Digital Realty Trust Q1 Earnings Call Highlights

Digital Realty reported a “record start” to 2026 with its second-highest bookings quarter, including the company’s largest-ever 200 MW hyperscale AI lease in Charlotte and record 0–1 MW interconnection bookings, totaling over $700 million of new leases ($423 million at DLR share) and 116 new customer logos.

Core FFO rose to $2.04 in Q1 (up 15% YoY) and management raised 2026 Core FFO guidance by $0.10 to a range of $8.00–$8.10, while Same‑Capital Cash NOI grew 7.9% (2.5% on a constant‑currency basis) despite elevated operating expenses.

The development pipeline and backlog ramped materially—1.2 GW under construction (61% pre‑leased) and a record $1.8 billion backlog ($1.0 billion at DLR share)—as leverage fell to a multiyear low of 4.7x and the company cites roughly $10 billion of capacity to support hyperscale development, with net CapEx guidance of $3.5–4.0 billion and $500 million–$1 billion of expected dispositions/JV capital.

The Top 3 Investment Themes That Will Dominate 2026

Digital Realty Trust (NYSE:DLR) reported what executives described as a “record start” to 2026, driven by strong leasing across both interconnection-focused colocation and large hyperscale deployments. On the company’s first-quarter 2026 earnings call, management highlighted the second-highest bookings quarter in company history, a record development pipeline ramp, and a higher full-year Core FFO outlook.

Leasing highlights: record interconnection and a 200 MW hyperscale deal

Senior Vice President of Public and Private Investor Relations Jordan Sadler said the company delivered its “second highest bookings quarter ever,” including “the largest megawatt lease in company history,” while also setting “another quarterly record in 0-1 MW+ interconnection.”

Tap Into 2026 AI Infrastructure Gains With This High-Growth ETF

President and CEO Andy Power said the demand backdrop remains robust as customers navigate “increasingly complex power, performance, and connectivity requirements.” He pointed to constraints including “power availability, labor and supply chain risks, and community concerns,” which he said are widening the gap between “theoretical demand and deployable capacity.”

In the quarter, Digital Realty signed over $700 million of new leases, or $423 million at its share, Power said. The company posted a record $98 million of leasing in its 0-1 MW+ interconnection product category and added 116 new customer logos. Power noted that 21% of 0-1 MW bookings were AI-oriented requirements.

5 AI Infrastructure Stocks Enabling the Next Wave of Growth

In hyperscale leasing, Power said the company signed its largest single lease ever: a 200 MW AI inference-oriented deployment with a “double-A-rated hyperscaler” in Charlotte. He described it as Digital Realty’s first hyperscale deployment in that market, complementing a connectivity hub the company operates and is expanding in Uptown Charlotte. Power also said Digital Realty signed 10+ MW leases in Dallas, São Paulo, and Tokyo during the quarter.

Backlog and commencements support longer-term visibility

CFO Matt Mercier said leases signed in the first quarter represented $707 million of annualized rent at 100% share, or $423 million at Digital Realty share. The company’s total backlog reached a record $1.8 billion, or $1 billion at Digital Realty share, as new bookings exceeded $204 million of commencements during the quarter.

Mercier outlined the commencement schedule the company is seeing:

$544 million of leases scheduled to commence “somewhat ratably throughout this year”

$247 million scheduled to commence in 2027

$242 million commencing in 2028 and beyond

Asked about a longer lag between signing and commencement, Mercier said the shift was largely driven by the company’s record 200 MW Charlotte lease, which “just started” and will deliver “over a phase period, starting next year into 2028.”

Financial results: Core FFO rises; same-capital NOI pressured by OpEx

Sadler said Digital Realty posted Core FFO of $2.04 per share in the first quarter. Mercier said Core FFO of $2.04 per share was up 15% year-over-year, reflecting lease commencements and “increased fee income associated with our growth in our strategic private capital platform.”

Mercier also reported Same-Capital Cash NOI growth of 7.9% year-over-year. On a constant-currency basis, Same-Capital Cash NOI rose 2.5%, which he attributed largely to operating expense growth versus the prior-year period.

In response to a question on what drove elevated operating expenses, Mercier said it was “largely a result of a low operating expense comp” in the prior year quarter, driven by repairs and maintenance and labor. He said the company expects this to “start to smooth out” over the next three quarters and maintained full-year guidance for 4% to 5% Same-Capital Cash NOI growth on a constant-currency basis.

Mercier also addressed energy exposure amid geopolitical conflict, saying the company has limited direct economic exposure because “approximately 90%” of utility expense is reimbursed by customers. For the remaining portion, he said most electricity is hedged forward through 2026 and beyond and many contracts allow pricing adjustments.

Development pipeline ramps; land bank expands

Sadler said the development pipeline increased more than 50% sequentially to 1.2 GW under construction, and the pipeline is 61% pre-leased at an 11.4% average expected yield. Mercier said the company delivered 63 MW of new capacity in the quarter, 84% of which was pre-leased, and started about 464 MW of new capacity that was nearly 50% pre-leased.

At quarter end, Mercier said the gross data center pipeline under construction was approximately $16.5 billion, up more than 60% from year-end, with nearly 80% located in the Americas. He added that Charlotte and Atlanta “eclipsed” Dallas and Chicago due to multi-hundred-megawatt developments activated in those markets.

Chief Investment Officer Greg Wright discussed the company’s land expansion, including a “north of 870 acres” contiguous parcel in the greater Atlanta metropolitan area. Wright said the company is still working through power alternatives with the utility and will provide additional guidance later. Mercier also cited a 30-acre land parcel in Hillsboro expected to support 160 MW of IT capacity, adding to an 85 MW assemblage announced previously.

In response to a question about longer-term capacity, Power said the company has roughly 3 GW operating today and “another 6 GW that we own today” beyond the operating base, with 1.2 GW currently under construction.

Capital strategy, leverage, and updated 2026 guidance

Mercier said leverage declined to 4.7x debt-to-Adjusted EBITDA at quarter end, which he called a multiyear low, supported by Adjusted EBITDA growth and retained capital as the FFO payout ratio fell to 64%. He said the company completed its $3.25 billion U.S. hyperscale data center fund in March, and said Digital Realty has “approximately $10 billion to support hyperscale data center development and investment,” along with “substantial incremental dry powder” within its $8+ billion hyperscale development joint venture.

For 2026, Sadler and Mercier said the company raised its Core FFO per share guidance by $0.10 to a range of $8.00 to $8.10, which Mercier said reflects better-than-expected execution early in the year and implies 9% growth at the midpoint versus 2025. Mercier also said the company increased its cash renewal spread outlook to 6.5% to 8.5% and expects net CapEx (after partner contributions) of $3.5 billion to $4.0 billion. He also reiterated expectations for capital recycling, with $500 million to $1 billion of dispositions and JV capital later in the year.

On the Q&A, Power and CTO Chris Sharp discussed AI-related demand and data center design changes. Power said he does not see “a dramatic difference” in economics between AI and prior hyperscale use cases, and said hyperscale contracts are typically 15 years with escalators “certainly 3% or maybe even higher.” Sharp said demand has “converted from pilot to production,” and emphasized the company’s “workload agnostic” portfolio, including dense interconnection and metro proximity, to support inference-oriented workloads.

In closing remarks, Power said the company’s first-quarter results improved visibility for long-term growth, while Digital Realty also expanded its connected footprint in parts of the Mediterranean and APAC and added land for hyperscale development, “all…while bringing our leverage down to multi-year lows.”

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.