DLR-PJ — Digital Realty Trust, Inc.

Summary of Digital Realty (DLR-PJ) 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: Strong double-digit growth driven by robust leasing activity and a favorable FX environment.
• Leasing Activity: Signed leases representing $707 million of annualized rent at 100% share, marking the strongest start to the year in company history.
• Total 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 lease in company history (200 megawatts for AI inference).
• Interconnection Growth: Notable strength in the 0-1 megawatt plus 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, while expanding existing markets in Atlanta and Charlotte.
• Customer Base Growth: Added 116 new logos in the quarter, highlighting a diverse demand across various sectors.

3. Forward Guidance and Outlook

• Core FFO Guidance: Raised for 2026 to a range of $8.00 to $8.10 per share, implying a 9% growth at the midpoint.
• Cash Renewal Spreads: Expected to increase to 6.5% to 8.5%.
• CapEx: Anticipated to rise to a range of $3.5 billion to $4 billion, with plans for $500 million to $1 billion in capital recycling through dispositions and joint ventures.

4. Challenges and Points of Concern

• Operating Expenses: Increased operating expenses were noted, primarily due to higher R&M and labor costs, which could impact future NOI growth.
• Supply Chain Risks: Ongoing supply chain constraints and local community pushback (NIMBYism) could delay project timelines and affect future developments.
• Energy Costs: While Digital Realty has limited direct exposure, rising energy costs due to geopolitical tensions could impact customers and indirectly affect operations.

5. Notable Q&A Insights

• AI Demand: Management indicated that AI workloads are driving significant leasing activity, with expectations for continued growth in both hyperscale and enterprise segments.
• Commencement Lag: The average lease commencement lag increased to 19 months, primarily due to the large lease signed and utility power delivery delays.
• Market Rent Growth: Management remains optimistic that market rent growth will continue to outpace inflationary pressures in development costs.
• Community Engagement: Digital Realty emphasized its commitment to community engagement and the importance of articulating its value proposition to mitigate local pushback against data center developments.

Overall, Digital Realty's Q1 2026 results reflect strong demand and strategic positioning in the data center market, despite facing challenges related to operating expenses and supply chain constraints. The company is well-positioned for future growth with a robust backlog and expanded development pipeline.