Digital Realty Trust, Inc. (DLR) Earnings Call Transcript & Summary

Well, good afternoon, and welcome back to Citi's AppsEconomy Conference. For those of you I haven't met, I'm Mike Rollins, and I cover the communication services and infrastructure stocks at Citi. Before we begin, I just want to mention that we do have disclosures available to the right of your video player as well as under the Citi Disclosures tab if you're viewing this via Velocity. And for those of you joining us for the video stream today, if you'd like to ask a question of the management during our time together, just enter your question into the question box, hit the send button. It should get to me, and I'll try to work it into the discussion over the time that we have. With those details out of the way, it's a real pleasure to welcome back Digital Realty. From Digital Realty, joining us is Andy Power, President and Chief Financial Officer; as well as Jim Huseby, Vice President of Investor Relations. Andy, Jim, thank you both for joining us today.

Thanks for having us. Happy New Year, Mike.

Thanks, Mike.

Happy New Year. Well, since we are in the new year, as you know, Andy, it's been our tradition to throw out the first question to learn more about your priorities operationally and strategically as we're in this new year. So we may as well start there.

Sure. So I mean, I think first and foremost, which is very much on our mind, is health and safety of our customers, employees, partners, vendors and communities, given this current state of the pandemic or the virus. So not taking our eye off the ball when it comes to that topic. And certainly see it with a global platform and footprint stretching -- circling the planet, certainly see in this wave, the virus kind of filter through and doing everything we can to put our team members' safety first. Two, I go back to the blocking and tackling, I don't think they've canceled all the American football just yet, but it's the markets, the capacity and the capabilities that provides our -- creates our global platform and gives our customers the service they need for their critical infrastructure. And we've been -- stayed focused on all those elements through the pandemic through 2021, through the very last days of 2021 into 2022 and making sure that we're continuing to focus on having their critical capacity, connectivity and services where they need it, when they need it with the operational resilience we're known to deliver. And then last, but not least, I think innovation, innovation on a holistic fashion. Excited about more to come in 2022 on the innovation front when it comes to innovating our product offering, our connectivity offering. We've had some innovation on the capital front as well with the announcement of our Digital Core REIT partner now listed in Singapore just prior to the holiday, but making sure that we're looking ahead and keeping an eye over the [indiscernible] here for our customers and their needs.

Great. Well, this gives us a bunch of topics to drill down on. Maybe first, just on a high level, as the industry has been consolidating over the past year, how are you choosing to invest your capital to expand reach, deepen scale and choose the assets that are best for the digital portfolio?

I mean this consolidation theme has been playing -- I mean it certainly was a major element of the fall of 2021, but it's been playing out for several years and quarters here. And I would say really under Bill's leadership now going, call it, 8 years ago, we made a pivot in terms of a few things. One, we saw the importance of being global, making sure we had the major metros and countries and markets covered where our customers needed us to be to. Two, being full product spectrum from that highly connected cage or cabinet environment to these dedicated data halls for our hyperscales around the world. So I would say elements of that strategic journey has been our filter as to where we've been elected to be a participant in the consolidation and where we elected to not be a participant in the consolidation theme. And I think it's been pretty clear in our actions leading up to really the -- even the pandemic, it was almost an annual strategic move by Digital Realty culminating with our combination with Interxion. Over the last 2-plus years since they announced that transaction, other than smaller tuck-in activity, almost all of our incremental capabilities of markets was done in organic fashion. We're delighted to announce the opening of our Seoul, South Korea, carrier -- first carrier-neutral data center connectivity hub in that country. I think it's either this week or next week and a lot of other elements where we've done it on our own means. So really trying to make sure that we're making -- increasing the value proposition to our customers, increasing our pricing power, increasing the organic growth potential of our platform has really been the recipe of where we said, hey, this is where we want to invest those incremental inorganic dollars versus, hey, this is where we're not the right buyer for that type of asset.

And just drilling down a little bit more on this theme. And one example was recently just the investments in Africa. And so maybe you could talk with what got you excited about those opportunities. And also if you could frame valuation. I think that's been a question that we've been getting is how did the -- you get to the value case for those assets?

I mean I would say our move to Africa was a fairly well thought out over multiple years and also with the input of others who have come into the company through some of our combinations, building on their success, and there's some of the seeds they planted. If you look at some of what we inherited both in terms of capability-wise, asset-wise, from the legacy Interxion combination, we had, call it, circle the northern portion of Africa with Marseille and in terms of its connectivity hub and subsea cable innings. We subsequently made investment of a platform in Athens, Greece. Legacy Interxion prior to our even involvement had made, I'd say, pretty small tuck-in investments or the beginning of investments into Kenya. We built upon that success with another smaller acquisition in Nigeria. And then this most recent announcement, which is a little larger scale relative to those prior deals, was really buying a majority stake, not all of 55%, a majority stake of the leading connectivity and data center provider, colocation provider in South Africa and Africa for that matter. That was a view towards saying Africa is an important portion of the world in terms of population, GDP, where our customers have been telling us where they see their road maps going. All those [indiscernible] were about making investments of a critical connectivity destinations, quite irreplaceable quantities of on-ramps or network providers, backing teams that have experience on the ground, not importing our people to foreign countries with no experience, but backing teams we believe in, in each one of those examples. And it comes with a long deliberate approach that some of which we can control and some of which we can't control. When we bought into iColo, we've expanded inorganically into incremental cities. But the Medallion purchase and Teraco, we're certainly -- we're beholding the third-party sellers. That relationship in Teraco, in particular, it goes back many years. I mean I can -- at customer conferences sitting next to Jan, their CEO, I think when he was the CFO at the time, building a relationship there. The last time the business transacted, I think over 3 years ago, we've made some inquiries about even making just a small minority investment into that partnership, which at that time they weren't willing to share the potential upside in the business. But I think those long-term relationships we fostered and coming to the table with a flexible and agile approach in terms of structure and a playbook where you could say we quite successfully in South America replicated this with a very strong management team and a private partner with a public company partnership similar to what we're doing here. In terms of valuation, I think the -- I think I level set a few things here. First off, I kind of -- let's -- we quoted the cash NOI for 2022 over the aggregate purchase price of to, call it, [ speak to ] valuation stamp. To call it, benchmark the last time we did that, that was 3 weeks ago when we executed our IPO of the Singapore REIT, which was 10 North American assets that were 100% fully leased, 6-plus years weighted average lease term and an appraised value of a 4.25% cap rate, and that thing has traded now up 30% and sub-4% in terms of valuation with, I think, 2% type annual escalations. This is -- we're buying into a platform, a leading platform in terms of connectivity, 22,000 cross-connects, 7 on-ramps, mostly fee simple owned, 6 of the 7 facilities. 75 megawatts is in service. I could tell you that today. 60% of that is recently delivered, i.e. it's just white. 4 of the customers have not moved into or it's not been leased. So significant upside from leasing into that capacity, most of the 60%, I would say. In addition to that, there's 90 megawatts that are under construction, the [indiscernible] are in the ground. And last, but not least, there's another 80-plus or so megawatts that kind of gets you to 187 in total of adjacent to those prime connectivity destinations, fee simple owned land for expansion. So high growth part of the world, irreplaceable asset, adjacent runway for growth, management team with expertise in the business, invests directly in this business and success. And last but not least, we didn't have to buy just 55%. The shareholders elected to roll their 45%. And these are very sophisticated shareholders who have made -- had success with this management team with this investment for years now. And they said, we want to leave our money on the table, which to me was an incremental valuation cross-check as to the prudence of the risk-adjusted return from this investment.

Andy, the comment around that 60% that's fairly new and not utilized, is that the key where if someone is trying to say what's the stabilized yield, would someone just logically multiply the 3.5 by 2 to 2.5x and just say a stabilized yield is much higher than the -- what's coming into the business in 2022?

I think -- the other element I should have mentioned is, and I'll get to answer in a second, but it's also a sizable portion of U.S. dollar contracts. I think it's roughly 40% of the EBITDA is U.S. dollars, that in-place EBITDA. So insulated versus the risk. But the reason -- I think a better way to answer this, because there was a quote as to, well, the South African rand is at X percent, which is a high single-digit coupon. We look at our underwriting in this business over several years at a very conservative residual value in the high teens in the local currency to show a significant unlevered IRR premium and ran relative to a risk-free rate. So I'm not dodging your question on where the yield goes. But on a yield on cost basis, I think more than doubling that is a fair assumption based on what we see as the attractiveness of this available capacity.

And one other question just broadly on M&A. Since the CoreSite prospectus was released and the transaction has now been completed, it seems like party A could have been Digital Realty. If it was and you were involved, what was the strategic decision to walk away in the end for what didn't seem to be a big spread from the winning bid?

Yes. Listen, I -- obviously, no comment on confidentiality provision on agreements. And honestly, I didn't -- I read the recaps of the note, some of this, I didn't even read the actual perspective personally. So I can't tell you who party of the A, B, C, D or Z is. But I'd perhaps answer that question in the context of just general, there's been several transactions that have happened in the last year or in the last 2 or 3, 4, 5 years, where Digital Realty was not the best buyer and did not essentially meet the highest price on the table. And there are certain transactions where, if you go back -- I think that was our 2Q call where Bill was quite frank, not having any interest in even looking at certain portfolios, given the lack of strategic fit to Digital Realty. So there is a selective lens, and there is a financial discipline lens. And just because I view our Teraco investment as buying them to an irreplaceable platform asset, there is a price for -- a ceiling for every price. I'm not saying it's a priceless asset, right? And I feel good about the price we paid on that investment. And I feel -- you can see that our actions speak louder than our words that we're not the owner of that business. And I would also say -- I'm not saying that in a disparaging way whatsoever because at least the legacy CoreSite management team that I -- Jeff Finnin, and Paul and Steve, those that I know, I have a lot of respect for what they did with that platform. It was -- I think I said -- when the rumors came out about this, I think it said it's a nice platform. There's certainly -- who wouldn't want One Wilshire, right? I mean that's also a very attractive data center asset, but it also wasn't a need to have or dire to have, especially looking our footprints in the markets like Chicago and Ashburn and other parts of the U.S.

And while we're just staying on this topic of consolidation, there is a question that came in, and then we'll switch over to the fundamentals of the business. How do you see the opportunity to work and partner with tower companies to pursue the edge data center opportunity?

I think the -- I'm a believer in the edge opportunity and the demand sets, whether it's commercial Internet of Things, artificial intelligence-related demands, virtual, augmented reality. I mean the list goes on. The things we haven't dreamed the innovation that could come there. I feel it's very nascent to me in the commercial use cases, i.e., it hasn't been settled how it's going to look and feel. I'm not 100% sold on the foot of the tower being the most locationally sensitive in terms of requirements. And I think our approach to this is really about our openness and partnership. And that's kind of equivalent to our investment in AtlasEdge, our partnering with Vapor IO. We want to ensure that our platform apart from digital and its 4,000 customers, which we're adding to every day, has access to those edge use cases. That does not mean we need to own everything that looks and smells like a data center in the world. So I think that we're very open to partnership frameworks. I'm not at the place where I feel that a tower and a data center has to be owned 100% by the same exact ownership group. I don't see that criticality of consolidation.

You were talking earlier about the pivot and the evolution of the asset mix. And over the last 4 quarters, you've cleared quarterly $100 million in bookings, 5 of the last 6 quarters. Can you talk about what's driving the demand, the quality of the demand? And can you sustain this improved level of bookings going forward?

I think the -- we've been over either 2021 or the last 6 to 9, whatever, some series of quarters that [ strings us out ] a significant amount of periods now, been executing and harvesting the fruits of our labor, putting the other, the critical puzzle pieces, the almost 50 metropolitan areas, the 6 continents, the 25 countries with the full suite of capabilities and investing in our people and our go-to-market, investing in our supply chain, investing in our sales force amplifiers. And I would say, doing quite well in both of our major segments, both our service providers and our enterprise segment. Service providers, albeit call it maybe akin to the hyperscale bucket where I view we're probably extending our lead in many shapes and forms. They're whittling their list down to fewer and fewer providers on a global scale that can really be their trusted infrastructure partner and doing that with the operational excellence, the supply chain capabilities, the boots on the ground and all the geographic locations is certainly tightening our alignment with them for the long run. In the enterprise segment, I've said it for a while, we've been playing catch-up. This is not an area where we had an early success or early focus. And I think we've made some great strides. And yes, our one great accolade is the 100 [indiscernible] of signings. The other one is look at the mix, when we're close to 50% and the less than a megawatt interconnection category, where we're putting north of 100 new logos every quarter and we're doing multi-market when we're especially getting greater and greater penetration in enterprise customers who really, I think, were looking for an alternative to having one global enterprise provider. And I think the tide has been rising for ourselves and the other major competitor in this arena. And we've been doing the things that allowed us to narrow the gap in terms of capabilities. We're doing this in a very neutral and open format. And I -- hats off to the entire digital organization for strong execution, especially turning up pandemic, where you could probably even barely go see an enterprise customer in person.

And speaking of that, with this latest wave that we've been experiencing, has there been any change in the decision-making or the behavior and ability to get sales or installations for that matter?

I'm not seeing -- I've not seen the COVID pause, and I do feel that the enterprise customer after, call it, 18 months of COVID or even more are basically saying digital transformation, digitization, being able to connect to my customers, my employees and the planning ahead, it's a massive priority. So I'm not seeing any buyer bottlenecks do these elements to date. And I would say the enterprise demand has remained incredibly firm and robust. And I -- potentially even upticking a little bit now that we've now several quarters putting up significant success in that arena. Supply chain not 100% bulletproof, certainly seeing modest little delays here and there during the months, type of categories of delays for -- relative to different components. But nothing I would say is draconian in nature from a delay or supply chain bottleneck that I would say, slowed down a signing of a deal or a decision of a deal or a project or anything like that.

As you're looking at the sales and bookings performance over the last few months and looking forward over the next few months, are there any pockets of strength or softness that investors should be mindful of?

I mean if you look at the geographic lens, you've seen each of the regions being major contributors and really pulling all -- pulling their oar in a strong fashion. So pretty diversified geographic demand. When I go back to those 2 segments, both service provider segment and the enterprise segment, has been pretty robust. Service providers and much more towards hyperscale cloud, but have seen a fair bit of, call it, content gaming type of use case has also been strong. Enterprise, maybe certain subsegments. Financial services seem to have a pretty strong boon recently, whether it's banks or other financial services or fintech type firms. So in terms of softness, I don't think there's one area that I would say is particularly soft or weaker than the other. I mean it's been a pretty well-diversified robustness [ in a sense ].

And as you're adding 100 logos or more per quarter, are those coming from firms that are new to the category? Is it switching? Or is it like a doubling up or tripling up of resources? So is it a rising tide? It's just helping everyone? Or are you benefiting from some share switching or just new to the category?

I mean we're -- there's definitely a portion of share switching, more I would say from smaller regional subscale type providers. A fair bit of moving from an on-prem solution still. There's a little bit of pop out to the cloud, starting to see a little bit of that, not massive deals, but seeing more of that pop out to the cloud type environment. I don't think the -- I think the first category of share switching relative to smaller regional-type providers is probably the biggest piece of the pie, though.

And when you say pop out to the cloud, is that cloud workloads coming back to being direct? Or is that firms popping into your facilities to connect to the clouds and the digital exchanges?

Customers that were pretty heavy cloud reliant with probably a small amount of on-prem really diversifying into a private workload with the digital.

So some of the questions coming in are regards to pricing. And so as you look at the environment that we're now in, what's the opportunity to use price differently or greater than maybe previously? And are you also seeing higher input costs at the same time?

So let me take them in reverse for a second. So we -- our design and construction supply chain team have done a really nice job getting ahead of this in terms of vendor-managed inventory programs, other supplier relationships, preorders that feel very well insulated for the, call it, almost 300 megawatts we have under construction now. The next flag after that, I would say, if this world of inflation continues, we'll have some type of pricing impact down the road. It seems still to be in a more modest category, but it won't be 0. I think we're going to outshine our smaller providers to be top of queue in terms of best pricing and best delivery in terms. I think the inflation trend, one, we have a very dynamic pricing model to begin with. So all forms of inventory are dynamically priced and revisited with cost inputs as well as supply-demand inputs calibrated. So -- and I mean I've said this a thousand times now, Singapore is a great example, where it wasn't just a cost input, the government essentially shutting down of incremental data center capacity allowed for us to reset the pricing. And we did that several times, given a rather medium dynamic and a limited supply dynamic. So I think this inflation trend will continue to allow to push for better pricing or more incumbent pricing power because the -- it's going to put -- it's going to increment the cost models for even newer entrants to a dis-portion -- in fact, slow down different portions of supply. And I think it's -- on a -- at a human level, I think it's just it's very in your face, right? You can't read -- pick up a piece of a news article today that doesn't mention something on inflation or go to your gas station or the grocery store and not see the inflation in your face. So net-net, if you look at our most recent price book updates, probably the most positive price movements I've seen in my time at Digital here. So certainly seeing a combination of supply chain disruption, demand or supply in general running up to physical barriers allow to shift that leverage back off our way a little bit.

When we take together some of the acquisition announcements, the capital recycling, some of the ways you're capitalizing the business, I think previously, you were hoping to improve financial performance in 2022 over 2021, and I think the barometer was core FFO per share growth. Taking some of the recent announcements and decisions, is that still a fair opportunity and objective for Digital? Or should investors recalibrate their expectations for 2022?

So the caveat being, we haven't closed the books on 2021 yet. So knowing that your growth in 2022 depends on what your answer is for 2021. And we're going to put our guidance, like we usually do, on our fourth quarter call in the middle of February. I would say, one, you've got to remember that we closed on the Singapore REIT, Digital Core REIT, congratulations to John Stewart, who is missing probably this conference for the first time in 8 years, I'll be able to focus on that. And welcome to Jim picking up the mantle. So make sure you got Jim's contact information if you need to get hold of us on any IRR matters. But that raised $950 million, and that was a little bit of a strained transaction that it literally -- it closed like the very -- 2 weeks left in the year. So some of the fees, including the acquisition fee, is going to fall into '21, but not fall [indiscernible] in 2022. You have the Teraco announcement, which we mentioned and estimated the dilution for, as well as we've been trying to mitigate our FX with our most recent eurobond, but the dollars [indiscernible]. So long story short, make sure your models pick up all that. But based on what everything I'm seeing, I would still stand by the statement that we think 2022 growth is going to be at least as good as 2021 growth, which -- again, 2021 growth was stronger than 2020 growth. So the growth is accelerating. It won't be accelerating at as quite a strong, clip given the dilution from the Teraco investment, but I still stand by. That's just dilutive in the first year. It's breakeven in the second year. So we're back to where we were pre Teraco plan. And I think we really have essentially taken control of an incredible asset that strengthens our platform, strengthens our pricing, thanks to our overall growth, and drives greater value to Digital Realty shareholders in the long run.

And just thinking through another comment that you provided earlier about innovation. And I think when investors hear the term innovation or investing in innovation or digital platforms, they get concerned that there could be some margin dilution, take a step back, take 2 steps forward in the future. What are the possible impacts of greater investments, whether it's in innovation or for sales for Digital in 2022?

We're acutely aware of growth in our bottom line and making investments that we think are prudent, like the one I just mentioned, but also not making investments be it M&A or otherwise that we don't think to sacrifice the bottom line is worth the long-term benefit. So we believe we have done and whether it's Service Exchange or other investments, some of which we invested in companies and made significant gains like our investment in Megaport, which obviously doesn't flow through our P&L. And other different shapes and forms of that can do this in a non-EBITDA margin-bleeding type of framework. So we don't think those things are lockstep one for one. We've made some investments, I think it was a year ago, that are really focused on a connectivity standpoint. And we'll have incremental connectivity announcements to come in 2022 about expanding our offering in a new and different format. And we're making investments in our ERP systems to remove the friction in our selling and friction on our operations. We're still doing integration elements. There's been a lot of companies that have come together that we're still trying to tie together and clean up at the back end of, which is not as transparent to our investors. So there's a host of investments, such innovation categories where we think we're going to strengthen our offering to our customers, make it easier to do business, make us more efficient, allow us to scale without major -- not even a major -- without degradation to EBITDA margin at the cost.

Another question that's come up from time to time, as you look at the portfolio that you manage, the utilization, I think, from all the repositioning of the assets and changes has gone from a 90% down to 84%. The portfolio now is about 30% larger. And so how does Digital look at the opportunities to increase utilization and drive a higher margin operating leverage from doing so?

I mean some of that was at our own election or direction. We literally sold 100% outright noncore assets that were very highly leased, some of which 100% leased. We sold joint venture stakes in assets that were also 100% leased where I view as the juice was already squeezed. They're core assets, but the juice was already squeezed, the upside for harvest. We've invested in platforms like Interxion that was in the, call it, 70% utilized and Teraco in terms of the upside in terms of occupancies even greater than that. So we've essentially bought into platforms that we think have better long-term value proposition to us or better long-term organic growth and pricing power and have runway to harvest incremental cash flow growth from. So these are at our election. I can tell you, selling into existing capacity is priority #1, 2 and 3 at Digital. We've focused on that, given the flow-through benefits, given the elements that it strategically can be advantageous toward a date, occupied tomorrow. And we take a very focused approach to how we position our inventory, whether it's pricing or capability-wise in order to drive utilization higher. We have been trying to make sure we are an active manager of our business over the last several years. That means selling out right things that we don't believe in for the long run, joint venture and the things that are slowing our growth and investing in things that are going to make us grow faster. All those moving parts are complicated, I 100% agree with that. But we do believe that the platform and the portfolio and the platform of Digital in general is a much higher growth, stronger value proposition, higher pricing power offering today than it was X years ago when you quoted that higher occupancy stat.

And Andy, how should investors think about the capital recycling program going forward in terms of opportunities and size?

When it comes to what I would say is noncore to Digital, i.e., we don't only need to own every data center. We're the largest in terms of megawatts or square feet in the world. But there's still aspects that we had a portfolio at the beginning -- this -- around this time last year we sold in Europe that fell in this category. Other portfolios that fell in this category 2 years ago. I would say that noncore element, while we're going to always keep an eye on that -- because things change, assets change, markets change. But based on what we know today, I think we're down to a very small portion of Digital that we say, you know what, we don't need to be the [ nurturer of ] this asset for the long term. So we'll continue to chip away at that, but it's in the rather small component, call it, billion-ish type size of component that we'll sell at the right time to the right buyer. I mean we just sold on, I think, a $60 million asset in December, where they -- it's a downtown San Jose building where they're going to turn that into a residential condo project, which is the higher better use than a data center, right? I don't care how critical that data center was. They're going to be able to sell that, make a lot more money at a different use case. But there's things like that we're going to still monetize. In addition to that, capital recycling is going to be a very important part of our funding strategy with the creation of Digital Core REIT. We then still have 290 data centers, many of which we fully leased. We've locked into contractual returns for many, many years. But probably to some of our biggest customers who have negotiated probably the most advantageous to them rental escalators, you know what, that's a great asset for Digital Core REIT that can give those investors exposure to that growth. It is an inorganic growth needle mover relative to that smaller platform. We can maintain that and see the most customer experience. We can essentially have the management of that vehicle, the economic reward in addition from a manager as well as a minority owner. And that is -- we view as an incremental way to fund our equity sources of our business, given our large development pipeline and a better cost of capital to Digital Realty's shares.

And Andy, on just the subject of green and renewable power, how important has that become for the customer conversation? And what are Digital's plans to increase the proportion of power consumption in your facilities that's green and renewable.

So I'm -- and this is not me. So I'm really -- this is a proud or pride for the accomplishments of our sustainability team and really making this a table stake type of requirement at Digital years ago and doing in a holistic fashion. So how it is done, build, operate, procure power, use of water. And I think we've done a really nice job in terms of our actions to date in terms of moving the needle on a massive amount of megawatts in terms of greeting it and doing that in a true green fashion power purchase agreements, actually creating more green energy in this world, not just through financial derivatives. I -- we're not anywhere near done yet. We've also made some aspirational -- I would say, some strong goals of science-based targets in terms of limiting our impact on the environment, which we're making progress along. And I go back to it, it is not just more PPAs or wind farms or solar projects. It's also other elements of the impact of our asset classes in the environment. I mean [indiscernible] the legacy Interxion team and our country MD in France was incredibly innovative in terms of utilizing river resources for water cooling. So -- and I think that you've got to come at this from many angles in order to essentially move the needle on it. Power is a huge, huge piece of it, but we're not stopping there.

So Andy, are you ready for our rapid fire questions, 3 questions in 3 minutes?

Ready or not, go for it.

All right. Question number one, why should investors buy your equity?

One, we're an industry blessed by incredible secular tailwinds. I mean, digital transformation, digitization, it's making this call happen. It's protecting our mankind today with this technology. It's the future, and the future is here. So we're blessed to be in this industry. Two, we've created a platform that I think has really widened the moat relative to any others behind us. And we've done that in terms of adding the right markets, the right capabilities, critical assets, connectivity hubs, land banks for growth, customer relationships. And we get to play this incredibly important part of supporting that digitization, digital transformation with the physical required elements of it. And three, I think we're teaming up for riding a wave of demand that I mentioned with the right platform, the right horse, the right capabilities and doing anything in a way that is going to create a platform that's going to stand the test of time here and be at many more Citi AppsEconomy Conferences here to come with not just a bigger enterprise value, that's not the goal, higher stock price is the goal.

Second question, I realize we talked about this a little bit earlier on the subject of inflation. But if you had to summarize, is inflation for Digital Realty net opportunity, net neutral or net risk for your business model and financials?

Modest inflation is a net positive to the largest existing platform in this business with global scale, supply chain, land banks, supplier relationships that trend at a modest level is our friend.

And since -- as you mentioned, this is the AppsEconomy Conference. Is there an application that you want to highlight that can fundamentally change demand for connectivity or data consumption over the next few years?

The -- artificial intelligence to me is the one that I want to learn the most about because I think it's going to do the most. And it just start -- it has continued to pop on my personal radar, whether it's the predictive things going on in my Office 365 or the alarming of packages to deliver to X, Y, Z, the extrapolation of that intelligence is an impact on compute, higher density, potentially computing. And I just -- and it's going to be the link to so many other things. It's going to be add on to the commercial Internet of Things, so many other things that as the one that I think is going to be a force multiplier for data and for Digital Realty.

Well, Andy, Jim, it's great to see you. Thank you for joining us. I also want to thank our clients for joining us for the conference, and I hope everyone stays safe and well.

Thank you very much for having us. Have a good weekend.

Thank you. You too.