Here’s our initial take on Prologis‘ (PLD 1.28%) fiscal 2025 second-quarter financial report.
Key Metrics
| Metric | Q2 2024 | Q2 2025 | Change | vs. Expectations |
|---|---|---|---|---|
| Rental revenue | $1.853 billion | $2.037 billion | 4.6% | Beat |
| Core FFO per share | $1.34 | $1.46 | 9% | Beat |
| Occupancy | 96.3% | 94.8% | -150 bps | n/a |
| Cash rent change | 51.4% | 34.8% | N/A | n/a |
A Solid Quarter in a Challenging Environment
While Prologis may not be the industry most affected by tariffs worldwide, concerns about the demand for its leased logistics spaces have been expressed due to its global network. However, Prologis’ robust second-quarter earnings provided a sense of reassurance for investors.
To begin with, Prologis’ FFO, a significant measure of real estate profits, increased by 9% compared to the same timeframe last year. This figure surpassed expectations. Furthermore, their rental income amounted to $2.04 billion, exceeding predictions.
Despite the top-line figures, Prologis maintained a robust occupancy rate of 94.8%. Over the past few years, we’ve observed a significant increase in cash rent for both new and renewed leases, averaging approximately 34.8%. To put it simply, when tenants renew their contracts with Prologis, they typically agree to pay nearly 35% more than their previous lease amount. This trend can be attributed to the surge in demand (and rental rates) for industrial properties during the pandemic. Many of Prologis’ existing leases were signed before this period, and as these expire, rental costs are being adjusted to align with current market rates.
To start off the second quarter, Prologis boasts over $7.1 billion in available resources and an impressive financial standing. Therefore, it stands poised to seize chances when they present themselves.
To summarize, Prologis adjusted its annual outlook slightly upward. Disregarding net promotion income (which can be inconsistent), they boosted their full-year core FFO projection by over 4 cents at the midpoint of the range. Additionally, the company increased its forecasts for development starts and acquisitions as well.
Immediate Market Reaction
15 a.m. EDT, shares increased by approximately 2%. However, this reaction occurred prior to the management’s earnings call, so whatever is discussed during the call might cause the stock to shift in either direction.
What to Watch
According to Prologis’ leadership, the industrial real estate market may be approaching a significant shift over the past few quarters, but it seems we’re not quite there as of now. However, if interest rates begin to decline later in the year, they could serve as a powerful trigger for change. CEO Hamid Moghadam emphasized that Prologis’ major clients are growing more eager to make moves, so it’s something to keep an eye on in the future.
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2025-07-16 21:24