Digital Realty Predicts Accelerating Data Center Demand, Even Amid DeepSeek Disruption

“This is a new player in the arena, driving more efficiency to the model. But that doesn't take us off the course of the tremendous investment our top customers need to make on building out their AI infrastructure. I don't see there's a wavering in the course here of overall demand coming to Digital [Realty],” CEO and President Andy Power told analysts.

Digital Realty CEO Andrew Power said the data center giant had a “break out year” in 2024 as demand for its capacity surged amid the AI boom, despite the threat of tariffs and technology disruptions like the DeepSeek AI chatbot.

Analysts are concerned that the Chinese open-source DeepSeek might hit Digital Realty’s potential upsides for delivering large-scale compute capacity. But Power, speaking on a Feb. 13 earnings call with analysts, said he saw no change in commitments from the company’s largest customers.

Power said 30 percent of the megawatts Digital Realty signed during the quarter were AI related, during an “enterprise heavy” quarter.

Digital Realty CTO Chris Sharp said on the call that the higher the leaps in efficiency, the more demand Digital Realty will see for its data centers as more powerful language models become available to more consumers.

Sharp said software models such as DeepSeek, are the first in a line of efficiencies that are coming to AI software as well as the GPU layer that supports it.

“I think we're going to continue to see AI being democratized," he said. “There's going to be [increases in] step functions that we'll continue to see in the industry. But, you know, this shift will drive higher and higher AI utilization to more and more customers, ultimately creating more and more demand for our facilities.”

Sharp previously worked at Equinix where he developed cloud solutions. He also held leadership roles at Qwest Communications, MCI-Verizon and Reliance Globalcom. He said from their vantage point it is still the early days of AI.

“A lot of the interest we see is around augmenting current capabilities,” he said. “Just to kind of press upon the demands of inference, it will still have more and more proximity to the end consumer. I think that's the important piece that we always look at, and where we apply our capital is that long term durability of where that inference matures, because that's where the actual consumption or monetization of AI will happen. And that's why we're very excited about how that's going to be maturing over time.”

Digital Realty reported revenue of $1.4 billion in the fourth quarter of 2024, a slight increase from the previous quarter and a 5 percent increase from the same quarter last year. The company delivered net income of $186 million in the quarter. For all of 2024 Digital Realty’s revenue was $5.55 billion, up 1.4 percent year over year.

“2024 was a breakdown year for Digital Realty, as we capitalized on the surge in demand for data center infrastructure, positioned the company for the opportunity that lies ahead, and continued to execute on the key strategic priorities that we outlined on this call two years ago to enhance our long term sustainable growth,” Power told analysts.

The company renewed a record number of leases in its sub 1 mw business, which added 591 new logos, said Power, who joined Digital Realty in 2015, originally as CFO. Meanwhile the company has been growing its physical footprint to add capacity.

“We expanded the capacity of our total portfolio by over 200 megawatts in 2024 while scaling our development pipeline by over 75 percent to seven plus billion [dollars] of projects underway that are 70 percent pre-leased in order to serve our customers’ growing data center needs,” Power said.

The data center supply chain has headwinds in terms of electricity supply, as well as hardware from vendors and global politics, he said.

“We’re using our relationships. We’re using our scale. We’re being creative to find ways to accelerate solutions for those customers whenever possible,” he said. “Our supply chain with the vendors is on the tight side as well. We’ll see what happens when the talk of tariffs comes to data center land in terms of impact. But our current read of that outlook is that we’re well insulated.”