Prologis, Inc. earnings

Management highlights

- Core Logistics Market Performance * Record leasing volume of 67 million square feet in Q2 2026, the fourth record over the prior seven quarters * U.S. net absorption hit 66 million square feet, the highest level since 2022, pushing national vacancy down to 7.2% with 70 bps of quarterly market rent growth * Europe is 12 months into a market recovery, with robust demand, a tight vacancy rate of 5.2%, 60 bps of quarterly rent growth, and 160 bps of cumulative growth from the 2025 trough * Supply of large-format (over 500,000 square foot) logistics space is extremely tight, with no available space over 1 million square feet in the portfolio, and occupancy is improving across smaller unit sizes in nearly all markets * Broadening demand drivers include e-commerce, advanced manufacturing, digital infrastructure build-out, and stable demand from basic daily needs; the recovery of cyclical sectors (housing, autos, furnishings) represents additional upside potential - Cross-Business Platform Synergies * ProLogis' existing logistics land bank (14,000 acres, 240 million square feet of development opportunity), customer relationships, and local operating capabilities enable low-cost expansion into high-growth data center and energy businesses * $1 trillion in data center capex is estimated to generate 30 to 40 million square feet of incremental logistics demand, creating durable secular growth for the core business * Management sees data center and energy opportunities as still in early stages, with less than 1% of the global portfolio currently allocated to these projects, leaving significant long-term runway - Capital and Deployment Activity * Started $1.6 billion in new development projects in Q2 2026, with $800 million allocated to logistics properties across high-demand global markets * Acquired $1.8 billion of real estate at an average 20% discount to replacement cost, deepening presence in existing core markets to leverage existing operational infrastructure * Disposed of $800 million in assets in Q2 2026; year-to-date, underwritten IRRs for acquisitions have exceeded disposition IRRs by 140 bps, supporting ongoing portfolio optimization * Closed a $1.2 billion European logistics joint venture with Lacasse, and received $500 million in capital contributions from strategic partners in Q2 2026 * Completed $3.4 billion in financing activity across North America, Europe, and Asia, ending the quarter with a debt-to-EBITDA ratio of 4.7x, creating significant unused borrowing capacity - Data Center Business Execution * Completed a 100 megawatt power land sale in Q2 2026 that generated an 82% margin, demonstrating a disciplined approach to monetizing projects at the stage that maximizes risk-adjusted returns * The total data center power pipeline has more than doubled over the past two years to 5.8 GW, with 85% of the pipeline positioned for development starts by 2030; management sees over 10 GW of total data center development opportunity over the next 10 years

Guidance

Management raised full-year 2026 guidance across most metrics to reflect stronger-than-expected operating performance and improving market fundamentals, with the following updates: * Average occupancy forecast revised upward to a range of 95.25% to 95.75% * Net effective same-store NOI growth guidance raised to 5.25% to 5.75%, and cash same-store NOI growth guidance raised to 6.75% to 7.25% * Strategic capital revenue (excluding promotes) maintained at the prior range of $660 to $680 million; net promote income is now expected to be flat year-over-year * G&A expense guidance maintained at $510 to $525 million * Own-and-manage development start guidance increased to $5.5 to $6.5 billion, incorporating the $2.1 billion in year-to-date data center starts that already exceeded the prior full-year data center guidance; the incremental increase is driven by higher projected logistics development * Acquisition guidance raised to $1.5 to $2.5 billion * Combined contributions and dispositions guidance set at $4.25 to $5.25 billion, consistent with the firm's capital recycling strategy * Core FFO guidance raised to a range of $6.22 to $6.30 per share, representing a 100 basis point increase at the midpoint of the prior guidance range * Net earnings guidance raised to $4.40 to $4.55 per share

Segment performance

The transcript does not break out separate financial performance for individual product segments with absolute revenue values and revenue contribution percentages. Core financial results for the overall firm in Q2 2026 include: core FFO of $1.63 per share (including net promote income) and $1.60 per share (excluding promote income), both above internal expectations; $83 million of promote revenue driven by outperformance in three strategic capital vehicles; overall portfolio occupancy of 95.5%, a 20 basis point increase from Q1 2026; net effective rent change on lease rollover of 36%, generating $60 million in incremental NOI; cash basis rent change on rollover of 22%; portfolio lease mark-to-market of 17% (unchanged from Q1 2026), representing nearly $800 million in embedded NOI opportunity; net effective same-store NOI growth of 6.4%, and cash same-store NOI growth of 8.5%. For the data center sub-segment specifically, Q2 2026 saw the start of a 260 megawatt build-to-suit campus with a total expected investment of $800 million; year-to-date 2026 data center development starts total $2.1 billion, exceeding full-year 2026 guidance. The overall energy business holds a 5.8 gigawatt power pipeline, with potential investment ranging from $17 billion (powered shell) to $87 billion (turnkey delivery).

Risks & headwinds

- Forward-looking statements are based on current assumptions, and actual results may differ materially due to known and unknown risks and uncertainties, as detailed in the firm's SEC filings * NIMBYism and increasing local regulatory/entitlement restrictions present growing barriers to new data center and logistics development, requiring long lead times and proactive local engagement to mitigate * The embedded 17% lease mark-to-market is expected to decline over time as existing leases roll, and will only expand again if market rent growth exceeds rollover rent change, which is not guaranteed * Capital markets remain selective for commercial real estate, with a persistent preference for high-quality, well-located assets that could limit liquidity for lower-quality assets * Cyclical sectors including housing, autos, and furnishings remain below trend demand levels, and their recovery timeline is uncertain, representing a source of potential upside if recovery occurs or downside if it is delayed * While ProLogis maintains a strong balance sheet, ramping large-scale data center development requires ongoing capital management and alignment with external investor preferences, which introduces execution uncertainty

Analyst Q&A

• Q: When will the embedded 17% lease mark-to-market start expanding again, and is ProLogis' portfolio positioned to capture higher rents faster than competitors?

  A: Management noted that the mark-to-market stabilized this quarter, but expects it to decline in future quarters as leases roll over. It will only begin expanding when market rent growth exceeds rollover rent change, which is a possible but not guaranteed outcome. ProLogis has consistently outperformed competitors on occupancy and gained market share quarter after quarter, positioning it to capture rent growth ahead of peers.

• Q: Is the current strong leasing demand driven by pent-up delayed demand, or is it broader new demand from new customers? What industries are driving this growth?

  A: Demand is broad-based and improving, not just pent-up. Four key segments drive growth: 1) international e-commerce across all size categories; 2) advanced manufacturing including semiconductors, defense, and data center construction; 3) ongoing supply chain reconfiguration as companies become more comfortable investing in long-term capacity; 4) roughly a quarter of demand tied to housing-related sectors (construction materials, furniture, appliances) that are still not at full strength but represent future upside.

• Q: What is the expected mix of powered shell versus turnkey delivery for the 5.8 GW data center pipeline, and how should we estimate potential capital investment?

  A: The total potential investment ranges from $17 billion for all powered shell to $87 billion for all turnkey, and the final outcome will fall somewhere between these values. While turnkey projects deliver higher returns for ProLogis, the business is customer-led, and the company will deliver whatever structure customers prefer. ProLogis is willing to monetize at earlier stages (like the recent 100 megawatt land sale that delivered an 82% margin) when risk-adjusted returns are attractive.

• Q: How do you plan to structure capital ownership for the growing data center pipeline, and how are margins and residual values underwritten?

  A: The core plan remains selling completed data center assets after development, with the next package of assets expected to go to market in the next 6-9 months. The opportunity set is large enough that a single capital structure will not work for all opportunities, so ProLogis has built frameworks with multiple external partners, and will align structure to each opportunity. All projects are build-to-suit with long-term leases to high-quality hyperscale customers, and ProLogis buys land at logistics pricing, creating inherent uplift when converted to data center use, which supports targeted 20-50% margins.

• Q: How is ProLogis addressing growing NIMBY and entitlement risks for new data center projects, like the New York moratorium and Northern Virginia project rejection?

  A: Entitlement and approval processes are becoming more complex, and this actually acts as a barrier to new supply that benefits existing players like ProLogis. ProLogis differentiates itself with 110 local offices globally, where local teams embedded in the community manage the multi-year approval process. The company is not impacted by the recent New York moratorium, and has experience navigating similar regulatory challenges in its core logistics business, proactively engaging communities to deliver responsible development.