On Thursday, Digital Realty Trust (NYSE:DLR) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Digital Realty Trust delivered its second-highest bookings quarter, highlighting strong demand and signed its largest megawatt leasing deal in company history.
The company’s development pipeline increased by over 50% to 1.2 gigawatts under construction, with a significant portion pre-leased.
Core FFO exceeded expectations at $2.04 per share, leading to a raised 2026 core FFO per share guidance range, implying 9% growth.
The company is expanding its global connectivity footprint with strategic acquisitions in Europe and APAC, and is focused on AI-driven workloads.
Digital Realty Trust’s balance sheet is strong, with leverage reduced to a multi-year low, supporting its growth initiatives across hyperscale and enterprise segments.
Full Transcript
OPERATOR
Good afternoon and welcome to the Digital Realty first quarter 2026 earnings call. Please note this event is being recorded during today’s presentation. All parties will be in a listen only mode. After the following the presentation we’ll conduct a question and answer session. Callers will be limited to one question and we will aim to conclude at the top of the hour. I will now turn the call over to Jordan Sadler, Digital Realty Senior VI President of Public and Private Investor Relations Jordan. Please go ahead.
Jordan Sadler (Senior Vice President of Public and Private Investor Relations)
Thank you Operator and welcome everyone to Digital Realty Trust’s first quarter 2026 earnings conference call. Joining me on today’s call are President and CEO Andy Power and CFO Matt Mercier. Chief Investment Officer Greg Wright, Chief Technology Officer Chris Sharp and Chief revenue officer Colin McLean are also on the call and will be available for Q and A. Management will be making forward looking statements including guidance and underlying assumptions on today’s call. Forward looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. For further discussion of risks related to our business our Form 10-K subsequent filings with the SEC. This call will contain certain non GAAP financial information. Reconciliations to the most directly comparable GAAP measure are included in the supplemental package furnished to the SEC and available on our website. Before I turn the call over to Andy, let me offer a few key takeaways from our first quarter results. First, we delivered the second highest bookings quarter ever for Digital Realty, underscoring the diversity and durability of demand across our platform. We signed the largest megawatt leasing company history while simultaneously setting another quarterly record in the 0 to 1 megawatt plus interconnection category. Second, 0 to 1 megawatt signings boosted our 2026 outlook while the greater than a megawatt leasing increased our total backlog to a total $1.8 billion or $1 billion at Digital Realty share, providing strong visibility for our growth into 2027 and 2028. Third, our development pipeline increased by over 50% sequentially to 1.2 gigawatts under construction and is now 61% pre leased at an 11.4% average expected yield, mainly driven by successful leasing and our continued efforts to position capacity to support our customers growing requirements. And finally, we exceeded our earnings expectations, posting core FFO of $2.04 per share for the first quarter, delivering strong double digit year over year growth. Given strong execution across our product offering visibility from our backlog and confidence in our operating outlook, we are raising our 2026 core FFO per share guidance range, implying 9% growth at the midpoint. With that, I’d like to turn the call over to our President and CEO Andy Power.
Andy Power (President and CEO)
Thanks Jordan, and thanks to everyone for joining our call Digital Realty Trust got off to a record start in the first quarter of 2026, a clear continuation of the momentum we built throughout 2025. Demand for digital infrastructure remains robust, execution across platform digital remains crisp and our strategy continued to resonate with customers who are navigating increasingly complex power, performance and connectivity requirements as well as mission critical on time delivery challenges. We continue to gain market share in our zero to one plus interconnection product category while providing needed hyperscale capacity in our greater than a megawatt category on an expanding playing field. As the global economy continues to digitize, data center infrastructure has moved from being a supporting layer to to being foundational, AI adoption is accelerating compute intensity, cloud demand remains resilient and enterprises are continuing to embrace technology to improve productivity and efficiency across their core operations. At the same time, power availability, labor and supply chain risks and community concerns have become meaningful constraints on our industry, creating a widening gap between theoretical demand and deployable capacity. Against that backdrop, only a limited number of providers can deliver fit for purpose capacity, future scalability and deep connectivity across multiple metros and regions with the certainty that customers require. Customers are coming to Digital Realty seeking capacity close to users and clouds to interconnect within and across markets and the ability to scale as requirements evolve, particularly as AI driven workloads move from experimentation to production. This demand environment translated into strong leasing activity during the first quarter, reflecting both the breadth of customer needs and the value of our global platform. We signed over 700 million of new leases in the quarter, or 400.3 million at our share, representing Digital’s second highest leasing quarter and nearly 70% above our next highest quarter. Strength was broad based in the quarter with another record of 98 million of leasing within our zero to one megawatt plus interconnection product where proximity, connectivity and access to relevant enterprises and service providers matter most. Notably, a record 21% of 0 to 1 megawatt bookings were AI oriented requirements. We continue to increase our market share in this category while growing our customer base with 116 new logos added in the quarter during the first quarter, we continue to see both enterprises and hyperscalers continue to spread across platform Digital. A few examples include A global biotech company is optimizing its AI infrastructure on platform Digital to enable AI modeling, factory design and diagnostics for safety and reliability. A global social and AI platform is expanding on Digital Realty Trust with a new AI inference node to serve a regional customer base and also expanding edge capabilities across global metros while deploying a new subsea cable interconnection node. A multinational pharmaceutical company is deploying its AI infrastructure on Digital Realty Trust to meet growing R and D infrastructure and computing needs. A leading technology services company is leveraging Digital Realty Trust to create a distributed inference AI ready ecosystem to support advanced AI workloads for growing enterprise demand. A global cloud computing and content distribution provider is expanding their footprint on Digital Realty Trust by leveraging the market leading connectivity available to support edge POP expansions and a technology services company chose Digital Realty Trust to enable cloud based platforms by leveraging their available connectivity, security and architecture to support their future growth. These deployments highlight the strength of Digital Realty Trust in supporting increasingly distributed connectivity intensive workloads, enabling customers to deploy, connect and scale critical infrastructure across a global interconnected platform. The momentum in our interconnection led product set is being reinforced by the continued expansion of our global connectivity footprint in Europe. We expanded our footprint in the quarter by entering Sofia, Bulgaria through the acquisition of telepoint, one of Southeast Europe’s most important emerging interconnection products. This addition deepens our presence along the Eastern Mediterranean connectivity corridor and complements our existing markets in Southern Europe. At the same time, recent land acquisitions in Portugal and Milan position us to extend this connectivity rich capacity along critical subsea and terrestrial routes, complementing existing assets in Marseille, Athens, Crete and our soon to be open facility in Barcelona, reinforcing our ability to serve customers that require low latency access, geographic diversity and scalable interconnection across the region. In apac, we are taking a similar approach to expanding connectivity in strategically important markets. Our entry into Malaysia will add a highly network dense facility in cyberjaya that complements our established presence in Singapore, Jakarta and other key regional hubs. This expands our customers ability to deploy infrastructure close to end users while maintaining seamless connectivity across markets and provides a clear path for future scalability as requirements continue to evolve. Taken together, these investments reflect a consistent strategy globally building interconnected campuses in the right locations to support customers as their IT architectures are infused with AI oriented workloads become more distributed, more latency sensitive and increasingly connectivity driven. Switching gears to the greater than a megawatt category, we signed the largest single lease in digital realty history this quarter, a 200 megawatt AI inference oriented lease with a AA rated hyperscaler in Charlotte. This was a milestone transaction for digital realty, representing the largest lease in our history and our first hyperscale deployment in this market, validating our hub and spoke expansion strategy in Charlotte and complementing the connectivity hub we have long operated and are currently expanding in Uptown. The breadth of our greater than 1 megawatt activity in the quarter was also notable as signings in this category exceeded the level achieved in the prior 3 quarters. Even when excluding the record lease, we signed 10 plus megawatt leases in each of Dallas, Sao Paulo and Tokyo during the quarter, highlighting the accelerating pace at which large AI workloads are moving into scaled production environments and the continued global appetite for compute. Given record low vacancies in most of our existing data center markets, we continue to target land and power opportunities adjacent to our connected campuses, allowing us to support large scale deployments while remaining connected to core cloud and connectivity networks. To meet those needs, we are expanding our ability to deliver hyperscale capacity where land, power and certainty of execution matter most. In the first quarter we demonstrated the ability and expertise necessary to source position and then lease hyperscale IT capacity for development in less than 18 months. Building on this success in Charlotte, we have a second 200 megawatt building that will follow building one and we launched construction on another 200 megawatt development site in Atlanta. We also have in position today or are preparing substantial capacity for development in Dallas, Northern Virginia, Hillsborough, Sao Paulo, Frankfurt, Paris, Tokyo, Osaka and Seoul. Given the significant development starts in the first quarter, our development pipeline scaled by more than 60% to $16.5 billion at 100% share at strong double digit unlevered returns. While this marks a historic ramp in our ongoing activity, we remain disciplined and well positioned to continue to meet this opportunity. As we think about our ability to support our customers long term growth needs. The combination of land holdings, power availability, supply chain, execution and capital all matter and each must be sourced in a deliberate and scalable manner. Over the last several years, we have been strengthening each of these disciplines so that we can continue to deliver capacity reliably, particularly as projects become larger, more capital intensive and thereby more complex to execute. That same discipline has guided the evolution of our capital Strategy. In early 2023, we announced a plan to diversify our capital sources by utilizing more private capital, including joint ventures in our plans. We then evolved that approach with our first US Hyperscale Closed End Fund, significantly expanding the pool of capital available to support hyperscale development while preserving alignment through our retained ownership and management role. During the first quarter, we continue to scale our strategic private capital platform shifting to broaden our foundation to support the capitalization of stabilized hyperscale data centers. The objective is straightforward to align long duration institutional capital with the long live nature of our assets and our customers digital infrastructure needs. By continuing to diversify, evolve and expand our capital sources, we are enhancing our ability to secure land, power and equipment, to scale development responsibly and to deliver capacity when and where our customers need it while continuing to drive attractive risk adjusted returns for our shareholders. And with that, I’ll now turn the call over to our cfo Matt Mercier.
Matt Mercier (Chief Financial Officer)
Thank you Andy. As Andy outlined, the first quarter reflected strong demand across our platform combined with disciplined execution resulting in record quarterly financial results. In the first quarter, Digital Realty again posted strong double digit growth in revenue and adjusted EBITDA, reflecting continued momentum in our 0 to 1 megawatt interconnection business commencements from our growing backlog, healthy releasing spreads, modest churn and a favorable FX environment. We achieved these strong results while maintaining significant dry powder to expand and invest in our now 6 gigawatt development pipeline and simultaneously reducing our leverage to a multi year low of 4.7 times at quarter end. Overall, the strong environment and our favorable positioning are translating into better than anticipated execution and results and we are continuing to lean into the opportunity we are seeing with discipline. During the first quarter we signed leases representing 707 million of annualized rent at 100% share or 423 million at Digital Realty share. This represented the strongest leasing start to the year in Digital Realty history and as Andy noted, demand remains robust across our product categories. New leasing was particularly strong in the Americas which represented over 75% DLR share of bookings in the quarter, while we also posted a new quarterly leasing record in the AAPAC region, our 0 to 1 megawatt plus interconnection products that continued its strong momentum posting 98 million of new signings marking a third quarterly record in the past year and reflecting a 40 plus percent increase in 01 bookings versus first quarter 2025. The 0 to 1 megawatt plus Interconnection category was driven by a record pace in the Americas region and a meaningful step up in the largest capacity band within the product category reflecting an acceleration of larger enterprise deployments. Further highlighting this strength, we also saw a new record level of activity in the 1 to 3 megawatt leasing band in the quarter. Interconnection bookings remained strong at 18.6 million, 24% higher than a year ago. The APAC and North America regions led this growth driven by demand for our bulk fiber and service fabric products. The record lease signing in Charlotte was the biggest contributor to the 280 million of America’s leasing performance in our greater than a megawatt category. Pricing in this product segment remained healthy, averaging $181 per kilowatt in the quarter, validating the expansion of our hyperscale product in this market. The total backlog at the end of the first quarter reached a new record of of 1.8 billion, reflecting the robust data center fundamentals we are experiencing and our ability to capitalize on this demand. At Digital Realty Share, the backlog reached a new record of 1 billion at quarter end as 423 million of new bookings exceeded the strong 204 million of commencements in the quarter. Looking ahead, we have 544 million of leases scheduled to commence somewhat radically throughout this year, with 247 million of leases to commence in 2027 and another 242 million commencing in 2028 and beyond. While the successful execution of our 0 to 1 megawatt/interconnection segment is helping to accelerate near term growth, our scaling backlog is improving our visibility over the long term, helping to support strong sustainable growth. During the first quarter we signed 193 million of renewal leases at a blended 5% increase on a cash basis. Renewals were heavily weighted toward our shorter term 0 to 1 megawatt leases which represented over 80% of our total renewal activity with 157 million of colocation renewals at 4.3% uplift greater than the megawatt renewals dipped to just $32 million in the quarter at a 7.4% cash re leasing spread driven by deals in Vienna, London and Silicon Valley. As per earnings, we reported core FFO of $2.04 per share for the first quarter, up 15% year over year, reflecting the ongoing benefit of strong data center leasing and development related lease commencements along with increased fee income associated with our growth in our strategic private capital platform. Same Capital Cash NOI growth continued to be strong in the first quarter, increasing by 7.9% year over year as strong data center rental revenue growth was balanced by elevated operating expense growth on a constant currency basis. Same Capital cash NOI rose 2.5% in the quarter, largely reflecting the above trend operating expense growth versus the prior year period. Given the conflict in the Middle east, energy costs and supply …
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