DLR-PK — Digital Realty Trust, Inc.

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

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 representing $707 million of annualized rent (or $423 million at Digital Realty's share), marking the strongest leasing 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 megawatt lease in company history (200-megawatt AI inference lease).
• Interconnection Growth: Strong performance 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 enhancing existing markets in Europe and APAC.
• Hyperscale Capacity Development: Continued focus on building interconnected campuses to support growing AI workloads and hyperscale demand.

3. Forward Guidance and Outlook

• 2026 Core FFO Guidance: Raised 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 estimates.
• CapEx Plans: Anticipated to increase to $3.5 billion to $4 billion, with $500 million to $1 billion in capital recycling expected later in the year.

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 may impact future NOI growth.
• Supply Chain Constraints: Ongoing challenges related to utility power delivery, labor shortages, and community pushback could impact construction timelines and costs.
• Market Risks: Rising energy costs and geopolitical tensions (e.g., conflict in the Middle East) could indirectly affect customer operations and demand.

5. Notable Q&A Insights

• AI Demand: The company is seeing strong demand for AI workloads across various lease sizes, with AI contributing significantly to both hyperscale and enterprise segments.
• Commencement Lag: The commencement lag for new leases has increased to about 19 months, largely due to the record lease signed and ongoing construction timelines.
• Land Bank Expansion: Digital Realty has secured a substantial land parcel in Atlanta for future development, indicating a proactive approach to meeting demand.
• Market Rent Growth: Despite rising construction costs, market rent growth is expected to outpace inflation, supporting profitability.

Overall, Digital Realty Trust demonstrated strong performance in Q1 2026 with record leasing activity and a robust development pipeline, while also acknowledging potential challenges related to operating costs and supply chain constraints. The company remains optimistic about future growth driven by AI and hyperscale demand.