Digital Realty’s Business in Europe and Asia Outpaces North America

The shift illustrates the transformational nature of its Interxion acquisition.

Yevgeniy Sverdlik

October 30, 2020

3 Min Read
Interxion's MRS3 data center under construction in Marseille
Interxion's MRS3 data center under construction in MarseilleGERARD JULIEN/AFP via Getty Images

Digital Realty reported having signed a record 130 new customers in the third quarter, with nearly 60 percent of the deals outside of North America, reflecting how transformational its blockbuster Interxion acquisition has been for the San Francisco-based giant’s business. The $8.4 billion purchase of the Netherlands-based data center provider closed in May.

Interxion sourced 40 of the new logos, Andy Power, Digital Realty’s CFO, said on the company’s earnings call Thursday. Of the $89 million its third-quarter bookings are expected to generate annually, $14 million comes from interconnection, while $29 million comes from network providers and enterprises each taking 1MW of data center capacity or less.

Digital also signed more wholesale, 1MW-plus leases in Europe than it did in North America, which traditionally drives the bulk of its wholesale business. Two of the five biggest deals signed during the quarter, for example, were for data center capacity in Zurich, where the company is expanding its campus.

“We are certainly seeing outsized growth relative to our installed base in these non-US markets,” Bill Stein, Digital Realty’s CEO, said on the call. But he also noted that the company had leased a lot of capacity in North America in the preceding quarter, adding that he did not expect Digital to continue seeing more wholesale business in EMEA than in North America “for some extended duration.”

Related:Digital Realty’s Interxion Enters Southeast Europe Data Center Market

The Americas still accounted for 40 percent of total bookings. EMEA also accounted for 40 percent, while Asia Pacific accounted for 20 percent, Power said. Zurich, Frankfurt, and Marseille were especially successful markets in Europe during the quarter, while “Singapore was the star in Asia Pacific,” he said.

Power highlighted the New York metro, Chicago, and Toronto as especially strong North American markets for Digital in the three-month period.

Like other large publicly traded US-based data center REITS, Digital doesn’t have many companies on its client roster from industries hard hit by the ongoing pandemic and its economic fallout.

“We are fortunate to be primarily serving customers whose businesses are thriving in the current environment, with limited exposure to sectors most negatively impacted,” Power said.

Together, retail, energy, and travel and hospitality companies, which Digital has identified as “potential at-risk enterprises,” are responsible for 4 percent of its total revenue.

While some customers have asked for rent relief since the global crisis started, those requests have now “largely subsided,” Power said.

Related:Digital Realty’s Connected Campus Brings AI Compute and Data Closer Together

Digital reported $1 billion in revenue for the third quarter. That’s up 27 percent year over year, but the bulk of the increase is due to the addition of Interxion’s revenue. FFO (Funds from Operation) per share was $1.19, down from $1.59 a year ago.

The quarter’s business wins highlighted on the call included a deal with PCCW to land a new intercontinental submarine cable at Interxion’s MRS2 data center in Marseille, a deal with a multinational Fortune 500 professional services firm for data center space in Hong Kong, and a London data center lease by the open source software company Canonical, best known for being the publisher of the Ubuntu Linux distribution.

Digital also had several cloud gaming infrastructure wins. Cloud gaming platform Boosteroid took data center space in Paris, Marseille, Madrid, and London; gaming CDN G-Core expanded in four North American and European locations; and cloud gaming startup Blade Group took space in San Francisco Bay Area.

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