BXDC (BXDC) Q2 2026 Earnings Report, Transcript and Summary

Good day, and welcome to the Blackstone Digital Infrastructure Trust Second Quarter 2026 Investor Call. Today's conference is being recorded. [Operator Instructions] At this time, I'd like to turn the conference over to Tim Hayes, Vice President, Shareholder Relations. Please go ahead.

Good morning, and welcome, everyone, to Blackstone Digital Infrastructure Trust Second Quarter 2026 Earnings Conference Call. I'm joined today by Nick Pell, President and Chief Executive Officer; Mike Forman, Chief Investment Officer; Tony Marone, Chief Financial Officer; and Andrew Winchell, Executive Vice President of Strategy. This morning, we filed our 10-Q and issued a press release summarizing our results, which are available on our website and have been filed with the SEC. I would like to remind everyone that today's call will include forward-looking statements, which are subject to risks, uncertainties and other factors outside of the company's control. Actual results may differ materially. For a discussion of some of the risks that could affect results, please see the Risk Factors section within our prospectus dated May 13, 2026, which is accessible on the SEC's website at www.sec.gov. We do not undertake any duty to update forward-looking statements. We will also refer to certain non-GAAP measures on this call. And for reconciliations, you should refer to the press release and 10-Q. This audio cast is copyrighted material of Blackstone Digital Infrastructure Trust and may not be duplicated without our consent. For the second quarter, we reported GAAP net income of $0.14 per share, while funds from operations, or FFO, was $0.07 per share and adjusted FFO, or AFFO, was $0.08 per share. As a reminder, we completed our initial public offering in May 2026 and had no real estate operations during the quarter ended June 30, 2026, as the net proceeds of the offering were invested in cash and cash equivalents. Therefore, we do not believe 2Q results are indicative of the operating performance we expect to achieve upon deployment of our capital into target assets. With that, I will now turn the call over to Nick.

Thanks, Tim, and welcome, everyone, to Blackstone Digital Infrastructure Trust inaugural Earnings Conference Call. We are thrilled to have recently completed our IPO in May, listed on the New York Stock Exchange under the ticker BXDC and successfully raising $2 billion of gross proceeds, the largest blind pool REIT IPO in history. We are grateful for the support of our investors who participated in the offering and look forward to the continued partnership as we deploy our capital and seek to capture highly compelling risk-adjusted returns in the stabilized data center market. The opportunity set in front of us is massive with a total addressable market for our business expected to eclipse $1 trillion over the next several years, and yet we believe we are still in the early innings of long-term capital formation in the sector. With strong underlying fundamentals and limited scale buyers in the market dedicated to the strategy today, we view this acquisition environment to be one of the best we have seen and expect it to become even more fruitful as the newly delivered assets come online in the next several years with the sector anticipated to double in size. And we also view recent debt capital markets volatility as a potential catalyst for new deal flow. We believe BXDC is uniquely positioned to capitalize on this generational opportunity, benefiting greatly from Blackstone's data relationships and experience as the largest investor in data centers and digital infrastructure globally. For those newer to our story, BXDC is a REIT focused on acquiring stabilized mission-critical data centers that power the modern digital economy. Across Blackstone, we have seen firsthand that the convergence of AI, cloud computing and the broader digitalization of our economy are driving unprecedented demand for compute with data centers serving as the backbone of this revolution. Even as demand accelerates, it is becoming increasingly difficult to build data centers across the U.S. Power, labor, zoning, supply chains and other factors have all become real constraints, and we expect many of these pressures to persist over time. To contextualize these supply and demand dynamics, vacancy in U.S. data center markets continues to trend lower and reached an all-time low of approximately 1% in Q1. And in our target markets, vacancy is essentially nonexistent at just 0.4% today. With limited availability, rent growth has accelerated, increasing by more than 100% from 2021 levels in the U.S. We believe these robust market fundamentals will bolster performance and long-term demand for our target assets. As one of the largest private capital providers in the AI ecosystem, Blackstone has a bird's-eye view of the entire digital infrastructure landscape. This perspective provided clear line of sight into the rapid evolution of the stabilized hyperscaler data center marketplace, which we translated into BXDC's dedicated strategy designed to generate attractive and predictable cash flow and with embedded growth drivers supporting strong risk-adjusted returns. And our strategy is simple: acquire recently built high-quality income-producing data centers located in Tier 1 markets with long-term leases to top investment-grade hyperscalers, no development risk, no power or entitlement risk and powerful downside protection with assets fully leased at the time of acquisition to some of the most creditworthy tenants in the world. We have a robust pipeline of attractive investments that fit these parameters and are actively engaged with a number of third parties to acquire our first assets while also planting seeds for future growth opportunities. We are confident in the near-term prospects for capital deployment. We also have increasing visibility over the long term given the accelerating hyperscaler CapEx spend, which is expected to exceed $800 billion this year, just from the top 5 alone, nearly double last year and a fraction of the $3 trillion we expect to see over the next 5 years. We expect that the significant capital requirements to build out this infrastructure could create additional compelling opportunities to work strategically with the hyperscalers themselves. We remain confident in our ability to deploy capital at attractive yields with close to $30 billion of recent comparable transactions in the market pricing at the low to mid-6 cap rates. Consistent with our buy box and the pipeline opportunities we see, cash flow yields and annual rent escalators set up powerful flywheel for growth and position BXDC to capitalize on attractive opportunities. We view our growth potential at highly compelling relative value in today's market, given the long-duration cash flow profile, strong tenant creditworthiness behind our leases and the robust demand drivers supporting long-term market fundamentals. The public markets are starting to recognize the opportunity in the sector. Our data center REIT peers are up approximately 30% year-to-date and trade at implied cap rates well inside where we believe we can acquire assets in the private markets, a supportive backdrop for accretive acquisitions. Looking forward, we could not be more excited about the investment opportunity in front of us. The size of the market and our ability to deploy capital at scale provide a clear road map for growth in our portfolio and earnings power. Thank you again for your time and interest in BXDC. I will now pass it over to Tony to discuss our financial results for the quarter.

Thank you, Nick, and good morning, everyone. As Nick mentioned, we completed our IPO in May 2026, raising $2 billion of gross proceeds as a blind pool REIT. When we initially formed BXDC, we determined that establishing this vehicle as a publicly traded company with perpetual capital and access to the public debt and equity markets was paramount given the scale of the stabilized data center opportunity. We also elected to IPO as a blind pool, prioritizing speed to market and positioning BXDC as a first mover for stabilized data centers in the public REIT sector. We believe this also establishes BXDC as a clear capital solutions provider to data center developers and owners looking to unlock liquidity in their assets and reinvest in projects that better align with their higher cost of capital. Looking at our second quarter results, we reported GAAP net income of $0.14 per share, FFO of $0.07 per share and AFFO of $0.08 per share. As a reminder, we had no real estate operations during the quarter and do not believe our second quarter results are indicative of our near-term or long-term earnings power as we begin executing our business plan and deploying capital to our target assets. These earnings metrics reflect the revenues and expenses incurred between the closing of the IPO through June 30 or roughly 1/2 of the calendar quarter, but they differ materially in terms of the share count used to calculate each metric. Our net income per share is based on a weighted average share count of 50 million shares, which is in accordance with GAAP and includes the period prior to the completion of our IPO, during which we effectively have no shares outstanding. Our non-GAAP metrics of FFO and AFFO per share are based on an adjusted share count of 99 million shares that only reflects the period following the closing of our IPO at quarter end. We believe this adjusted share count better reflects the economic experience of our investors. Following our IPO, our net cash proceeds generated $9.3 million of interest income during the quarter. We also incurred $800,000 of interest expense, reflecting fees associated with our revolving credit facility and $1.4 million of G&A expenses, including $535,000 of costs associated with the IPO and formation of our business. Such organizational costs are the primary adjustment between FFO and AFFO this quarter. Turning to our corporate structure. We are an externally advised REIT managed by Blackstone. We benefit greatly from our integration across Blackstone's global real estate and infrastructure platform, which we believe is a strong competitive advantage, providing BXDC with real-time proprietary insights into market dynamics, tenant demand, lease structures, transaction flow and more. And Blackstone is highly aligned with BXDC shareholders with 11% of BXDC shares owned by Blackstone and its employees. We believe stockholder alignment is critical and thoughtfully constructed our management agreement that 100% of management and incentive fees are tied to BXDC's stock performance. Our management fees are also tiered, starting at 1% of market cap today, but stepping down as we scale and allowing BXDC stockholders to benefit from future operating efficiencies. And our incentive fee, 25 basis points on our market cap, is only payable if the stock is above the IPO price and achieved an 8% annualized total return for the quarter, a good outcome for our stockholders. And as a reminder, 100% of base and incentive management fees have been waived for the 6 months following our IPO to roughly align with our expected time line to deploy the proceeds from our offer. And lastly, on our balance sheet, we ended the quarter with total assets of $2 billion, effectively all cash and cash equivalents. We currently have no debt on our balance sheet, but expect to target 40% leverage over time as we prudently access asset-level and corporate debt to finance new investments. We believe this balance sheet management aligns with our strategy of investing in new stabilized assets with long-duration cash flows backed by a select group of high-quality tenants. And with $1 billion of unused capacity on our revolving credit facility, we have ample flexibility and dry powder to capitalize on our robust investment pipeline today. Thank you again for joining our call. I will now ask the operator to open the call to questions.

[Operator Instructions] We will take our first question from Brendan Lynch with Barclays.

Maybe just one on NIMBYism to start. It seems like we're -- it's kind of increasingly becoming a consideration. And I'm curious on how this is changing the dynamics in the transaction market. Conceivably, would-be sellers might hold out or hold on to assets a bit longer knowing that it might be difficult to recycle the proceeds into their next development project. So I'm wondering how you're seeing that dynamic play out.

Yes. Thanks so much, Brendan. It's a really good question. So I will say you're spot-on. There is growing NIMBYism and just, sort of, pushback around new development. That being said, there is still an enormous amount of development that's taking place in the market. I think the crux of that story is there would be even more development than there is if that weren't the case, but there's quite a bit of development happening regardless. And as a result, the motivation for people to sell assets, recycle into development is very much there. Maybe it could be even more. But just for context, like, leasing this year in the United States will probably be north of 20 gigawatts versus 13 gigawatts last year, which was more than double the prior year. The amount of supply is pretty dramatic and the capital requirements to actually go build these projects is going up pretty materially, everything from the land purchase price, the power commitments that you need to make, the actual cost to build. So I think the story around why groups want to recycle capital is very much intact.

Okay. Great. That's helpful. And maybe just to get your thoughts on Meta. They've been one of the largest consumers of data center infrastructure over the past 5 years and still have very ambitious plans to scale. But how do you guys think about the potential for Meta to lease compute capacity to Anthropic? And what it implies about the supply-demand balance of compute capacity within hyperscalers' portfolios?

Yes. Good question. Look, I would say, as these groups continue to build out more and more compute capacity, they're finding various ways to monetize it. It could be through their existing businesses, it could be through new businesses. I think the most important thing going on here is the world has run out of compute. The large hyperscalers have the largest balance sheets in the world. They're building out significantly more compute. There's lots of ways they'll be able to monetize that.

We'll take our next question from Aryeh Klein with BMO Capital Markets.

You talked a little bit about, obviously, the broad opportunity that's out there. Just curious on the competitive backdrop for these deals. What are you seeing? Are you seeing more bidders, kind of, compete for acquisitions? And then directionally, just curious what you've been seeing on pricing?

Yes. So thanks for the question. I think we mentioned there have been $30 billion of transactions year-to-date. So there are deals getting done. That said, the opportunity set is massive, as I think we referenced in our remarks. And with the sector expected to double, there's just a lot to consider in the opportunity set. So there is -- there are groups out there looking at deals, but I think we feel very confident with the opportunities that we're engaged on and looking at. And I think the idea of being able to do something programmatic with our counterparties is very attractive, both for us and for them. And so I think we feel very confident in our ability to execute on the pipeline.

And then maybe just -- you talked a little bit about hyperscale sale-leasebacks as a potential opportunity. Where do you think that stands currently in terms of their willingness to transact? And would you consider expanding beyond Tier 1 markets for those types of deals?

Look, I think at the end of the day, if the hyperscalers are looking for sources of capital through sale-leasebacks or otherwise, Blackstone is very well positioned to be able to offer solutions for these huge companies. And I think we are, again, like, very well positioned to do so. And I think as it relates to our buy box, I think we're very focused on delivering our IPO proceeds into the specific buy box we laid out, and I think have been pretty focused on really sticking to, sort of, the buy box description that we laid out for everybody.

We will take our next question from Eric Luebchow with Wells Fargo.

Nick, you alluded to some of the volatility we've seen in the credit markets as potentially opening up some opportunities, greater opportunities for you. So maybe you can talk about whether you've seen any kind of changes in pricing relative to the move in interest rates or just some of the large financing deals we've seen in the market that haven't been as oversubscribed as usual? Has it had any impact on pricing so far?

Yes. Thanks, Eric. It's probably a little early to tell on pricing. I think where we're seeing it translate potentially just in terms of, like, how counterparties think about their alternatives, their expectations, their choices of how and when to execute on an exit. I think the nice part about these transactions is it can be a win-win, like, our -- the developers themselves, counterparties, they're looking to recycle capital. They're looking to exit out of a successful development opportunity. And at the same time, it's allowing us to identify premium real estate to build a portfolio around to be the foundation of this REIT. So a lot of it is just about thinking through that dynamic in the market, but it's all pretty recent. I just think, like -- we do think that uncertainty and volatility in general probably allows things -- facilitates the market a bit more.

We will take our next question from Michael Funk with Bank of America.

So 2, if I could. So first, I wanted to know if you still intend to deploy the IPO capital within 3 quarters? And then second part to the question, have you thought about expanding your buy box to data centers under development, but not RFS yet given the size and pace of development year-to-date?

Yes. So look, I think we feel very confident in the pipeline and our level of engagement with a number of different opportunities here and feel like we're well on track and, frankly, excited about the real estate that we're engaged on and that's in our pipeline. In terms of forwards, it's certainly a part of the marketplace and part of a few of the deals that have happened and been announced earlier this year. We're certainly evaluating those. And I mentioned thinking about planting seeds for future opportunities. It's certainly something we're looking at. I think we're trying to prioritize for our IPO deployment into deals and assets that can pay rent upon closing.

The only thing I would tack on, Michael, is, like, we feel really good about the pipeline today. Like, it's very strong. We have more opportunities than we have capital for right now, frankly, which is a good place to be. We have the luxury of choice. So I think we feel really good about our buy box. And -- but to your point, there will be opportunities to go expand that over time.

We will take our next question from Nick Del Deo with MoffettNathanson.

First, I think your expectation had been that there wouldn't be a ton of competition for deals in general, given their size and so on. Are you seeing that play out in your negotiations and discussions so far?

I'd say that, look, there isn't a lot of capital formed as we alluded to in our remarks, and I think we alluded to on the road and around the IPO with the stabilized data center strategy. There are groups that buy stabilized data centers here and there as well, as evidenced by the deal flow so far. But again, as we engage with the marketplace, there's plenty of really interesting and compelling real estate to choose from. And there are counterparties that are more excited to do business with us and with Blackstone and, again, do something programmatic and help us build, like, a really high-quality premium portfolio here. So look, there's always going to be some competition in the market, but I think we feel very well positioned in that market and have deep relationships with a lot of these different groups already, just given how active Blackstone is across the data center ecosystem.

Okay. Okay. And then as you've gone to market and start to speak with potential sellers in a more fulsome way, do you find that there are particular aspects of your approach that really align with what they're looking for? Or are there things where you find that you might need to, kind of, adjust what you're offering or particular terms that you've been thinking about?

I don't think there's been anything super notable in terms of change of approach that's required. We know these markets really well. We know these groups that we can and will transact with really well. And I think what we've laid out in terms of our buy box, the way we want to work with the market totally fits what the market is looking for. So it feels pretty good.

We will take our next question from Cameron McVeigh with Morgan Stanley.

I wanted to ask, as we've seen the evolution in some of this AI technology recently, there's been this growing debate around open versus closed weight models. Curious if your strategy has shifted at all to target more training or inference? Or on that point, are you maybe more agnostic to the type of workloads that are expected to run through your data centers? I'd love to just get your thoughts there.

Yes. Thank you, Cameron. I think you hit on it at the end, which is we're pretty agnostic, and we think that's a really good place to be. We don't need to guess perfectly on, like, which model is going to do best for the most efficient or open versus closed weight. I think what we're fundamentally investing in is that as digitalization continues to, sort of, grow throughout the world, the demand for compute will continue to grow materially. What you can do with compute will continue to grow in a pretty massive way. And owning and controlling the infrastructure, which is hard to create and underpins all these various technology solutions, is a really good place to be. I think it is that simple, and we're pretty agnostic.

We'll take our next question from David Guarino with Green Street.

There's been a wave of AI company and data center company IPO rumors in recent months. And I guess, hypothetically, assuming all these came to market, would that limit your ability to raise new equity as we think about what 2027's growth opportunity might look like?

We don't believe so. We've certainly followed some of the news around other potential listings. I think the unique thing about BXDC is we have this very simple business plan of targeting stabilized hyperscaler data centers. And I think we're -- with this specific strategy, I think we're -- and with Blackstone's, sort of, very unique breadth of expertise in this space, I think we're very well positioned to execute on our business plan regardless of what happens with other listings. There are all different ways to play this data center space. And I think those groups that whether they're developing or have different other strategies around what they're targeting, I think we, again, have a very simple, focused business plan. And I think we can distinguish ourselves in that market and access capital to be able to grow and really access that flywheel for growth that we talked a lot about in our roadshow.

We'll take our next question from Richard Choe with JPMorgan.

I wanted to ask about the, I guess, programmatic nature that you're looking to eventually deploy. Is it fair to think that you're working with multiple potential developers and not just for that first deal, but ones after that? And how do you, kind of, think about that pacing?

Yes. It's a great question. And the beauty of this is we want to be the easy button for the best developers and counterparties in the market. And so whether they're staying in as an operator in a minority joint venture arrangement, and we can, sort of, rinse and repeat with some of these operators to help facilitate takeouts of successful developments that they've had to be able to recycle capital into new development pipeline opportunities for them. I think that's how we want to distinguish ourselves. And I think the engagement we've had within our pipeline and counterparties to date suggests that that's a very attractive thing for them. They think they want to engage with sophisticated counterparties who can move quickly, do what they say they're going to do and, and again, do something programmatic over time for them as well to satisfy their goals for their businesses. So I think that's how we think about it. And I think that helps set us up for further growth down the line and planting these seeds, again, for not only deals that we can do with the IPO proceeds, but hopefully also down the road.

With no additional questions in queue at this time, I'd like to turn the call back over to Tim Hayes for any additional or closing remarks.

Great. Thank you, Katie, and to everyone joining today's call. Please reach out with any questions.