Digital Realty Trust Reports Strong 2024 Performance

Digital Realty Trust ((DLR)) has held its Q4 earnings call. Read on for the main highlights of the call.

Digital Realty Trust’s recent earnings call revealed a strong performance in 2024, characterized by record leasing and revenue growth, successful capital management, and continued innovation. However, the company also faces challenges such as lumpy demand in certain segments and supply chain constraints, which need to be addressed going forward.

Record Leasing and Revenue Growth

Digital Realty achieved a record $1 billion in total leasing for 2024, significantly driven by contributions from the 0 to 1 megawatt plus interconnection segment. The company’s core FFO per share grew by 6% in the fourth quarter, highlighting a robust financial performance. This substantial leasing activity underscores strong demand and positions the company well for future growth.

Increased Liquidity and Reduced Leverage

The company successfully raised over $2 billion in new debt and equity, along with $500 million from asset sales, boosting its liquidity to over $6 billion. This financial maneuvering reduced leverage to 4.8 times by the year-end, improving the company’s financial stability and providing a solid foundation for future investments.

Expansion and Innovation in Services

Digital Realty expanded its global portfolio capacity by more than 200 megawatts and its development pipeline by over 75%. The introduction of new products, such as the high-density Colo 2.0 and private AI Exchange, highlights the company’s commitment to innovation and meeting evolving customer needs.

Strong Global Demand and Customer Growth

In 2024, the company added nearly 600 new logos, with strong leasing activity in both the Americas and EMEA. Record leasing activity in these regions indicates robust demand, further bolstering Digital Realty’s market position and growth prospects.

Commitment to ESG and Sustainability

Digital Realty has begun construction on a 120-megawatt solar power plant in South Africa and signed community solar agreements in Chicago. These efforts support the company’s 100% renewable energy goals, demonstrating a strong commitment to environmental sustainability.

Lumpy Demand in Greater than 1 Megawatt Segment

The demand for larger capacity blocks remains inconsistent, with significant deals occurring sporadically. This unpredictability poses a challenge in forecasting and requires careful management to mitigate its impact on financial results.

Short-term Headwinds from Capital Recycling

The company’s efforts to enhance long-term growth through capital recycling have resulted in short-term headwinds, affecting immediate financial outcomes. While these activities are crucial for future stability, they temporarily impact current financial metrics.

Supply Chain and Power Constraints

Digital Realty continues to face tight supply chain issues and power delivery constraints, which could impact their ability to meet rising demand efficiently. Addressing these challenges will be crucial in maintaining operational efficiency and customer satisfaction.

Forward-looking Guidance

Looking ahead to 2025, Digital Realty has provided a robust guidance, forecasting a core FFO growth of 5.7% year-over-year. They anticipate over 10% growth in total revenue and adjusted EBITDA, with same capital cash NOI expected to increase by 3.5% to 4.5%. The company remains focused on capital recycling, innovation, and meeting the growing demand for data center capacity driven by AI, cloud, and digital transformation initiatives.

In summary, Digital Realty Trust’s earnings call highlighted a strong financial year, marked by record leasing and revenue growth. While challenges such as demand inconsistency and supply chain constraints persist, the company’s strategic initiatives and robust guidance for 2025 position it well for continued success. Investors and stakeholders will be keen to see how these strategies unfold in the coming year.