DLR-PJ — Digital Realty Trust, Inc.

Summary of Digital Realty Trust 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 Adjusted EBITDA: Both showed strong double-digit growth, driven by robust leasing activity.
• Leasing Activity: Signed leases totaling $707 million at 100% share, marking the strongest start to the year in company history and nearly 70% above the next highest quarter.
• Backlog: Increased to a record $1.8 billion (or $1 billion at Digital Realty's share), enhancing visibility for future growth.
• Development Pipeline: Expanded by over 50% sequentially to 1.2 gigawatts under construction, with 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 Leasing: Achieved the largest megawatt lease in company history (200-megawatt AI inference lease) and set another quarterly record in the 0-1 megawatt plus interconnection category.
• Market Expansion: Entered new markets in Sofia, Bulgaria, and Cyberjaya, Malaysia, while acquiring strategic land in Atlanta and Hillsboro for future development.
• Product Demand: Continued strong demand for digital infrastructure, particularly for AI workloads, with 21% of 0-1 megawatt bookings being AI-oriented.
• Private Capital Strategy: Expanded the strategic private capital platform to support hyperscale development, including 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% to 8.5%, up from previous guidance.
• CapEx: Anticipated to increase to a range of $3.5 billion to $4 billion, reflecting ongoing investment in development.
• 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, particularly in R&M and labor, affected same capital cash NOI growth, which was only 2.5% on a constant currency basis.
• Supply Chain Constraints: Ongoing challenges related to utility power delivery, equipment, and labor availability could impact construction timelines and costs.
• Market Risks: Concerns about rising energy costs and geopolitical tensions affecting customer operations, though Digital Realty has limited direct exposure.
• NIMBYism: Increased local community pushback against data center developments may pose challenges in securing future projects.

5. Notable Q&A Insights

• AI Demand: Management highlighted that AI workloads are driving significant demand across various segments, with a notable increase in enterprise adoption.
• Commencement Lag: The commencement lag for new leases was noted at 19 months, primarily due to the record lease signed and delays in utility power delivery.
• Future Capacity: The company is actively working on expanding its land bank and development pipeline to meet growing demand, with a focus on strategic locations.
• Market Dynamics: Management expressed confidence that market rent growth is outpacing inflationary pressures, despite rising construction costs.

Overall, Digital Realty Trust reported strong financial performance in Q1 2026, driven by robust leasing activity and strategic expansions, while navigating challenges related to operating expenses and supply chain constraints. The company remains optimistic about its growth trajectory and market positioning, particularly in the AI sector.