23 February 2026 | 4:18PM EST Equity Research GLOBAL TECHNOLOGY Global Data center Supply/Demand update: Tight conditions likely to extend through 2026 + Read-across for Power, Hardware, and Industrial Tech / Engineering Since the October update of our data center supply/demand model, where we updated for 2Q25, fundamental supply/demand indicators remain healthy in the medium term, occupancy rates continue at elevated levels for outsourced data center providers across key global markets, and our checks cont ...

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Core Insights - The article emphasizes the importance of unique insights and knowledge in stock analysis, aiming to provide contrasting views on investment portfolios [1] Group 1 - The analyst expresses a commitment to sharing personal opinions and insights without any financial compensation from the companies mentioned [2] - The analysis is intended for informational purposes only, highlighting the necessity for investors to conduct their own research and due diligence [3] - There is a clear disclaimer that past performance does not guarantee future results, and no specific investment recommendations are made [4]

Core Insights - Iron Mountain Incorporated (IRM) reported fourth-quarter 2025 adjusted funds from operations (AFFO) per share of $1.44, exceeding the Zacks Consensus Estimate of $1.39, with total revenues of $1.84 billion surpassing the estimate of $1.80 billion, reflecting year-over-year increases of 16.1% and 16.6% respectively [1][8] Revenue Details - Storage rental revenues increased by 12.7% year over year to $1.061 billion, exceeding the estimate of $1.057 billion [2] - Service revenues grew by 22.3% year over year to $781.9 million, higher than the estimate of $745.3 million [2] - Total revenues in the Global RIM business reached $1.373 billion, a 9.1% increase from the prior year, surpassing the estimate of $1.370 billion [2] - Global Data Center business revenues rose by 39.1% year over year to $236.7 million, exceeding the estimate of $230.1 million [3] - Corporate and Other business revenues increased by 52.9% year over year to $233.5 million, higher than the estimate of $216.5 million [3] Adjusted EBITDA - Adjusted EBITDA for the Global RIM business rose by 7.5% year over year to $622.4 million, surpassing the estimate of $621.8 million [4] - Global Data Center business reported adjusted EBITDA growth of 38.3% year over year, totaling $121.9 million, exceeding the estimate of $112.5 million [4] - Adjusted EBITDA for Corporate and Other experienced a decline of $39 million year over year, which was better than the estimated decrease of $44.2 million [4] Balance Sheet Position - As of the end of the fourth quarter, IRM had $158.5 million in cash and cash equivalents, down from $195.2 million as of September 30, 2025 [5] - The company reported net debt of $16.39 billion, an increase from $16.11 billion as of September 30, 2025, with a weighted average years to maturity of 4.6 years and a weighted average interest rate of 5.6% [5] 2026 Guidance - For 2026, IRM expects AFFO per share in the range of $5.69-$5.79, with the Zacks Consensus Estimate at the lower end of this range [6] - Revenues are projected to be between $7.625 billion and $7.775 billion, while adjusted EBITDA is anticipated to be between $2.875 billion and $2.925 billion [6]

Financial Performance - The company's total revenues for the year ended December 31, 2025, were $4.1 billion, reflecting a growth driven by organic storage rental and service revenue [191]. - Adjusted EBITDA for 2025 was $2.57 billion, compared to $2.24 billion in 2024, indicating a year-over-year increase of approximately 15.1% [203]. - Reported EPS for 2025 was $0.49, down from $0.61 in 2024, while Adjusted EPS increased to $2.12 from $1.77 [207]. - The company reported a net income of $152.3 million for 2025, down from $183.7 million in 2024 [203]. - FFO (Nareit) for the year ended December 31, 2025, was $584,175,000, compared to $571,464,000 for 2024, reflecting an increase of approximately 1.2% [210]. - FFO (Normalized) for 2025 was $1,079,920,000, up from $932,562,000 in 2024, representing a growth of about 15.8% [210]. - Operating income for 2025 was $1,163,822 thousand, up 15.3% from $1,009,519 thousand in 2024 [240]. - Adjusted EBITDA for 2025 reached $2,573,950 thousand, reflecting a 15.1% increase from $2,236,380 thousand in 2024 [240]. - Net income decreased by $31.4 million, or 17.1%, from $183.7 million in 2024 to $152.3 million in 2025, resulting in a net income margin of 2.2% [263]. - Adjusted EBITDA increased by $337.6 million, or 15.1%, from $2,236.4 million in 2024 to $2,573.9 million in 2025, with an adjusted EBITDA margin of 37.3% [263]. Revenue Growth - Organic storage rental revenue growth is expected to remain stable, while organic service revenue growth is anticipated from digital offerings and asset lifecycle management services [191]. - Storage rental revenue for 2025 was $4,052,510 thousand, a 10.1% increase from $3,682,259 thousand in 2024 [241]. - Service revenue grew to $2,849,227 thousand in 2025, marking a 15.5% increase from $2,467,650 thousand in 2024 [241]. - Segment revenue for the Global Data Center Business reached $803,429,000 in 2025, reflecting a 29.6% increase compared to $620,028,000 in 2024 [270]. - Corporate and Other segment revenue increased to $806,827,000 in 2025, a 46.6% rise from $550,443,000 in 2024, driven by service revenue growth [274]. Costs and Expenses - Total cost of sales increased by $382.9 million, or 14.2%, from $2,696.5 million in 2024 to $3,079.5 million in 2025, with labor costs rising by 11.8% and product costs increasing by 52.9% [244]. - Selling, general and administrative expenses rose by $54.4 million, or 4.1%, from $1,339.5 million in 2024 to $1,393.9 million in 2025, with general and administrative expenses increasing by 3.9% [246]. - Interest expense increased by $107.8 million, reaching $829.3 million in 2025, primarily due to higher average debt outstanding [253]. - Depreciation expense rose by $101.6 million, or 16.1%, from the previous year, reflecting increased investments in storage systems and infrastructure [248]. - Amortization expense increased by $21.9 million, or 8.1%, compared to 2024, driven by intangible assets related to customer and supplier relationships [249]. Restructuring and Transformation - In 2025, the company incurred approximately $574.4 million in restructuring and transformation costs related to Project Matterhorn, with $195.9 million and $161.4 million incurred in 2025 and 2024, respectively [187]. - The company invested in optimizing its operating model through Project Matterhorn to better serve customer needs and capture a larger market share [187]. - Restructuring and other transformation costs were $195,912,000 in 2025, compared to $161,359,000 in 2024, an increase of about 21.4% [210]. - Acquisition and Integration Costs for 2025 totaled $19,545,000, down from $35,842,000 in 2024, a reduction of approximately 45% [210]. Currency and Foreign Operations - The average exchange rates for key foreign currencies showed a weakening of the Australian dollar by 2.3% and a strengthening of the British pound by 3.1% against the US dollar [199]. - The company’s total foreign currency-reported revenues from international operations were 13.0% for 2025, down from 13.6% in 2024 [199]. - The company has implemented strategies to mitigate currency risk, including financing international subsidiaries with local currency-denominated debt [315]. Debt and Financing - As of December 31, 2025, total long-term debt amounts to $16,431.96 million, with a net amount of $16,215.89 million after accounting for the current portion [287]. - The Revolving Credit Facility has an outstanding balance of $751.5 million, with a maximum availability for borrowing of $1,986.1 million as of December 31, 2025 [290]. - The weighted average interest rates as of December 31, 2025, are 5.7% for the Revolving Credit Facility, 5.5% for Term Loan A, and 5.8% for Term Loan B [290]. - The company amended its Credit Agreement on June 18, 2025, increasing Term Loan A from approximately $218.8 million to $500 million, and on November 13, 2025, increasing Term Loan B from approximately $1,836.7 million to $2,036.7 million [289]. - The company has various outstanding letters of credit totaling $12.4 million under the Revolving Credit Facility as of December 31, 2025 [290]. Cash Flow and Capital Expenditures - Cash flows from operating activities increased by $143.3 million in 2025, primarily due to a rise in net income and working capital [280]. - Total capital expenditures for 2025 amounted to $2,271,628,000, with growth investment capital expenditures at $2,067,975,000 [283]. - The company expects total capital expenditures of approximately $2,200,000,000 for 2026, focusing on growth investments [283]. Goodwill and Impairment - The annual goodwill impairment review conducted on October 1 for both 2025 and 2024 concluded that goodwill was not impaired [227]. - The ALM reporting unit's fair value exceeded its carrying value by approximately 93.7% as of October 1, 2025, with a goodwill balance of $781,128 thousand [228]. Risk and Sensitivity - A hypothetical 10% decrease in expected annual future cash flows could reduce the estimated fair value of reporting units by approximately 9.4% to 10.6% [238]. - Approximately 22.0%, or $3,640.4 million, of total long-term debt is subject to variable interest rates, with a potential net income reduction of $41.9 million if the average variable interest rate increases by 1% [312]. - A 10% depreciation in year-end 2025 functional currencies relative to the U.S. dollar would result in a reduction in equity of $374.7 million [319].

Core Insights - Iron Mountain Incorporated (IRM) reported fourth-quarter adjusted funds from operations (AFFO) per share of $1.44, exceeding the Zacks Consensus Estimate of $1.39, marking a 16.1% year-over-year increase [1][9] - The company's total quarterly revenues reached $1.84 billion, surpassing the Zacks Consensus Estimate of $1.80 billion, and reflecting a 16.6% year-over-year growth [2][3] Financial Performance - For the full year 2025, IRM's AFFO per share was $5.17, up 13.9% year over year, also beating the Zacks Consensus Estimate of $5.11 [3] - Revenues for the full year amounted to $6.90 billion, a 12.2% increase year over year, exceeding the consensus mark of $6.86 billion [3] Segment Performance - Storage rental revenues in Q4 were $1.06 billion, up 12.6% year over year [4] - Service revenues increased by 22.4% year over year to $782 million [4] - Global RIM business revenues grew 9.1% year over year to $1.37 billion [4] - Global Data Center business reported revenues of $236.7 million in Q4, rising 39.1% year over year [4] - Adjusted EBITDA rose 16.6% year over year to $705.3 million, with an unchanged adjusted EBITDA margin of 38.3% [4] Interest Expenses and Balance Sheet - Interest expenses increased by 13% year over year to $219.8 million in the quarter [5] - As of December 31, 2025, IRM had net debt of $16.39 billion, up from $16.11 billion as of September 30, 2025, with a weighted average interest rate of 5.6% [6] Dividend Announcement - Concurrently with the fourth-quarter earnings release, IRM announced a cash dividend of 86.4 cents per share for the first quarter of 2026, payable on April 3, 2026 [7] Guidance for Future Performance - For Q1 2026, Iron Mountain expects AFFO per share of $1.39 and revenues estimated at $1.855 billion [8] - For the full year 2026, the company anticipates AFFO per share between $5.69 and $5.79, with revenues projected in the range of $7.625 billion to $7.775 billion [10]

Financial Data and Key Metrics Changes - The company reported a record performance in Q4 2025, achieving a 17% year-over-year growth in revenue, adjusted EBITDA, and AFFO [3] - For the full year, revenue increased 12% to $6.9 billion, adjusted EBITDA grew 15% to $2.6 billion, and AFFO increased 15% to $1.5 billion [3][23] Business Line Data and Key Metrics Changes - Data center revenue increased 30% in 2025, with a 39% increase in Q4 alone, driven by strong demand from hyperscalers [4] - Asset Lifecycle Management (ALM) revenue grew 63% in total for 2025, including 40% organic growth, with a notable 56% organic growth in Q4 [6] - Digital solutions revenue surpassed $500 million in 2025, supported by double-digit growth and a strong pipeline for future projects [7] - The physical storage business achieved record revenue, growing at a mid-single-digit rate, marking 37 consecutive years of organic storage rental revenue growth [9] Market Data and Key Metrics Changes - The company expects data center revenue to exceed $1 billion in 2026, representing over 25% year-on-year growth [27] - The ALM business is projected to reach $850 million in revenue for 2026, indicating approximately 35% year-over-year growth [29] Company Strategy and Development Direction - The company aims to sustain industry-leading revenue and earnings growth into 2026 and beyond, capitalizing on robust demand in the data center industry [4] - The growth portfolio, including data center, ALM, and digital solutions, is expected to support double-digit growth in the future [8] - The company is focused on cross-selling opportunities within its existing customer base, which includes 950 of the 1,000 largest global companies [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining strong data center growth, supported by a backlog expected to drive over 25% revenue growth in 2026 [5] - The company anticipates another record year in 2026, with guidance for total revenue between $7.625 billion and $7.775 billion, representing a year-on-year growth of 12% at the midpoint [31] Other Important Information - The company declared a quarterly dividend of $0.864 per share, a 10% increase from the previous year [29] - Capital expenditures for 2026 are planned at $2.0 billion for growth and $150 million for recurring CapEx, slightly down from the previous year [30] Q&A Session Summary Question: Can you touch on the data center pipeline? - Management highlighted strong momentum with over 40 MW of leasing in Q4 and significant interest in markets like Northern Virginia, Richmond, and Madrid [36][38] Question: Can you provide more color on the momentum in ALM? - Management noted a 20% increase in the number of Fortune 1000 customers using ALM services, with expectations for continued growth in both existing and new customers [42][46] Question: How much of the ALM growth came from volumes versus pricing? - Management indicated that the growth was balanced between hyperscale and enterprise, with strong pricing trends contributing positively [49][51] Question: Can you dive deeper into gross margin trends in the services business? - Management explained that gross margins were affected by mix, with services margins improving year-over-year due to strong execution and operational leverage [54][56] Question: What is the M&A landscape for ALM and data centers? - Management stated that while they do not foresee significant M&A activity in data centers, they continue to explore opportunities in the ALM space to expand their footprint [60][66] Question: Any meaningful restructuring charges to consider for 2026? - Management confirmed there will be no restructuring charges in 2026, as the previous restructuring plan ended last year [69]

Financial Data and Key Metrics Changes - The company reported a record revenue of $1.84 billion for Q4 2025, up $262 million year-on-year, representing a 17% increase [20] - Full-year revenue increased 12% to $6.9 billion, with Adjusted EBITDA growing 15% to $2.57 billion and AFFO increasing over 15% to $1.54 billion [23] - Adjusted EBITDA margin reached 38.3%, the highest level reported to date, with a 15% year-on-year increase in Adjusted EBITDA [22][10] Business Line Data and Key Metrics Changes - Data center revenue increased 30% in 2025, with a 39% increase in Q4 alone, driven by strong leasing activity [4] - Asset Lifecycle Management (ALM) revenue grew 63% in total for 2025, including 40% organic growth, with Q4 organic growth at 56% [6] - Digital solutions revenue surpassed $500 million in 2025, driven by double-digit growth and a strong pipeline for future projects [7] Market Data and Key Metrics Changes - The data center market is expected to remain strong, with a projected 25% revenue growth in 2026 and over 20% growth in 2027 [5] - The company has a backlog that supports its growth expectations, with 400 MW of capacity expected to energize over the next 24 months [5] - The physical storage business achieved record revenue, growing at a mid-single-digit rate, marking 37 consecutive years of organic storage rental revenue growth [9] Company Strategy and Development Direction - The company aims to sustain industry-leading revenue and earnings growth into 2026 and beyond, capitalizing on robust demand in the data center industry [4] - The growth portfolio, including data center, ALM, and digital solutions, accounted for two-thirds of the company's growth in 2025 [8] - The company is focused on cross-selling opportunities within its existing customer base, which includes 950 of the 1,000 largest global companies [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering another record year in 2026, with expectations for total revenue between $7.625 billion and $7.775 billion [31] - The company anticipates continued strong demand for its services, particularly in the data center and ALM sectors, supported by recent commercial wins [11] - Management highlighted the importance of operational efficiency and strong execution in driving profitability and margin expansion [10] Other Important Information - The company declared a quarterly dividend of $0.864 per share, a 10% increase from the previous year, reflecting its commitment to returning value to shareholders [29] - Capital expenditures for 2026 are planned at $2.0 billion for growth and $150 million for recurring CapEx, slightly down from the previous year [30] Q&A Session Summary Question: Can you discuss the data center pipeline and leasing activity? - Management noted strong momentum with over 40 MW of leasing in Q4 and highlighted key markets such as Northern Virginia, Richmond, and Madrid as areas of interest for future deals [36][37] Question: What is the momentum in the ALM business and opportunities for growth? - Management indicated strong organic growth in ALM, with expectations for 20% organic growth in the enterprise segment and significant opportunities for expansion through acquisitions [42][46] Question: Can you elaborate on gross margin trends in the services business? - Management explained that while total gross margin is affected by mix, services gross margin improved year-on-year, driven by operational efficiency and pricing [54][56] Question: What is the outlook for the U.S. Department of Treasury contract? - Management expects approximately $45 million in revenue from the Treasury contract in 2026, with potential to ramp up to around $100 million as outsourcing progresses [80][81]