Prologis: The Smartest Backdoor Bet on AI Real Estate

Prologis Inc. (PLD) stock has dropped 1.3% despite a 4% gain initially after reporting Q2 earnings. The industrial REIT is positioning itself in the data center arena, offering land and power infrastructure to hyperscalers like Amazon and Meta. Prologis' earnings were solid, with a topline revenue of $2.03 billion and EPS of $1.46, beating forecasts and increasing 52% YoY. The company reaffirmed its full-year FFO guidance and has a net debt to adjusted EBITDA of 4.1x, indicating a strong financial footing. Prologis is a smart backdoor bet on AI real estate without paying a premium for dedicated data center REITs.

Prologis Inc. (PLD) has reported its second-quarter (Q2) 2025 results, demonstrating resilience despite a volatile environment. The company's stock initially gained 4% but later dropped by 1.3% following the announcement. Despite the stock movement, Prologis' earnings were robust, with a topline revenue of $2.03 billion and earnings per share (EPS) of $1.46, surpassing forecasts and marking a 52% year-over-year (YoY) increase [1].

Prologis' core funds from operations (Core FFO), a key measure for real estate investment trusts (REITs), increased by 9.0% to $1.46 per diluted share. This measure excludes net promote income (Expense) and is a crucial indicator of a REIT's operating performance. The company also saw a 33.7% decrease in net earnings per diluted share to $0.61, primarily due to lower gains and unrealized foreign exchange (FX) [1].

The company's strong operational performance is evident in its average occupancy rate, which reached 94.9% for the quarter, and a period-end occupancy rate of 95.1%. Leases commenced totaled 51.2 million square feet, and retention rates stood at 74.9%. The company's strategic capital expenditure, which includes acquisitions and development starts, totaled $1.43 billion, with a weighted average stabilized cap rate of 5.7% [1].

Prologis is also positioning itself as a key player in the data center market. The company is offering land and power infrastructure to major hyperscalers such as Amazon and Meta, aiming to capitalize on the growing demand for data centers. This strategic move underscores Prologis' commitment to diversifying its revenue streams and adapting to the evolving needs of its customers [1].

The company's financial footing remains strong, with a net debt to adjusted EBITDA ratio of 4.1x. This ratio indicates that Prologis has a manageable level of debt relative to its earnings before interest, taxes, depreciation, and amortization (EBITDA). The company has also issued debt totaling $5.8 billion at a weighted average interest rate of 4.5% and a term of 5.4 years, further strengthening its balance sheet [1].

Prologis reaffirmed its full-year FFO guidance, reflecting its confidence in the strength and resilience of its business. The company's guidance for net earnings is included in the table below, with a range of $3.00 to $3.15 per diluted share for 2025 [1].

In conclusion, Prologis Inc. reported solid Q2 2025 earnings, demonstrating strong operational performance and a strategic positioning in the data center market. The company's financial health remains robust, with a manageable debt-to-EBITDA ratio and a strong balance sheet. Investors should closely monitor Prologis' progress in the data center arena and its ability to execute on its strategic initiatives.

References:
[1] https://ir.prologis.com/press-releases/detail/1017/prologis-reports-second-quarter-2025-results