DLR — Digital Realty Trust, Inc.

Summary of Digital Realty (DLR) Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Core FFO: Reported at $2.04 per share, reflecting a 15% year-over-year growth.
• Revenue and EBITDA: Strong double-digit growth driven by robust leasing activity and a favorable FX environment.
• Leasing Activity: Signed leases totaling $707 million at 100% share, marking the strongest leasing start in company history.
• Backlog: Increased to a record $1.8 billion, with $1 billion at Digital Realty's share.
• Development Pipeline: Expanded to $16.5 billion, with 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 debt to adjusted EBITDA.

2. Strategic Updates and Business Highlights

• Record Bookings: Achieved the second highest bookings quarter ever, including the largest megawatt lease in company history (200-megawatt lease in Charlotte).
• Interconnection Growth: Continued strong performance in the 0-1 megawatt interconnection category, with $98 million in new signings, 21% of which were AI-oriented.
• Geographic Expansion: Entered new markets in Sofia, Bulgaria, and Cyberjaya, Malaysia, enhancing connectivity and capacity.
• Hyperscale Development: Launched construction on additional 200-megawatt facilities in Charlotte and Atlanta, indicating strong demand for AI infrastructure.

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 improve to 6.5% to 8.5% for the year.
• CapEx: Anticipated to increase to a range of $3.5 billion to $4 billion, reflecting ongoing investments in development.

4. Bad News, Challenges, or Points of Concern

• Operating Expenses: Increased operating expenses were noted, primarily due to elevated costs in labor and maintenance, which could impact future NOI growth.
• Supply Chain Risks: Concerns about labor availability and utility power delivery delays were highlighted, potentially affecting construction timelines.
• Market Conditions: While demand remains strong, the company acknowledged community pushback (NIMBYism) and rising construction costs as ongoing challenges.

5. Notable Q&A Insights

• AI Demand: Management indicated that AI workloads are driving demand across various lease sizes, with a notable increase in AI-related bookings.
• Commencement Lag: The average lag for lease commencements was noted to be about 19 months, primarily influenced by the record lease signed during the quarter.
• Market Rent Growth: Despite inflationary pressures, market rent growth is expected to outpace development cost inflation, maintaining healthy pricing dynamics.
• Future Capacity: Management expressed confidence in filling remaining capacity, with a focus on both large hyperscale and smaller enterprise deployments.

Overall, Digital Realty's Q1 2026 results reflect a strong start to the year, with significant growth in leasing and development, although challenges related to operating expenses and supply chain constraints remain. The company is well-positioned for future growth, particularly in the AI and hyperscale segments.