Digital Realty's Q2 2025: Unraveling Contradictions in AI Demand, Market Growth, and Leasing Dynamics

Leasing environment and market conditions, AI adoption and market leadership, AI demand and contribution to bookings, hyperscale demand and market momentum, 0-1 megawatt category growth and market share are the key contradictions discussed in Digital Realty's latest 2025Q2 earnings call.



Revenue and Core FFO Growth:
- Digital Realty's core FFO surged to a record $1.87 per share in Q2 2025, up 13% year-over-year.
- The significant growth was driven by record lease commencements, low churn, and higher fee income, reflecting the ongoing momentum in the company's business operations.

Growth in 0-1 Megawatt Plus Interconnection:
- The company reported $90 million in bookings for the 0-1 megawatt plus interconnection category, which is 18% higher than the previous record.
- The increase in demand for this category is attributed to a growing customer preference for connectivity-rich metro campuses and mission-critical deployments that support hybrid multi-cloud IT applications.

Hyperscale Demand and Capacity:
- Digital Realty has a total inventory runway for capacity of 5 gigawatts, supported by a $15 billion private capital fund.
- The demand for hyperscale capacity is strong, particularly in North American markets like Northern Virginia, driven by customer needs for AI and cloud computing workloads.

Funding Strategy and Financial Flexibility:
- The company launched the U.S. Hyperscale Data Center Fund with over $3 billion in LP equity commitments, surpassing its target.
- This strategic move allows Digital Realty to support customer growth without overtaxing their balance sheet, diversifying capital sources and enhancing long-term financial flexibility.