Digital Realty Trust NYSE: DLR raised its 2026 earnings outlook after reporting a second quarter marked by record leasing in smaller deployments and interconnection, unusually strong renewal pricing and a sharply larger backlog.
On the company’s second-quarter 2026 earnings call, Jordan Sadler, senior vice president of public and private investor relations, said results exceeded internal expectations across revenue, adjusted EBITDA and core funds from operations. Core FFO excluding net promote income reached $2.13 per share, up 14% from a year earlier, while reported core FFO was $2.65 per share, including $0.52 per share from net promote income.
Chief Financial Officer Matt Mercier said Digital Realty is increasing its 2026 core FFO per share guidance, excluding net promote income, to a range of $8.15 to $8.20. The midpoint implies double-digit growth over 2025 and would represent a second consecutive year of double-digit core FFO per share growth, he said.
Bookings and renewals hit records
President and Chief Executive Officer Andy Power said the company’s “business is firing on all cylinders,” pointing to momentum across colocation and connectivity, hyperscale deployments and strategic private capital.
Digital Realty reported $108 million of bookings in its zero-to-one-megawatt plus interconnection category during the quarter, a third consecutive quarterly record and roughly double the level the company said it was averaging about two years ago. Mercier said the result was 11% above the prior record set in the first quarter, with EMEA reaching a new quarterly high and activity strongest in the sub-300 kilowatt band.
Interconnection bookings also reached a record $20.5 million, up 18% from the prior year. Power said customers deploying AI-enabled applications increasingly need environments that combine power, proximity and connectivity, a trend he said supports the company’s PlatformDIGITAL strategy.
Renewal activity was another highlight. Mercier said Digital Realty signed more than $261 million of renewals with cash re-leasing spreads above 25%. Renewals in the zero-to-one-megawatt category accounted for 55% of the total and produced a 5.2% cash mark-to-market, while greater-than-one-megawatt renewals accounted for 44% of the total and delivered a 66.7% mark-to-market. He said renewal strength was most pronounced in APAC, with outsized spreads in Singapore.
Backlog rises to new high
The company’s total backlog reached $1.9 billion at 100% share at the end of the second quarter, or $1.4 billion at Digital Realty’s share. Mercier said the company’s share of backlog has risen 75% since the beginning of the year and now represents about 30% of in-place data center rent.
Digital Realty commenced $208 million of annualized rent during the quarter, its third-strongest commencement quarter on record. Mercier said $635 million of annualized rent is scheduled to commence in the second half of 2026, followed by $480 million in 2027 and $312 million already scheduled for 2028 and beyond.
After quarter-end, the company signed two additional U.S. hyperscale leases representing about $410 million of annualized rent at 100% share, or $205 million at Digital Realty’s share. Those leases were not included in the second-quarter backlog figure.
Development pipeline expands as hyperscale demand continues
Digital Realty invested $1.1 billion in development capital expenditures during the quarter, net of partner contributions, bringing year-to-date spending to $2 billion. The company delivered 76 megawatts of new IT capacity, about 60% of which was pre-leased, and began development of 312 megawatts of additional capacity.
Mercier said the development pipeline expanded to 1.4 gigawatts under construction at a total cost of $20 billion, doubling during the first half of 2026. Pro forma for hyperscale leases signed in July, the pipeline is 63% pre-leased at an average expected stabilized yield of 11.5%. More than 80% of active development is in the Americas, with Northern Virginia the largest development market and significant activity also underway in Charlotte, Atlanta and São Paulo.
The company also announced an expansion into the Kansas City metro, where it secured 600 megawatts of utility power beginning to ramp in early 2028, with a long-term runway of up to two gigawatts. In response to an analyst question, Chief Investment Officer Greg Wright said Digital Realty views Kansas City as a potential major U.S. data center market, citing its central location, fiber availability and low-latency connectivity.
Strategic transactions broaden platform
Digital Realty closed a transaction to acquire Blackstone’s ownership interest in three fully leased hyperscale data centers in Northern Virginia totaling 288 megawatts of IT capacity. Mercier said the company paid $1.2 billion in cash, issued 12.3 million shares valued at about $2.3 billion, assumed Blackstone’s share of a $725 million loan and took on remaining capital expenditures needed to finish construction and fit-out.
The company also announced plans to acquire a 16% interest in Teraco for about $650 million of Digital Realty common stock and Columbia Capital for approximately $485 million, with both transactions expected to close in the second half of the year. Power said the Columbia Capital deal would add more than $9 billion of fund commitments and expand Digital Realty’s private capital platform into adjacent digital infrastructure sectors, including fiber, mobility and enterprise technology.
Mercier said the Blackstone transaction generated roughly $200 million of promote income during the quarter, reflecting value created through development and lease-up of the joint venture assets. Net promote income contributed $0.52 per share to reported core FFO, though the company presented results excluding that benefit because it was not included in prior 2026 guidance.
Balance sheet and outlook
Digital Realty ended the quarter with debt to adjusted EBITDA of 4.7 times, which Mercier said remains below the company’s long-term threshold. He said the company has about $6 billion of liquidity and estimates more than $12 billion of remaining capacity to support hyperscale data center development when including private capital capacity.
The company also raised its 2026 outlook for cash renewal spreads to 9% to 11% and increased its constant-currency same-capital cash NOI growth forecast to 4.25% to 5.25%. Expected capital expenditures net of partner contributions rose to $4.25 billion to $4.75 billion, reflecting recent leasing success and customer demand.
Power said Digital Realty is also focused on operating responsibly as data centers receive more public attention. He cited the company’s 2025 impact report, including 93% renewable energy coverage globally, 205 sites matched with 100% renewable and emissions-free energy and a contracted renewable energy portfolio of about 1.7 gigawatts.
In closing remarks, Power said record bookings, a record backlog and strategic investments give the company confidence in its ability to deliver double-digit earnings growth into 2027 and beyond.
About Digital Realty Trust (NYSE:DLR)
Digital Realty Trust, Inc NYSE: DLR is a real estate investment trust that owns, acquires and operates carrier-neutral data centers and provides related colocation and interconnection solutions. The company focuses on large-scale, mission-critical facilities that support the physical infrastructure needs of cloud providers, enterprises, network operators and content companies. Digital Realty's offerings are designed to enable secure, reliable and highly available IT infrastructure with an emphasis on power density, cooling, and physical security.
Digital Realty's product set spans wholesale data center space, turnkey build-to-suit facilities, and retail colocation suites, complemented by interconnection services that allow customers to establish private and public connections to networks, cloud on-ramps and other ecosystem partners.
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