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DR

DIGITAL REALTY TRUST, INC. (DLR)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered solid operating momentum but modest headline misses versus Street: revenue was $1.41B (−2% q/q, +6% y/y) with diluted EPS of $0.27; Core FFO/share rose to $1.77 (+2% q/q, +6% y/y) as leasing strength and lower opex flowed through .
  • Bookings were strong at $242M annualized GAAP rent at DLR share, driving a record backlog to $919M and ~10-month average commencement lag; renewal cash spreads rose +5.6% .
  • 2025 guidance raised: revenue to $5.825–$5.925B (from $5.800–$5.900B), Adjusted EBITDA to $3.125–$3.225B (from $3.100–$3.200B), Core FFO/share to $7.05–$7.15 (from $7.00–$7.10); FX assumptions updated (USD/GBP $1.25–$1.35, USD/EUR $1.05–$1.15) .
  • Strategic funding evolution: launch of U.S. Hyperscale Data Center Fund with >$1.7B LP commitments; Azure ExpressRoute on-ramps added (Atlanta, Brussels, Vienna); dividend maintained at $1.22 per share for Q2 2025 .

What Went Well and What Went Wrong

  • What Went Well
    • Record backlog and sustained leasing: “Leasing kept pace with our 2024 record, lifting our backlog to a new high of $919 million” as Q1 bookings hit $242M at share and renewal cash spreads were +5.6% .
    • Guidance raise on top-line and Core FFO: revenue, Adjusted EBITDA, and Core FFO/share ranges all moved up on FX improvements and execution .
    • Funding model and ecosystem progress: >$1.7B LP commitments into the new U.S. Hyperscale Fund; added three Azure ExpressRoute on-ramps; continued sustainability initiatives (e.g., IL solar partnership) .
  • What Went Wrong
    • Modest estimate misses: revenue ($1.41B) trailed consensus ($1.42B*), and FFO/share ($1.67) trailed consensus ($1.73*); diluted EPS ($0.27) below consensus ($0.31*) .
    • GAAP EPS down y/y: diluted EPS fell to $0.27 vs $0.82 in 1Q24 on lower non-operating gains/other items despite stronger Core FFO; occupancy broadly stable at ~84% .
    • Leverage ticked up vs year-end: net debt/Adjusted EBITDA at 5.1x (vs 4.8x at 12/31), reflecting development ramp and capital timing; still within comfort and backed by >$5B liquidity prior to fund capital .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$1,431.2 $1,435.9 $1,407.6
Diluted EPS (GAAP)$0.09 $0.51 $0.27
FFO/share – diluted$1.55 $1.61 $1.67
Core FFO/share – diluted$1.67 $1.73 $1.77
Adjusted EBITDA ($USD Millions)$758.3 $751.3 $791.2
  • Estimate comparison (Q1 2025)
    • Revenue: Actual $1.408B vs Consensus $1.425B* .
    • FFO/share: Actual $1.67 vs Consensus $1.731* .
    • GAAP EPS: Actual $0.27 vs Consensus $0.315*.
    • Note: Consensus values marked with an asterisk (*) are from S&P Global.
Q1 2025 Actual vs ConsensusActualConsensus*
Revenue ($USD Millions)$1,407.6 $1,424.8*
FFO / Share (REIT)$1.67 $1.731*
Primary EPS (GAAP)$0.27 $0.315*
  • KPIs and balance sheet
    • New bookings (annualized GAAP, DLR share): $242.3M; interconnection bookings: $14.649M .
    • Backlog (signed-but-not-commenced): $919M annualized GAAP base rent; average lag ~10 months .
    • Renewal cash spreads: +5.6%; GAAP basis +7.1% .
    • Occupancy: 84.0%; data centers: 308; cross-connects: 228,000 .
    • Adjusted EBITDA: $791.2M; Interest coverage: 5.3x; Net debt/Adj. EBITDA: 5.1x .

Leasing Mix – Q1 2025 (Annualized GAAP Base Rent)

Region0–1 MW ($000s)>1 MW ($000s)Interconnection ($000s)Total ($000s)
Americas23,219163,390—187,916
EMEA24,9063,626—28,630
APAC5,9975,113—11,110
Interconnection——14,64914,649
All Regions Total54,122172,12914,649242,305

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total revenueFY 2025$5.800–$5.900B$5.825–$5.925BRaised
Adjusted EBITDAFY 2025$3.100–$3.200B$3.125–$3.225BRaised
G&AFY 2025$500–$510M$505–$515MHigher
Core FFO/shareFY 2025$7.00–$7.10$7.05–$7.15Raised
Constant-Currency Core FFO/shareFY 2025$7.05–$7.15$7.05–$7.15Maintained
Net income/share (GAAP)FY 2025$2.10–$2.20$2.15–$2.25Raised
FFO/share (NAREIT)FY 2025$6.60–$6.70$6.65–$6.75Raised
FX assumptions (USD/GBP)FY 2025$1.20–$1.25$1.25–$1.35Updated
FX assumptions (USD/EUR)FY 2025$1.00–$1.05$1.05–$1.15Updated

Earnings Call Themes & Trends

TopicQ3 2024 (Q–2)Q4 2024 (Q–1)Q1 2025 (Current)Trend
AI/hyperscale demandRecord $521M bookings; pricing up ~30% in >1MW; backlog up to $859M Continued strength; record 0–1MW & interconnection; backlog ~$797M ~Two-thirds of signings AI-related; dev pipeline 814MW (63% pre-leased) Accelerating
Enterprise/0–1MW momentumRecord 0–1MW & interconnection bookings; 149 new logos Back-to-back records in 0–1MW; 166 new logos; interconnection momentum Second-highest 0–1MW + interconnection ($69M); record new logos 119 Sustained
Supply chain/power & tariffsTight power; expanding pipeline; green financing Supply chain secured; liquidity >$6B; yields double-digit Tariffs impact <5% on build costs; proactive procurement Manageable constraints
Funding model/private capital€850M green bond; upsized credit facilities Delevered to 4.8x; >$2B capital raised U.S. Hyperscale Fund >$1.7B LPs; supports ~$10B investments Evolving, positive
Regional expansion/connectivityEMEA Slough campus; dev starts Dallas Azure on-ramp; HD Colo 2.0 New Azure on-ramps ATL/BRU/VIE; land in Charlotte/Atlanta Expanding footprint

Management Commentary

  • CEO: “Robust demand across our key product segments drove strong leasing and acceleration in Core FFO per share growth… leasing kept pace with our 2024 record, lifting our backlog to a new high of $919 million” .
  • CFO: “We are increasing our core FFO guidance range for the full year 2025 by $0.05 to $7.05 to $7.15 per share… top-line and adjusted EBITDA growth of more than 10% in 2025 on a normalized, constant-currency basis” .
  • CEO on tariffs: “We’re seeing a very modest, less than 5% impact to potential build costs… supply chains very U.S.-focused or under USMCA” .
  • Strategy: “The fund will support approximately $10 billion of hyperscale data center investment… enabling us to serve robust demand while enhancing returns through fees” .

Q&A Highlights

  • Leasing outlook despite volatility: Pipeline “very robust” across both enterprise and hyperscale; largest signing occurred in March; quotes for large blocks “going out across multiple markets” .
  • Tariffs & supply chain: Tariffs expected to have “less than 5%” cost impact; proactive component orders and USMCA footprint help mitigate .
  • Land/capacity expansion: Charlotte to support up to 400MW campus; Atlanta ~100 acres post-quarter, >200MW supported; strategy ties hyperscale campuses near connectivity hubs .
  • Pricing & escalators: Positive pricing in both segments; majority of leases include ≥4% escalators or CPI link .
  • AI mix: ~Two-thirds of new signings AI-related in Q1; growing enterprise AI pipeline and rising power densities supported by HD Colo .

Estimates Context

  • Q1 2025 vs Wall Street (S&P Global): revenue $1.41B vs $1.42B*, FFO/share $1.67 vs $1.73*, GAAP EPS $0.27 vs $0.31* — modest misses on headline metrics despite strong Core FFO/share and Adjusted EBITDA execution .
  • Street FY outlook: 2025 revenue $6.06B* and 2026 revenue $6.73B* reflect multiyear growth underpinned by backlog commencements and development conversion; FFO/share consensus: $7.31* (FY25), $7.82* (FY26). Values marked with an asterisk (*) are from S&P Global.

Key Takeaways for Investors

  • Strong underlying demand with quality mix: Backlog at a record $919M and healthy renewal spreads (+5.6% cash) improve visibility; ~10-month lag should translate to H2’25/H1’26 revenue ramps .
  • Guidance raised across key lines: FY25 revenue, Adjusted EBITDA, and Core FFO/share all increased; constant-currency CFFO maintained, suggesting balanced confidence amid macro/FX .
  • Funding optionality expands: U.S. Hyperscale Fund (> $1.7B LPs) supports ~$10B of investments while generating fee income and capital efficiency; complements already robust liquidity .
  • Tactical risks: Small headline misses vs consensus and leverage up to 5.1x reflect the development ramp; occupancy (~84%) leaves room to improve via 0–1MW execution and interconnection attach .
  • Near-term trading setup: Guidance raise and record backlog are positives; modest revenue/FFO misses may temper reaction. Watch for H2 commencements cadence, additional fund closes, and pricing power in core metros .
  • Medium-term thesis: Multiyear acceleration driven by commencements (2025–2026), double-digit normalized top-line/EBITDA growth, rising development yields, and expanding ecosystem (cloud on-ramps, HD Colo) .

Footnote: Consensus/Guidance metrics marked with an asterisk (*) are values retrieved from S&P Global.