DigitalBridge Group, Inc. Q3 FY2025 Earnings Call

Good morning, everyone, and welcome to DigitalBridge's Third Quarter 2025 Conference Call. Speaking on the call today from the company is Marc Ganzi, our CEO; and Tom Mayrhofer, our CFO. I'll quickly cover the safe harbor. Some of the statements that we make regarding our business operations and financial performance may be considered forward-looking, and such statements involve a number of risks and uncertainties that could cause actual results to differ materially. All information discussed on this call is as of today, October 30, 2025, and DigitalBridge does not intend and undertakes no duty to update it for future events or circumstances. For information, please refer to the risk factors discussed in our most recent Form 10-K filed with the SEC for the year ending December 31, 2024, and our Form 10-Q to be filed with the SEC for the quarter ending September 30, 2025. With that, let's get started. I'll turn the call over to Marc Ganzi, our CEO. Marc?

Thanks, Severin, and welcome, everyone, to our third quarter 2025 business update. We appreciate you joining us on the call and look forward to answering your questions. Let's get to the quarter. This quarter really exemplifies what we've been building towards at DigitalBridge, from our near-term financial goals to our longer-term strategic priorities. Let's get started with the key highlights that align with our strategic road map. First, financial performance. DigitalBridge delivered another quarter of robust growth with fee revenues reaching $94 million, up 22% year-over-year. Our fee-related earnings grew 43% to $37 million in the third quarter, reflecting continued margin improvement as revenue growth continues to outpace expenses. Second, capital formation. We raised $1.6 billion in new capital during the quarter, bringing our year-to-date total to $4.1 billion. Look, we're well positioned thinking through the fourth quarter here as we remain on track to meet our full-year objectives. As most of you know, the fourth quarter is historically our strongest quarter. Finally, and this is the most important story of the quarter, the relevance and strategic value of our power bank was on full display. We saw record data center leasing activity across our portfolio that will build and accrue significant value for you, our investors, over time. Our portfolio company, Vantage Data Centers, announced the Frontier mega campus in Texas, a $25 billion, 1.4 gigawatt development serving the leading AI infrastructure build-out. This was followed up by a second campus, dubbed Lighthouse in Wisconsin, a $15 billion-plus development to support the expanding OpenAI and Oracle Stargate project. These landmark transactions demonstrate that our years of securing power across the portfolio are now translating into the largest leasing commitments in data center history. I talked about it last quarter, having a power bank that is ready to go for our customers is a comparative advantage. Let me put this quarter's performance in a broader context. Continued financial performance and capital formation that advances us towards exceeding our full-year objectives. What makes this quarter truly distinctive is how our strategic positioning around power is creating differentiated outcomes at the portfolio level. For years, we've talked about the importance of power as the critical constraint in the AI era. Today, we're seeing that thesis play out in real time, and DigitalBridge is leading on the front. As I referenced, year-to-date capital formation of $4.1 billion positions the firm to surpass our financial targets. We achieved our $40 billion FEEUM target one quarter ahead of schedule, reaching $40.7 billion as of the third quarter. This milestone reflects both the strength of demand for digital infrastructure and the execution capabilities of the DigitalBridge global platform. The record FEEUM today translates directly into revenue and earnings growth. We're seeing particularly robust activity in co-invest, where third quarter fee rates continue to expand relative to historic levels, up to 70 basis points in Q3. I talked about this earlier this year in multiple quarters. We're very focused on expanding margins in our co-investment program, and we're getting it done. That's the key. We're executing. We're finalizing our flagship strategy capital formation, targeting over $7 billion in the next few weeks as we head into the end of the year. Our focus has pivoted to the second credit strategy and our new offerings in power, stabilized data centers, and private wealth that will drive our 2026 capital formation. Having a new product pipeline that sets you up for success is really what it's about in terms of being an alternative asset manager where we have a multi-strategy platform. This is the full effect of DigitalBridge as a full alternative asset manager. This is on display for all of our investors as we push forward into 2026. Next slide, please. Now I want to talk about a key component of our private wealth strategy, the partnership we announced with Franklin Templeton in the third quarter to launch our first programmatic private wealth distribution channel. At its heart, the partnership is about democratizing access to institutional quality, differentiated digital and energy infrastructure investments that were previously reserved for institutions. Franklin Templeton is a $1.6 trillion global investment leader, and their CEO, Jenny Johnson, has prioritized this initiative as growing alternative investment portfolios. Importantly, Franklin Templeton is building a diversified open-ended infrastructure solution that will have the ability to invest across all infrastructure subsectors. They intend to compete head on with the mainstream supermarket asset managers. On our side, we're bringing our $100 billion-plus in assets under management and our position as the leading digital infrastructure specialist across data centers, cell towers, fiber networks, digital energy, and edge infrastructure. We're partnering with our friends at Copenhagen Infrastructure Partner, the world's largest dedicated greenfield energy fund manager with $37 billion in AUM, and Actis, backed by our friends at General Atlantic with their deep sustainable infrastructure expertise. For their part, Franklin will focus their accredited investor product on the mass affluent segment in the market, a difficult segment to access without significant investment in sales infrastructure. They have a sales force of over 600 people, giving them strong distribution capabilities and reach. The strategic rationale here is compelling. Together, we're focused on a massive investment opportunity. There's a $94 trillion global infrastructure need by 2040. We're positioned at a pivotal inflection point as AI, electrification, and connectivity megatrends accelerate infrastructure demand. Now, why does this matter for you, our DigitalBridge shareholders? Look, first, the three reasons: One, evergreen capital. This is an incremental source of capital and FEEUM that layers over time in a long-duration structure. Second, it's an earnings contributor. Fee revenues convert to fee-related earnings as the platform scales. Then third, earlier carrier realization. The potential private wealth carry is paid as accrued earlier than our traditional institutional structure. This partnership launches exactly at the right time, and it supports our strategy of building a multichannel approach to wealth sales. It enables us to reach multiple client segments across the broader wealth universe. There is a secular migration of wealth management allocations to private infrastructure. This is happening. The institutional quality solutions were designed to provide stable, inflation-linked cash flows with resilience through economic cycles. We're capturing what we believe is a massive opportunity, and Franklin Templeton gives us a distribution platform and private wealth client access to do it at scale. That's the key component that we're doing this at scale. Next slide, please. Let me bring this all together with what I believe is the defining characteristic of the DigitalBridge portfolio today, our power bank. To be credible and to be honest with our customers today, if you don't have a power bank, you really can't have a conversation in terms of leasing megawatts and gigawatts. Last quarter, I highlighted this. We have over 20 gigawatts of total secured power across our data center portfolio. That's not a projection. That's actual power that we can access. That's critical to understand that this is not a book dividend or something that we're trying to accomplish. This is power that exists inside of existing land, existing facilities, existing campuses with our 11 existing platforms. In the third quarter, we put that power bank to work and leased a record 2.6 gigawatts across the DigitalBridge portfolio. To put that in perspective, that represents one-third of total record U.S. hyperscale leasing for the quarter. One-third. That's not market share. That's market dominance in the most important segment of the data center industry today. Here's what it means in practical terms. When the world's largest technology companies need to deploy AI infrastructure at scale, they come to our portfolio companies. They come because the portfolio companies have a long track record of delivering for them, and because they've got the power. In today's environment, power is everything. You cannot build a 1 gigawatt AI campus without 1 gigawatt of power. It's just that simple. Ultimately, the 2.6 gigawatts of third quarter leasing translates directly into new capital formation, fee revenues, and carried interest and long-term value creation. These are decade-plus contracts with investment-grade counterparties. The revenue visibility is exceptional, and the returns are improving relative to what we underwrote when the power was originally sourced. As you think about DigitalBridge's positioning today, think about it this way. One, we have the power; two, we have the platforms; three, we have the customer relationships; and four, we are executing. That combination is creating outcomes that very few firms in the world can deliver. I would argue we are actually the only firm that can deliver it on a global basis, and we're only in the early innings of this cycle. I cannot be more excited about this development. Again, this has been set up. This has been our conversation with you, our investors, for the last three quarters. How would we translate this 20-plus gigawatt power bank into comparative advantage? This is as easy as you can see it for investors today. We have the capability, we have the advantage, and we're executing. Next slide, please. Now let me put the power bank into broader context of what we're building across the entire DigitalBridge portfolio. Look, across our 11 data center platforms, we're deploying significant capital to support the growth of the AI ecosystem on a truly global scale, catalyzing development from hyperscale to private cloud to the edge, spanning North America, Europe, Asia Pacific, and Latin America. The key to this is it's a customer-driven investment model following the logos where the hyperscale, enterprise, and cloud customers are demanding capacity. In North America, Switch, Vantage, DataBank, and Expedient are each scaling to meet differentiated customer segments from the largest hyperscale AI workloads to enterprise edge computing. In Europe, Vantage EMEA and Yondr, our newest platform, are building out critical capacity across multiple markets. Vantage Asia Pac and AMES are positioning us for rapid growth in Asia Pacific, while Scala continues to lead in Latin America and AtlasEdge is capturing the emerging opportunities at the intersection of connectivity and compute in Europe where inferencing will come into full focus in the next decade. We have the products for every type of workload. We have the products for every type of workload in every geography. This is by far the most unique and differentiated data center platform in the world. What makes this powerful is the diversity and complementary of these platforms. We're not a one-product shop. We have the right platform for hyperscale GPU compute, for private cloud workloads, for enterprise colocation, edge infrastructure, and of course, now we move to inferencing. That breadth means we can serve the full spectrum of AI infrastructure demand. It means our customer relationships deepen as their core requirements evolve. That's what I love. I love evolving with customers. Just like we did 30 years ago when we evolved the towers from analog to digital into multiple different technologies over the last few decades. We're capturing that same business model with our customers today in data centers. The capital we're deploying across these platforms is measured in tens of billions of dollars over the next several years. It's directly tied to contracted customer demand and secured power positions. This is DigitalBridge's competitive advantage at scale, a global platform with local expertise backed by institutional capital following customer demand and enabled by our market-leading power bank. With that exciting overview, let me turn over the call to Tom to walk you through the financial details, and I'll come back later to wrap it up. Tom?

Thanks, Marc, and good morning, everyone. As a quick reminder, the full earnings presentation is available within the Shareholders section of our website. As Marc discussed, we had an exceptionally strong third quarter, supported by continued capital formation in our flagship fund series, which generates high-margin catch-up fees. Throughout my remarks, I'll highlight the impact of these catch-up fees in order to provide a baseline for our prospective performance once we complete the fundraise for our current flagship funds in the fourth quarter. Starting with the financial highlights. In the third quarter, we recorded $93 million of fee revenue, representing an increase of 22% over the third quarter of 2024. Our fee revenue this quarter benefited from the cumulative effect of organic growth in our flagship fund series and co-investments over the last 12 months with an $8 million contribution from catch-up fees in the third quarter. This growth in fee revenue resulted in $37 million of FRE in the quarter, an increase of 43% over Q3 of last year and putting us on track to hit or potentially exceed the top end of the range for our 2025 full-year FRE guidance. Excluding catch-up fees, FRE for the quarter would have been $29 million, an increase of 36% year-over-year. Growth in FRE resulted in distributable earnings of $22 million for the quarter, representing a double year-over-year. As of quarter end, our available corporate cash was $173 million, providing material liquidity and flexibility for us as we continue to evaluate both our capital structure and opportunities to invest in and grow our business. We also currently hold $54 million of warehouse investments on our balance sheet to support the launch of new power and private wealth strategies, which we expect to recycle over the next year as we raise third-party capital for these products. Moving to the next page. Fee-earning equity under management increased to $40.7 billion as of September 30, representing a 19% increase from last year. This growth is primarily driven by capital formation in the DBP series and co-investments, as well as fees activated upon deployment of previously raised capital. We closed $1.6 billion in new fee earning commitments during the quarter, led by strong co-investment activity and new commitments to our latest DBP flagship fund. Turning to the next page, which summarizes our non-GAAP financial results. As mentioned earlier, we reported $93 million of fee revenue in the quarter, representing growth of 22% over the same quarter in the prior year. Our LTM FRE margin was 38% as of the third quarter. We expect FRE margins to remain elevated through the final close of our flagship fund in the fourth quarter of 2025, supported by the continued contribution from catch-up fees. Moving to the next page, which summarizes our carried interest and principal investment income. We reported a $20 million reversal of carried interest during the quarter. As a reminder, the company accrues carried interest based on quarterly changes in the fair value of our fund investments. As discussed previously, many of our vehicles are in the early to middle stages of their life cycle and have not fully worked their way through the J curve to be entirely clear of the preferred return. At this point in their life cycle, small changes in the fair value of the fund assets can have an outsized impact on the quarterly accrued carried interest that we report, including causing reversals as we've seen this quarter in periods when the appreciation in the portfolio does not exceed the preferred return hurdle for the quarter. As we've discussed in prior quarters, carried interest compensation expense tracks these changes, and therefore, there was a commensurate reversal of a portion of the unrealized carried interest compensation this quarter. Principal investment income, which represents the mark-to-market on the company's GP investments in our various funds, was $25 million. Turning to the next page. This chart continues to highlight the stability and consistency in growth, both in revenues and margin that we've experienced over the last two years. We've included this quarter FRE metrics, both gross and net of catch-up fees, given the more meaningful contribution from catch-up fees this year as we close out the fundraising period for our most recent DBP fund. LTM margin, excluding catch-up fees, has grown to 33% as of September 30. This quarter, we saw $1.1 billion of FEEUM inflows, a significant portion of which was related to the activation of fees on previously raised co-investment capital. These inflows were partially offset by approximately $100 million of outflows. Finally, the company continues to maintain a strong balance sheet with approximately $1.7 billion of corporate assets, largely reflecting our material investments alongside our limited partners and available corporate cash. We're pleased with our results through the first three quarters of the year, and we're very excited about the opportunity set that we see ahead of us, both in our core business and some of the new initiatives that we're working on. With that, I'll turn the call back over to Marc.

Thanks, Tom. Now I want to shift gears and talk about our investment activity and how we're creating value at our portfolio companies. Our competitive advantage is built on a three-decade operational framework that delivers repeatable value creation. The DigitalBridge development model has three phases. In phase one, we establish platforms, collaborate with exceptional CEOs, and create outstanding companies. We methodically identify and acquire the right platforms and teams to capitalize on unique digital infrastructure opportunities. This process combines capital and operational expertise with a strategic business plan focused on both greenfield development and strategic mergers and acquisitions, which I have referred to as build and buy. In the second phase, we focus on transforming and scaling our platforms. Once we have established a platform with the right team, we implement operational transformations to enhance margins, facilitate business growth, and achieve efficient scaling. In the third phase, we focus on customer-driven investments, directing capital and resources to support network growth in areas where our customers demand increased capacity. We do not build data centers, cell towers, or fiber networks speculatively, and we will not start now. We respond to the needs expressed by our customers, such as Microsoft or Oracle, to provide them with the necessary capacity. This framework has consistently delivered repeatable value creation for thirty years, evident in our current results at Vantage, DataBank, Switch, and our other platforms. Our playbook has been reliably effective, and I want to highlight several new initiatives and transactions demonstrating this model in action. In September, we announced that GIC and ADIA, both existing partners of Vantage, are investing $1.6 billion to expand the Vantage Asia Pacific platform to 1 gigawatt of capacity. This investment will aid our acquisition of the Johor Campus and broader regional expansion across five markets. Johor, just across the border from Singapore, has emerged as a key overflow market, much like Reno was for us regarding Santa Clara's previous growth limitations. Johor offers lower costs, proximity to Singapore, and robust connectivity. This resembles our previous success story with Switch and Reno, where we now provide over 1.8 gigawatts of compute power. We're utilizing the same strategy in Johor. The APAC data center market is anticipated to grow substantially, reaching $77 billion by 2030, fueled by the increasing demand from organizations linking their data strategies directly to AI initiatives. As such, the demand for data center capacity in the region will continue to surge. To facilitate this growth, we brought in new leadership last year to enhance our positioning, specifically bringing Jeremy Deutsch on board as the President of APAC. His extensive background at Equinix will be invaluable as we build this platform. The strategic growth drivers in this market are clear: demand from Singapore creates a natural customer base, the accelerating demand for AI capacity across the region, and our well-positioned platform backed by GIC and ADIA. We expect the investment to close in the fourth quarter of 2025, marking another instance of us following the logos in critical markets like Johor, Kuala Lumpur, Melbourne, Sydney, and Osaka. Let me discuss two significant developments that illustrate our strategic positioning: Vantage's Frontier and Lighthouse mega campuses, representing a combined investment of $40 billion and over 2.4 gigawatts of GPU compute power. These campuses reflect DigitalBridge's commitment to developing a new generation of compute infrastructure. The requirements of the AI revolution demand fundamentally different infrastructure, including higher power density, innovative cooling technologies, and large-scale power access. These campuses are our response and are designed with long-term contracts from leading providers like Oracle and OpenAI. Frontier in Texas is a $25 billion investment in 1,200 acres, delivering 1.4 gigawatts of ultra-high-density racks capable of supporting extreme power loads. Lighthouse in Wisconsin represents a $15 billion investment providing 1 gigawatt of power, with potential expansion through our Stargate program, noted for developing new renewable capacity. Together, these projects are expected to create over 9,000 jobs and have a significant economic impact, while also demonstrating that DigitalBridge possesses the capital, expertise, and relationships to support large-scale infrastructure development—something few platforms globally can replicate. Construction has commenced, with the first deliverables slated for the second half of 2026. These facilities are essential for advancing some of the most critical AI initiatives, proving that our strategy around power and partnerships with world-class operators creates significant differentiation and value in the AI space. In summary, we've achieved organic growth this year, with both management revenue and fee-related earnings up 20% year-over-year. We've surpassed our FEEUM target a quarter early and expect to meet or exceed our metrics for 2025 on other fronts like FRE and margins. We've launched new investment strategies, maintained a robust balance sheet, and experienced record leasing across our global data center portfolio. Moving forward, we aim to exceed our financial targets for the fourth quarter while formally launching our new digital energy and stabilized data center strategies. We're simultaneously pursuing anchor commitments and expanding our private wealth initiatives while evaluating strategic M&A opportunities. This quarter has been exceptional for DigitalBridge, reflecting significant progress from last year. It confirms my strategic positioning on power and AI infrastructure, which translates into substantial differentiated value for our portfolio and investors. The announcements regarding Frontier and Lighthouse represent long-term commitments with top technology companies, and these developments will allow us to create substantial value over time. With this strategic context, we are focused on a clear path for long-term value creation while executing our plan effectively. I look forward to sharing our continued progress. Now, let's open the line for questions. Thank you very much.

Our first question comes from Michael Elias with TD Cowen.

Congrats to you and the team, including Surrel on the massive leasing in the quarter. Great job. In the past, Marc, you've talked about $1.55 a share in carried interest for every gigawatt of data center leasing. Can you just help us understand when in the life cycle of the data center, that unrealized carried interest is recognized? Is it when it's leased? Or is it when it's delivered? Then also, I'm seeing more of these gigawatt scale deals on the market. I'm curious, as you think of your power bank, how would you describe your ability to take on more of these massive projects?

Thank you, Michael. Let's address the latter part of your question first. Gigawatt projects are quite challenging, and I don't think we'll see a large number of them moving forward. Instead, I expect more projects in the 350 to 800 megawatt range that are more customized and specific. Constructing these large gigawatt campuses is difficult, both from a capital formation and resource availability standpoint. Many of the large campuses catering to significant language models are being completed now and will continue to be over the next three to five years, considering that it usually takes 24 to 48 months to build them. We're noticing an increase in workloads around 250 to 500 megawatts across our portfolio. Our sales funnel has expanded considerably this quarter, currently surpassing 7 gigawatts. When you lease 2.6 gigawatts in a quarter and see a substantial sales funnel, it suggests that there are significant deals in the pipeline. Our pipeline has grown, and we've accounted for over one-third of the industry's leasing based on delivered power, likely delivering around 50% of actual capacity in the quarter. These numbers highlight the importance of our power bank of 21 gigawatts. Leasing another 2.6 gigawatts and delivering the same is quite a challenge. We've been active in this for over 10 years, sustaining our pipeline and delivery schedules, which gives us a significant competitive edge. I anticipate more strong leasing quarters ahead, with a shift towards distributed computing. As we advance to inferencing, a new wave of deals between 20 and 200 megawatts will arise, primarily in secondary markets, following trends we’ve seen in public cloud. The inferencing boom is likely to begin around 2027 and continue through 2032, as we still work on large language models. Contrary to slowing, we experienced acceleration this quarter. Despite expectations of a slowdown, we continue to progress, largely thanks to our vast power bank across our 11 portfolio companies. Recently, we've highlighted major deals with Switch, and now we're focusing on significant deals with Vantage, with potential future discussions around DataBank, Yondr, or Scala. We don't depend on a single platform, which makes us unique. Investors don’t have to rely on one narrative when they own our stock, as we have multiple teams globally working on diverse workloads and customer needs. I prefer our strategy with multiple teams over a singular focus, as it provides us a significant advantage. Given the 21 gigawatts and the 2.6 we delivered, no one else in the AI data center space can match DigitalBridge's pace and scale. This quarter demonstrated our capabilities, and I believe this will persist. Regarding your question about the $1.55 per gigawatt in carried interest, realizing that carry takes about three to five years. Some carry accrues with entitlements, others when leases are signed, some when the first data hall is delivered, and more when the final data hall is complete. Ultimately, all carry is realized if the data center is purchased, put into a continuation fund, or included in a portfolio deal. Our history of monetization and DPI track record in data centers goes back over four years. We've been returning capital to investors for several years through various funds. However, the challenges concerning DataBank and Vantage were due to them being outside our funds before the Colony merger. As we scale other companies like Gala, Switch, and Vantage Asia Pac, these will now be part of our funds. Approximately 28% of the carry across our fund products is held by public investors. This development means that carried interest doesn't solely benefit management teams; it also starts benefiting public shareholders. Our current efforts are accumulating carry, and we expect to begin delivering carried interest to our shareholders in the next 24 to 36 months. Importantly, the math remains solid; what we presented to investors a year ago regarding the value of megawatts and gigawatts clearly translates to tangible benefits for them now.

Our next question comes from Jade Rahmani with KBW.

What's your overarching view on how the new data center projects achieve a stabilized capitalization given their size? Do you envision they will be owned long term by a combination perhaps of large REITs, infrastructure funds, and hyperscalers themselves? It seems like DigitalBridge's structuring expertise could provide solutions to that eventuality.

Thank you, Jade. It's great to hear from you. Last quarter, we announced the creation of the Data Center Income Fund, and that initiative is now underway. We're engaging in fruitful discussions with a fresh group of investors who differ from those in our flagship funds. In our primary offerings, we engage with infrastructure allocators, whereas with the DCIF product, we are connecting with real estate allocators. For instance, at the recent PREA conference in Boston, our new Head of Capital Formation for the DCIF, Wendy Price, attended with Ramel Marseille, and we had over 60 meetings with real estate investors. These investors are eager to allocate funds toward our exceptional stabilized data centers, in which we have a solid pipeline. This represents an entirely new avenue for capital for us. Annually, approximately $3 trillion is allocated to real estate, which exceeds the $1.7 trillion for infrastructure. This presents a larger opportunity than we currently have in traditional infrastructure. Real estate allocators are currently interested in various asset types such as industrial properties, shopping centers, and downtown office buildings, which face challenges. In contrast, our investment-grade data centers provide a low incremental capital expenditure going forward, and tenants typically require minimal interaction. Importantly, 95% of our cash flows are investment grade. This is a promising development for us. With the launch of this strategy, we are thrilled to have Wendy on board, alongside John Diev and Jon Mauck, who are managing the initiative. Our team is robustly engaged in this new opportunity and is attracting a new investor base. This growth is enhancing our fee-earning assets, recurring fees, and assets under management simultaneously within a sector we understand deeply. We have an advantage, given our connections with developers and other general partners in need of liquidity, which excites us. The key factors are that we have the appropriate solutions, an effective team, a solid pipeline of ideas and products, and we've pinpointed the right investors. Everything is coming together for success, akin to our approach in digital power. Looking ahead, we expect 2026 to be driven by this real estate product, our digital power strategy, and private wealth. We have three new products lined up for next year and will consistently have some co-investment vehicle in the market. Everything is preparing well for the upcoming year, and we're enthusiastic about the product offerings.

Can you, as a follow-up, give some insight into what fund outflows look like for DBP I, II and InfraBridge perhaps in 2026?

Thank you, Jade. We don't provide specific guidance on how we are realizing or monetizing assets. As we monetize those assets, we will report them in our usual timeline. Fund 1 is approaching its natural turning point where we start to consider monetization, and we are carefully evaluating that. At the appropriate time and pace, we will proceed. Credit is continuously turning over, with loans generally having a lifespan of 24 to 36 months. As we turn over loans and return capital, we are also booking new loans in the second fund and our SMA strategy. InfraBridge is performing as we expect, and we will continue to monetize assets in InfraBridge I in due course. Looking ahead, we will also focus on InfraBridge II, and we will update you on monetization as it occurs each quarter. All fund products are progressing at the expected pace, and we feel confident about the speed and timing of our DPI delivery.

Our next question comes from Timothy D'Agostino with B. Riley Securities.

On the Franklin Templeton strategic partnership, in the deck, you outlined the $15 trillion opportunity through 2040 with wealth management allocations to private infrastructure. I was wondering if this strategic partnership is sort of a one-time partnership, or if we could see more of these down the road?

Yes. Look, I mean, for this particular product, alongside Actis and CIP, it's a strategy that they've launched on their platform. We have other partners in private wealth. We did a fantastic product offering last year with Goldman that was really successful. It was wildly oversubscribed. We do intend to be on other platforms and have other partnerships. That is something that we'll reveal in due course. We are not exclusive nor limited just to the Franklin Templeton platform. We are working with other allocators, and we agree with your arithmetic. It's a $15 trillion opportunity. It's really big, and there's a lot of great partnerships to be had, and we're excited about it. For right now, we love what we're doing with Jenny and her team. They're fantastic partners. So far, it's been a really successful launch. Great question, and we'll reveal more next year, but right now, my focus is supporting Franklin Templeton and making sure that product is wildly successful and oversubscribed.

Then as a quick follow-up, could you provide a little bit more color on the Evergreen capital on the long term, on the long duration and then kind of why the structure is so attractive to you all?

Well, look, I think we have both types of structures across our product set. We don't believe that you have to be all permanent capital nor do we believe you have to have 10-, 11-year closed-end funds. Commingled funds work well for certain allocators, particularly pension funds and other types of sovereign wealth funds; they like that because there's a finite end to what they're doing. I think other allocators like the open-ended structure, for example, like real estate investors. They're very familiar with that structure as well as private wealth clients. Our continuation funds, the things that we're doing around the real estate asset class, the stuff we're doing around private wealth tend to be open-ended and be permanent in nature. Then our flagship vehicles tend to be closed-end in nature, along with our digital power strategy. That tends to be a strategy that you would lend itself to being closed-end. I think that the great thing about DigitalBridge today is that we're a multi-strat platform. We have multiple strategies really focused on allocators very specifically and then pairing that allocation with the right products, the products that investors want, whether it's a data center platform, a tower platform, a stabilized asset, an energy project that's tethered to the AI economy. These are the things that investors really want today. We have the right products and the right structures, so having that multi-strategy capability is really what differentiates DigitalBridge today.

Our next question comes from Rick Prentiss with Raymond James.

First, to follow-up on Michael's question a little bit. I mean, Marc, you guys are an all-asset manager, but focused on digital infrastructure AI. Good to see you communicate numbers, hit numbers, achieve numbers, maybe exceed numbers. The piece that seems to be missing from the stock price is really recognition of carried interest. You touched on it a little bit to Michael's question, but help us understand the pacing as your portfolio companies now ballpark 50 companies or so, I guess, how should we think about a stable, consistent kind of monetization path into the future to try and get some of this value realized because clearly, AI is hot, power banks are hot, data centers are hot. You're not getting the credit for that. Just trying to think through how do we see that monetization path play out to help the realization of that. I'll come back with a question for Tom on that the bookend impact.

I'll let Tom address the bookend piece. I'll cover the broader perspective and then hand it over to him for the more complex details. In response to your question, Rick, it's crucial to recognize that we have certain fund products that have started to turn the corner, entering a phase where we will begin to monetize. If we look back at a 2019 vintage fund where we made investments in 2020 and 2021, it’s reasonable to expect realizations will start occurring in 2026, 2027, and 2028, which aligns with our first flagship fund. From there, we can consider how we exit some investments in Fund II. While I'm not going to speculate on which companies will lead to those realizations, I can share that we are now in a consistent rhythm with several portfolio companies undergoing strategic reviews. Based on the timeline and characteristics of our original flagship funds, we anticipate a gradual unwinding of those funds and a return of capital. This return of capital will be accompanied by the realization of carried interest. Fund II offers more carried interest for investors, and our third flagship fund provides even more carried interest for our investors. As time passes, we're expecting to see both an increase in the frequency of carried interest and a higher amount overall. Next year, we plan to focus heavily on this aspect, and it's a key difference between this year and next; you can expect to see more realizations next year. Additionally, within our data center business across the 11 platforms, we have been innovative in creating returns and carried interest. With effective vehicles in permanent capital structures, like DataBank and Manage North America, and the robust growth metrics from some of these businesses, we need to recycle capital and return funds, which also activates carried interest. The data centers represent a promising area for us. We believe that, considering the age and vintage of some of these fund products, it is reasonable to anticipate carried interest becoming more predictable rather than sporadic. Tom, would you like to add anything?

No, you've really covered it well. The only thing I would add is that if you had looked four years ago and projected where we would be in terms of distribution, it seems that over the last few years, there’s been a remarkable opportunity to continue investing in some of our portfolio companies, more than might have been anticipated four or five years ago. This may have delayed exits that were expected around 2025. We've chosen to keep investing in some of those companies because the potential there is exceptional. I wouldn't add anything different than what Marc mentioned regarding the distribution and the vintages.

Marc, one of the interesting things we saw this quarter was the story that Elon Musk is now following you. Can you give us a little background color? Did that happen? How did it happen? What's your kind of relationship with Elon?

Yes. Thanks, Rick. I don't comment about social media stuff. It's just kind of, unfortunately, it becomes like water cooler banter. What I will say is I've got a lot of respect for him. Yes, I do know him, not particularly well, but we know each other, and he's an important customer. He uses a lot of our different portfolio companies, and we serve Starlink; we serve SpaceX; we serve Tesla; we serve xAI; and we use his batteries at some of our data centers for storage. It's a really super important customer that we think can get bigger over time and that can be a lot more strategic. Anything we can do to work with him and support what he's doing, I'm very supportive of him, and I'm always happy to put capital into his businesses through infrastructure; we're side-by-side with him. A lot of deep respect there, and I think he's one of the great minds of our generation. If he chose to follow me, that's great, but I'm super focused on servicing him and trying to figure out how we can help enable his businesses to go faster.

Our next question comes from Richard Choe with JPMorgan.

I understand you spent quite a bit of time on it, but I believe it's important to delve into it further. With Vantage at the Frontier campus and Lighthouse campuses, these are significant achievements. Recently, many companies have claimed they possess substantial power and deliverable capacity, yet you have secured these leases. Could you walk us through the process a bit? What factors contributed to DigitalBridge and Vantage having an advantage over the other companies in securing this deal?

We believe that in the next couple of years, this industry will unfortunately see many inexperienced players and casual participants. Some individuals may understand land acquisition and entitlements, but it's a different challenge to build a data center and meet high standards consistently over a decade. Customers recognize the difference between newcomers and established providers with extensive track records, like our network of over 400 data centers across 11 companies. True differentiation comes from execution and reliability in delivering services on time, rather than from marketing efforts. Despite being in this industry for over 30 years, our share price doesn't fully reflect our experience as operators. It is crucial for us to deliver strong quarterly results that highlight our unique leasing volumes and power capabilities, while also meeting the performance metrics that investors track, like FRE, FEEUM, distributable earnings, and AUM. We acknowledge our peer group as an alternative asset manager, and our focus now is to execute effectively for our public shareholders just as we have for our customers. We learned from the challenges of last year's third quarter and worked hard to establish trust with investors through transparent and reliable performance. Execution is vital, not only for our public shareholders but also for our key customers like Oracle and OpenAI, and hundreds of others this quarter. While we can't detail every success, we are actively delivering on dark fiber routes, towers, small cell infrastructure, and WiFi offload. Our commitment to our clients sets us apart. Customers will support us based on their trust in our network integrity, and we have established ourselves as a trusted partner over the years. We are currently operationalizing capacity that we planned for a long time, indicating our foresight and commitment to this industry. We are built to last, having been here for two decades and looking ahead to the next ten years. Our consistency is appreciated by customers. Ultimately, having experienced teams like Sureel and his group, who are skilled at customer delivery, is what makes a difference. We are fortunate to have such a capable management team dedicated to meeting our customers' needs.

You mentioned it a little bit, but will these projects be meaningfully contributing to FEEUM early in '26? Or is it more later in '26 and '27?

No, 100%. It will be a big contributor in two years. We took in a lot of new capital, co-invest capital specifically to these two projects. We get paid on that capital, that committed capital. There will be an immediate impact when you have really good co-invest. Look, Tom said it earlier in the year, we've got to improve our margins. Both Tom and I committed to that. Tom has been working on the cost; I've been working on making sure we get our fees up and co-invest. I think we can look at each other and say we've delivered. Tom has done a great job on the cost side. We've done a great job in improving our margins on co-invest. When you put those two things together, you get a result like this in the third quarter, which is improved margins, incredible year-over-year growth, as you can see. I mean, just looking at fee-related earnings, were up 43% year-over-year. I don't think there's another publicly traded alternative asset manager that's up 43% year-over-year. This has been a lot of hard work, and we're not done. I think there's a sharp focus on what we have to keep doing. The fees build as we build. As we keep leasing megawatts and we keep deploying capital, so does our FEEUM raise go up and so does our FRE go up. We're heading into a historically strong fourth quarter. I think Tom and I are excited to continue to work hard between now and the end of the year. I don't know, Tom, if you have any voice-over on that.

Our next question comes from Eric Luebchow with Wells Fargo.

Marc, I'm curious about your data center power bank that you've been highlighting in the last few quarters. Maybe you could talk about the split you're seeing between kind of behind-the-meter power solutions versus more direct grid-connected power and perhaps how that behind-the-meter opportunity, which seems to be much bigger today, kind of ties into the size and scope of the energy fund you're fundraising for.

The energy strategy is extremely important and plays a significant role in our plans for the latter half of this year and especially for next year. We've successfully closed a couple of deals in this area, including one with Takanock, where we offer digital power solutions for our customers and other data center developers. We are also working on a project that involves connecting a specific power solution to one of our existing DigitalBridge data centers, where we will be adding 500 megawatts of power. What excites me about our digital power initiatives is that these are not just concepts; they are very targeted solutions in specific locations aimed at achieving specific results for our customers. This uniqueness mirrors our approach in the data center sector, as we are not taking on risk but establishing long-term contracts with investment-grade counterparties. We have certainty regarding the offtake. As we have been engaged in this for around two years, we have realized that the grid is still an essential component. We must learn to effectively utilize and collaborate with the grid, and incorporate battery storage capabilities within our microgrids. The strategy involves accumulating power during the day, some of which will be sold back into the grid, positioning us as an offtaker, and then during nighttime when the baseload is more readily available, we can purchase power from the grid. This relationship within a microgrid is quite dynamic. A crucial aspect of this is having interconnection with the Public Utility Commission grid in each state and maintaining a collaborative relationship with utilities. What we are doing is complementary to our utility partners; in many ways, we are trading partners with them. Much like our work in interconnection and fiber, we are applying the same principles in the power domain. It's a fascinating business model, and we have seen promising early results. I recently heard another alternative asset manager mention that there is a $7 trillion market in AI and an equal amount allocated for CapEx spending in the sector. To supply the necessary power to deliver 300 gigawatts, an additional $1.3 trillion in power infrastructure needs to be developed. We see this as a tremendous opportunity and are happy to report that investors are quite enthusiastic. In my discussions about digital power and microgrids and how we deliver these solutions, I have found limited partners are genuinely interested. This year has been remarkable for infrastructure fundraising, with expectations to exceed $200 billion in capital raised, of which over half is focused on energy transition rather than data centers or digital solutions. It’s compelling to observe that allocators are concentrating on power-related issues. Considering the expenses tied to constructing large-scale campuses, if building a data center costs $11 million to $12 million per megawatt, integrating grid-independent power could range from $3 million to $5 million. We view this as an incremental power expense of about $0.30 to $0.50 because we are taking on the risk to develop the data centers. We have the expertise in building microgrid infrastructure and sourcing the best energy solutions, whether from LNG, solar, wind, or hydro, and leveraging the grid effectively. There seems to be a common misconception that one must choose between being on or off the grid. In reality, building to scale often requires using the grid at certain times. For instance, in our recent major projects, we are both supplying power back into the grid and consuming power from it at different times. This creates a fluid and dynamic relationship between a microgrid and the grid itself. Others seem to be beginning to recognize the logic behind our approach. We have solid industrial partnerships and a substantial pipeline of projects underway, and we are eager to share more about this in the coming year. Digital power will be one of our key strategies in 2026. When we next meet in person, I'm looking forward to providing you with a detailed overview of our digital power initiatives.

That would be great. I appreciate it. I guess just one follow-up, Marc. Some of these mega deals we've seen, including the ones that Vantage did, obviously, there's a lot of kind of newer hyperscale tech like large language models that are directly or indirectly backing some of these new builds. How do you think about the pricing, the lease terms, the credit risk of some of these newer players that are obviously not profitable today but growing incredibly fast? There's certainly been a lot of industry chatter about some of the LLMs, their ability to pay for some of the future commitments they've made. Just curious how you guys think about it at the infrastructure level.

Yes. Look, I think that there's different types of large language models, Eric, right? There's different types of quality of credit tenants. We look at some of the NeoCloud business models, and we've chosen not to put our equity capital to work there. We've been very selective about those types of credits. I think, again, when you've got a really substantial power bank and you've got on-demand capacity ready to go, it does allow you to be a little selective about what we can do. I think it's pretty unique, our ability to choose customers we want to work with. I do get a little worried about some of the credit profile risk around NeoCloud versus AI providers versus the hyperscalers. We've been very cautious about not overweighting one particular customer or one particular story. I think what's unique about our platform is given the scale of our platform, we're invested across all of these customers and all across these workloads so that we're not beholden to one customer or one technology or one large language model. I think that's where scale matters, Eric. We talk a lot about scale in the alternative asset management space. Well, in our specific swim lane, we have a lot of scale, and we have a lot of customers. That diversity in customers is what's really important. We've been able to demonstrate that we can lease to a lot of different logos at the same time. I think at the end of the day, having a diverse set of cash flows and a diverse set of customers and a diverse set of data centers is really where you want to put your capital today. Again, same thing we talked about; buying our stock is a proxy for that, right? You're not making one bet on one specific data center platform; you're making a bet on a global portfolio of 11 platforms, 21 gigawatts, and record leasing. That flow-through will come through as a function of FRE, FEEUM, and carried interest.

There are no further questions at this time. I would now like to turn the floor back over to Marc Ganzi for closing comments.

Thank you for the insightful questions from the analyst community. We look forward to engaging with all of you in the coming days to provide more clarity about the quarter. I want to express my gratitude to our amazing team. Focusing on the comparison between the third quarter of last year and this year, I want to specifically thank my CFO, Tom Mayrhofer, for managing a very clean quarter and fulfilling the commitments we made to our public investors. Fee revenue is up 22%, FRE is up 43%, distributable earnings have increased by 102%, and fee equity under management is up 19%. This quarter was well-executed, and we are committed to delivering results like this for our investors. We maintain strong liquidity, are effectively allocating capital, are raising funds, and have an exciting range of new products set to launch in 2026. We are well-positioned to lead in digital infrastructure and the power necessary to support it. I'm looking forward to the end of this year and to reconnecting with all of you as we participate in various investor conferences. Please reach out to Severin and our team for access to us; we are always open to discussions. Thank you for your ongoing interest and investment in DigitalBridge shares. We truly appreciate it. Have a wonderful day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.