We will go ahead and get started. My name is Cameron McVeigh. I cover communications infrastructure here at Morgan Stanley, and it's my honor to welcome Matt Mercier, TFO of Digital Realty. Welcome, Matt.

Thank you. Great to be here.

And before we get started, I'll read this. For important disclosures, please read our Morgan Stanley Research Disclosure website. If you have any questions, please reach out to your Morgan Stanley sales representative. We'll get started. So, Matt, you know, Digital Realty reported strong fourth quarter and full year results in February. There's a record zero to one megawatt bookings and a near record backlog. I guess as you think about the past year and the year ahead, you know, what would you identify as the one or two main drivers behind recent results? And what are the key priorities for the for 2026?

Yeah, I mean, so, you know, first off, yeah, so thanks for the setup. I mean, we came into 25 with, you know, roughly guiding to a little bit over 5% bottom line core FFO growth. We ended up the year basically almost 300 basis points above that. Um, and I would say the, the setup for 25, uh, is very similar to kind of where, where we, where we're setting up for 26, um, and partly why you're seeing a congruence in terms of where we're, where we started our initial guidance, you know, close to 8% for 2026. Um, and, and the key drivers, I would say are one, um, continuing our momentum on our zero to one megawatt interconnection business, uh, which I'm sure we'll dive into more. We've seen great growth and execution across that segment for a number of reasons in terms of the number of markets that we're in, our connectivity profile and capabilities and product set. And as a result, we grew the signings, as an example there, over 30%, interconnection bookings over 20%. So we see that as a very stable, sticky, connectivity-rich business that we're seeing overall demand increase from an enterprise perspective. And we see a long-term tailwind in terms of not only continued digital transformation from that same enterprise base, but also, I think, near and long-term scaling for, you know, AI, in particular inference, which from our standpoint, we're still in quite the early ending. So I think that's a foundational layer of our growth. In addition, we're also, you know, we're also did well on signings that we did in late 24, in through 25. We had over a billion in overall bookings at our 100% share. That led to a very healthy backlog of over $600 million in revenue that we've got expected to commence in 26. So, again, kind of de-risking the majority of our revenue profile for 26 and, therefore, supporting that overall bottom line growth per share. And then I think all those things, you know, largely the favorable supply-demand dynamics are proving to be a, call it a pricing tailwind, favorable pricing dynamics throughout both of those segments, leading to improved mark-to-market story, which is benefiting our same store portfolio. So I think all those things together are what's giving us conviction for continued bottom-line growth that we put up for 26, but also continue that in 27 and beyond. As we've said, that's a clear and key focus for us in sustaining that momentum on bottom-line growth.

Great. That's helpful. And just to follow up on the 26 guide, it's about 8% growth at the midpoint on a core FFO per share basis. When you think through the key building blocks here, what do you think could drive you to the high end of this guide?

I mean, it's a couple of those components that we just talked about. So I'd say the two that probably have the most near-term call revenue through to bottom line impact are, one, you know, outperforming on our zero-to-one megawatt interconnection business. So those signings generally have a shorter sign to commence lag, generally in, like, the one to three months, right? So the more that we can outperform in that, that should accrue to further in-year revenue growth as well as longer-term growth, but has a near-term impact. And then I would say two would be outperformance on, call it mark-to-market renewals, and that could be both within our zero-to-one as well as our greater-than-a-megawatt category. Again, I would say we're in a favorable supply-demand dynamic where pricing continues to be in our favor. there's broad-based you know constraints to bringing on capacity so that should continue for an extended period of time and I would say those are those are probably some of the two near-term items that would be levers for us to outperform within the within at least the current year got it that's great

now I wanted to ask about the you know power-based occupancy it was guided to improve 50 to 100 basis points at the end of the year to I think around 89% or so. I guess what's driving this transition to reporting power-based metrics and how should investors interpret occupancy progression given the shift?

Yeah, so for those who maybe, I'll add a little bit more color for those who may not have heard us talk about this on the last call. So almost for our history, we've reported occupancy more on what you would call more of a real estate oriented basis, which is on square footage. But if you look at a lot of the other metrics and key metrics that we report on, whether that be leasing, development capacity, like almost all of our other key metrics are power oriented, based on per KW generally metrics. So we just thought it was time, given how much power is a part of the overall dynamic and the overall marketing messaging around our space, to align all those things together and really make some consistency across those key metrics, which are pricing, signings, development deliveries, and therefore utilization slash occupancy. So that was the main impetus behind that change to create more consistency and uniformity in how we look at our business and what really drives our business. In terms of what that, you know, the relative change in occupancy, which is kind of why we've guided towards more of this relative versus absolute within our occupancy guidance, is really not any different. I mean, the other part of the reason for that change is that, you know, we've been seeing increasing densities within our space, right? So you can have the same amount of power or more power within the same amount of space. So, again, in creating that consistency within those metrics, I think, is what we've talked to not only our investors about that they thought largely would be helpful. But that doesn't really – the relative change, like we guided last year toward basically a similar 50 to 100 basis points occupancy. We were basically right in the middle of that. We're guiding to another 50 to 100 on top of that this year. That relative change is consistent whether you're measuring it based on power or square footage.

I wonder that shift a bit to AI inference. And in the past, you've described the zero to one megawatt plus interconnection business as the most strategic priority. You know, the last quarter set a new record in terms of bookings. And so, you know, what's driving the momentum and how do you see the segment evolving with both AI inference and, you know, edge case workloads?

Yeah, so, I mean, we're, again, to set the stage a little bit, I mean, we're seeing AI come into play. I mean, part of our strategy is that we're able to satisfy a broader spectrum of workloads, all the way from multi-megawatt, hyperscale, up to gigascale-type deployments down to single-caged cabinets through our global portfolio. Over the last two years, we've started to talk more about AI-related workloads in terms of signings as a percentage of our bookings. for the last two years more that was was oriented towards our greater than a megawatt where we saw training come into play more more you know early on more prevalent um so we've talked about on average we've seen roughly 50 of our bookings you know again going back the last call it one to two years within that greater than a megawatt category b within training um and that's where you know so that's where we started to see more of that workload start early inference we you know we've seen pick up, but I would still say we're in the early stages of that. So as a comparative, last year we talked about within our zero to one megawatt and interconnection, which is more that kind of retail co-location enterprise type workload, which more people associate kind of where that inference might land. Last year, meaning, I mean, 2024, we had maybe mid single digits in terms of like the percentage of those bookings that were AI oriented. And we, you know, we categorize that based on discussions with customers, types of chips they're deploying, the level of density they need. And we saw that we did see that increase. So last year, 2025, we saw roughly 20 percent of those of the bookings within that category were driven by, you know, AI had some level of inference workload. So a minority, but a growing percentage of that share. and I think we'll see that continue to pick up into 26. Still feels early from our side. You know, we're still seeing where they're looking for, you know, enterprise customers are still utilizing, you know, the large language models from the larger hyperscale and companies that are really focused on that technology. And where we're seeing more of the inferences in financial services, health care, some level of content. So companies that are, you know, generally speaking, look to get ahead of the curve and have the resources and the wherewithal to be able to deploy AI specifically within their stack, whether that be for their own customer and use cases or internally for trading algorithms or other needs. So I think it's an early – we're in the early innings, I think, of what we see as AI inference, But we see the potential as that continues to roll out, as we expect to see more enterprises adopt some level of what we saw and how we saw cloud roll out over its many years where it started really with the same customer base. The hyperscalers were driving the majority of the cloud in the early days. You then had enterprises that started to adopt their own private cloud. and now you're kind of in a position where hybrid is like the preferred architecture, we see that same thing rolling out in some level for AI where you've got the same large hyperscalers and some new companies driving the large language models, the training, which has some level of inference embedded within it. You're seeing a very small cohort of enterprises that are driving their own enterprise-level AI and inferencing, And we think over time you're going to see private AI and then some level of convergence into a hybrid AI rollout, which is why we're setting ourselves up in a portfolio that can satisfy both those large training deployments all the way down to more inference, you know, smaller inference workloads, whether that be 100 kW, you know, 800 kW, 4 megs, or 50 megs.

That's great. And I guess with this broadening enterprise AI adoption, how important really is latency? How often does it come up within customer conversations? And how do you think you're positioned in a latency-sensitive world?

So where we're seeing more clear workloads in the enterprise, and I should say that also is we're not only seeing inference happen from enterprise-oriented customers, but the same companies, hyperscale companies that are taking hundreds of megawatts on, that are training, they're also taking, similar to how they do with cloud, smaller deployments within our, quote, zero-to-one segment, more in our highly connected facilities for inference-related workloads. So I think the theme is that latency continues to be an important factor for not only enterprise deployment of cloud and AI, but also for hyperscale deployment. So they still feel that it's important to be, for the most part, as close to the eyeballs as possible, so major core markets, as close to as many networks as possible so they can transact and transmit across a number of telecom providers, and also being as close to as many different customers as possible, so curating these sites and campuses that have multiple customers that they can then connect with. So that all comes back to why we've been focused on creating a portfolio that is highly interconnected across 50-plus major metropolitan markets, adding capabilities within our interconnection ecosystem through service fabric, bringing partners onto that fabric to enable further differentiation as well as value to our end customers. because ultimately we believe whether it's for cloud workloads or AI-oriented workloads that are still relatively new, especially within the inference but expected to grow, that we can satisfy that and we can bring value to our customers over time.

Okay, and on that point, I wanted to touch on liquid cooling. And I'm just curious if you could provide an update on the rollout of liquid cooling solutions, both in new and existing capacities? And I guess how important is liquid cooling from an AI inference basis?

Yeah, so right now I would say the majority of liquid cooling needs that we're seeing is more targeted toward newer deployments. And again, you would say most of that is probably more oriented towards training, but there's likely some level of inference happening in those deployments as well. So we're seeing more liquid cooling, you know, 50 to 150 kW type rack levels that we can satisfy, particularly in our new sites and new developments. We're seeing some level of liquid being requested in some of our existing facilities, which we have the ability to handle and be able to retrofit for. So we've done high performance compute type deployments within our existing facility. We have the ability to do that broadly across roughly 30 markets that we have today. We've done it today in, I think, 14 of our sites. I think it helps that we've had sites that were built when water-cooled chillers were still in vogue, so we're able to tap into that. But I think also there's a level of workload today that's still able to be satisfied with air-cooled technologies. In particular, at least what we're seeing on the inference side, where the densities haven't quite reached that 50 kW average that we're currently seeing from a 50 kW and above training. I think even hear Reconext talk about it's in the 10 kW. That's all relatively manageable within an air-cooled environment.

On sovereign AI, it seems like that has been recently highlighted as a growing theme. And, you know, how significant is it an opportunity to capture the government demand globally?

Yeah, you know, I think we see that, again, as a growing area and need, especially internationally. And we've actually captured some of that, you know, today. Where we see most of that is it typically doesn't come directly from government. Government, they're typically working through, in some cases, a hyperscaler or an intermediary. So that's where we see most of it through a partnership that governments have with some of the even the larger hyperscale or other partnerships. So I think the benefit that we have is take our MIA portfolio. You know, we're in – not only are we in all the flat markets, but we have a presence through the majority of the countries within the EU. Take that through to APAC, where, you know, we have a strong foothold in Singapore. We have capacity in Tokyo and Osaka, Seoul, Australia. So we have an ability to satisfy workloads at a country level, which is where you're starting to see that more sovereign level being requested. So I think our ability to be able to have capacity available in multiple global markets and the ability to partner with a number of different hyperscale as well as sovereign, whether that be cloud or sovereign AI needs, puts us in a position to be able to satisfy those demands across our global portfolio.

I wanted to ask on pricing. And when you think across your customer demographic, how do you think about the price elasticity across the customer base? And then secondly, how do market rates currently look for when leases come up for renewal?

Yeah, I mean, it's, you know, look, the pricing is largely a supply-demand typically equation through, you know, most of our core markets. So right now we're in a phase, in a cycle where, you know, that is, the demand is high, supply is constrained, and we have a favorable pricing environment at the moment. um you know we've seen um you know we've we've largely seen you know when you when you look at it from a couple different angles like our mark to markets continue to improve so that's we talked about this a little bit i think earlier in terms of last year we had six little over six percent mark to market on our on our global portfolio that's um that's a mix and a weighting between our zero to one, which is typically more inflationary, three to four percent because their contracts are more three to, you know, I'm sorry, two to three years in terms. So they're always usually close to market. So they're escalating more like an inflationary type rate, even when they come up for renewal. And then where we're seeing sort of the higher margin markets is in our greater than a megawatt portfolio, which was north of 10 percent last year, and essentially expecting a very similar type of setup, like I mentioned before, coming into 2026 in terms of the guidance that we set forth. Now, I think as you look at sort of broader pricing dynamics across our global portfolio, I think you're seeing, call it spillover effects. One to two years ago, you saw significant increases in pricing in Northern Virginia, as an example, is that was one of the first markets that saw a very heightened level of demand versus basically a supply constraint that happened almost overnight due to power transmission issues. And now we're starting to see that spill over, I think, into a number of our other core U.S. markets where we're seeing mid- to high-single-digit type annual increases in the U.S. markets. Go over to Europe, and you're seeing roughly kind of mid-single-digit type increases is not quite the same heightened level of demand versus supply challenge, but still healthy demand, constrained supply. And then you move to APAC, like a market like Singapore that's, you know, highly constrained, very competitive in terms of market-market pricing, still highest set of demand. So we see really good market-to-markets within that market in particular in APAC as well as others. but Singapore, I think, Singapore stands out. I would say the one other thing I'd add to that is as we look out in particular from a mark-to-market perspective and opportunity at digital, like we see an improving mark-to-market profile as our expiring rates that we're comparing against markets start to step down in 27 and 28 and 29. So I think that gives us kind of continued confidence and being able to have pricing power given the supply-demand dynamics and having that as a lever to support our continued bottom-line growth going forward.

On the international market theme, you've entered several new markets recently, Malaysia, Portugal, Israel, Indonesia, all over the past year. Can you walk us through your decision framework for a new market entry and, you know, how these markets fit the global interconnection strategy?

So I would say the common themes that you've seen, and we even announced another acquisition this morning, a highly connected site in Bulgaria. But I think the common themes you see and all the ones you mentioned, Indonesia and Malaysia, I think there's a couple of highlights. One, in particular, we've been looking to grow our presence in APAC. That's just as a region, finding sites capacity where we can grow there. APAC is roughly, call it, 10% of our revenue today. We'd like to continue to grow that region. We see very healthy demand dynamic and want to expand that as an overall portion of our overall portfolio and customer number of markets. So that kind of hinges some of those new market entries to continuing to build our overall connectivity platform globally. So all these sites have been largely some of the more connected sites within those markets, giving us a strong, I think, solid base for not only enterprise customers, but that path to continue as AI continues to roll out throughout the globe, So having those connectivity points of presence and networks, we think, is going to be very important. And then third is, you know, we have expansion capacity that typically we've been able to procure as part of those acquisitions. So both being able to continue to drive our enterprise zero-to-one signings growth, but also having potential capacity for larger-scale deployments within those regions, too, is creating a broader connected campus ecosystem within each of those markets. So those are kind of the key things that we look for in terms of expanding within new markets globally.

I wanted to hit on power. It's a growing theme that a lot of investors are interested in. How does digital think about using grid connections and utility providers versus behind-the-meter power solutions about fuel cells or turbines, where do those bridging solutions fit into the general strategy?

Yeah, I mean, so I think first and foremost, like our view, and I believe this is a broader industry view, and maybe not everybody, but from who we speak to, I think it's a general consensus, if you will, that at the end of the day, long-term utility grid power is the best primary source so that's again from our standpoint from customers we talk to other industry participants developers operators um but as we as we've seen we're in we're you know the grid is the grid hasn't necessarily kept up with the needs so you mean uh ourselves as well as our customers and other developers we're looking at ways to bring and bridge ultimately um the power capacity divide that exists today but we see that again more as a as a bridge versus a permanent solution and we are looking at a number of our larger markets where where it makes sense because of the investment that we need to have the regulatory approvals the partnerships we need in order to bring you know in order to bring a site online that and bring on a developer and a partner that understands and knows how to do this since it's not our core business we do see a need to try to bridge that capacity in the near term and put us in a position to be able to continue to bring on on capacity in some of these more highly constrained markets like a like a northern Virginia or Dallas in the U.S. so we are we as well as others are looking at bridging capacity whether that be the gas or fuel cells that we can bring bring to bear and be able to bridge and kind of rotate as power comes online to new to the next set of incremental sites so that those are things that we are we are looking at none of those solutions are are easy you still got to get you know it's it's another complexity within the overall development and procurement process but But it's a necessary thing given the power constraints we have in a number of markets in finding these bridging solutions to be able to bring capacity online sooner and be able to rotate that through to the next set of development sites that we have or able to bring online in those markets.

And on that point, there have been headlines around grid operators implementing some of stricter requirements to you know access the grid for various data centers is this I guess how do you how do you view this is this a headwind or because

you're scaled with access and more of a tailwind I I mean I would say and I and I and I believe you're speaking more to like there's there's either financial or other commitments that grids are looking to just to maybe clarify for you know Whether that's take or pay, deposits, guarantees, because there's a lot of operators out there and developers who have come and said, I need this much power and either not taking it, and that's created some of the concern, congestion. So I think from a digital standpoint, while I don't necessarily love it because it's incremental potential financial commitment that we have to put up, I think because, you know, this is one of many areas where an investment-grade balance sheet, I think, is a strategic advantage because, one, typically that means if we do have to post anything, we're able to negotiate a lower amount. If we do have to put up anything, typically we can do it at a lower cost. And I think it just gives us some incremental, you know, leverage and bargaining power with major power suppliers. Probably first and foremost, because we've already been doing business with a lot of the utility providers in most of the markets throughout, in particular in the U.S., but also throughout Europe and Asia, just given that we've been in business for over 20 years. So, you know, we've shown that we've not only, you know, we're procuring the power that we've asked for, we're utilizing it like we've said. So I think overall it's a benefit for us, both from an operational perspective and already having established relationships with most of these utility providers, and to, I think, ultimately, from a financial perspective, given that we're an investment-grade counterparty versus some others who aren't able to put that up.

I'm going to open it up to audience Q&A, so think of a question. But before I do, I wanted to ask, you know, on the earnings call, you called that a minor interest expense headwind related to newly raised debt. How should we think about market appetite for raising incremental capital, just both from a credit and equity market perspective?

Yeah, I mean, so there's probably a couple of different angles on that one. But I think, one, you know, we've we've in essence put to bed the headwind that we we talked about. I mean, it's still a headwind, but we had done that refinancing in late November, early December in terms of zero bonds that we had coming, maturing in January, so we got ahead of that. Granted, still a headwind from an overall bottom line because we're taking out 2% debt and essentially refinancing it at, you know, a little over, basically right around 4%. But that's in our guidance already taken care of, so kind of check that one off the list. at least for 2026, I would say, in addition, you know, this is another, I would say, advantage of being a public company. So we have access to multiple pockets of capital, both, you know, public bonds, hybrid securities, you know, asset level financing. And, you know, and we have great relationships with a number of banks, you know, in our bank group to help support us. And so I think that's an advantage, I think, of being in the public sphere versus some of our maybe private competitors who are, in essence, probably overly reliant on asset-level type financing and, therefore, have to be even more diligent, if you will, on the type of customer and credit quality that they're able to finance in this environment where we have potentially a little bit more flexibility. Now, don't get me wrong. That's not to mean we're very conscious about the quality of customers we have. When you look at our top 20 customers, the majority of those are high-credit-quality customers. But I think it gives us – it really goes back to that we have a broader diversity of customer base and ability to finance across different types of products.

We have a couple minutes left if there's any audience Q&A. If not, I did want to ask about hyperscalers. If you think about this year, they've announced these massive CapEx plans, which creates some worry maybe around bottlenecks on power, construction, equipment. How do you manage supply chain risk? And what does elevated hyperscaler CapEx mean for pricing power?

I think first, probably something to note. Like, when you look at the, you know, what is almost half, or more than half, like, what is it, 600 billion-ish area, well over half a trillion, which is crazy when you say it out loud, that hyperscalers are spending. Not all of that is going into building data centers. Actually, a good majority of that is actually going into the CPUs, GPUs, servers, and equipment that are actually going to move into a data center. So I think that's, it's important to kind of distinguish, you know, what level. And figuring out how much is in each category, that's a little bit of more art than science, but I think it's good to keep that in mind. And, you know, from a digital reality standpoint, in terms of what that means, you know, that just means I don't think it's any different, really, from how we've approached it historically, meaning we've lived through the pandemic. We've seen long lead equipment lead times elongate. we've gotten ahead of that you know for a number of years that's really not gotten any better so we've been on top of it for a long time we look ahead in terms of what we need to procure given the the megawatts that we expect to deliver working with our partners to strengthen that those supply chains so that's something we've been doing for a number of years something will continue to do as we deliver even more and more megawatts into our operating portfolio and has that, and I'm not sure exactly where you're going with the pricing part, but I would say we have seen increases in the cost of that long lead equipment over the last couple years, but we've also seen a corresponding increase in the pricing that we're able to achieve on that deployed capital, related to the deployment of that capital, and keeping and or improving the overall yields that we're getting on our development pipeline.

Great. And we are out of time. Matt, thank you so much.

Yeah, appreciate it. Thank you.