IRM Iron Mountain
AI data-center growth story is real, but $2.25B capex against $1.54B FFO keeps AFFO thin.
The story
IRM's records management cash cow is funding an aggressive pivot into AI-driven data centers, with revenue compounding ~10.6% over five years. The problem: capex of $2.25B against $1.54B FFO means AFFO is being heavily diluted by recurring and growth capex, yet the market prices near-perfect execution at $116. Operating margins have compressed from 22% to 15%, signaling cost pressure from the data-center buildout. Rate sensitivity is elevated given the growth capex funding gap and beta above the REIT anchor.
FFO growth stays at 9% near-term given the data-center pipeline and AI demand tailwinds, with terminal growth nudged to 4.5% (just below risk-free) reflecting durable records storage annuity plus digital upside. AFFO/FFO cut from 0.68 to 0.62 because capex at $2.25B vs FFO of $1.54B implies recurring capex is consuming a larger share of cash flow than previously modeled. Failure probability slightly higher at 3% given execution risk on the massive capex program and leverage implications.
Value drivers
| AFFO growth (Y1) | 9.0% |
| Terminal AFFO growth | 4.5% |
| AFFO / FFO ratio | 62.0% |
| Beta | 1.05 |
| Failure probability | 3.0% |
| Cost of equity | 9.5% |
Valuation bridge
| PV of AFFO (explicit) | 8.64B |
| PV of terminal value | 15.33B |
| Equity value | 23.25B |
| ÷ shares → per share | $78.11 |
News
neutral -0.10 · 8 articles
- Iron Mountain (IRM) Stock Gets Fair Value Boost On Higher AI Growth Assumptions
- 3 REITs Getting Paid as Big Tech Builds Out AI
- Iron Mountain (IRM) Down 5.7% Since Last Earnings Report: Can It Rebound?
- Iron Mountain Expands Saudi Presence With AI Digital Partnership
- Iron Mountain (IRM) Swings To Profit As Growth Businesses Surge
- Realty Income's Data Center Bet: What Does It Mean for Growth?
- Iron Mountain Chief Commercial Officer Sells 11,839 Shares for $1.5 Million
- Iron Mountain Stock: Analyst Estimates & Ratings
Projected AFFO
| Yr | FFO | AFFO | Growth | PV |
|---|---|---|---|---|
| 1 | 1.68B | 1.04B | 9.0% | 950.68M |
| 2 | 1.82B | 1.13B | 8.5% | 941.73M |
| 3 | 1.97B | 1.22B | 8.0% | 928.57M |
| 4 | 2.12B | 1.31B | 7.5% | 911.35M |
| 5 | 2.26B | 1.40B | 7.0% | 890.29M |
| 6 | 2.41B | 1.49B | 6.5% | 865.65M |
| 7 | 2.56B | 1.58B | 6.0% | 837.75M |
| 8 | 2.70B | 1.67B | 5.5% | 806.92M |
| 9 | 2.83B | 1.76B | 5.0% | 773.54M |
| 10 | 2.96B | 1.83B | 4.5% | 738.01M |
Key risks
- Capex funding gap: $2.25B capex vs $1.54B FFO requires external financing, raising balance sheet risk in a higher-rate environment
- Data-center execution risk: margin compression from 22% to 15% suggests the pivot is costlier than expected
- Rate sensitivity: elevated beta and growth-capex dependence make IRM vulnerable if rates stay higher for longer
Catalysts
- Data-center lease announcements from hyperscaler/AI tenants driving FFO acceleration
- Records storage pricing power providing stable AFFO floor
- Saudi Arabia and international digital partnerships adding incremental revenue streams