Digital Realty raises annual core FFO, revenue forecasts on data center services demand

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(Reuters) -Digital Realty Trust raised its annual forecasts for core funds from operations and revenue on Thursday, as it expects an increase in demand for data center services due to the boom in artificial intelligence.

Digital Realty has been benefiting from a surge in demand as more enterprises upgrade and outsource their IT infrastructure, further boosted by advancements in AI technology.

Large-scale cloud service providers called hyperscalers are racing to build AI infrastructure, with Amazon, Meta, Alphabet and Microsoft projected to spend over $360 billion in 2025, according to company filings.

Most of the investment is expected to go toward powering data centers.

The growing demand for data centers is expected to accelerate Digital Realty’s leasing activity, thereby aiding revenue growth.

Digital Realty leases out managed data centers to clients in sectors that range from cloud and information technology to social networking, communications and manufacturing.

The company earlier in October announced a strategic collaboration with Dell Technologies and DXC to bring AI directly to customers’ data through a combination of validated use cases and expert-led implementation and end-to-end management.

Austin, Texas-based Digital Realty now expects annual core FFO to be in the range of $7.32 to $7.38 per share, compared with its prior outlook of between $7.15 to $7.25.

The real estate investment trust now expects revenue between $6.03 billion and $6.08 billion for the year, compared with its prior forecast of between $5.93 billion and $6.03 billion.

For the third quarter ended September 30, Digital Realty posted revenue of $1.58 billion, above estimates of $1.53 billion.

Core FFO came in at $1.89 per share in the quarter, compared with $1.67 last year.

(Reporting by Juby Babu in Mexico City; Editing by Shreya Biswas and Maju Samuel)