Digital Realty Trust, Inc. RBC 2026 Global Communications Infrastructure Conference

Everybody to our next session. My name is Jon Atkin. I cover the communications infrastructure sector at RBC, and then with me for the next several minutes of Q&A is the Chief Financial Officer of Digital Realty Trust, Matt Mercier. Matt, welcome. Thank you. Thank you, John.

Appreciate you being here. So we're going to cover a lot of topics and see how many we get through.

Maybe starting with agentic AI and what you're seeing there. Sounds like there are some early demand signals. When do you start to kind of see that show up in bookings, things like cross-connect service fabric, and when do we get from preseason to early innings to maybe kind of the bulk of the demand?

Yeah, I mean, I've in terms of agentic, you know, I would say we're still we are still in the early innings, but we are I think we've seen, especially I mean, even over the last couple of quarters, definitely an uptick in what we're seeing around diverse deployments, within our zero-to-one that are taking up interconnection as well. So maybe to frame it, I mean, I think you're seeing demand is broad and diverse today across our product set. So which I'm sure we'll get into in terms of hyperscale, but also in our zero-to-one, which I would say more the agentic, although some of those cases I think are starting to see greater than or larger than greater than one megawatt deployments. But we've seen we've seen an increase in demand across our enterprise and service provider segment deploying diverse network-oriented deployments across multiple markets, globally. And I think we're starting we're actually starting to see that pick up in terms of discussions we're having across our global our global portfolio. So, you know, we've and I think some of the ways to characterize that are, you know, the last three quarters we've set records in our zero-to-one megawatt business.

That includes records within our interconnection as well to your question, just last quarter, I think was our was a record quarter in terms of interconnections. And we're seeing that show up not only in cross-connects, but also in service fabric demand, which still we still see a lot of opportunities. We add partners and capabilities across that across that product. But also, in our what we call our bulk fiber type product, which allows customers to be able to bring fiber across not only our campus, but also to other campuses, even outside in some cases, the digital realty portfolio. And that's part of stitching together what has been training more training-related deployments that are outside that, bringing them into more of our interconnected assets and campuses wanting to be here in Chicago, but across our broader global portfolio as well.

So the infrastructure requirement to support that growth, how does that look like versus, say, traditional colocation?

I would you know, the one thing I think we've seen, you know, our like our portfolio, I would call out two things at least that I've seen. One, I think you're seeing larger space and power requirements, you know, in some of these core markets needed to ultimately support, inference, and, you know, inference and more agentic AI type workflows. So, you know, what would typically have been a, you know, a standard kind of average 300 kW or below deployment within our zero-to-one megawatt, which would be landing in some of our most interconnected assets across our portfolio. We're now seeing greater than 500 kW a megawatt, and in some cases, you know, one to five megawatts is now starting to become more of a standard in terms of what we're seeing some of our enterprises as well as our service provider type customers take in order to support what is becoming a more diversified inference-oriented type architecture across our platform. And two is back to what I was mentioning before. I think in addition to seeing an increase in cross-connects, we're also seeing an increase in bulk fiber as the bandwidth needs increase to be able to connect to training facilities into these more dense interconnected carrier telco-heavy facilities that we have in multiple markets across the globe.

So moratorium and pipeline risk, is it just a broad topic area? And there's many U.S. metros and then globally, I think you probably see this as well, although it gets a little bit less attention. From investors, but they've all tightened or many have tightened data center permitting. Your current pipeline is not at risk, but you did flag concern about replenishing capacity in roughly the 2029 to 2032 period. How many years of pipeline visibility do you have before these constraints materially affect delivery?

Yeah, I mean, I mean, look, I think we've gotten ahead of, you know, I would say we gotten ahead of the game in terms of what we've done especially over the last several years both from a capital as well as a land and power perspective in order to put ourselves in a great position to extend what we see as a great opportunity set for several years to come. So you mentioned we have maybe a set context too as well. We have three gigawatts of operating capacity today. We got behind that, we've got 1.4 gigawatts under development. So right there, that's a 50% increase in what our portfolio could look like within the next call it two years. After that, we've got seven gigawatts of land capacity that we'll be able to bring online over the next call it two to five-plus years in order to continue our pathway of growth across our global portfolio. You know, we have that seven gigawatts of land is in various stages of power procurement. There's probably almost four three and a half to four gigawatts that we have in hand today in terms of like ESAs ready in hand.

And then we're working through the rest of that. So again, that's already another doubling of our overall capacity that we could bring online over that call it two to five-year time horizon. Yes, I mean, there's never I would say there's never been a better time to be in this industry, but there's also been another you know, it's never been probably harder in terms of bringing on power and related capacity. But again, that's where we've been I think well ahead in bringing land capacity online, broadening our capital sources, and putting us in a great position to be able to continue our momentum of delivering what we've recently talked about, which is called 10% bottom line growth, which we've done last year. We expect to do this year. And expect to continue that for several years to come.

So with the moratorium topic, work its way into any of your releasing discussions and even indirectly affect things like renewal spreads. Do you expect that or not?

I mean, look, there's I think there's a the problem with the short answer is yes, in some regards, but look, I think there's a few things that are happening right now. One of which is just there's just a broad supply demand imbalance, right? And so we've seen pricing continue to pick up across the majority of our global markets. I mean, it started a few years ago with Virginia, which was kind of the initial foray, although I would say we're we've seen last week I was in Europe, I was in Zurich and London. We did a couple of property tours, including some customers. And it actually reminded me, I mean, Europe has seen a level of call it constraints well ahead of what we're seeing in the U.S. Maybe different degrees, but digital, we've been operating in 50-plus markets. We've seen where constraints have come up over the last several years. Europe's one place, Singapore's another. I think one thing that we've seen, which probably goes to where your point is, as demand continues to improve and supply becomes constrained, pricing is what tends to move. So we've seen that in terms of our new signings and our development yields, which have picked up over the last call it year to two years.

We're seeing that in terms of renewal spreads. Just this last quarter, I think we set a record in terms of what our renewal spreads were which were over 60% or greater than a megawatt categories and very healthy within our zero to one. We're seeing on top of that, we're seeing an environment, at least in our portfolio, where over the next couple of years our expiring rents are on a downward trajectory versus market that I expect will continue to increase as a result of where inflation is heading, where interest rates are going. And again, back to what has been a very favorable supply-demand backdrop that I think all brings itself to a better pricing environment.

Maybe talk about neoclouds. I think all 1.4 billion of your signings and first half '26 were IG-rated traditional hyperscalers. And now you've got IG project-level ratings, hyperscale credit backstops for neoclouds and how does that kind of factor into your underwriting framework?