Ari Klein

Ari Klein asked about the drivers of strength in the 0-1 MW business, specifically distinguishing between market share gains and underlying demand. He also inquired about the evolution of deal sizes, including 0-2 or 0-3 MW segments, and the potential impact of enterprise AI adoption.

Answer

Chief Revenue Officer Colin McLean confirmed Digital Realty is taking market share due to strong execution, channel contributions, and new logos. He highlighted the value proposition of delivering high contiguous capacity in mixed-density environments and supporting a full spectrum of capabilities globally. President and CEO Andy Power added that deal sizes are trending towards larger capacity blocks, even in enterprise, with increasing power density and a gradual densification of deal bands.

Ari Klein questioned whether the strength in the 0-1 MW business is primarily from market share gain or underlying demand, and how deal sizes are evolving, particularly with enterprise AI adoption or inference.

Answer

Chief Revenue Officer Colin McLean highlighted record Q4 performance in 0-1 MW, driven by strong channel contributions and new logos, confirming that Digital Realty is unquestionably taking market share. He noted the value of delivering high contiguous capacity in mixed-density environments and supporting the full spectrum of capabilities globally. President and CEO Andy Power added that while hyperscale deals are larger, there's also a gradual densification and increasing size of deal bands in enterprise, with customers sometimes seeking north of 1 MW.

Ari Klein of BMO Capital Markets asked about the company's long-term growth outlook, seeking to understand what sustainable Core FFO per share growth could look like beyond the current year's projection of approximately 7%.

Answer

CEO Andy Power stated the goal is to be a 'consistent compounder' in the 7% range or better for as long as possible. He explained that near-term growth (2025-2026) is driven by momentum in the zero-to-one megawatt and interconnection business, while longer-term growth (2027 and beyond) will be fueled by the large hyperscale bookings being signed today.

Ari Klein from BMO Capital Markets asked about the legal costs associated with DISH, specifically if they are included in G&A and their significance. He also inquired about the reason for the altered composition of share repurchases and debt repayments, noting less repurchases than previously discussed, and whether this change is primarily to maintain leverage given the ex-DISH leasing levels.

Answer

Sunit Patel, CFO, confirmed that legal costs related to DISH have been factored into the guidance provided, though extreme scenarios are always possible. He explained that the change in the composition of share repurchases and debt repayments (more debt repayment) is to maintain the target leverage range of 6-6.5 times, especially with the revised DISH outlook. This strategy preserves financial flexibility and ensures the company remains investment-grade while still providing good risk-adjusted returns for shareholders.

Ari Klein inquired about the significance of legal costs associated with DISH and if they are included in G&A, and why the composition of share repurchases and debt repayments is different than previously discussed, with less repurchases, to maintain leverage excluding DISH.

Answer

Sunit Patel, CFO, confirmed that legal costs for DISH are factored into the guidance provided. He explained that the revised allocation, with more debt repayment and less share repurchases, is to maintain the target leverage range of 6-6.5 times, given the change in the DISH outlook, ensuring an investment-grade rating and preserving financial flexibility.

Ari Klein of BMO Capital Markets questioned whether recent capacity additions indicated a shift in the mix of colocation versus amendment activity and asked why the full-year EBITDA guidance wasn't raised further given the strong performance in the first half.

Answer

Interim President and CEO Daniel Schlanger clarified that there has been no significant change in the mix of colocation and amendment activity. CFO Sunit Patel explained that the EBITDA guidance accounts for seasonality in the business, with some expenses expected to be weighted towards the second half of the year.

Ari Klein asked for more color on any near-term group booking softness, its broad-based nature across business verticals, and any changes in cancellation, attrition, or lead volumes from a forward booking standpoint.

Answer

President and CEO Jim Risoleo clarified that there hasn't been meaningful cancellation beyond some D.C. government business, noting a strong Q4 group pace (up almost 8%). He explained that Q3 softness was expected due to the Jewish holiday shift, with some softness attributed to government and government-adjacent businesses. Despite lower group volume in Q3, banquet and catering revenue per group room night was up, indicating continued spending by groups. He concluded there are no specific cracks in driving group volume for Q4 and beyond.

Ari Klein asked for more color on any near-term group booking softness, whether it's broad-based across business verticals, and if there are any changes in cancellation, attrition, or lead volumes from a forward booking standpoint.

Answer

Jim Risoleo, President and CEO, clarified that there hasn't been meaningful cancellation activity, apart from some government business in D.C. He stated that the fourth quarter group pace remains strong, up almost 8%. The softness observed in Q3 was anticipated due to the shift in Jewish holidays, which impacted September and October. He noted that some softness is specifically related to government and government-adjacent businesses. Despite a decrease in group volume in Q3, banquet and catering revenue per group room night was up, indicating continued spending by groups. Risoleo concluded that there are no specific cracks in driving group volume for Q4 and beyond.

Ari Klein of BMO Capital Markets asked about the expected RevPAR growth cadence in the second half of the year, specifically the factors driving Q4 growth, and sought clarification on the $14 million insurance savings.

Answer

EVP & CFO Sourav Ghosh clarified the $14 million insurance savings applies only to the current year. He attributed the anticipated Q4 RevPAR strength to three factors: the favorable timing of the Rosh Hashanah holiday, renovation disruption at the Grand Hyatt San Diego impacting group pace, and easier year-over-year comparisons due to booking softness around the prior year's elections.

Ari Klein of BMO Capital Markets asked about the expected RevPAR growth cadence in the second half, specifically the factors driving Q4 growth over Q3, and clarified if the $14 million in insurance savings was an annualized figure.

Answer

EVP & CFO Sourav Ghosh confirmed the $14 million insurance saving is for the current year only. He explained that Q4 RevPAR growth is expected to be stronger than Q3 due to the holiday shift of Rosh Hashanah into Q3, renovation disruption at a major San Diego hotel in Q3, and an easier year-over-year comparison in Q4 related to prior-year election softness.

Ari Klein asked if the recent premium card program renewals by Chase and Amex for their own offerings are viewed as competition and what implications they might have for Marriott's upcoming credit card renewals.

Answer

Tony Capuano (President and CEO) acknowledged the broad recognition of travel-related spending strength among financial services players. He stated that Marriott believes its cards can coexist and be complementary with other premium offerings, and this dynamic will be incorporated into ongoing discussions.

Ari Klein asked about the potential competitive impact of premium card program renewals by Chase and American Express on Marriott's co-branded credit card renewals, and what this might mean for future negotiations.

Answer

President and CEO Tony Capuano acknowledged a broad recognition among financial services players of the strength and long runway for travel-related spending. He stated that Marriott believes these cards can coexist and be complementary, but it is a factor incorporated into ongoing discussions.

Ari Klein of BMO Capital Markets asked if there was an opportunity for Marriott to be more aggressive with key money, given that it is accretive to growth and the company has a strong cost of capital.

Answer

CEO Tony Capuano reiterated that while key money is a valuable tool for high-value deals, the company is not interested in 'buying growth at any cost.' He stressed that every deal is evaluated through a disciplined lens for value creation, and capital is deployed only when it is expected to generate higher-than-typical fees.

Ari Klein (BMO Capital Markets) asked if the new Verizon MLA could serve as a template for a future agreement with T-Mobile, given SBA currently lacks a similar deal with them. He also inquired about the sustainability of the services business's recent strong trend and the potential to broaden customer relationships in this segment.

Answer

Brendan Cavanagh, President and CEO of SBA, stated it's too early to determine if the Verizon deal will template a T-Mobile MLA, as each carrier has unique needs. He noted their good relationship with T-Mobile and an expiring agreement in about a year, expecting a positive outcome. On services, Mr. Cavanagh hopes to sustain recent trends, noting 2025 is the second-best year for services revenue. He sees potential to broaden the customer base, especially with Verizon, due to SBA's delivery capabilities and some competitors exiting the market.

Ari Klein inquired about the impact of Equinix's updated sales approach, which allows selling capacity further out from delivery, on the recent strength in pre-sales activity. He also asked about the level of pre-leasing for new capacity coming online in key markets.

Answer

Adaire Fox-Martin, President and CEO of Equinix, explained that the pre-sales motion for core retail business is relatively new, with the sales window extended to 12 months ahead of delivery. This provides sales teams with critical capacity and offers customers comfort regarding future deployments. Keith Taylor, CFO of Equinix, added that the shift in supply-demand dynamics, with demand outpacing supply, has driven this new sales motion and accelerated builds. Pre-sales activity is evenly spread, with significant interest in high-demand locations like Frankfurt, London, and New York.

Ari Klein inquired about the drivers behind the strong pre-sales activity, specifically if the recent change allowing sales teams to sell capacity further out contributed to this strength, and the level of pre-leasing for new capacity in key markets.

Answer

Adaire Fox-Martin, President and CEO of Equinix, confirmed that the extended sales window for retail capacity (now 12 months ahead of delivery) is a key factor, providing critical capacity visibility for both sales and customers. She noted an increased velocity of pre-sales throughout 2025, with 40% of the total pre-sold balance signed in Q3 2025, spread across high-demand locations like Frankfurt, London, and New York. Keith Taylor, CFO of Equinix, added that this shift is driven by demand outpacing supply and efforts to accelerate builds. Adaire clarified that 'pre-sale' applies to retail, while 'pre-leasing' refers to the xScale business.

Ari Klein from BMO Capital Markets asked about the significant increase in CapEx guidance and whether Equinix has the flexibility to accelerate investments to deliver capacity more quickly.

Answer

CFO Keith Taylor confirmed the desire to accelerate but noted constraints like supply chain and energy access. He stated that a key reason for the increased CapEx guidance was the strategic pre-purchase of long-lead-time equipment to ensure timely delivery. CEO Adair Fox-Martin reinforced that delivering on 'Ready for Service' (RFS) dates is a primary operational focus.

Ari Klein from BMO Capital Markets questioned the reasons for the significant increase in CapEx guidance and asked about the company's flexibility to accelerate investments to bring capacity online sooner.

Answer

CFO Keith Taylor explained that while the company aims to accelerate delivery where possible, it faces external constraints like supply chain and energy access. He noted a large portion of the increased CapEx is for strategic pre-buys of long-lead equipment to mitigate delays. CEO Adair Fox-Martin reinforced that delivering on Ready-For-Service (RFS) dates is a top operational priority.

Ari Klein from BMO Capital Markets asked for more detail on the strong performance in July, current booking trends, the expected RevPAR growth cadence for Q3 and Q4, and the drivers of weakness in Sunbelt markets like Phoenix, Nashville, and Dallas.

Answer

CFO Liz Perkins noted sequential RevPAR improvement through July but highlighted softer bookings for August and September, with an expected recovery in Q4. CEO Justin Knight added that market-specific factors caused the weakness, such as convention center renovations in Dallas and a temporary pullback in semiconductor business in Phoenix. He emphasized the team's success in offsetting these issues by attracting higher-rated group business.

Ari Klein of BMO Capital Markets inquired about the trend in lead volumes, which were down 16% year-over-year, and the long-term strategy for acquiring more JW Marriott properties to create a rotational network similar to the Gaylord brand.

Answer

EVP & COO Patrick Chaffin clarified that the pressure on lead volumes is primarily for the current year (2025), with a strong outlook for 2026 and beyond. President & CEO Mark Fioravanti and Executive Chairman Colin Reed confirmed that acquiring more JW Marriott hotels in top-tier markets is a core part of their growth strategy, citing the benefits of higher ADR, strong market demand, and the ability to rotate customers between the Gaylord and JW brands.

Ari Klein from BMO Capital Markets asked about the sustainability of strong out-of-room spending into the second half and questioned if there were any changes to the full-year EBITDA expectations for the Grand Hyatt Scottsdale.

Answer

Chair & CEO Marcel Verbaas noted that while Q2's out-of-room spend was exceptionally strong, he anticipates a more muted Q3 before a potential rebound in Q4, which has a stronger group base. EVP & CFO Atish Shah confirmed that the EBITDA outlook for Grand Hyatt Scottsdale remains unchanged in the low-twenties million range for the year.

Ari Klein of BMO Capital Markets asked about the factors underpinning the implied guidance improvement in Q4 relative to Q3 and questioned the sustainability of sub-2% expense growth, probing the long-term impact of efficiency initiatives.

Answer

Chairman & CEO Jon Bortz cited several factors for the Q4 improvement, including tougher Q3 comps in markets like Chicago and Boston and easier Q4 comps in Los Angeles. Regarding expenses, Bortz emphasized that the benefits from their productivity and efficiency programs are 'very substantial' and still in the 'early stages,' providing a significant offset to wage inflation. Co-President & CFO Raymond Martz added that moderating union labor cost increases in future years will also help.

Ari Klein asked about the key drivers behind the strong, near-record performance of the U.S. Services business and its future outlook.

Answer

President & CEO Steven Vondran attributed the strong services results to a robust application pipeline driving volume-based work and a larger contribution from construction management services. He noted that while construction management has lower margins, it increases customer value and stickiness, and the overall strength is indicative of a healthy leasing pipeline.