Digital Realty Trust Q3 Earnings Call Highlights

Key Points

• Digital Realty exceeded expectations in the third quarter, reporting Core FFO of $2.10 per share, up 11% year over year, and raising 2026 Core FFO guidance to $8.30–$8.35 per share.
• Record leasing bookings reached approximately $855 million, while the company’s backlog grew nearly 30% sequentially to a record $2.5 billion, supported by demand for AI, cloud and enterprise data-center capacity.
• Operating momentum remained strong, with occupancy rising to 93.4%, churn falling to a record-low 0.7% and the development pipeline reaching 1.5 gigawatts under construction. Management also raised its same-capital cash NOI growth and capital-recycling guidance.

Digital Realty Trust NYSE: DLR reported third-quarter results that exceeded its expectations, supported by record leasing activity, rising occupancy and continued demand for data-center capacity tied to artificial intelligence, cloud computing and enterprise workloads.

The company raised its 2026 Core FFO per-share guidance, excluding net promoting income, by $0.15 to a range of $8.30 to $8.35. The midpoint would represent nearly 13% growth from 2025, according to Chief Financial Officer Matt Mercier. Third-quarter Core FFO was $2.10 per share, up 11% year over year.

“Digital Realty delivered an outstanding quarter, highlighted by strong execution across our global platform, robust financial results, record leasing activity, and continued progress against our long-term growth strategy,” President and CEO Andy Power said.

Record Leasing and Backlog

Total leasing bookings reached approximately $855 million during the quarter, or $627 million at Digital Realty’s share. The total exceeded the company’s previous leasing record by 20%, Mercier said.

Bookings in the company’s 0 to 1 megawatt-plus-interconnection category totaled $165 million, or $151.8 million at Digital Realty’s share, up 40% from the prior quarter’s record. Interconnection bookings were $23.9 million, or $22.2 million at the company’s share, also a record.

Power said the results reflect the growing need for connected data-center environments as AI infrastructure becomes more distributed. The company cited demand from enterprises, cloud providers, network operators and AI customers, including an AI platform deploying inference and low-latency edge hubs in 15 metros.

“AI workloads increasingly depend on a broader digital infrastructure architecture that connects compute and storage with cloud platforms, networks, customers, and inference locations,” Power said.

Hyperscale leasing, defined as deployments greater than 1 MW, reached $689 million, or $474 million at Digital Realty’s share. The activity included two previously disclosed leases in Northern Virginia and record signings in Asia-Pacific, including Seoul, Chennai and Sydney.

The company’s backlog rose nearly 30% sequentially to a record $2.5 billion, or $1.8 billion at Digital Realty’s share. Booked but not billed backlog represented almost 40% of in-place rental revenue, Mercier said. Management said the backlog provides visibility into 2027 and beyond.

Operating Metrics and Development Activity

Same-capital portfolio cash net operating income increased about 6% year over year in the third quarter. Stabilized occupancy increased nearly 90 basis points sequentially to 93.4%, while churn fell to a record low of 0.7%.

Cash re-leasing spreads approached 12% during the quarter, while the company signed $261 million in renewals at an average 11.8% cash re-leasing spread. Renewals for deployments above 1 MW delivered a 26.3% cash mark-to-market, led by multiple hyperscale renewals in Northern Virginia.

Digital Realty commenced $207 million of annualized GAAP rents during the quarter. Mercier said commencements are expected to accelerate over the following two quarters, supported by newly signed smaller-scale leases and more than 250 MW of upcoming pre-leased deliveries.

The company invested $1.5 billion in development capital expenditures during the quarter and $3.3 billion year to date, net of partner share. It delivered 50 MW of new IT capacity that was 95% pre-leased and began development on 112 MW across projects in APAC, EMEA and the Americas.

Its development pipeline reached 1.5 gigawatts under construction, with an expected total cost of $22 billion. The pipeline was 63% pre-leased and carried an average expected stabilized yield of 11.6%.

Land, International Expansion and Capital

Digital Realty acquired sites for future development across seven U.S. and European locations, investing more than $700 million. The investments included a 1 GW development in the greater Indianapolis area. The company also entered Türkiye, its 65th global metro, through a development joint venture that plans an initial 22 MW project in Ankara before pursuing expansion into Istanbul.

In discussing recent land purchases, Power said the company is targeting markets with robust and diverse demand from enterprise customers, cloud computing and AI workloads. Chief Investment Officer Greg Wright said Indianapolis has drawn more than $25 billion of hyperscale investment over the past three years and benefits from lower power costs and proximity to major population centers.

The company also continued to expand its private-capital platform. During the quarter, Digital Realty closed its acquisition of Columbia Capital, a digital-infrastructure-focused investment platform. Subsequent to quarter-end, it secured more than $1.4 billion in initial cornerstone equity commitments for a perpetual-capital strategy focused on stabilized hyperscale data centers in North America.

Mercier said Digital Realty raised approximately $3.5 billion across its capital stack in recent weeks, including $450 million of common equity through its at-the-market program and $1.7 billion of debt proceeds from euro and Swiss franc bond offerings at a blended average coupon of 4%.

At quarter-end, headline leverage was 5.2 times, or 4.9 times on a pro forma basis for the expected stabilization of three fully leased Northern Virginia developments acquired at the end of the previous quarter. Moody’s upgraded the company’s long-term issuer rating to Baa1 in September.

Updated Outlook

Along with its Core FFO guidance increase, Digital Realty lifted its forecast for constant-currency same-capital cash NOI growth to 5.25% to 5.75%. It expects cash renewal spreads of 10% to 12% and maintained its capital-expenditure forecast, net of partner contributions, at $4.25 billion to $4.75 billion.

The company raised capital-recycling guidance by $500 million to a range of $1.5 billion to $2 billion, citing progress with its perpetual private-capital strategy. Management said continued strength in smaller-scale colocation and interconnection leasing, the record backlog and its development pipeline support confidence in extending double-digit Core FFO per-share growth into 2027 and beyond.

About Digital Realty Trust (NYSE:DLR)

Digital Realty Trust, Inc is a real estate investment trust that owns, operates and develops data center facilities for businesses, cloud service providers, information technology companies and telecommunications organizations. The company provides the physical infrastructure needed to support data storage, networking, cloud computing and other digital operations.

Its services include data center colocation, interconnection and private connectivity solutions. Digital Realty also offers access to cloud and network providers through its PlatformDIGITAL platform, which is designed to help customers deploy, connect and manage their digital infrastructure across multiple locations.

Founded in 2001, Digital Realty serves customers through a global portfolio of data centers and related facilities across North America, Europe, Asia-Pacific and Latin America.

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