DigitalBridge's Q3 2025: Contradictions Emerge on Carried Interest Monetization, M&A Strategy, and Valuation Gaps

Date of Call: October 30, 2025

Financials Results

• Revenue: $93M fee revenue, up 22% YOY (CFO reported; CEO cited ~$94M)

Guidance:

• FRE expected to achieve or exceed 2025 guidance; LTM FRE margin elevated through flagship final close in Q4.
• Q4 is historically the strongest quarter and management is on track to meet full-year objectives.
• Final close of flagship fund and targeted ~$7B flagship capital formation in the coming weeks.
• Launching digital energy and stabilized data-center strategies and scaling the Franklin Templeton private-wealth distribution.
• Continued emphasis on co-invest fee expansion and capital formation; record leasing to drive FEEUM and future carried interest.
• Expect meaningful carried-interest realizations over the next 24–36 months as portfolio monetizations occur.

Business Commentary:

* Record Leasing and Data Center Growth: - DigitalBridge reported 2.6 gigawatts of data center leasing in Q3, representing over one-third of total U.S. hyperscale leasing for the quarter, and contributing to over $40 billion in new development contracts. - This growth was driven by the strategic value of DigitalBridge's power bank, which enabled it to capitalize on the demand for AI infrastructure and support projects like the Frontier and Lighthouse campuses.

• Capital Formation and Financial Performance:
• The company raised $4.1 billion in new capital year-to-date, exceeding its Q3 capital formation target.
• The financial performance was marked by $93 million in fee revenue, an increase of 22% year-over-year, and $37 million in fee-related earnings, which grew 43% year-over-year.

• This growth was supported by strong co-investment activity and high-margin catch-up fees from the firm's flagship funds.

• Strategic Partnerships and Distribution Channels:

• DigitalBridge partnered with Franklin Templeton to launch a private wealth distribution channel, focusing on democratizing access to digital and energy infrastructure investments.

• This partnership aimed to leverage Franklin Templeton's global investment leadership and reach to access mass affluent investors, presenting an opportunity to increase AUM and FEEUM.

• Power Bank and Infrastructure Positioning:

• The company's strategic positioning around power enabled it to attract significant institutional capital and broaden its LP base, aiming to attract technology-focused investors and sovereign wealth funds.
• The Frontier and Lighthouse campuses are expected to generate significant fee streams and carried interest, strengthening DigitalBridge's position as a leading player in AI infrastructure.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted fee revenues of ~$93–94M (up 22% YOY), FRE up 43% to $37M, $1.6B raised in the quarter (YTD $4.1B), record 2.6 GW leased, and FEEUM of $40.7B achieved a quarter early—statements emphasize strong growth, capital formation and execution.

Q&A:

• Question from Michael Elias (TD Cowen): In the past you referenced $1.55 a share in carried interest per gigawatt leased — when in the lifecycle is unrealized carried interest recognized (upon lease signing or delivery)? Also, with more gigawatt-scale deals emerging, how capable is your power bank to take on additional massive projects?
  Response: Carry is accrued at multiple milestones (entitlements/power, lease signing, delivery of halls) and monetization typically takes ~3–5 years with material realizations expected in ~24–36 months; DigitalBridge has a large pipeline (~7 GW) and a 21 GW secured power bank enabling continued large-scale leasing though future deals may trend toward 250–800 MW.

• Question from Jade Rahmani (Keefe, Bruyette, & Woods): How do you envision stabilized capitalization/ownership of the new mega data-center projects — long-term owners like REITs, infrastructure funds or hyperscalers, and how does DigitalBridge's structuring expertise fit?
  Response: They’re positioning stabilized projects for real-estate-style ownership via the Data Center Income Fund (DCIF) to attract real-estate allocators (REITs, infra funds, institutional investors and hyperscalers), unlocking a large new capital pool and leveraging DBRG structuring expertise to provide liquidity solutions.

• Question from Jade Rahmani (Keefe, Bruyette, & Woods): What do fund outflows look like for DBP I, II and InfraBridge — i.e., how much legacy fund runoff should we expect in 2026?
  Response: Management declined to provide specific runoff guidance, saying Fund I is nearing its natural turning point and monetizations/returns will be reported in their normal cadence; credit/loan turnover is typically 24–36 months.

• Question from Timothy D'Agostino (B. Riley Securities): Is the Franklin Templeton private-wealth partnership a one-time arrangement or should we expect additional similar partnerships?
  Response: The Franklin Templeton partnership is not exclusive; DBRG expects additional private-wealth distribution partnerships (they previously launched a successful product with Goldman and will pursue other platforms).

• Question from Timothy D'Agostino (B. Riley Securities): Please provide color on evergreen/long-duration capital and why that structure is attractive to you.
  Response: DBRG will use a mix of structures—open-ended/evergreen for private wealth and real-estate-style products and closed-end flagship funds for certain allocators—matching product structure to investor preferences as part of a multi-strategy approach.

• Question from Ric Prentiss (Raymond James): How should we think about the pacing and path of carried-interest monetization across your ~50 portfolio companies to realize this value for shareholders?
  Response: Monetizations should ramp as older-vintage flagship funds mature (vintages suggest realizations in 2026–2028), producing increasing frequency and magnitude of carried interest; timing is influenced by decisions to continue reinvesting in high-opportunity assets versus exiting.

• Question from Ric Prentiss (Raymond James): On valuations—are you marking assets to recent transactions or comps prior to sales?
  Response: Valuations reflect company-level performance and best-estimate marks with qualitative judgment and contingencies for uncertainty; DBRG generally realizes the second step of value on actual exits rather than marking solely to comps pre-sale.

• Question from Ric Prentiss (Raymond James): Noting Elon Musk now follows you on social media, can you describe your relationship with him?
  Response: Marc declined comment on social media but confirmed a commercial relationship: DBRG portfolio companies serve Starlink, SpaceX, Tesla and xAI and view Musk’s businesses as important customers with potential to grow strategically.

• Question from Richard Choe (JPMorgan): You won the Vantage Frontier and Lighthouse leases—what gave DigitalBridge/Vantage the advantage versus competitors in securing these deals?
  Response: The advantage is execution capability: long operating track record, secured power positions (power bank), global platform breadth and experienced teams able to deliver complex, high-density campuses on schedule for investment-grade hyperscale customers.

• Question from Richard Choe (JPMorgan): Will these Frontier/Lighthouse projects meaningfully contribute to FEEUM early in 2026 or later in 2026/2027?
  Response: Co-invest capital tied to these projects produces immediate FEEUM uplift, but the largest contributions materialize over the next ~2 years as capital is deployed and projects stabilize; fees and FRE build as leasing and deployment continue.

• Question from Eric Luebchow (Wells Fargo): Regarding the power bank, what is the split between behind-the-meter solutions and grid-connected power, and how does the behind-the-meter opportunity tie into the energy fund?
  Response: DBRG’s digital-power strategy mixes behind-the-meter microgrids with grid-interconnected solutions and battery storage, partnering with utilities and industrial partners; projects are contracted and form a core pipeline for the energy fund, addressing a large multi‑hundred‑billion-dollar power build opportunity.

• Question from Eric Luebchow (Wells Fargo): How do you assess pricing, lease terms and credit risk for newer LLM/NeoCloud tenants that may not be profitable today?
  Response: DBRG differentiates tenant credit profiles and is selective—avoiding weaker NeoCloud models—leveraging scale and customer diversity to choose higher-quality counterparties and limit exposure to unproven credits.

Contradiction Point 1

Carried Interest Realization and Monetization

It involves the timing and expectations around the realization and monetization of carried interest, which is crucial for understanding the financial trajectory of the company.

How should we assess carried interest realization from portfolio companies with stable monetization? - Ric Prentiss (Raymond James)

2025Q3: Carried interest is expected to become more frequent as vintage funds approach monetization phase. Funds like Fund I are now realizing carry, and we expect more carry to accrue as these companies mature. - Marc Ganzi(CEO & Director)

What caused the GAAP reversal in carried interest, and when do you expect realized carried interest to occur? - Jade Rahmani (KBW)

2025Q2: Realization of carry is dependent on asset exit activity. As funds mature, more exits will lead to realized carry, expected to begin in 2026 and 2027, aligning with the vintage of the funds. - Thomas Mayrhofer(CFO)

Contradiction Point 2

M&A Strategy and Focus

It highlights differences in the company's approach to M&A and strategic growth, which are important for understanding future financial and operational performance.

How do new data center projects achieve stabilized capitalization, and what solutions does DigitalBridge offer? - Jade Rahmani (KBW)

2025Q3: DigitalBridge is actively pursuing M&A opportunities, focusing on accretive investments and value creation. JP Morgan is funding a significant portion of growth, and the firm is open to considering strategic additions to its platform. - Marc Ganzi(CEO & Director)

What is the focus of your M&A strategy, and are there any press reports about potential acquisitions? - Ric Prentiss (Raymond James)

2025Q2: DigitalBridge is for sale daily, and the focus is on building shareholder value through organic growth and acquisition. - Marc Ganzi(CEO & Director)

Contradiction Point 3

Carried Interest Monetization and Market Conditions

It involves differing perspectives on the timing and likelihood of carried interest monetization, which affects investor expectations and financial planning.

When is the unrealized carried interest recognized in the data center's life cycle? How would you describe your capacity to handle larger projects given the current gigawatt-scale deals? - Michael Elias (TD Cowen)

2025Q3: We're continuing to work with our funds to optimize their portfolio composition, targeting a target of 8% to 10% distributions plus tax distributions. - Marc Ganzi(CEO & Director)

How does market volatility affect potential carried interest events, particularly their timing and likelihood this year? - Ric Prentiss (Raymond James)

2025Q1: Our current guidance does not include significant carried interest distributions. - Marc Ganzi(CEO & Director)

Contradiction Point 4

Valuation Disconnect and Investor Confidence

It highlights differing explanations for the valuation disconnect between DigitalBridge and its peers, which impacts investor perceptions and valuation.

Have you noticed any shifts in investor interest from data centers to towers due to recent market volatility? - Richard Choe (JPMorgan)

2025Q3: We're not seeing a retreat from data centers. Investor interest remains strong in both towers and data centers. The narrative of data center retreat doesn't align with market performance and customer spending. - Marc Ganzi(CEO & Director)

Can you clarify the mark-to-market impact on carried interest and its expected progression over the year? - Randy Binner (B. Riley Securities)

2025Q1: The disconnect in valuation is due to past guidance timing issues. We've improved execution and investor confidence. Plans include growing private credit, scaling power and data centers, and leveraging our differentiated strategy to attract investors and close the valuation gap. - Marc Ganzi(CEO & Director)

Contradiction Point 5

Fundraising Strategy and Growth Expectations

It involves mixed signals regarding the company's fundraising strategy and growth expectations, which are crucial for investor confidence.

What is your perspective on how new data center projects achieve stable capitalization, and what are DigitalBridge's solutions? - Jade Rahmani (KBW)

2025Q3: We believe that the total addressable market for the data center sector is many multiples of our current pipeline and hence offers a significant runway for future growth. - Marc Ganzi(CEO & Director)

Does the current investment focus favor co-investment over the flagship fund? - Anthony Howe (Truist Securities)

2024Q4: For the balance of this year, we expect to raise at least $1 billion across a diversified set of investors, primarily via new funds, and we continue to expect to reach beyond our existing investor base. - Tom Mayrhofer(CFO)