On Wednesday, 14 May 2025, Corning Incorporated (NYSE:GLW) presented at the 53rd Annual JPMorgan Global Technology, Media and Communications Conference. The company discussed its strategic plans under the SpringBoard initiative, focusing on growth in sectors like Gen AI and solar, while addressing global uncertainties. Despite challenges, Corning highlighted robust financial performance and strategic positioning to leverage market opportunities.
Key Takeaways
- Corning aims to add over $4 billion in annualized sales by 2026 with a 20% operating margin.
- The solar platform is expected to triple Q1 sales run rate by 2027, adding $1.6 billion in revenue.
- Digital Bridge manages $100 billion in assets, focusing on data centers, cell towers, and fiber networks.
- Corning’s Q1 2024 core sales grew 13% year-over-year, with EPS increasing by 42%.
- Digital Bridge raised $1.2 billion in capital commitments in the most recent quarter.
Financial Results
Corning’s SpringBoard plan is set to drive significant growth, targeting over $4 billion in annualized sales by the end of 2026, with an operating margin of 20%. In 2024, adjusted free cash flow increased by 42%, and the company repurchased over $250 million in shares. Q1 2024 results showed core sales rising by 13% year-over-year to $3.7 billion, while EPS increased by 42% to $0.54. The operating margin expanded by 250 basis points to 18%, and ROIC grew by 300 basis points to nearly 12%.
Operational Updates
Corning’s strategy includes mitigating tariffs by locating manufacturing close to customers, which acts as a natural hedge. The company also made a $2 billion risk adjustment to align internal plans with high-confidence investor expectations. Corning’s re-entry into the solar market has generated over $1 billion in cash from 2020 to 2024, with positive cash flow expected in 2025. U.S.-made innovations are in demand due to tariff policies, and the company boasts unique fiber facilities in North Carolina.
Future Outlook
Corning is optimistic about upside variance opportunities, especially in Gen AI and solar. The enterprise sales CAGR from 2023 to 2027 has been upgraded to 30%. The solar platform is expected to generate $200 million in sales in Q1 and triple by 2027, contributing $1.6 billion in new annualized revenue. Digital Bridge aims to increase its fee-earning equity under management to $40 billion this year, with a focus on digital infrastructure investments.
Digital Bridge Strategic Initiatives
Digital Bridge is expanding its sales infrastructure to approach diverse capital pools, including private wealth and real estate investors. The firm manages a $1-2 billion private credit business, aiming for growth to $5-10 billion. Their data center income strategy targets a market gap, with a TAM of $120 billion. Energy strategies focus on transmission and grid-related opportunities, particularly for data centers.
Conclusion
For a comprehensive understanding of Corning and Digital Bridge’s strategic plans and financial performance, readers are encouraged to refer to the full transcript provided below.
Full transcript - 53rd Annual JPMorgan Global Technology, Media and Communications Conference:
Samik Chatterjee, Analyst, JP Morgan: Good morning. Thank you everyone for joining. I’m Samik Chatterjee and I cover the hardware and networking equipment companies at JP Morgan. I have the pleasure and we are really thankful for the company making it an annual event of hosting both Wendell and Ed Hewler from Corning. So thank you both for coming to the conference and really, again, always a pleasure to have you here.
What I’ll do is I’ll hand it over to Wendell to go through some of his prepared remarks, but before I do, there would be potentially forward looking statements. And if you have questions on that front, please go look up Corning’s website. Anne is here in the room. She can help you with any forward looking statements as well. So with that, Wendell, over to you.
Wendell Weeks, Corning: Thank you, Smedes. Hello, everyone. It’s always great to be here with you. Now at this very conference last year, I walked through the fundamental elements of our SpringBoard plan to accelerate our revenue and earnings growth by adding more than $3,000,000,000 in incremental annualized sales by the end of twenty twenty six. Now, what we said then was that we already have the required production capacity and technical capabilities in place to deliver the sales growth and the cost and capital already reflected in our financials.
And therefore, we expect to deliver very powerful incremental profit and cash flow leading to our earnings growing much faster than sales. And as I said, because of our confidence in the plan, we started buying back shares in the second quarter of twenty twenty four. And here we are, together again. And what a difference a year makes. Since we last met, we’ve made tremendous progress.
In 2024, we grew adjusted free cash flow of 42% for the full year and we repurchased over a quarter of a billion dollars worth of our shares and we plan to continue buybacks in 2025. Earlier this year, we actually upgraded our high confidence SpringBoard plan by $1,000,000,000 to now add more than $4,000,000,000 in annualized sales and to achieve an operating margin of 20% by the end of twenty twenty six. And a few weeks ago, we reiterated our commitment to delivering this upgraded plan on our first quarter earnings call. We also reported continued strong execution in quarter one. Year over year, we grew core sales 13% to $3,700,000,000 We grew EPS 42% to $0.54 more than three times the rate of sales growth.
We expanded operating margin by two fifty basis points to 18%. We expanded ROIC by 300 basis points to almost 12%. Now interestingly, if you take a look at our quarter two guide and you compare it with our springboard starting point of quarter four of twenty twenty three, we expect EPS to be up about 50 and our stock is also up about 50% over that same period. Now, when we deliver our $4,000,000,000 high confidence plan and our 20% operating margin target, we will grow EPS 100% from our springboard starting point. So we have plenty of growth ahead and we’re well positioned for upside variance to that plan.
And that is going to be my main topic today. And that’s because given the strong start to SpringBoard and the great growth opportunities we have in front of us, investors are actually asking us less and less about our ability to execute and more and more about how global uncertainty could impact Corning’s ability to deliver that plan. And, the news we’ve witnessed just over the past few days is a great example of that uncertainty. At Corning, our approach to uncertainty is to position ourselves for upside variance. On our quarter one earnings call a few weeks ago, we shared with you how we handled downside risk.
First of all, on tariffs, we said that our longstanding philosophy to locate our manufacturing operations close to our customers serves as a natural hedge against tariffs and mitigates the financial impact. Our quarter two EPS guidance included the minimal financial impact of the then very high 100% plus tariffs between The US and China, which was only 1 to 2¢. Of course, situation is already looking up based on what we’ve all learned so far this week. We also shared that the impact of a potential economic slowdown was already built into SpringBoard as part of the $2,000,000,000 risk adjustment we made at the corporate level to translate our $6,000,000,000 internal plan into our $4,000,000,000 high confidence investor plan. We modeled the impact of different slowdown scenarios on our growth plan including a shock case using the worst downturn in the last twenty five years.
And we were well within our risk adjustment. Now these were just a couple of the many reasons we reiterated our high confidence plan despite the current global uncertainty. Now thankfully, uncertainty is actually a two sided distribution. And today I want to turn to the other side. The significant potential upside variance to the SpringBoard plan.
I’m going to give you three examples. I’m going to start with Jet AI. First, in our enterprise business where we report sales for inside the data center, we saw a record $2,000,000,000 in sales last year. In March, we upgraded our 2023 to 2027 enterprise sales CAGR from 25% to 30%. Now the primary technical driver behind that growth is what the industry calls the scale out of the network.
Now that basically means that hyperscale customers are scaling out the GPU clusters with more and more connected AI nodes of server racks or simply put larger neural networks. Because each AI node is connected to the others in the cluster by fiber, this creates more volume for Corning. And that is what is primarily reflected in the 30% enterprise sales CAGR. Our upside variance to that growth rate inside the data center is driven by what the industry calls the scale up of the network. As hyperscalers create more capable nodes that move from less than 100 GPUs per node today to hundreds of GPUs per node in the future.
Now historically, an AI node has been within a single server rack. As hyperscalers scale up, AI nodes are shifting to stretch across multiple server racks. This causes the distance to link these GPUs within the node to get longer. This will cause the links to reach about a hundred gigabit per second meter, what we call the electrical to optical frontier line, which roughly marks the point where fiber connections become more techno economical than copper. Now to help understand the size of this upside opportunity created by crossing that frontier, A single black well like node has more than 70 GPUs with more than 1,200 links using more than two miles of copper.
As that node scales up, those two miles will be replaced by fiber connections and those miles will grow over time as more and more GPUs are included in the AI node. Additionally, as data rates rise with more capable GPUs, our upside increases further. This opportunity alone is two to three times the size of our existing $2,000,000,000 enterprise business if we are successful technically. And we’re working with key customers and partners as we speak today on making that future a reality. Now you’ll often hear folks in the industry talk about co package optics or CPO.
That is one of the key technologies that enables this scale up with optics. In fact, just yesterday we announced a collaboration with Broadcom to accelerate their processing capacity with co package optics. And you’re going to hear a lot more about this area in the near future. So that’s one. Another example of upside variance tied to Gen AI is playing out in our carrier business.
We’ve been studying this space for some time and we have been seeing that most long haul routes were approaching their maximum data rate capacity creating a need for many new high bandwidth low latency links between cities and data center campuses. And this essentially requires a rebuild of long haul networks. And density it turns out is every bit as critical outside the data center as inside. So to create a denser solution, we took our core innovations from inside the data center, applied them to this outside plant density channel challenge. We introduced a new technology connecting data center campuses.
In the industry, this is referred to as DCI or data center interconnect. And we shared last year that we’d reached an agreement with Lumen Technologies to provide our new Gen AI fiber and cable system that enables Lumen to fit anywhere from two to four times the amount of fiber into their existing conduit. And the agreement reserved 10% of our global fiber capacity for 2025 and 2026. We have fully commercialized this product set. We now have three industry leading customers adopting the technology.
Now that being said, we are just in the very, very beginning of this new market. We expect this business to scale rapidly reaching a billion dollar opportunity for us by the end of the decade. Now I’ll turn to my third example of upside variance which is solar. At our March IR event, we shared our low risk, high return strategy to reenter the solar market. We generated over $1,000,000,000 in cash from 2020 to 2024 in this platform and we expect 2025 to be another year of positive cash flow.
We funded the expansion of our manufacturing assets with the growing cash flow generated from the assets we acquired for less than $0.10 on the dollar, customer funding and government support, all while generating positive cash flow every year. As a result, we have now built a platform for rapidly accelerating growth. We made process advancements to serve a higher end chip segment in semiconductors and we are on track to double our semiconductor business by the end of the decade. We activated idle assets to serve the need for domestic solar polysilicon and we added the capability to transform our polysilicon into higher value domestically made solar wafers, all integrated together on our campus in Michigan. We now have committed customers for 100% of that capacity available in 2025 and eighty percent of our capacity for the next five years.
Now because we have built this platform so quietly while growing our cash flow, our new solar map has not garnered much attention from investors relative to the significance of the opportunity. So let me quantify this sum for you. In quarter one, we generated $200,000,000 of sales in the map. We expect to triple that run rate by 2027, adding $1,600,000,000 of new annualized revenue to Corning’s earnings power. Now I hope that can help everyone understand the upside potential of that new map.
So to wrap things up, we have built a high confidence springboard plan that is well positioned to provide investors with upside variance. And with that, I’ll be delighted to unpack this more with Samik and take some questions.
Samik Chatterjee, Analyst, JP Morgan: Thank you. Amazing. Let me, since you talked about the macro already, I won’t go in too much into that. But would it suffice to say, given some of the announcements over the weekend or on Monday, in terms of how you’re thinking about the macro is a lot more improved relative to where I probably think your thinking was during the time of the earnings call?
Wendell Weeks, Corning: It certainly seems that the probability of using that risk adjustment in the near term appears less. That being said, when we build SpringBoard to provide investors a high confidence plan, we always try to build into that $4,000,000,000 an economic cycle. Because if we don’t build that in, right, then I can’t give you a super high confidence plan. So yes, it does make it much more likely that we’ll be at the 6 than the 4 if that’s what you’re asking.
Samik Chatterjee, Analyst, JP Morgan: Yep. Great. So I’ll start off on and we’ll focus on solar, but before I do that, I mean, did mention on the earnings calls as well that due to the tariff policies, you’re seeing early signs of stronger demand for your U. S.-made innovations. Maybe unpack that and how much of that is coming just on your sort of solar business versus where else are you seeing that in your broader portfolio?
Wendell Weeks, Corning: So we’re actually seeing it across our platforms. In optical, we’re seeing both new and existing customers look to take advantage of our U. S. Origin assets. We’re unique in the world, which is the two largest and lowest cost fiber facilities in the entire world are both in North Carolina and they’re both ours.
Right? And we have that supported by cable and connectivity. So, that is a unique asset. And with tariff pressures and increasing push for domestic content, we’re seeing a large number of folks approach us for access to those platforms. And some will be significant enough that you’ll see announcements in the coming months.
But we’re also seeing a similar type behavior in our life science platforms. We’re seeing similar type behavior in solar as you say. We’re seeing similar type behavior in our mobile consumer electronics businesses as people seek to source more locally. We’re still sorting through the size of this and how much is moving from if it’s an existing customer how much is moving from one of our other sources, right? If it’s a new customer then that’s found revenue.
And so we’re still working our way through it. It’s too early to embed in our plans but it is a source of upside variance.
Samik Chatterjee, Analyst, JP Morgan: Okay. And maybe I’ll just follow-up on that. Obviously there’s one part of it which is how much of that is incremental customer versus existing. But also where does your capacity stand today to even onboard a new customer?
Wendell Weeks, Corning: So it all depends on what the product set is. We still have the capacity in place to support that SpringBoard plan without having to add significant amounts of capital. That was really sort of the core of SpringBoard is basically there was an ability for us to create an entire Corning in terms of earnings within the sort of four walls of our existing footprint as we filled up that capacity and our enhanced productivity. That still is all in place. So the key thing that will trigger whether or not we need more capacity will be how quickly do we get to that 100% growth from the original EPS at SpringBoard.
The quicker we get there, the more likely it is that will add to our capacity sets depending on the products. Where you’ll hear rumors of our tightness, which I know you run into, is on these new Gen AI products where because of the uniqueness of our product set, we are experiencing more demand than we can keep up with. It is not a capacity situation at large. It is turning our production for these new product sets and getting the productivity of that, of those new product sets up. And that’s what’s causing that.
And we’re getting more share than we counted on originally. So that’s why you always, when people complain that they can’t get enough from us, which you hear, that’s what it is. It didn’t go out of capacity. It’s just that product that’s having explosive demand. That makes sense?
Samik Chatterjee, Analyst, JP Morgan: Yes. Okay. Let’s move to solar and do want to take the opportunity to ask you to sort of dive into that opportunity a bit more. It’s obviously your newest one. I agree.
I mean, hasn’t got the investor attention, particularly in terms of the magnitude that you’re talking about. So maybe just outline your strategy there, your thinking about what this what the driver for growth is and then we’ll go into maybe a bit deeper into the solar business.
Wendell Weeks, Corning: The driver for solar is super simple, right? And the strategy is super simple, right? Let’s do the strategy. We’ll just do the driver first. The driver is 50 gigawatts.
So think of a gigawatt as being about the equivalent of a nuclear power plant. There was 50 gigawatts of solar capacity installed last year in The US. Okay. Hardly any of it came from The U. S.
So it’s all imported, right? Very small amount is made here. We looked at that opportunity and said, you know what, that is not going to stand. People are going to want, since it’s the fastest growing and it’s the largest incremental adds of capacity, people are going to want at least some U. S.
Source. That then plays to the strategy piece, which is we saw we had the ability to get assets fundamentally for free that we could then activate, turn into solar. And because of our deep engineering and technical capabilities, we could move up the value chain to basically be able to displace what largely comes in from China based suppliers into this market. And so all we’re seeking to do is basically take share. We’re not counting on solar to grow.
We’re just counting on us taking share with the domestic production. And therefore, when we say we’ve signed up for customers to take 80% of our capacity just so far for the next five years, that is showing you sort of how we feel about where we are in that process.
Samik Chatterjee, Analyst, JP Morgan: The financial strength of solar companies sometimes comes into question and there’s also uncertainty around government policy. I think we’ve seen some over the So can you tell us about the risk profile to your solar business, customers, financial risk, technology, sort of, and government policy most importantly, which seems to change very frequently?
Wendell Weeks, Corning: I think the right way to think about this is, and Ed did this pretty well at our IR event, is we feel there’s relatively low risk to the revenue because we’ve already signed up for it. Now, we’ve got to bring up these assets, right? And making wafers is new to us. So, we’ve got to ramp those up and sell them. The real impact of government policy will be what will the relative profitability of those assets be?
There are scenarios of government policy where that profitability will be well above Corning’s average. There are scenarios in government policy where it can be a little below Corning’s average. But one way or the other, we’re highly confident that we’ll make more money for Corning investors with this solar platform than we would without it. And then the question just is back to upside variance, how much more can we make? If you were to take a look at the current mark that just cleared out ways and means, it’s very advantageous in that current mark for us.
But it’s politics, right? So we’ll see how the whole thing works out. But that’s just a matter of how much upside there is for us in profit. Would you think that’s fair? Yes, I would agree.
Ed Hewler, Corning: And I also think if you go back to Wendell’s point about the number of new installations, how impactful solar is, we don’t see that necessarily changing. It’s a low cost of energy. It’s a critical source of energy. The most important thing that’s changing is it’s on shoring. So for us, it makes it higher probability of our ability to sustain the business and be a critical part of the supply chain.
So there are no U. S. Wafer makers today. We will be the only U. S.
Wafer maker. So to the extent it helps with someone else’s cost, someone who’s making a cell or a module, that makes our capacity that much more valuable to them for things like domestic content and so on.
Wendell Weeks, Corning: So if they choose, if government for instance chooses instead to tariff to get domestic as opposed to an approach of tax credits, they’ll just work its way out in price, right? So we’ll make the money, but then what the margin percent is if you get it in price is a little different than getting it in a credit. And that’s what’s moving you around between where are you relative to our average profitability. Does that make sense?
Samik Chatterjee, Analyst, JP Morgan: Okay. A lot of investors I talk to think about the $2500000000.0.20 20 8 target as going from zero to 2,500,000,000.0 and see that as a very steep ramp. Good that you shared sort of what you’re doing already, but maybe dive a bit deeper into sort of the $1,000,000,000 kind of run rate that you have for that business. What are you doing exactly there versus the incremental sort of 1.5, where that comes from and what share does that imply of the total market?
Ed Hewler, Corning: Yes. So today our business is about fifty-fifty semiconductor grade polysilicon and solar polysilicon. We started restarted assets that had been idled, as Wendell described, back in around 2021, we’ve ramped the solar component. So when we took Hemlock, it was really semiconductor poly, and we’ve grown that from $05,000,000,000 to 1,000,000,000 over the last four years or so. We’re adding more poly capacity that’s coming online this year.
That will be a good hunk of what we see impacting us in the back half. And then we’re adding the ability to make ingots and wafers, which will also come online, but it will be a little bit slower. It’s newer technology and it’s really starting from zero to where we are. So that’s sort of what’s driving the growth from the billion. It will be predominantly in solar.
Semi capacity, semiconductor poly sales for us will also continue to grow. We expect that to double over, let’s say the next five, six years or so. So you’ll see nice growth there, but a lot of the growth will come from the solar side. And the only other thing I would say is that I think what will allow us to be able to get to that $2,500,000,000 run rate is mostly the domestic supply chain being built out here. You saw an announcement from us.
We signed up with Sunniva and Helion. They’re actually building out capacity. So when you take our ability to supply The U. S, it’s 20% maybe of the installed base. That would be like a share target for us, something along those lines.
Wendell Weeks, Corning: When we’re fully ramped.
Ed Hewler, Corning: When we’re fully ramped, yeah.
Samik Chatterjee, Analyst, JP Morgan: Let me ask you one on optical and then I’ll open it up to the audience if there are any questions. You mentioned you have raised the enterprise, the optical enterprise CAGR target at the Investor Day from 25 to 30. The question which you’ve got, I’m sure from investors as well is more about visibility into the next year. And what is the visibility that your customers are now willing to provide you, particularly given that you’re capacity constrained in some of these Gen AI products, like I’m assuming you get a longer visibility on those than others. How would you sort of characterize 2026 or early indications for 2026 shaping up?
Wendell Weeks, Corning: We get very good visibility. Having products people really want improves customers’ willingness to share, we find. So, we have pretty good visibility. I think most of the dynamics is around when you hear different things in the industry, we will experience them differently because of the breadth of our footprint. What happens with a given hyperscaler or a given player in Gen AI if they let go some leases someplace there or do something like that there is it is more about who’s going to get those Gen AI loads.
And one way or the other, they tend to find their way back to us. So, we have to worry less about which players we’re aligned with and how each individual player is doing in that particular piece of the industry as we do on really how is GPU growth working in the scale out piece. Are the clusters becoming bigger? Yes, really good, easy visibility for that. I think it’s probably one of the most studied things in the world is how many GPUs you’re going to sell every year.
So, there you go. There’s that, right? And then the real uncertainty we just haven’t built into the plan, which is does a brand new link fall to optical? And that’s why we didn’t put the scale up piece in the 30 because that is a technological node that has yet to occur. It would have to occur, which takes a new ecosystem built, would have to get adopted, and our solutions would have to get adopted.
So we just don’t count on that until we hit the node. Does that make sense?
Samik Chatterjee, Analyst, JP Morgan: Yes. Okay. Let me see if anyone in the audience has a question. This one here.
Richard Cho, Analyst, JPMorgan: Sure. What do you see demand for the HoloFold four fiber? Are you having any manufacturability issues with it? And is there any margin or pricing uplift from that technology?
Wendell Weeks, Corning: Well now there is an inside baseball question. I love Core5 for me. That’s some arcade stuff, Matt. Good for you. For those of you who don’t know, this is a technology that’s been studied for many years.
I worked on it personally when it was photonic band gap fibers. And what it’s seeking to capture is that the speed of light through air is about 30% faster than the speed of light through glass. Okay? And so, there are situations that could potentially emerge in Gen AI where that 30% matters. Today, with high speed traders and things like that, what we do is we will straighten out.
We’ll use very high performance fiber. And we literally just straighten out the links so that the light doesn’t travel as far. And then they locate relatively close. And that is their advantage for people who play in that microsecond sort of game. Okay?
There are technical futures in which Gen AI believes that you could end up with clusters that are going to span enough distance that need to be synced depending on where you put the shards, right? And you’d want to have lower latency, and that 30% Technically, I don’t know, right? 30% in everything that’s in a network, 30% playing around with the speed of light in air versus glass, I’m not convinced has a super powerful value problem. That being said, yeah, of course we’ll do it, right?
That’s what we do. And that if it does happen, that is complex enough and different enough that it’ll be a new fiber cable connectivity system that we will be a significant player in. And that will have a different pricing entirely, right? So, but wow, I wasn’t expecting that question. Good for you.
Samik Chatterjee, Analyst, JP Morgan: Maybe when staying with optical, you’ve talked about the carrier side of the business, DCI being a big driver of the growth there. Maybe parse that out in terms of your outlook for growth in DCI versus what is traditional carrier spend doing? Is it still a bit sort of depressed rate of what you would expect at the current levels? And do you see a catch up there eventually as well?
Wendell Weeks, Corning: What we see in our traditional carrier business is their deployments are relatively steady. What happened is during the pandemic, they built up inventories and then they’ve well above their deployment levels. And what they’re doing is they’ve just sort of been drawing that down, which caused a lot of people in that industry, suppliers to that industry for that to go through sort of a cyclical downturn. What we’re now seeing is that inventory looks like and from our analysis and direct discussions with them that they will now start purchasing much closer to the deployment levels. We’re seeing that in our order books.
And we think sort of the ground is there for this business to start growing nicely this year.
Samik Chatterjee, Analyst, JP Morgan: Okay. Last question, and I’ll make a hard pivot here to mobile consumer electronics. But rather than sort of talk about the industry, your primary customer there, there’s a lot of innovation supposedly coming on foldables, and there’s also need to go support the customer in additional regions given their exit from China. How are you feeling about the basket of opportunities there? What are you more excited about?
Wendell Weeks, Corning: I never talk about anybody who lives in the area code of Cupertino.
Samik Chatterjee, Analyst, JP Morgan: Okay. So I will wrap it up there just because we don’t have time. Thank you. Thanks for coming to the conference.
Wendell Weeks, Corning: Always a pleasure, my friend. Thanks, Samik.
Richard Cho, Analyst, JPMorgan: Hi, my name is Richard Cho. I cover communications infrastructure here at JPMorgan. I’d like to welcome Tom Meirhofer, CFO of Digital Bridge and Severin White, Head of Investor Relations. Thank you for being here with us today. I just wanted to start off for those that might not be as familiar with Digital Bridge.
Tom, can you go through a quick overview on Digital Bridge and your key priorities for this year?
Tom Meirhofer, CFO, Digital Bridge: Sure. We’re an alternative investment manager focused on digital infrastructure. So we raise long term closed end pools of capital from institutional investors and invest in data centers, cell towers, fiber networks and other adjacent areas of digital infrastructure. We have about $37,000,000,000 of fee earning capital under management and with that we manage a portfolio of about $100,000,000,000 assets in the digital infrastructure ecosystem.
Richard Cho, Analyst, JPMorgan: Great. And I guess part of the appeal of Digital Bridge is that investors are allowed or enabled to play in different themes that are really on long term secular positive trends. Can you kind of frame for us a little bit of how you view the TAM of Digital Bridge in terms of its different verticals?
Tom Meirhofer, CFO, Digital Bridge: Sure. We think that the opportunity ahead of us is many multiples of where we are today. There’s probably about 500,000,000,000 a year in capital expenditures in the sectors in which we invest. So we’re still a very small fraction of that overall and we think there’s a huge opportunity for growth ahead.
Richard Cho, Analyst, JPMorgan: Got it. And then in the most recent quarter, you reported $1,200,000,000 of capital commitments and you have over 70% commitment in your flagship fund. Can you talk a little bit about your fundraising goals for this year and overall environment, mainly because I think there’s been a lot of volatility in financial markets. People have seen different, I guess, news articles about private equity in general, but I feel like Digital Bridge is a little bit different than that because your sole focus on digital infrastructure has a much more, I guess, resilient long term focus.
Tom Meirhofer, CFO, Digital Bridge: Yeah, absolutely. You just gave the commercial for us,
Wendell Weeks, Corning: I think.
Tom Meirhofer, CFO, Digital Bridge: But we did raise $1,200,000,000 of capital in the first quarter. We’d set out a target this year to increase our fee earning equity under management to $40,000,000,000 We’re at 37,200,000,000.0 at the end of the first quarter and we feel really comfortable with that guide for the year. The investment process or for us the sort of marketing sales process is a relatively long cycle because investors when they commit with us are locked up for seven to ten years. So these investment decisions for them are not overnight decisions. We may spend six months with an investor for them doing diligence, reviewing track records, sort of negotiating.
So while there are some short term sort of volatility from time to time, the overall fundraising cycle is sort of a long one. Particularly in our portfolio, we feel very insulated from sort of the short term gyrations in the market day to day.
Richard Cho, Analyst, JPMorgan: And I think on your earnings call you mentioned that two eighty investors are doing due diligence on Digital Bridge and to your point, this is a long process. Have you seen any of those kind of pull back and stop what they’re doing or have they continued to kind of do their due diligence because this is something they might, whether it’s the new flagship fund or other funds that you may be launching over or strategies you may be launching over the next few years that they want to make sure they do their due diligence ahead of time?
Tom Meirhofer, CFO, Digital Bridge: By and large, we haven’t seen much of an impact from in terms of investors engagement with us, whether it’s kind of continued due diligence, dialogue, negotiating documents, all of that. I think that investors have to make decisions and sort of not investing is a choice as well. And so large investors have allocation targets and they have to make decisions where to allocate their capital. Like I said, not investing is itself a choice. So, you know, while it may seem as though investors may just sit on their hands, they ultimately have return objectives, they have constituents, and so they’re continuously allocating capital.
Richard Cho, Analyst, JPMorgan: Got it. Something I wanted to go back to a little bit is your own experience because Mark and Digital Bridge have been well known, I guess, for digital infrastructure for a while, and Mark’s track record is great. But in kind of, I guess, growing Digital Bridge to become a tier one private equity firm, there’s a lot of infrastructure that needs to be built in the company itself. And at your Analyst Day last year, you talked about the sales infrastructure. When you joined last year, in terms of the build out and your experience, what were you focused on when you came to Digital Bridge and building out the company from your perspective?
Tom Meirhofer, CFO, Digital Bridge: Yeah, look, I don’t think that I have tried to change anything fundamentally and just try to help Mark and help the team grow smartly. Whether that’s how we evaluate what new products we should launch. We’re very focused on our core strategy and we’re looking at opportunities to grow adjacent to that. And so helping the team think through how, what products make sense to launch, what products might be too far afield. You mentioned sales, we’ve definitely been investing in the sales organization.
I think that’s a trend throughout the industry that as firms look to approach different pools of capital, whether it’s the private wealth channels or we’ve seen a little bit of a migration from investors that have historically been real estate investors looking to kind of expand their remit to include digital infrastructure. And so we’ve looked at whether we should hire some kind of sales folks that have specific experience in real estate, with real estate investors, because sometimes that’s a different group of investors at the same kind of client. So those are definitely areas that we continue to invest in.
Richard Cho, Analyst, JPMorgan: And following up on that, I guess the original capital formation was based in The U. S. And with large institutions in The U. S. But increasingly, I guess the fundraising has been more global.
How have you built out your global sales team? And what is left that needs to be done, if anything?
Tom Meirhofer, CFO, Digital Bridge: Know, like I think for us, there’s such a significant opportunity that we can continue to grow organically the sales team. We have had fairly significant success raising capital overseas and I think like most firms, the large checks from sovereign wealth funds are typically relationships at the top of the house. So whether it’s Mark or our head of fundraising or some of the other senior executives, but where we’re supplementing that is kind of one level down. The investors have put 25 to $50,000,000 in a fund and adding to the geographic coverage that we have in those markets.
Richard Cho, Analyst, JPMorgan: And I think one of your kind of newer products and funds has been towards credit and part of that has been with private wealth also. Can you talk a little bit on how you’re building out your credit strategies and how the private credit vertical or private wealth vertical is kind of playing into that?
Tom Meirhofer, CFO, Digital Bridge: Yeah, so private credit isn’t exceptionally new for us, although it’s more recently that we’ve been talking about it. We’ve been in the private credit business for three to four years and are on our second vintage of funds. We’ve been a little bit quiet about it as we’ve allowed the team to sort of grow and execute. And we really feel like that’s a great opportunity for us. And so it’s something we’ve been a little bit more sort of talkative about.
That’s like between a 1 to $2,000,000,000 business for us. By all accounts, it can be and should be sort of a $5 to $10,000,000,000 business for It’s not there yet. But we’ve been very happy with the performance of the team so far. And so we’re a bit more comfortable sort of talking about it publicly than maybe we were two years ago or three years ago when we wanted to give the team some time and opportunity to sort of do their thing. And then private wealth, I would say we’re relatively new to the private wealth fundraising channels.
Based on our size, we historically were capable of raising all the capital we needed from some of our traditional larger institutional LPs. Some of the larger peers have, you know, literally a couple hundred people dedicated towards raising money from private wealth and high net worth channels. We’ve just dipped our toe in the water and raised and hired one individual who’s leading that effort. You know, we’re going to sort of grow into that sort of responsibly. And he’s raising money, he’s going to hire a couple of people and prove the concept and sort of pay for itself as it goes.
But that’s a huge channel for us. It might, for us, can certainly be a multi billion dollar opportunity, which at our size is meaningful.
Richard Cho, Analyst, JPMorgan: Yeah, and I feel like with the private credit side, you started off of small, but it’s grown larger. Can you talk a little bit how you expect that to evolve in that how much investing is going directly from the fund versus kind of, I guess, add ons from the investors? Yeah,
Tom Meirhofer, CFO, Digital Bridge: sure, yeah. I mean, so add ons largely being co investments have been a significant source of opportunity for us both in our flagship strategy as well as on the credit side. And so we have seen a number of opportunities to take down larger loans and put some of it in our fund. Then also we have kind of a network of some of our large investors who are very eager to deploy co investment capital. And that can be particularly attractive because it doesn’t really add much overhead and it sort of is a relatively kind of strong fee generator.
Richard Cho, Analyst, JPMorgan: Something that I haven’t talked about in a little bit, but I always like coming back to is that I think the way Digital Bridge always approached their investments is that not only do you make investments in different portfolio companies, but you have deep management teams both on running the companies, but also advising you. Can you talk a little bit about how you oversee where capital is being allocated for investments across your portfolio companies and how, I guess, the management team, which has broad experience in the different verticals, kind of works with the portfolio companies to kind of make sure that the capital is being allocated the right way.
Tom Meirhofer, CFO, Digital Bridge: Yeah, I think we are a little unique and I’ve been at a couple of different firms. One of the things that comes up often in our discussions internally is talking about the customers of our portfolio companies. And I think our teams internally both sort of the investment professionals as well as some of our operating partners are really focused on who the customers are for our portfolio companies and making sure that the portfolio companies are delivering what the customers need. And so I do think that’s a bit of a differentiator. We also are, we’re investors, but we’re also typically building businesses.
And so that’s part of the reason that we end up with sometimes outsized co investment opportunities. We’re often not just doing a singular deal like you might see in a private equity fund where we buy a company and then five years later we sell it. We buy a company because we think there’s a great opportunity there. And in the infrastructure space, we’re then deploying meaningful additional amounts of capital where we think there’s value. And so sometimes that results in additional capital raises for that company over a period of years.
Richard Cho, Analyst, JPMorgan: And I think in one of your recent earnings decks, you kind of went through the amount of organic investment that is being done by your portfolio companies. And obviously, large part is data centers, but you also have towers and fiber. And it’s not just US based. It’s on a global basis. Can you talk a little bit about how much organic opportunities you have in your data center portfolio?
And then we can kind of move to the other stuff. But I think to keep it a little more focused, can you talk a little bit about the data center opportunities that you’re looking at near term and then we can move to the other verticals?
Tom Meirhofer, CFO, Digital Bridge: Yeah, data centers have been sort of what everyone has wanted to talk about in the last few years, and we’ve been a very active participant there. Sometimes we feel like the tower portion of our portfolio hasn’t gotten enough credit. Although in the last sort of quarter or it seems like maybe there’s been a bit more appreciation for a business like that that’s fairly defensive and stable yet also growing. So we, like I said, on our deployment, we have these opportunities where we buy particularly in the data center business. We buy data center, they have success, their customers want more capacity.
So we’re helping them in funding the build out of additional campuses. The tower portfolio tends to have kind of an ongoing build to suit component, but then also sporadic acquisition opportunities. And then we also, I think it’s been relatively public that we’re about to close on another data center platform called Yonder, which we thought was an interesting opportunity to bring in kind of another independent kind of data center business that’s going to be pursuing that. So we see both new acquisition opportunities, but also meaningful opportunities to deploy capital at our existing portfolio companies.
Richard Cho, Analyst, JPMorgan: With the data center investments, I think there was a lot of enthusiasm last year, but the start of this year that kind of tailed off. Have you seen any change from your portfolio companies or their customers in terms of like pulling back or wanting to do less builds or has it kind of stayed pretty steady and they’re thinking more longer term?
Tom Meirhofer, CFO, Digital Bridge: Like this is a long term business and there’s always going to be kind of short term ebbs and flows and sentiment. Sevan and I were talking this morning and it’s a matter of whether we don’t try to figure out if the tailwinds are 22 miles an hour or 15 miles an hour or 25 miles an hour, but there continue to be strong tailwinds in this business. And we’re just really excited about what we see ahead.
Richard Cho, Analyst, JPMorgan: Got it. I guess can you talk a little bit about your data center portfolio? You have Vantage, which I guess focuses on hyperscale larger customers, then you have DataBank, more color and then Switch, which is kind of in between the two and then you’re going to be adding on Yonder. When investors come to you and look at this portfolio, are they wanting to kind of invest in particular portfolio companies or are they looking to you and realize that you know what, you’re going to be able to find the next growth investment on a global basis because there’s a lot of opportunity out there.
Tom Meirhofer, CFO, Digital Bridge: I think there’s a mix. Kind of are close to this as well, so feel free to jump in. But there’s a mix. Some investors are going to put money in our fund, in the coming old fund, and rely on us to make the allocation decisions. And then other investors will do that, but also like to supplement that with individual co investments, whether it’s because they have a geography that they prefer or they have a view on which sector.
But I think having assets in a number of different sectors of the data center industry is really helpful to us because we see the whole field and we know what all the customers are looking for versus just sort of one slice of it.
Richard Cho, Analyst, JPMorgan: Makes sense. In terms of, I guess you mentioned towers. Towers have been a very stable, strong business, but kind of got less noticed in the data center hype. What do you see in your tower portfolio, particularly with Vertical Bridge buying the Verizon towers and then GD towers and European towers seem to be doing well? Do you see that growth as a long term opportunity?
And are you seeing potential for, I guess, continued growth maybe in emerging markets at all?
Tom Meirhofer, CFO, Digital Bridge: Yeah, like, trying to talk too much about individual portfolio companies, but in general, the tailwinds continue to be there. They’re not maybe howling the way the data center tailwinds but they’re steady and they’re consistent. And there’s continued densification, continued demand, and we’re very happy with the portfolio of towers that we have.
Richard Cho, Analyst, JPMorgan: Got it. And kind of the final piece, which I guess is tying together a little bit of the data centers and towers is fiber. I think for a long time fiber kind of got lost in the conversation, but it seems like, and not to talk about data specifically, but it seems like fiber is making a resurgence and there’s a lot of opportunities there. Are you seeing more opportunities between data centers and fiber?
Tom Meirhofer, CFO, Digital Bridge: Yeah, like I mean fiber is many different sectors depending on what it is. And so there’s certainly been an uptick in demand across the space for data center business. And there’s probably has been a little bit of evaluation reset in some areas that make it a little bit more attractive. So fiber is not something we’ve talked about a lot recently, but it’s something we’re looking at more and more.
Richard Cho, Analyst, JPMorgan: And you’re seeing more interest there or?
Tom Meirhofer, CFO, Digital Bridge: I think more activity. More activity.
Severin White, Head of Investor Relations, Digital Bridge: I think on the AI side in particular it’s been the vertical outside of data centers that we’ve seen the most engagement with customers. I think we’re just talking about towers. We see and we’re talking about kind of rest of network becoming more important in the next couple of years as inference starts to play out in AI. A lot of the focus is on training on these huge very large scale data center deployments. But we’re starting to talk about what happens a year or two years from now.
Those are the conversations we’re having with customers that are going to drive the rest of the network, right? Ultimately AI is going to be on this or on a computer at an enterprise. And so fiber is kind of the first place that we’ve really seen that spike in interest and we expect it in towers over the next couple of years.
Richard Cho, Analyst, JPMorgan: And I think with that inference wasn’t a big discussion six, nine months ago. It was more on the training side, but it seems like inference has quickly kind of come to a head. And a lot of the colo data center companies are talking about enterprises looking for inference kind of deployments. Have these fiber discussions and kind of more edge network discussions kind of ramped up over the past few months versus like a year ago?
Severin White, Head of Investor Relations, Digital Bridge: Yeah, listen I think that in particular around inference the idea if you talked earlier about some pause or changing profile of some of the data center deployments, I actually think some of that is tied to an appreciation by the largest customers think the hyperscalers around what’s the use case for this data center not just today but further down the road, Building a very large scale data center in the middle of nowhere. If it’s got very low power maybe that makes sense. But we’ve seen from our customers a greater focus on hey, I know I’m using this for training today but in a year or two years from now, can this be an inference focused facility? And we talked last quarter about this, the idea of inference looking a lot like cloud two point zero where you put a facility, it’s got to be close to people to deal with the latency issues. So that’s a nuance that I think actually maybe contributing to where do I want my data center footprint to be.
Richard Cho, Analyst, JPMorgan: And it’s funny because I feel like these discussions need to happen now because it’s going to take a few years to actually You can’t just dig a ditch hundreds of miles out of nowhere. Going back to Digital Bridge specifically, something you don’t get as much credit as you probably should is on the carry of the business. And you’ve had realizations and some good, I guess, outcomes, but it’s been more sporadic. How should investors feel or think about your approach to kind of carry over the next few years as your flagship funds mature, you have more fee and kind of grow and over time, how should we think about it?
Tom Meirhofer, CFO, Digital Bridge: Look, think our priority for this year is sort of nailing our FRE guidance and target and kind of demonstrating a track record of doing what we say we’re going to do and executing. And once we’ve done that, I think what you’ll see the next step is, and I would put principal investments on our balance sheet in the same bucket as Carrie. We have a significant, a couple of relatively significant principal investments on our balance sheet. And we will sort of, if you think about end of this year, next year, our fund, our first fund is like seven years old, second fund is five years old, you would expect to start to see some realizations there. And we have to prove that we’re going to generate carry.
We’re all very confident in it. Our employees all highly value the carry they receive. And so we need to prove to folks that we will become a consistent generator of carry. And I think also along with that goes realization of balance sheet assets.
Richard Cho, Analyst, JPMorgan: I think something that’s interesting here is that you could have realizations without completely selling out because I feel like a lot of your portfolio companies that your funds are in need a lot of capital to grow and there’s a lot of opportunity ahead of them. So should investors expect, I guess some partial realizations, but for Digital Bridge to continue to be invested in these portfolios?
Tom Meirhofer, CFO, Digital Bridge: Yeah, I think we’ve had some of that on a few of our investments where we’ve taken out partial realizations of carry or I’m sorry, partial distributions, but not had kind of a full exit. And that’s partly because we think there’s a lot more opportunity at those companies. So we haven’t necessarily sold the entire business.
Richard Cho, Analyst, JPMorgan: Can you go through the data bank realization that you had recently how that played Yeah,
Tom Meirhofer, CFO, Digital Bridge: so data bank over the course of Q3, Q4, and Q1 raised about $2,000,000,000 largely primary capital to support what we and the investors who invested see as a really interesting opportunity for DataBank over the next couple of years. We’ve owned DataBank in a couple of different iterations for quite a while. So there were some investors who wanted to get some liquidity. So a percentage, a smaller percentage of that capital was earmarked to secondary transactions to buy out some investors. And we, as a firm, sold about 10% of our position in DataBank and realized about $50,000,000 So that was just we still retain a significant component of our investment in DataBank, but we just felt like it was appropriate.
It was a $500,000,000 investment on the balance sheet. From our size, it just seemed prudent to take a little bit of liquidity.
Richard Cho, Analyst, JPMorgan: And I think something with that is that in your slide deck where you show your fund performance, your marks appear very conservative. And I think there’s been some feeling that the performance hasn’t been as good as or marked as well as what people are hearing about and seeing about. But I feel like, and you talked a little bit about this on the call, that if realizations actually happen, they seem to be done at much higher multiples or valuations than your booking. So for investors, can you talk about your process on how you’re marking your investments in your funds and what you show on that fund performance slide versus what the actual value may be realized at because there seems to be a very big valuation gap there.
Tom Meirhofer, CFO, Digital Bridge: Yeah, think everybody would hope that in general you sell your assets at more than where you have them marked. Our valuation process is I think relatively robust. We look at transaction comps in the market, we look at public company comps, we look at a DCF, we sort of look at all of these things and triangulate on what we think is the right value. Valuing private companies is as much of an art as it is a science. And so we’re thoughtful and careful and cautious about it.
And we hope that we will achieve some level of a premium to those marks when we sell things.
Richard Cho, Analyst, JPMorgan: After you close Fund III, and I guess Mark talked about it, he seemed very excited about it, your next two potential strategies. Can you talk first about the data center income strategy and what you might hope to achieve there? Because it seems like there’s a very large opportunity there. I know a lot of other, I guess, funds or firms need to kind of monetize this because they want to keep What’s the opportunity there?
Tom Meirhofer, CFO, Digital Bridge: Yeah, we think that’s a very large opportunity set. And what it really amounts to is trading out the sort of cost of capital from what right now is a development cost of capital for a lot of these data centers that are being developed. And putting them into a capital structure that makes more sense for a stabilized asset. You think about like real estate. You have a real estate developer that has a certain cost of capital.
When a building’s built fully leased, there’s a different appropriate owner. And so we don’t think that there’s enough capital right now earmarked for that mature stabilized phase of the life cycle. And so that’s a different investor profile than the investors that are going to look for a mid to high teens return to invest in building a data center. So we think there’s a missing gap in the market right now and we feel like we can fill that.
Richard Cho, Analyst, JPMorgan: Got it. And I think Mark talked about the TAM being like 120,000,000,000 or something. I forget the exact number, but what kind of scale would you want to be of the total TAM?
Tom Meirhofer, CFO, Digital Bridge: So I’ll talk about it in terms of products. So for us, it doesn’t really make a lot of sense. Our flagship large funds are of on the $8,000,000,000 size. It doesn’t really make sense for us to do a product that’s less than a billion dollars. It just doesn’t move the needle or add enough profitability for us.
I think any time we do a new initiative, we’re not going to do something that’s less than $1,000,000,000 Realistically, we’re not going to be at that kind of 8,000,000,000 to $10,000,000,000 size for our mature business, like our flagship funds. But at least out of the gate, we would hope to be kind of plus a billion, but kind of in that single digit billions. And to the extent we’re successful, we wouldn’t enter a business if we didn’t think it could be ultimately a 5,000,000,000 to $10,000,000,000 kind of business.
Richard Cho, Analyst, JPMorgan: And the other strategy, I guess, that you mentioned on the call and I think has a lot of opportunity, but people might not be sure on how you want to approach it, is the energy side. And there was a lot of, I guess, enthusiasm early in the year and end of last year. But I think the way Digital Bridge wants to approach it is not on the generation side per se, but more on transmission and then kind of individual grids and whatnot. How would Digital Bridge kind of, I guess, focus on the energy strategy?
Tom Meirhofer, CFO, Digital Bridge: Yes, Severin may jump in because he’s actually spending a lot of time on it. He wears many hats at Digital Bridge, Investor Relations, and he’s really involved in the energy strategy. You know, look, we see a huge opportunity around particularly the data center business that is significantly power constrained right now. And so, you know, getting behind the meter and either having kind of permanent energy generation opportunities co located with the data center or in some cases mobile, temporary. You have a permit and you have everything you need to do to build a data center but you can’t get power for three years, if we can bring it to you, even if it’s only temporary for three years, there’s a huge value to you at that.
Or if we can kind of get energy generation up and running, there’s a huge value to you in that. And so that’s where we think our expertise in the data center side combined with some of the power generation can be very valuable both on its own and within our ecosystem. You’re spending a of time on this.
Severin White, Head of Investor Relations, Digital Bridge: Yeah, listen, think one of the things that’s true and you talked about this in terms of customers us thinking through our portfolio companies to the end customers. Historically power wasn’t a friction point in the data center ecosystem. It’s become one and so we’re naturally thinking about, okay, if my big customers need this as part of the solution, how can I be active in doing that? And so that’s really the stimulant for us to kind of be in that space from a TAM and a scale standpoint. We think about it as maybe if the data center opportunity is 100, the digital energy opportunity is kind of 50 if you think about the amount of power that has to be adjacent to it.
And I think we’re being very prudent and thoughtful about how we enter it. You’d expect us probably to do it with or in partnership with people that have a lot of experience in the power sector. So we think it’s a huge opportunity and obviously one that probably will drive growth in ’twenty six and beyond in the same way the data center income is a focus point.
Richard Cho, Analyst, JPMorgan: And following up on those two without being too specific, but how should investors look at these strategies kind of I guess coming Are we talking end of this year, into next year? Just any timeframe you can give on either one or both?
Tom Meirhofer, CFO, Digital Bridge: Yeah, I think that, as Severin said, I think in terms of real results, those are going to be ’26 and ’27. We would hope over the second half of this year that we’re able to report kind of substantive progress on those business initiatives. But in terms of the financial kind of flow through, it’s much more likely a 2627. For us, first half of this year is laser focused on closing out our flagship fundraise. Sort of final close of that is at the July.
And hitting our FRE kind of guide. And then the second half of the year is focused on making sure these new initiatives get off the ground. We’re obviously already doing work on them, but it becomes a priority for us. And I’m really focused on keeping us laser focused on doing a couple of things really well at a time. And first half of the year is close out our flagship fund, make sure we’re hitting our FRE guidance.
People are separately working on these new initiatives, but second half of the year those become front and center firm wide sort of priorities.
Richard Cho, Analyst, JPMorgan: Great, we’ll leave it at that. Thank you.
Severin White, Head of Investor Relations, Digital Bridge: Okay, thanks. Awesome, thanks.
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