DuPont Fabros 3Q16 Earnings Call Notes

DuPont Fabros Technology (DFT) Q3 2016 Results

Christopher Eldredge

Leased 80 megawatts in trailing 12 months

“DFT is setting leasing records with 48.05 megawatts leased year-to-date and 80.42 megawatts leased in the trailing 12 months. Our strong leasing performance reflects cloud service provider demand demonstrated over the last quarter (sic) [last year]. Strong cloud demand continues to drive high occupancy levels, which places greater emphasis on our development activity.”

Large enterprises moving to cloud at a faster pace

“Large enterprises are expected to move workloads to the cloud at a faster pace than in the past. The survey found that nearly 51% of large enterprises expect to move to the public cloud by 2018, compared to only 10% in 2015. At the same time, only 37% of large enterprises expect to continue with traditional on-premise environments, down from 80% in 2015.”

Chicago, Virginia are under supplied markets

“But we view Chicago as a market that is slightly undersupplied, and we think there is enough opportunity in that market for all of us to be successful. In Northern Virginia, there is a lot of development coming out. There’s some private equity money being thrown into the market right now. Again, it’s another market that’s undersupplied. When you look at the demand in the hyperscale cloud providers and the amount of capacity that they’re taking up, it’s a market that we think we’re going to be very successful in. ”

Hyperscale cloud providers are not great at forecasting

“Well, Manny, it’s why it’s important to have inventory because one of the things that the hyperscale cloud providers are not great at is forecasting. And when you look at the growth that they’re experiencing quarter-over-quarter, it supports a lot of the demand that you’re seeing in the marketplace. And that’s something that’s going to continue. So it really isn’t an exact science like that. But once they get to 5 megawatts, they are already talking about their next phase that they take 10 megawatts from you to support the demand.”

Jeffrey H. Foster – DuPont Fabros Technology, Inc.

Dupont Fabros Technology 1Q16 Earnings Call Notes

A leading enabler of cloud

“A good portion of our leasing in Q1 can be attributed to the exponential growth of our cloud customers. As a leading enabler of cloud, we are encouraged by the continuing evidence of demand for cloud-based services”

CIOs expect to move 50% of their workloads to the public cloud from 16% over the next 5 years

“notably a recent JPMorgan survey of CIOs found that only 16.2% of enterprise workloads are on the public cloud today. The same CIOs expect this to triple over the next 5 years to 50% of enterprise workloads.”

Examples of cloud

“Microsoft announced Azure contracts with BMW and Toyota, to assist in making their cars smarter and more connected. This is in addition to contracts Microsoft has with Volvo and Nissan. BMW is using Azure to power its open mobility cloud for their new BMW connected app. Toyota will use Azure to run Toyota Connected to support in-car services, telematics, Internet of Things, home connectivity and smart city integration. It’s no wonder Microsoft’s datacenter spend is up 65% year-over-year.”

Cloud adoption is expanding in almost every way

“We see cloud adoption expanding at an increasing rate in almost every way. Be it protestant development, storage or compute, the move to the cloud appears inevitable.”

There’s tremendous demand from social media, media, cloud. We’re in the first inning

“there’s a tremendous amount of demand for our product, and it’s the hyperscale cloud providers, it’s social media, it’s media and content, we’re in the very early stages of cloud right now, I’d say we’re in the first inning, so I think demand is going to be healthy over the next coming years.”

Very early stages of cloud

“we are at the very early stages in cloud. So I think you’re going to see more outsourcing to the cloud, that hybrid model that a lot of us talk about, so I would say we’re in the first inning, and two years or three years from now we’ll probably be in the third inning. So I think the pace of lease up is going to continue for the next five years.”