DLR-PK — Digital Realty Trust, Inc.

Summary of Digital Realty (DLR-PK) Q1 2026 Earnings Call

1. Key Financial Results and Metrics:

• Core FFO: Reported at $2.04 per share, reflecting a 15% year-over-year increase.
• Revenue and Adjusted EBITDA: Both showed strong double-digit growth, driven by robust leasing activity.
• Leasing Activity: Signed leases representing $707 million in annualized rent, marking the second highest leasing quarter in company history.
• Total Backlog: Reached a record $1.8 billion, with $1 billion at Digital Realty's share.
• Development Pipeline: Increased by over 50% sequentially to 1.2 gigawatts under construction, 61% pre-leased at an average expected yield of 11.4%.
• Leverage: Reduced to a multiyear low of 4.7x at quarter-end.

2. Strategic Updates and Business Highlights:

• Record Bookings: Achieved the largest megawatt lease in company history (200-megawatt AI inference lease) and set a quarterly record in the 0-1 megawatt plus interconnection category.
• Market Expansion: Entered new markets including Sofia, Bulgaria, and Cyberjaya, Malaysia, enhancing global connectivity.
• AI Demand: Notably, 21% of 0-1 megawatt bookings were AI-oriented, indicating strong demand for AI infrastructure.
• Private Capital Strategy: Continued to diversify capital sources, including the establishment of a $3.25 billion hyperscale data center fund.

3. Forward Guidance and Outlook:

• Core FFO Guidance: Raised for 2026 to a range of $8.00 to $8.10 per share, implying 9% growth at the midpoint.
• Cash Renewal Spreads: Expected to be between 6.5% and 8.5%.
• CapEx Guidance: Anticipated to increase to a range of $3.5 billion to $4 billion.
• Same Capital Cash NOI Growth: Projected at 4% to 5% on a constant currency basis.

4. Bad News, Challenges, or Points of Concern:

• Operating Expenses: Increased operating expenses were noted, primarily due to elevated costs in labor and maintenance, impacting same capital cash NOI growth.
• Supply Chain Risks: Ongoing constraints in supply chain, utility power delivery, and labor availability could extend construction timelines and impact project execution.
• Community Pushback: Increased NIMBYism (Not In My Backyard) sentiment could pose challenges for future developments.
• Market Conditions: While demand remains strong, the competitive landscape and rising costs could pressure margins.

5. Notable Q&A Insights:

• AI Economics: Management indicated that AI deals are not significantly different in economics compared to prior hyperscale deals, with robust demand driving healthy pricing.
• Commencement Lag: The commencement lag for new leases was noted at 19 months, largely due to the record lease signed, indicating longer timelines for project delivery.
• Diversity of Demand: AI demand is present across various lease sizes, from large hyperscale to smaller enterprise needs, showcasing a broad market appeal.
• Future Capacity: There is optimism about continued growth in greater than 1 megawatt bookings, with multiple large projects in the pipeline across various markets.

Overall, Digital Realty's Q1 2026 results reflect strong operational performance and strategic positioning in a growing market, despite facing challenges related to costs and community acceptance.