IRM Q2 2025: 47% Flow-Through Margin, 500MW Pre-Leased DC Pipeline
- Robust Data Center Pipeline: Iron Mountain’s management highlighted a strong pipeline of 500 megawatts in key markets (Northern Virginia, Richmond, Amsterdam, Chicago, and Madrid), driven by pre-leased construction that is expected to expedite revenue recognition and support future growth even as market focus shifts back from large language model campuses to cloud inference projects.
- Strong ALM Performance: The asset lifecycle management (ALM) segment showed 70% revenue growth with balanced momentum between enterprise and data center channels, bolstered by a high-volume trend and cross-selling opportunities—an encouraging indicator for sustained organic growth.
- Expanding Digital Solutions Business: The company’s Digital Experience Platform (DXP) is capturing market share by uniquely structuring unstructured data, leading to record revenue run rates (projected run rate of over $540 million) and strategic wins with major clients, underpinning Iron Mountain’s position as a digital innovation leader.
- Slower-than-expected data center leasing activity: Analysts noted that data center new lease signings were lighter than expected as customers have shifted their focus to building large language model campuses, which could delay the ramp‐up in IRM’s core data center revenue growth.
- Delayed treasury contract revenue and uncertainty around its ramp-up: The treasury contract is generating minimal revenue this quarter with most work deferred to next year, indicating near-term revenue uncertainty that could weigh on short-term performance.
- Dependence on shifting customer priorities: The transition of customer focus from traditional inference and core services to large language model infrastructure may create timing risks and instability in IRM’s revenue mix for the near term.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Total Revenue | FY 2025 | $6.74B to $6.89B | $6,790,000,000 to $6,940,000,000 | raised |
Adjusted EBITDA | FY 2025 | $2.505B to $2.555B | $2.520B to $2.570B | raised |
AFFO | FY 2025 | $1.48B to $1.51B | $1,505,000,000 to $1,530,000,000 | raised |
AFFO per Share | FY 2025 | $4.95 to $5.05 | $5.04 to $5.13 | raised |
Revenue | Q3 2025 | $1.68B | $1.79B | raised |
Adjusted EBITDA | Q3 2025 | $620 million | in excess of $650,000,000 | raised |
AFFO | Q3 2025 | $350 million | $385,000,000 | raised |
AFFO per Share | Q3 2025 | $1.18 | $1.28 | raised |
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Margin Outlook
Q: Is flow-through margin sustainable?
A: Management reported a 47% flow-through margin, driven by strong Global RIM performance and high-margin data center deals, reflecting consistent operating leverage that bodes well for future profitability. -
Data Center Slowdown
Q: Why fewer new lease signings?
A: They explained that fewer signings in the quarter resulted from customers initially prioritizing large language model campuses, with a current shift back toward inference and cloud solutions—a timing effect rather than a structural weakness. -
Leasing Timing
Q: Will leasing volume improve next year?
A: Management believes the current softness is temporary, as most new builds are 100% pre-leased and set to commence in upcoming quarters, paving the way for improved revenues in 2026. -
Megawatt Targets
Q: What are current megawatt targets?
A: They confirmed guidance of 30 to 80 megawatts for the year, with about 6 MW already leased to date, underlining a robust pipeline in key markets. -
ALM Growth
Q: What drove the ALM business growth?
A: Management emphasized balanced growth in ALM driven predominantly by increased volume in both enterprise and data center decommissioning channels, with modest pricing contributions reinforcing resilient demand. -
Hyperscale Decommissioning
Q: What factors are key in hyperscale decommissioning wins?
A: Success in this segment is largely attributed to their secure, flexible chain-of-custody services and global footprint, which enable efficient on-site and offsite decommissioning in a fragmented market. -
Treasury Contract
Q: What’s the status of treasury contract revenue?
A: Management noted the initial $140M contract is still ramping up, with minimal revenue recognized this quarter and significant seasonally driven revenue expected to accrue mainly in 2026. -
Data Center Ecosystem
Q: How is IRM positioned amid data center competition?
A: IRM is leveraging its prime properties in regions such as Northern Virginia and Amsterdam, focusing on inference and cloud build-out over low-latency retail, which secures its competitive position despite broader industry activity. -
Digital Business Growth
Q: How differentiated is the digital platform?
A: The digital business stands out with its unique DXP platform that structures unstructured data, driving strong double-digit growth and approaching a $540M run rate, effectively positioning it ahead of competitors.
Research analysts covering IRON MOUNTAIN.