. Jeff back there in the back.

I'm really happy to have Andy Power, CEO of Digital Realty with us. I think Digital is probably the first company I covered in this space about 13 years ago. So thank you again for coming out, Andy. We have Jordan Sadler, Head of Investor Relations as well.

I'm going to kick off the Q&A. I'll leave about 5 minutes at the end for audience questions as well. So if you have any, you can hold them until then.

So Andy, thank you again.

Thanks for having me. Appreciate it.

Absolutely. I wanted to kick off, Andy. So I relaunched in this sector earlier this year and what struck me was something you highlighted that you'd rather have a 7% growth for 10 years rather than 2% growth -- sorry, 10% growth for 2 years, right? And it certainly speaks to your philosophy. And I think the current market environment as well where there are so many big hyperscale deals available and a company to choose to chase them or not chase those deals. So how does that philosophy impact how you look at the market, the deals that you pursue and the deals that you're passing on?

Thanks, Mike. So just to clarify maybe I think we'd always want more and for longer as a common statement.

That's fair enough.

Just -- I think that where your question was going was something that I've said is I'd rather -- coming this year, we've turned the corner on our bottom line and have now, call it, put up a solid guidance at the beginning of the year that we've now raised throughout the year in addition to beating and on trajectory to repeat that movie into next year.

And the question that's come to me is how high could it go? What's next? And my euphemism back was I'd rather be compounding our bottom line, which we view as very important to our long-term strategy and our cost of capital at 7% for 7 years versus just having 2 years at 10%. And that was in the context of, there's levers that we can pull in our business beyond execution in the broader market that go to the risk we have on our balance sheet and how we fund our business model.

And that goes back to we've evolved our funding strategy, first from, call it, one-off joint ventures now to our first inaugural hyperscale fund. How much of development projects we keep on our balance sheet versus share with private capital has a near-term dilutive impact, but a longer-term extension of that runway, more projects that good returns further down the runway.

And two, how much of the recycling of those hyperscale projects we move into private vehicles and lose NOI and FFO in large quantities when you do $1.5 billion or $2 billion joint ventures like we've recently done.

So those are the levers I'd say, I think you were highlighting that I was referring to is becoming a consistent compounder at the bottom line per share growth and having that runway for growth supported by our backlog and our execution, but also the arrows in our quiver or levers to pull for our funding model.

That's a great answer there, Andy. And right or wrong, the market has gone very myopically focused on large AI hyperscale deals in the last couple of years. And you reported record numbers last third quarter, right, Jordan, for AI-related deals, even break that out for us. Thank you. But recently we see more of those deals have been go to markets that I would describe more as third tier, not primary, secondary data center market. So what are you seeing in the current market in terms of demand from those hyperscale customers? And do you think that demand comes back to the markets where you choose to compete where you can actually get a good return on your capital?

So the most important thing, I think, about our strategy is we believe -- we don't believe all data centers or all data center strategies are going to be created equal here. And we focus on markets that not only have robust demand, but diverse demand. They have workloads that are locationally or latency sensitive. And ultimately, many of these markets have some form of barrier to supply. Hence, we, for those hyperscale customers that you were referring to, which is in addition to our enterprise business which we love to talk about as well, gives us a value proposition to those customers and allows us to generate outside returns.

That -- we've intercepted AI demand in those core markets while that demand had in the training phase did not have to go there. And the customers' feedback to us is why they choose us, why they chose these markets is the fungibility of the workload. If they get their AI demand wrong, they have other real business use cases, cloud computing that they can put in that capacity blocks.

The cloud does not live anywhere or everywhere, I should say. It's locationally sensitive. There's architectures with availability zones in major metropolitan areas with radius restrictions within that metro. Hence, a vacant data center in a, call it, hinterland market cannot be backfilled necessarily with cloud computing versus a vacant data center in Ashburn, Santa Clara, Frankfurt, Singapore, Tokyo has ability to serve cloud needs.

And Andy, you mentioned the enterprise business, the 0-1 business. You've been increasingly highlighting as an important metric for investors to follow. So how does a 0-1 business strategy fit into the growth algorithm that you mentioned earlier and balance your business better than a pure hyperscale strategy?

So our results in the 0-1 megawatt enterprise colocation interconnection category are not an overnight phenomenon. It took massive investments over many years, spreading our business across now 50 metropolitan areas supporting 5,000-plus customers on 6 continents, the full product suite, investments in our go-to-market, investments in our business processes. And it also took a strategic pivot to make that the priority and the focus of the company. And we've now, in the last several quarters, started to see the fruits being born whereby we've been, in the $50-ish million per quarter or $200-ish million per year, call it inflecting 60s, 70s. And now we just had a record 2Q, which was $90 million, 18% higher than our prior record.

And I could tell you why we value that is because we are offering tremendous value to those customers. Those customers are not building data centers on their own. Those customers are buying a platform with us with propensity to grow in more locations with us. Those customers are benefiting from our expertise in higher power densities and liquid cooling, and we can generate outside value for the customers and outside returns for our shareholders.

And most satisfying piece of that is despite seeing the success come to fruition, it doesn't feel like we're anywhere near done where we could be generating that category. And I say that we're making significant investments in our systems, our business processes, our tooling for our sales teams, our penetration with partners and alliances. So we're not top ticking or anywhere near in that piece of our business today.

And I want to skip over to pricing, Andy. When I last covered these companies before moving to software for a few years, re-leasing spreads were viewed as a negative for Digital Realty. We're still working through some legacy contracts. They were largely flat to negative across your portfolio. And then more recent years, they've obviously ticked positive in a very strong way. Can you just walk us through your view on re-leasing spreads, how long they can remain positive in the range where they are and the contribution to growth?

So let's bucket again the business into the enterprise colo 0-1 megawatt for a second. We have inflected in that category, but to a lesser extent, but that's on the back of years and years of consistent inflation or inflation plus like growth in our mark-to-markets. We're now, call it, 4.5-ish percent mark-to-market in that category and signing new deals, uplifting pricing, normalizing pricing for our product set because we are a product of M&A and integration and adding more value to the customer and getting paid for that value from the customer.

And I see that runway from a long, long way to go here because the addressable market is large. There is a long fragmented tail behind ourselves and one other competitor in the leading positions in the market. We are in many of those markets, neck and neck with our top competitor, but other markets, we're playing catch up. And we're maximizing that price volume equation to essentially make sure we're not sacrificing our velocity of volume at the detriment of price where we may not have the leading ecosystem in that market.

On the bigger stuff, you've had legacy demands, digital transformation, cloud computing, now AI build upon each other, and it's come at a time when supply constraints have arisen to the greatest extent, quite honestly, in probably the history of data centers. And it's multifaceted, it's power generation, it's power transmission, it's supply chain for power equipment like substations, it's data center supply chain, it's use of water. And last but not least, it's governmental pressures, moratoriums and nimbyism in the space.

Going back to, it's harder and harder to deliver that capacity, and hence, those things -- and also a mild inflation backdrop that's come through our space and our build costs have pushed rates to much healthier levels they are today from, call it, a certainly lower rate on the backs of a lower interest rate environment.

I don't think this is going to last in a perfect state forever, and that's not how we operate our business, hence, my description of how we fund our business. But I believe, in many markets, this -- that are most important to our customers, this -- there will be a continuation of these themes in various shapes and forms. And how we operate in those markets, our history, our involvement deep and consistent with power companies, the community, all sorts of folks with a long-form approach -- long-dated approach is going to pay dividends to us because they're going to separate the people that came into data centers for a trade, broke some glass versus those who are here permanently. And I think we're -- again, our focus on these markets is insulating. One market may get some power relief, while another tightens up and vice versa.

And I want to come back to your comment a bit about the players that are under for the trade or a quick buck versus the longer-term durable operators. I'm going to table that for the moment because I want to continue to address what I think are, well, what are a lot of the questions I get from investors and concerns.

Another one is the future proofing of data centers, right? So obviously, AI is more compute power intensive. We've been talking about power densities increasing significantly at least the next 5 or 10 years. So can you explain to us how your current facilities and then future facilities can address the rising demands for power, the greater need for cooling that those power densities bring because I hear from a lot of investors that, well, the legacy facilities just can't carry the next-generation workloads and require material capital investment to bring them up to spec.

So from my vantage point, power densification is a trend that's happened in our industry for a while and has been accelerating recently. At the same time, I'm not subscribing to this view that all compute GPUs are going to have to be at the most scientific experiments power density out there on the planet. And I think there will be -- we're in an environment when one particular provider is pushing the envelope of invention and power densities and cooling features, but you have a whole host of others that are building their own types of chips or trying to compete and are looking for efficiencies in the infrastructure from a power density standpoint.

So I think that there's a world where numerous types of workloads from network to compute towards GPU AI today in training, ML, ultimately inference, incorporating private data sets will be in various private forms of power densities.

We're a 20-year-old company. Every investment we made over those 20 years wasn't the perfect investment, and we acknowledge it. And we pruned our portfolio, sold outright 100% billions of dollars of data centers over the years. We exited numerous markets along the way that didn't have the attributes of where we're focusing today.

What we found in the infrastructure arena, put aside the, call it, legacy telco hotels that may not support an AI cluster at massive power tens of liquid cooling but are running the Internet of New York City or Chicago or the Southeast, put those aside and have other uses, our campuses with larger format builds, contiguous capacity in terms of area, substations on site, runway for growth, that infrastructure, we found that we can -- of our own volition, go and densify the power. And we've done that for years in different shapes and forms.

We've been doing liquid cooling for customers in the quantitative trading segment for at least 7 years, well before AI was all over the press. And every 2.5 years, we probably brought more power into that same exact suite for that customer, right? So I think we have a track record of that. We've done that on data centers that have been 15 to 20 years old. We've done that on brand-new data centers when they want to change the mix of air versus liquid on the fly. So I think we've got the track record and experience to do that.

I don't think there's going to be a world where we're going to have the luxury to just say all the existing data center stock, no good. We can only move into new data centers. I just don't -- from the -- the data center is one piece of the broader technology, telecommunications, IT infrastructure. Remember, you got the servers and the compute, but then you have the distribution of the fiber optic networks and actually the consumption that goes all the way to your various devices today, in the past and we really consume this on in the future.

And you touched on power as well. I mean there are a few key parts to a data center and probably the most important is availability of power, right? We know it's very difficult today to procure more power. So you can talk about the advantage Digital has with the contracted power in some of your key markets like Northern Virginia.

We're very fortunate that we made some, call it, very forward big bets well before this inflection in demand happened. I was just in the D.C. area recently. And when we put together next to the Dulles Airport, sounded like a crazy bet in 2018, call it, spending $250 million on dirt next to the airport is now turning into some of the most precious capacity in that market.

So being there early, being there consistently, being a good partner to all the partners that are delivering the capacity has been key. Northern Virginia is our largest market. We're very large in that market, and our runway for growth in that market is -- could more than double what we have today. But we're doing that same playbook in the Chicago market, Dallas, in Atlanta, in Frankfurt, Amsterdam, London, Paris, Asia Pacific, South America and South Africa.

And can we move for a minute to also managing growth? You mentioned before kind of selling assets, but you also have the off-balance sheet arrangements. You have the JVs, which you also used. So how do you utilize those to also manage the growth of Digital Realty? Or is it even a component to managing growth is a better financial structure for you?

So we made a decision that based on the fact that when it came to hyperscale, the opportunity was large and only getting larger, more capital intensive, more long term. Every piece of it was just getting bigger. And it was going to be bigger in multiple stages, the development stage, upon stabilization stage that we needed to evolve our capitalization and funding -- of funding of the company.

Having relied mostly on the public company track record of raising public equity, we need more, call it, levers to pull for our business. We started with some great joint venture partners. This year had just recently announced our inaugural data center fund for hyperscale in the U.S., north of $3 billion upsized, oversubscribed. That was a vehicle that tactically, we seeded $1.5 billion of stabilized assets at an attractive valuation of call it, high 5 caps, but also seeded with some great development opportunities.

So -- and that was -- we know they did this. We shared opportunities that we had on our balance sheet before the vehicle. I look at that as a massive milestone on what we're building in strategic private capital. And that strategic private capital that can be a funding mechanism for our own initiatives or also to scale other businesses or assets in hyperscale that we think are going to come to need natural homes. And we think there's an avenue like our LP saw of a business like Digital that is solely dedicated to data centers, skin in the game financially with these vehicles, through owner-operator experience and not a commingled vehicle.

We're not investing in data centers plus office, multifamily, et cetera. We're not investing in data centers plus bridges and roads and airports. It's solely the swim lane that is our expertise. And we think that we have a good opportunity to scale that, that I think is going to help continue to allow us to support our customers' growth and grow our bottom line in an attractive fashion.

And you mentioned earlier, and I sort of want to come back to it. There are some companies that are basically this mantra of move fast and break things. It may not be long-term competitors. It's simply there for the trade in the space. But I wanted to separate those from some of the private companies that are more established, and we're seeing much higher levels of leverage at some of these companies. I'm seeing 10, 15x leverage. We're also seeing higher private market valuations in a lot of instances than public.

So 2 questions here, Andy. Does your lower public market leverage level, does that disadvantage you at all when you're bidding on these deals? And then second, is there a case to be made for identifying and selling more stabilized assets into the private market and creating some financial alchemy of the valuation disconnect between public and private?

So one, and I think this is more germane to the hyperscale piece of the business.

Sorry, yes, it is. I should be clear on that.

The -- going back to our strategy of not judging ourselves on market share for hyperscale, we -- like we do in enterprise colo, we pick our spots. We're in 50 metropolitan areas; 30 of them, we have something we can add a lot of value, we can generate outsized return. That value could be -- they've installed a tremendous amount of capacity with us. They've got great operational relationship. We've got a runway for growth that no one else has. It's a tougher place to do business. They need to connect on our campus to somebody else that's a customer, whatever it is, that's our angle and how we play.

In that arena, we don't just look at the minimum -- it's not just about the cost of capital of the commodity competitor. We're looking for alpha in those returns. And you can see that in our development schedule. I believe we're probably generating returns better than the average private capital that's taken the cost of debt and the cost of equity and what we're doing when it comes to hyperscale. It's intentional. And that sacrificing volume. We're saying in this market, we can't do that. We're not going to be in that market.

But focus to be a good steward of capital, to your point.

Yes. And now even with that playbook, we federate capabilities. There are certain markets where we bring alongside private capital. When we went to Latin America, we brought a financial partner with us. When we went to Japan, we came together with Mitsubishi Corporation to create MC Digital Realty. In the last couple of years, we did financial joint ventures, including development joint ventures.

So we try to, especially with the fund taking it to the next level, have the best of both worlds of have the benefits of the public company, the access to capital, all the benefits of being a public company gives to our team members, our shareholders, our partners and customers, but also have capital for hyperscale that is the same level playing field as anyone else in private capital when we use that. So -- and that example of leverage, our fund is not high levered, but it's a higher leverage attachment than digital.

Makes sense. Sorry, Sarah, please go ahead.

So [indiscernible] but [indiscernible] funds which is stabilized assets capital come in?

I think we would have been successful based on -- albeit I'm biased -- based on the portfolio we put together, tremendous diversity. This is a hard asset class to get diversity in because the assets are so big. But I would say when we approached moving from joint ventures and one-off vehicles to a fund, which I think is better for the investors, better for our platform and ultimately our shareholders, I think we said, you know what, we could spend a longer time going down the road that you have described to get successful or we could bring something that solves a problem because we needed to fund some of our development, have some stabilized assets and we can really start with a great foundation and build our brand when it comes to private capital, and then build upon that with other vehicles more akin to what you described.

[indiscernible]

I think that's -- to me, that's not just a data center phenomenon. The overall robustness of desire for capital moving towards core, core plus types of vehicles relative to, quite honestly, investments in certain segments of real estate has left that less desirable than going towards the development.

That's a product of risk, demand drop, demand supply, interest rates. I don't think that is a permanent fixture. And I think we, at Digital, have a role to nurture that not necessarily 100% with this vehicle, but incremental vehicles as we scale private capital.

Certainly to Mike's point about disadvantage versus private capital. The disadvantage really more not of returns, but not growth or really returns to equity holders because ultimately, their leverage just get some higher returns to equity holders, [ not ] -- they don't necessarily underprice you because their cost of capital is necessarily better or worse than [indiscernible] leverage, right?

I think in this current environment, we got some very -- a landscape of very sophisticated financial private equity firms backing platform in the space, many of which we partner with. They are not tone deaf to the supply-demand dynamics, right? They are not necessarily cutting to their cost of capital minimums.

I think the nuance of you could say, difference or potential disadvantage of solely being in the public markets going after hyperscale is something we lived in. The cycle of development, you spend money in the public [ wrapper, ] it doesn't earn any earnings for a while, especially as projects take longer digestion periods. Land is becoming a bigger portion of that. And then getting that algorithm in a development-fueled growth model, I think, is challenging. Hence, we said we need to tweak our model in many shapes. We need to make that colo interconnect the engine that led the business. We need to fund, when it comes to hyperscale, with private capital partnerships in order to get that growth algorithm that I don't think a private -- private capital aren't looking at their per share growth algorithms.

But their growth is higher. The growth can be higher, the returns aren't. Overall return to the total invested capital is [ high, ] but the growth -- the [ 2 points ] of growth for you [indiscernible] higher leverage and higher growth.

So said otherwise, we have a development partnership with a little famous group over on Park Avenue. And they haven't ever gone -- we haven't gone to them and said, hey, we want to quote the customer, and say, no, cut the rate, go lower return, Mike. They understand -- they're economic animals.

And on the enterprise business, I mean how long of a tail of growth do we have for the 0-1 megawatt? Is that a 5-year tail, a 10-year tail? I mean the question used to be the incremental migration of enterprise into cloud. That's kind of 100 basis points a year accelerated. But how much more do we have in that growth tail do you think?

No one's been focusing on this, quite honestly.

Should we be? Or is that a bad question?

I focus on it. Our company is focused on it. And when you focus on it and you see the results inflect on it, I think it's going to be paying less dividends from making that decision. But I'd say competitively, the landscape has not been a focus. Part of that is -- we call it -- there's been a lot of consolidation in that space. It's a harder road to build upon. I mean it's been a good 10 years at Digital, making this pivot to just getting the results we have today.

You look at the addressable market in that it is very, very large. It's still growing at a healthy clip. You look at the share ourselves and Equinix have in that market, it's still a relatively small share of that market. There's a long tail of competitors you probably never even heard of from net telcos who are still quasi in the space to one-off names. You still have an on-prem piece. You still have cloud adoption. And with cloud adoption has multi-cloud and hybrid cloud adoption. And then you still have AI to filter into that space, right? And I think AI is going to be different in terms of enterprises adoption of it. I mean you could elect -- I don't think Bank of America does this, but Bank of America could elect to put their data center in this building if they wanted or their old office buildings.

We elect not to.

Yes. Not a great decision, but it's doable. If you were going to put in 150 watts per cabinet or even higher in liquid cooling, I would say that, this is not a great building to do this in, right? So I think that's a nuance that I think we will eventually see in terms of influencing enterprise adoption for its AI.

I have one more quick one, then I'll open it up. I do have 3 questions from the REIT team that we're asking consistently across meetings I want to get to before we close. And Jordan knows this. He knows this thing.

So you kind of touched on it, Andy. How does the marriage of the enterprise business and the wholesale maybe create synergies or benefit Digital Realty? A lot of talk about inference developing. I think we're very early stage, probably even before first inning right now on that. But are there synergistic benefits as we make that transition? Or is that too much of a leap to say there'd be any kind of relationship there?

I think that at many times in the history of our company, we had decisions well predating me and even after my joining of which road to go down in terms of strategy, one road, the other, both. And I look at it as a few simple things. Whether it's hyperscale for cloud computing or AI, it's a large, attractive addressable market. Enterprise, you probably heard me sing the praises of, I think, of that business and what we're going to do in that business. Putting them together lets you fish in 2 large pools of opportunity. And we're doing it in different fashions, but it allows us to scale our infrastructure, scale our platforms, scale our capital.

I think there are synergies there. When we're in front of a customer and we can have discussions about network nodes, on-ramps, what they're doing in AI, megawatts of compute, et cetera, in a holistic fashion, we're spreading our resources and solving more for the customer in a differentiated fashion.

So -- and this is a virtuous cycle. All these -- I think we're not in the business of investing in island data centers, right? We're about numerous customers that connect on our campuses, connect to enterprises and service providers and build upon each other's technology and innovation to support their end customers at the end of the day. And that's why we focus where we focus and not go where we don't focus.

I [ do not ] think investors miss that as we all focus too much on the headlines coming about single deals, individual transactions. So it's a good point.

I do want to get to the REIT team questions before we run out of time here. So let me go ahead and read these off to you. These are going to be multiple choice, Andy, so it should be simple.

My favorite questions.

You can't be wrong.

Just go with C.

Yes, just go with C all the way down. When the Fed starts to cut, do you expect borrowing rates for long-term debt to, a, decline; b, stay flat; or c, potentially rise?

I'm going to pass this over to Jordan yelling over here.

First go down and eventually go higher.

Okay. So what part of the curve are you playing? I don't know if that was an answer. I'll let Jeff interpret that one and try to put that appropriate.

What was that? A was go down.

It was decline, stay flat or...

Decline. Okay.

It was not a good standardized testing.

No, I was better at the essays.

Where did you go to college [indiscernible]?

I did -- I went to Digital Realty University.

Perfect. Last year, the majority of companies stated they're ramping up spending on AI initiatives. How would you characterize your plans over this year? And that would, of course, be internally for expense reduction or efficiency? Sorry, higher, flat or lower is the multiple choice.

It's going to be higher. I think we're very fortunate. We've been integrating our systems because we're a product in numerous mergers. And we had to do this. We had to remove the friction from our internal customers, our sellers, our partners and our internal customers. But it also, I think, will make us AI-ready faster and more effective when AI tooling comes.

Okay? Industry prediction. Do you believe same-store NOI for your sector will be higher, lower or the same next year?

Higher.

Higher. Perfect. You answered exactly the same as Equinix earlier, by the way. So that was very consistent.

We have about 1 or 2 minutes left. Are there any quick questions from the audience? If not, we can let Andy and Jordan get the rest of their day back. So thank you all again for coming out. Really appreciate it.

Thanks, guys.

Take care.

Thank you.