The paragraph is from the Digital Realty Third Quarter 2024 Earnings Conference Call, where Jordan Sadler, Senior Vice President of Public and Private Investor Relations, provides an overview. The call features President and CEO Andy Power, CFO Matt Mercier, and other executives. Sadler mentions that management will make forward-looking statements, noting risks and uncertainties, and highlights that the third quarter saw record-breaking new leasing volume of $521 million, surpassing previous expectations and even exceeding the entire leasing activity of 2023. This has increased the backlog of signed but not commenced leases to nearly $860 million.

The paragraph discusses Digital Realty's strong performance in the recent quarter, highlighting record bookings for interconnection segments and improved pricing for data center capacity. It mentions a significant increase in the development pipeline, which is largely pre-leased, contributing to the company's goal of sustainable growth. Andrew Power, the President and CEO, credits the record results to the team's ability to capitalize on high demand for data center capacity, driven by growth in cloud and digital transformation efforts.

The paragraph outlines the company's success and strategic advantages in the third quarter, highlighting achievements such as $521 million in new leases, driven by large hyperscale deals in North America, and significant growth in their interconnection business. The company has a global presence, a robust land bank supporting over 3 gigawatts of development, and strong financial partnerships. This quarter saw record-setting leasing activity, particularly in deals over 1 megawatt and in small interconnections under 0.5 megawatt, underscoring the company's effective full spectrum strategy and increasing demand for data center capacity.

The paragraph highlights the company's strong performance in the data center market, characterized by a record number of new clients and significant growth in export activity, especially between the Americas and EMEA. The company has a backlog of $859 million in leases and has expanded its development pipeline by 50%, with 644 megawatts under construction and 3 gigawatts of potential capacity. Additionally, the company has strengthened its position in Europe through acquisitions and diversified its capital sources. It also notes the efforts of hyperscalers to secure power for expanding data center needs, including reactivating facilities and forming partnerships for nuclear energy solutions to ensure long-term, carbon-free power supply.

The paragraph discusses Digital Realty's capabilities in addressing power generation challenges and managing data center infrastructure, highlighting the importance of smaller capacity blocks and supply chain management. It emphasizes the company's role in enabling private cloud and hybrid IT solutions, noting several recent customer wins with Global 2000 telecom, healthcare, financial, technology, and electronics companies. These partnerships involve deploying distributed cloud solutions on PlatformDIGITAL, emphasizing connectivity, cloud compliance, and geographical data considerations.

The paragraph discusses Digital Realty's recent achievements and initiatives related to global expansion and ESG (Environmental, Social, and Governance) efforts. A cloud optimization provider has expanded its capacity on PlatformDIGITAL across two continents to cater to growing enterprise customer needs. The company leads the industry in green IT capacity and has received significant ESG recognition, including several awards for its data centers in Zurich and Japan. Digital Realty has also issued a €850 million green bond and incorporated a sustainability-linked pricing component in its credit facility, emphasizing its commitment to sustainability. Financial results show robust leasing activity in the third quarter, with $521 million in new leases, the majority of which are large-scale deals in the Americas. The paragraph concludes with a transition to the company’s CFO, Matt Mercier, to further detail the financial performance.

The paragraph discusses Digital Realty's performance in leasing and renewals. Over 75% of leases include significant annual rent increases, boosting the company's long-term growth. The backlog of leases increased by over 60% to $859 million, representing 20% of this quarter's annualized data center revenues, with most commencing by 2026. Specifically, $100 million is set to start by year-end, $350 million in the next year, and over $300 million in 2026. The company also signed $258 million in renewal leases during the third quarter, achieving a 15.2% cash increase, resulting in a 10.5% year-to-date cash renewal spread. Excluding significant package deals, renewal spreads were around 5.8%, aligning with their 5% to 7% guidance for 2024. Breaking down by segments, cash renewal spreads were up 4.5% in the sub-1 megawatt segment and over 30% in the greater-than-1 megawatt segment, with the latter still up 8.6% excluding package deals. Churn remained low at 1.5%.

In the third quarter, the company reported core funds from operations (FFO) of $1.67 per share, reflecting strong growth in revenues and adjusted EBITDA. Data center revenue increased by 7.5% year-over-year, and 10% when adjusted for transaction activity, due to improved renewal spreads and rent escalators. Adjusted EBITDA grew by 11% year-over-year, with margins benefiting from higher revenues. Same capital NOI growth was modest at 0.8% due to higher operating costs and bad debt reserves. Year-to-date, capital cash NOI rose by 2.6%, despite power margin headwinds in EMEA. The company invested $651 million in development, doubling its pipeline in the Americas and expanding in EMEA, with a total of 644 megawatts under construction, 74% preleased.

The company reports strong financial performance, with development capacity in EMEA and APAC expecting yields over 10%. They spent $2.4 billion on development CapEx, offset by $900 million from partners. They strengthened their balance sheet, raising over $800 million in equity and managing debt with actions like paying off $250 million in gilts and issuing an EUR850 million green bond. Credit facilities were increased, and they have nearly $5 billion in liquidity with a net debt-to-EBITDA ratio of 5.4. Their debt is primarily non-U.S. dollar denominated and fixed rate. They have no debt maturities until 2025, and their debt profile is well-laddered. The company raised its core FFO guidance for 2024, reflecting strong leasing, commencements, and renewal pricing, despite some customer bankruptcies.

The company is adjusting its financial guidance to account for lower utility expense reimbursements, increased leasing volumes, and higher pricing. They are raising their full-year cash renewal expectations to 8%-10% and tightening same-store guidance to 2.75%-3.25%. For 2024, they've adjusted net share development spending to $2.2-$2.4 billion while maintaining maintenance CapEx ranges. They completed a EUR850 million bond raise, slightly ahead of expectations, offset by higher short-term rates. Core FFO per share is expected to rise due to strong leasing performance. Looking to 2025 and beyond, Digital Realty anticipates accelerated growth as the demand for data centers remains strong. The remarks concluded, and the Q&A session began with a question from Michael Rollins of Citi, praising the company for exceeding expectations and inquiring about the demand possibly pulling forward future opportunities.

In the paragraph, Andrew Power responds to a question about the readiness of capacity that is in the pipeline but not yet in development. He mentions that while there hasn't been a significant pull forward in the quarter, the available capacity isn't yet ready to be sold, but preparations are progressing rapidly. He highlights that significant signings have taken place in key markets like Manassas, Ashburn, and Chicago, with other areas like Dallas and several international locations being prepared for power deliveries. Across various markets, they are aggregating over 3 gigawatts of capacity. Additionally, they have acquired new parcels, such as one near their Richardson campus in Dallas, which will support further growth in capacity. Overall, while growth is being systematically prepared, it isn't happening rapidly due to multiple factors. The paragraph concludes with a transition to the next question from Jon Petersen with Jefferies, who commends the team's performance in the quarter.

The discussion revolves around the use of AI and advanced GPU technology in large lease agreements, requiring adaptations in design for higher power densities. There have been some inflationary impacts on build costs, but these increases are minimal compared to the upward movement in rental rates. Andrew Power acknowledges the team effort in achieving these results, highlighting significant contributions from AI, which accounted for about 50% of overall bookings. Colin McLean emphasizes the high demand for large capacity blocks in core markets, as clients seek to leverage AI capabilities.

The paragraph discusses the development and strategic planning of a sub-1 megawatt framework and the introduction of the HD Colo program, led by Chris and his team. It highlights the focus on data center design adaptation to accommodate the increasing demands of cloud infrastructure and artificial intelligence (AI). Key aspects include modularity, advanced cooling techniques like liquid cooling, and efficient retrofitting to meet AI needs. The discussion also covers capacity blocks and the significance of interconnectivity in AI environments. The HD Colo offering has been launched to address these evolving requirements.

The paragraph discusses a conversation between David Barden of Bank of America and Andrew Power. David acknowledges a strong quarter following a non-record second quarter and a record first quarter, leading to confusion about the "new normal" expectation. He notes the average performance in the first half and a significant third-quarter result. David asks Andrew to clarify expectations for this performance moving forward and asks about the significant AI-related bookings, which remained at 50% in both record quarters, implying strong growth in other areas as well. Andrew Power is expected to address these points.

The paragraph discusses the company's advancements and growth in infrastructure and AI utilization, emphasizing the demand for digital transformation, enterprise, and cloud computing. It highlights the company's success in securing long-term contracts and its capacity to adapt infrastructure over time. The paragraph notes a significant increase in smaller interconnection deals and mentions a record increase in megawatt volume and pricing. While acknowledging that replicating this quarter's record in Q4 might be challenging due to upcoming holidays, the company believes it has the potential to sustain similar growth in the future.

The paragraph discusses the impact of a strong backlog of contracts, which are expected to lead to long-term sustainable growth starting in 2025 and 2026. The backlog currently represents about 20% of the revenue base and is seen as having potential to grow and stabilize future revenue. During a Q&A session, Jonathan Atkin from RBC Capital Markets inquires about future capital expenditure (CapEx) levels considering the demand and backlog. Andrew Power defers to Matthew Mercier, who explains that current CapEx for 2024 has been specified and anticipates that 2025 CapEx will not be lower, with more detailed guidance to be provided in the future.

The paragraph discusses the company's current financial stance, highlighting that they have met their leverage targets and maintain $5 billion in liquidity. In response to Richard Choe's question about large package deals and a 4% escalation in these deals, Andrew Power explains that the company has been proactively adjusting aspects such as rates and contract duration to cope with changes like inflation, particularly incorporating more CPI clauses in their larger contracts. He emphasizes that while large package deals are infrequent, they have contributed positively to their financial strategy, maintaining strong cash mark-to-market values and successful contract renewals.

The paragraph discusses a company's strategy and challenges in managing a large customer base and expanding its infrastructure. It highlights the need to provide holistic solutions to meet urgent customer needs and emphasizes the importance of leveraging relationships and tools for growth. During a Q&A session, Eric Luebchow from Wells Fargo asks about the company's strategy for maintaining its land portfolio and its ability to manage power delivery issues, particularly in Northern Virginia. Andrew Power responds by noting the company's success in securing large capacity contracts in Northern Virginia and discusses the availability of significant IT load capacity in both Digital Dallas and Manassas, indicating ongoing efforts to address power delivery challenges in their footprint.

The paragraph discusses the expansion plans and growth potential of a company, focusing on their infrastructure development timeline and capacity. It mentions upcoming projects that are set to be operational from late 2025 to 2027, with significant power output expected from their facilities in Digital Dallas and Manassas. There's also an additional capacity planned for Northern Virginia. Gregory Wright highlights the company's substantial buildable capacity in existing markets, amounting to over 3 gigawatts, underscoring their strong growth pipeline. The strategy involves acquiring land and resources globally, specifically in North and South America, Europe, Africa (notably Johannesburg and Cape Town), and major APAC markets.

The paragraph discusses the company's strategy for growth and expansion in the data center market. They are focusing on markets with robust and diverse demand, such as enterprise digital transformation, hybrid IT, service provider, and AI demand. They operate in 50 metropolitan areas with a growth capacity of over 3 gigawatts and aim to expand their presence in existing markets where they already have a strong position. They are cautious about entering new markets with uncertain long-term demand and are not chasing demand for the sake of it. The focus is on increasing their footprint in areas where they are already major players.

The paragraph discusses a company's approach to achieving long-term sustainable growth by maintaining a robust and diverse customer demand, which helps in maintaining pricing power during contract renewals. A question is raised by Irvin Liu from Evercore ISI about the company's growth prospects, specifically regarding the potential for growth acceleration and the medium-term growth outlook. Andrew Power prompts Matthew Mercier to address the question, and Mercier reiterates the company's previous guidance of mid-single-digit growth for 2025. Mercier notes that this growth expectation is despite the company's efforts to deleverage over the past 12 to 18 months. The emphasis is on improving the company's long-term sustainable growth profile, with some initiatives contributing to financial performance more quickly than others.

In the paragraph, the speaker discusses financial projections and performance, highlighting a current backlog of $350 million for the next year and $300 million for 2026, which is $200 million more than the previous year's forecast. This reflects confidence in meeting and exceeding growth goals for 2025 and beyond. During the earnings call, Jim Schneider from Goldman Sachs inquires about the composition of bookings for the quarter. Andrew Power defers to Colin McLean, who elaborates that there were approximately 1,000 customers booked on the platform in Q3, with 149 being new customers, primarily in the commercial segment.

The paragraph discusses the company's focus on expanding its customer base within large enterprises, highlighting significant growth in this segment. Of the $66 million in bookings, 52% came from large enterprises, marking a record high. This growth is attributed to increasing demand for PlatformDIGITAL driven by digital transformation, cloud, and AI needs. The company reports an all-time high pipeline for Q4, with strong bookings in primary markets and a notable share coming through indirect channels. This flexibility in meeting diverse client requirements is emphasized as a key value proposition. Overall, the quarter was robust in terms of new customers and types of clients. Michael Elias from TD Cowen then comments on the company's exceptional quarter and inquires about changes in the enterprise segment's booking run rate.

The paragraph discusses the enterprise market strategy and pricing for the company. Andrew Power addresses questions about improvements in the enterprise backdrop and pricing strategies. He emphasizes the company's focus on providing a strong value proposition to customers, which has been a long-term effort to drive success and growth. The company is seeing growth in the 0-1 megawatt signings category, with cash mark-to-markets up by 4.5% on an LTM basis and 70 basis points quarter-over-quarter. Power highlights the company's strategic priority to continue building on this success by commercializing the value they provide, particularly through interconnection opportunities. The overall goal is to offer more value to customers by addressing their infrastructure, power densities, and connectivity needs.

The paragraph discusses the ongoing transformation of a company into a platform-oriented service provider for enterprises and service providers, focusing on hybrid IT, cloud, and AI. Colin McLean credits this transformation as a multiyear effort, highlighting recent expansions in Dallas, Zurich, and Amsterdam that attract enterprises. The growth of PlatformDIGITAL is seen as an indicator of the increasing value enterprises find in the platform, evidenced by a record percentage of exports being between 0-1 megawatt. In a Q&A section, Georgi Dinkov asks about rising development yields and if they could go even higher, also seeking details on the development pipeline contracts. Andrew Power is set to respond.

The paragraph discusses a company's accelerated development and increased capital expenditures, driven by high demand. They mention being 75% preleased overall and 97% in North America, with some North American signings having longer commencing trails. The company focuses on selling not just immediate capacity but also meeting customer needs for future capacity. They aim to maintain or improve yields by scaling infrastructure and seizing the right rates for better returns. The discussion involves commercials like rates, escalations, real estate, tax bases, and renewal options. An operator introduces a question from Matt Niknam of Deutsche Bank, who inquires about AI bookings, whether contributions are from enterprise or sovereign players, or mainly traditional hyperscalers and newer AI model builders. Andrew Power appreciates Matt's adherence to specified questioning guidelines.

In the paragraph, Christopher Sharp responds to a question about AI demand and developments in the company. He mentions that AI demand is broad across various segments, not just limited to hyperscalers. A key highlight is the company's collaboration with NVIDIA, demonstrated by hosting NVIDIA's CEO Jensen Wong for the launch of the largest DGX supercomputer in Europe, in partnership with the Novo Nordisk Foundation. This project underscores the importance of private AI deployments in their portfolio. Sharp also emphasizes Digital Realty's commitment to sustainability, as the facility operates on 100% renewable power. In response to a question from David Guarino about leasing in the Americas, higher rental rates per kilowatt in certain areas like Ashburn are indicated.

The paragraph features a discussion involving Andrew Power and Nicholas Del Deo about market rates and development strategies. Andrew Power notes that GAAP rates are affected by lease durations and market conditions. He mentions that Ashburn has seen high rates with some customers in specific capacity blocks and suggests other markets like Chicago and Dallas are catching up. In response to Nicholas Del Deo's query about ensuring timely and budget-conscious project delivery, Power emphasizes the company's 20-year focus on the business, long-term operations in various markets, and strategic planning with utility providers. He highlights the importance of managing the supply chain as they scale their operations.

The paragraph highlights the company's strong relationships with vendors and a commitment to future-proofing supply chains through collaboration. It mentions the ability to leverage economies of scale by moving resources across markets and emphasizes investment in team development, systems, and operational scaling. The business is capital-intensive, and the organization has successfully supplemented public equity with private investments, positioning itself for long-term growth supported by stable partners. The Q&A portion of the call concludes, and CEO Andy Power expresses pride in the company's strong quarterly performance, increased guidance, and growth prospects, especially in data center demand, while maintaining a focus on seizing future opportunities.

The paragraph expresses gratitude towards the Digital Realty team for their hard work and indicates the conclusion of a conference, with the operator thanking attendees and allowing them to disconnect.

This summary was generated with AI and may contain some inaccuracies.