Digital Realty (DLR) Q1 2026 Earnings Transcript

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DATE

Thursday, Apr. 23, 2026 at 5 p.m. ET

Call participants

• President and Chief Executive Officer — Andrew P. Power
• Chief Financial Officer — Matthew R. Mercier
• Chief Technology Officer — Christopher Sharp
• Chief Investment Officer — Gregory S. Wright
• Executive Vice President, Global Sales and Marketing — Colin McLean

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Takeaways

• Total leasing bookings -- $707 million annualized (100% share), with $423 million at Digital Realty (NYSE:DLR)'s share, marking the second-highest quarterly leasing, nearly 70% above the next-highest quarter.
• Largest lease signed -- Two hundred megawatt AI inference-oriented lease with a AA-rated hyperscaler in Charlotte, the biggest in company history and first hyperscale deployment for the market.
• Zero to one megawatt plus interconnection bookings -- $98 million, more than 40% year-over-year growth, and a record; 21% of signings were AI-oriented requirements.
• Customer base growth -- One hundred sixteen new logos added; zero to one megawatt plus segment continues to increase market share.
• Total backlog -- $1.8 billion at 100% share, $1.0 billion at company share, providing visibility into 2027 and 2028.
• Development pipeline -- One point two gigawatts under construction, up over 50% sequentially, and 61% preleased at an average expected yield of 11.4%.
• Total pipeline value -- $16.5 billion gross under construction, up more than 60% from year-end, with nearly 80% in the Americas.
• Geographic expansion -- Entered Sofia, Bulgaria (via Telepoint acquisition), Milan, Italy, and acquired a network-dense facility in Cyberjaya, Malaysia.
• Atlanta land acquisition -- Eight hundred seventy-three-acre contiguous parcel secured for a gigawatt data center campus.
• Renewal activity -- $193 million in renewals at a 5% blended cash increase, with greater-than-a-megawatt renewals at a 7.4% cash releasing spread.
• Core FFO per share -- $2.04 for the quarter, up 15% year over year; management raised full-year guidance by $0.10 to $8.10 per share, implying 9% growth at the midpoint.
• Same-capital cash NOI growth -- 7.9% year over year, and 2.5% on a constant currency basis due to elevated operating expense growth.
• Leverage -- Debt to adjusted EBITDA at 4.7x, a multiyear low; AFFO payout ratio fell to 64%.
• CapEx (net of partners’ share) -- $910 million spent; CapEx guidance increased by $250 million to $3.5 billion–$4.0 billion for the year.

Summary

Management reported that delayed commencements on new leases reflected the timing of its largest-ever transaction, a two hundred megawatt AI lease in Charlotte, which is expected to phase in through 2028. The company streamlined its reporting by transitioning occupancy metrics to power-based measures and simplified supplemental disclosures, aiming for enhanced transparency. Digital Realty described further scaling of its strategic private capital platform by finalizing a $3.25 billion U.S. hyperscale data center fund and highlighted an additional $10 billion in available capital for future development. The company indicated nearly 90% of utility expenses are reimbursed by customers, and the remainder is largely hedged or contractually adjustable, leaving limited direct energy cost exposure. Digital Realty emphasized ongoing investment in organic new market entries and strategic expansions, while noting capital recycling plans with $500 million–$1 billion of expected dispositions and joint venture capital inflows later in the year.

• Christopher Sharp said, "Demand has definitely converted from pilot to production. We have seen that both in Andrew's remarks and in the 200 megawatt build that is inference."
• The Americas region accounted for over 75% of Digital Realty's share of bookings, and APAC achieved a new leasing record.
• Blended renewal pricing benefited from configuration changes and mark-to-market adjustments, per Andrew P. Power's comments on contract renegotiations amid technology upgrades.
• Matthew R. Mercier explained that a low operating expense comparison in the prior-year same quarter, driven by R&M and labor, was the main factor behind the lower constant currency NOI growth rate.
• Community and labor availability constraints were acknowledged as operational factors, but management stated, "we are still seeing market rent growth outpacing inflationary pressure in build costs."
• Digital Realty reported that preleased capacity in development remained steady even as overall pipeline and market expansions accelerated.

Industry glossary

• Core FFO: Adjusted funds from operations, excluding certain items, commonly used as a per-share earnings metric for REITs.
• Zero to one megawatt plus interconnection: Leases and connectivity solutions for deployments sized between zero and one megawatt, emphasizing enterprise and distributed workloads.
• ServiceFabric: Digital Realty's proprietary interconnection offering supporting high-capacity data transport across its platform.
• HD Colo program: High-density colocation infrastructure, enabling higher power and cooling capabilities per rack within data centers.
• Colocation: Renting space, power, and connectivity within a data center for customers' equipment, typically shared with multiple tenants.

Full Conference Call Transcript

Before I turn the call over to Andrew, let me offer a few key takeaways from our first quarter results. First, we delivered the second-highest bookings quarter ever for Digital Realty Trust, Inc., underscoring the diversity and durability of demand across our platform. We signed the largest megawatt lease in company history, while simultaneously setting another quarterly record in the zero to one megawatt plus interconnection category. Second, the zero to one megawatt signings boosted our 2026 outlook, while the greater-than-a-megawatt leasing increased our total backlog to 1.8 billion, or 1.0 billion at Digital Realty Trust, Inc.'s share, providing strong visibility for our growth into 2027 and 2028.

Third, our development pipeline increased by over 50% sequentially to 1.2 gigawatts under construction and is now 61% preleased at an 11.4% average expected yield, mainly driven by successful leasing and our continued efforts to position capacity to support our customers' growing requirements. And finally, we exceeded our earnings expectations, posting core FFO of 2.40 per share for the first quarter, delivering strong double-digit year-over-year growth. Given strong execution across our product offering, visibility from our backlog, and confidence in our operating outlook, we are raising our 2026 core FFO per share guidance range, implying 9% growth at the midpoint. With that, I would like to turn the call over to our President and CEO, Andrew P. Power.

Andrew P. Power: Thanks, Jordan, and thanks to everyone for joining our call. Digital Realty Trust, Inc. got off to a record start in 2026, a clear continuation of the momentum we built throughout 2025. Demand for digital infrastructure remains robust, execution across PlatformDIGITAL remains crisp, and our strategy continues to resonate with customers who are navigating increasingly complex power, performance, and connectivity requirements, as well as mission-critical on-time delivery challenges. We continue to gain market share in our zero to one megawatt plus interconnection product category while providing needed hyperscale capacity in our greater-than-a-megawatt category on an expanding playing field. As the global economy continues to digitize, data center infrastructure has moved from being a supporting layer to being foundational.

AI adoption is accelerating, compute intensity and cloud demand remain resilient, and enterprises are continuing to embrace technology to improve productivity and efficiency across their core operations. At the same time, power availability, labor and supply chain risks, and community concerns have become meaningful constraints on our industry, creating a widening gap between theoretical demand and deployable capacity. Against that backdrop, only a limited number of providers can deliver fit-for-purpose capacity, future scalability, and deep connectivity across multiple metros and regions with the certainty that customers require.

Customers are coming to Digital Realty Trust, Inc. seeking capacity close to users and clouds, to interconnect within and across markets, and the ability to scale as requirements evolve, particularly as AI-driven workloads move from experimentation to production. This demand environment translated into strong leasing activity during the first quarter, reflecting both the breadth of customer needs and the value of our global platform. We signed over 700 million of new leases in the quarter, or 423 million at our share, representing our second-highest leasing quarter and nearly 70% above our next-highest quarter.

Strength was broad-based in the quarter, with another record of 98 million of leasing within our zero to one megawatt plus interconnection product, where proximity, connectivity, and access to relevant enterprises and service providers matter most. Notably, a record 21% of zero to one megawatt bookings were AI-oriented requirements. We continue to increase our market share in this category while growing our customer base, with 116 new logos added in the quarter. During the first quarter, we saw both enterprises and hyperscalers continue to expand across PlatformDIGITAL.

A few examples include: a global biotech company optimizing its AI infrastructure on PlatformDIGITAL to enable AI modeling, factory design, and diagnostics for safety and reliability; a global social and AI platform expanding on PlatformDIGITAL with a new AI inference node to serve a regional customer base and expanding edge capabilities across global metros while deploying a new subsea cable interconnection node; a multinational pharmaceutical company deploying its AI infrastructure on PlatformDIGITAL to meet growing R&D infrastructure and computing needs; a leading technology services company leveraging PlatformDIGITAL to create a distributed, inference AI-ready ecosystem to support advanced AI workloads for growing enterprise demand; a global cloud computing and content distribution provider expanding their footprint on PlatformDIGITAL by leveraging the market-leading connectivity available to support edge PoP expansions; and a technology services company choosing PlatformDIGITAL to enable cloud-based platforms by leveraging the available connectivity, security, and architecture to support future growth.

These deployments highlight the strength of PlatformDIGITAL in supporting increasingly distributed, connectivity-intensive workloads, enabling customers to deploy, connect, and scale critical infrastructure across a global interconnected platform. The momentum in our interconnection-led product set is being reinforced by the continued expansion of our global connectivity footprint. In Europe, we expanded our footprint in the quarter by entering Sofia, Bulgaria through the acquisition of Telepoint, one of Southeast Europe's most important emerging interconnection hubs. This addition deepens our presence along the East Mediterranean connectivity corridor and complements our existing markets in Southern Europe.

At the same time, recent land acquisitions in Portugal and Milan position us to extend this connectivity-rich capacity along critical subsea and terrestrial routes, complementing existing assets in Marseille, Athens, Crete, and our soon-to-be-opened facility in Barcelona, reinforcing our ability to serve customers that require low-latency access, geographic diversity, and scalable interconnection across the region. In APAC, we are taking a similar approach to expanding connectivity in strategically important markets. Our entry into Malaysia will add a highly network-dense facility in Cyberjaya that complements our established presence in Singapore, Jakarta, and other key regional hubs.

This expands our customers' ability to deploy infrastructure close to end users while maintaining seamless connectivity across markets and provides a clear path for future scalability as requirements continue to evolve. Taken together, these investments reflect a consistent strategy globally: building interconnected campuses in the right locations to support customers as their IT architectures are infused with AI-oriented workloads and become more distributed, more latency sensitive, and increasingly connectivity driven. Switching gears to the greater-than-a-megawatt category, we signed the largest single lease in Digital Realty Trust, Inc. history this quarter: a 200 megawatt AI inference-oriented lease with a AA-rated hyperscaler in Charlotte.

This was a milestone transaction for Digital Realty Trust, Inc., representing the largest lease in our history and our first hyperscale deployment in this market, validating our hub-and-spoke expansion strategy in Charlotte and complementing the connectivity hub we have long operated and are currently expanding in Uptown. The breadth of our greater-than-one-megawatt activity in the quarter was also notable, as signings in this category exceeded the level achieved in the prior three quarters even when excluding the record lease. We signed 10-plus megawatt leases in each of Dallas, São Paulo, and Tokyo during the quarter, highlighting the accelerating pace at which large AI workloads are moving into scaled production environments and the continued global appetite for compute.

Given record-low vacancy in most of our existing data center markets, we continue to target land and power opportunities adjacent to our connected campuses, allowing us to support large-scale deployments while remaining connected to core cloud and connectivity networks. To meet those needs, we are expanding our ability to deliver hyperscale capacity where land, power, and certainty of execution matter most. In the first quarter, we demonstrated the ability and expertise necessary to source, position, and then lease hyperscale IT capacity for development in less than 18 months. Building on this success in Charlotte, we have a second 200 megawatt building that will follow Building One, and we launched construction on another 200 megawatt development site in Atlanta.

We also have in position today, or are preparing, substantial capacity for development in Dallas, Northern Virginia, Hillsboro, São Paulo, Frankfurt, Paris, Tokyo, Osaka, and Seoul. Given the significant development starts in the first quarter, our development pipeline scaled by more than 60% to 16.5 billion at 100% share and strong double-digit unlevered returns. While this marks a historic ramp in our ongoing activity, we remain disciplined and well positioned to continue to meet this opportunity. As we think about our ability to support our customers' long-term growth needs, the combination of land holdings, power availability, supply chain execution, and capital all matter, and each must be sourced in a deliberate and scalable manner.

Over the last several years, we have been strengthening each of these disciplines so that we can continue to deliver capacity reliably, particularly as projects become larger, more capital intensive, and thereby more complex to execute. That same discipline has guided the evolution of our capital strategy. In early 2023, we announced a plan to diversify our capital sources by utilizing more private capital, including joint ventures, in our plan. We then evolved that approach with our first U.S. hyperscale closed-end fund, significantly expanding the pool of capital available to support hyperscale development while preserving alignment through our retained ownership and management role.

During the first quarter, we continued to scale our strategic private capital platform, shifting to broaden our foundation to support the capitalization of stabilized hyperscale data centers. The objective is straightforward: to align long-duration institutional capital with the long-lived nature of our assets and our customers' digital infrastructure needs. By continuing to diversify, evolve, and expand our capital sources, we are enhancing our ability to secure land, power, and equipment to scale development responsibly, and to deliver capacity when and where our customers need it, while continuing to drive attractive risk-adjusted returns for our shareholders. I will now turn the call over to our CFO, Matthew R. Mercier.

Matthew R. Mercier: Thank you, Andrew. As Andrew outlined, the first quarter reflected strong demand across our platform combined with disciplined execution, resulting in record quarterly financial results. In the first quarter, Digital Realty Trust, Inc. again posted strong double-digit growth in revenue and adjusted EBITDA, reflecting continued momentum in our zero to one megawatt plus interconnection business, commencements from our growing backlog, healthy releasing spreads, modest churn, and a favorable FX environment. We achieved these strong results while maintaining significant dry powder to expand and invest in our now six gigawatt development pipeline and simultaneously reducing our leverage to a multiyear low of 4.7x at quarter end.

Overall, the strong environment and our favorable positioning are translating into better-than-anticipated execution and results, and we are continuing to lean into the opportunity we are seeing with discipline. During the first quarter, we signed leases representing 707 million of annualized rent at 100% share, or 423 million at Digital Realty Trust, Inc.'s share. This represented the strongest leasing start to the year in Digital Realty Trust, Inc., and as Andrew noted, demand remains robust across our product categories. New leasing was particularly strong in the Americas, which represented over 75% of DLR share of bookings in the quarter, while we also posted a new quarterly leasing record in the APAC region.

Our zero to one megawatt plus interconnection product set continued its strong momentum, posting 98 million of new signings, marking a third quarterly record in the past year and reflecting a 40%-plus increase in zero to one bookings versus first quarter 2025. The zero to one megawatt plus interconnection category was driven by a record pace in the Americas region and a meaningful step-up in the largest capacity band within the product category, reflecting an acceleration of larger enterprise deployments. Further highlighting this strength, we also saw a new record level of activity in the one to three megawatt leasing band in the quarter. Interconnection bookings remained strong at 186 million, 24% higher than a year ago.

The APAC and North America regions led this growth, driven by demand for our bulk fiber and ServiceFabric products. The record lease signing in Charlotte was the biggest contributor to the 280 million of Americas leasing performance in our greater-than-a-megawatt category. Pricing in this product segment remained healthy, averaging 181 per kilowatt in the quarter, validating the expansion of our hyperscale product in this market. The total backlog at the end of the first quarter reached a new record of 1.8 billion, reflecting the robust data center fundamentals we are experiencing and our ability to capitalize on this demand.

At Digital Realty Trust, Inc.'s share, the backlog reached a new record of 1.0 billion at quarter end, as 423 million of new bookings exceeded the strong 204 million of commencements in the quarter. Looking ahead, we have 44 million of leases scheduled to commence somewhat ratably throughout this year, with 247 million of leases to commence in 2027 and another 242 million commencing in 2028 and beyond. While the successful execution of our zero to one megawatt plus interconnection segment is helping to accelerate near-term growth, our scaling backlog is improving our visibility over the long term, helping to support strong, sustainable growth.

During the first quarter, we signed 193 million of renewal leases at a blended 5% increase on a cash basis. Renewals were heavily weighted toward our shorter-term zero to one megawatt leases, which represented over 80% of our total renewal activity, with 157 million of colocation renewals at 4.3% uplift. Greater-than-a-megawatt renewals dipped to just 32 million in the quarter, at a 7.4% cash releasing spread, driven by deals in Vienna, London, and Silicon Valley.

As for earnings, we reported core FFO of 2.04 per share for the first quarter, up 15% year over year, reflecting the ongoing benefit of strong data center leasing and development-related lease commencements, along with increased fee income associated with the growth in our strategic private capital platform. Same-capital cash NOI growth continued to be strong in the first quarter, increasing by 7.9% year over year. A strong data center rental revenue growth was balanced by elevated operating expense growth. On a constant currency basis, same-capital cash NOI rose 2.5% in the quarter, largely reflecting the above-trend operating expense growth versus the prior-year period.

Given the conflict in the Middle East, energy costs and supply chain risks are once again in the spotlight. While Digital Realty Trust, Inc. does not maintain a meaningful presence in the Middle East and has limited direct economic exposure, we recognize that many of our customers may be directly or indirectly impacted by rising input costs. In terms of direct exposure, approximately 90% of our utility expense is reimbursed by customers, meaning fluctuations in energy prices largely flow through rather than directly impacting our bottom line.

For the remaining 10%, primarily consisting of smaller colocation deployments, the large majority of our electricity is hedged forward through 2026 and beyond, while most of our contracts provide the ability to adjust pricing, giving us flexibility to respond to changing market conditions. As a result, while energy is critical operationally, Digital Realty Trust, Inc.'s direct earnings exposure remains limited and manageable. As we previewed on this call last quarter, we enhanced our supplemental report this quarter to align with how we manage the business. We have now fully transitioned the occupancy metrics of our operating portfolio toward power-based metrics, removing legacy metrics focused on square feet from our supplemental earnings disclosure.

Now the operating portfolio KPIs are consistent with the metrics we use to report new leasing and data center development. We also made other enhancements to our quarterly supplemental by streamlining our debt reporting metrics, the new and renewal leasing pages, and the occupancy analysis page. The objective was to continue to provide industry-leading transparency while making our disclosures easier to digest. Moving on to our investment activity, we spent 910 million on development CapEx in the quarter, net of our partners' share.

During the quarter, we delivered 63 megawatts of new capacity, 84% of which was preleased, while we started about 464 megawatts of new data center capacity that was nearly 50% preleased, increasing our total development to 1.2 gigawatts under construction. At quarter end, our gross data center pipeline under construction stood at approximately 16.5 billion, up more than 60% from year-end, reflecting the strong leasing activity executed by our team and the momentum we continue to see in our sales funnel. Consistent with last quarter, nearly 80% of this volume is situated in the Americas region, reflecting the demand for AI-oriented workloads from our largest customers.

Notably, while Northern Virginia remains our largest development market for the moment, the Dallas and Chicago markets were eclipsed by both Charlotte and Atlanta, as we activated multi-100 megawatt developments in each of these markets. Accordingly, we continue to invest in our platform through organic new market entries that enhance our global connectivity offering, as well as meaningful existing market expansions designed to meet our customers' long-term capacity and connectivity requirements.

Along these lines, in the first quarter, we bolstered our hyperscale capacity with the acquisition of an 873-acre strategic land parcel in the Greater Atlanta Metro that is expected to support a gigawatt data center campus and a 30-acre land parcel in Hillsboro that is expected to support 160 megawatts of IT capacity, adding to the 85 megawatt assemblage that we announced in this market last quarter. In addition, as we have previously announced, during the first quarter, we made three strategic market entrances in Milan, Italy; Sofia, Bulgaria; and Cyberjaya, Malaysia, each of which bolsters our global connectivity footprint. Year to date, we have also sold small non-core facilities in Boston and Atlanta.

Turning to the balance sheet, the first quarter was highlighted by a multiyear low in our leverage. Debt to adjusted EBITDA dipped to 4.7x at quarter end, supported by meaningful adjusted EBITDA growth and a further ramp-up in retained capital as our AFFO payout ratio fell to 64%. This decline in leverage, despite the continued ramp in our development pipeline, is intentional and deliberate, consistent with our key strategic priority of bolstering and diversifying our capital sources that we laid out three years ago. In March, we put the finishing touches on our 3.25 billion U.S. hyperscale data center fund, leaving us with approximately 10 billion to support hyperscale data center development and investment.

And we continue to bolster our strategic private capital platform as we build investment capacity to support the massive hyperscale data center opportunity that we continue to see before us. In addition, we maintain substantial incremental dry powder within our 8+ billion hyperscale development joint venture, which has been highly successful to date and remains ahead of plan. Our balance sheet is positioned to fuel growth opportunities for our customers around the globe, consistent with our long-term financing strategy. Let me conclude with guidance. We are raising our 2026 core FFO per share guidance range by 0.10 to 8.10 per share, principally reflecting better-than-expected execution across our data center portfolio early in the year.

The midpoint of the updated guide represents 9% growth over 2025, reflecting underlying strength in our zero to one megawatt plus interconnection business balanced by the continued ramp in our investment spending that is geared towards supporting our hyperscale customers and extending our runway for growth. We also expect cash renewal spreads of 6.5% to 8.5%, up 50 basis points from last quarter, as stronger greater-than-a-megawatt renewal prospects are balanced by the larger contribution from zero to one megawatt leases renewing. Power-based occupancy is still expected to improve by 50 to 100 basis points from year-end 2025, same-capital cash NOI growth of 4% to 5% on a constant currency basis.

CapEx, net of partner contributions, is poised to increase by another 250 million at the midpoint to a range of 3.5 billion to 4.0 billion. And we also continue to expect recycled capital, with 500 million to 1 billion of dispositions and JV capital slated for later this year. This concludes our prepared remarks. Now we will be pleased to take your questions. Operator, would you please begin the Q&A session?

Operator: Thank you. We will now open up the call for questions. In the interest of time and to allow a large number of people to ask questions, callers will be limited to one question. As a reminder, to ask a question, you will need to press 11 on your telephone and wait to be announced. To withdraw your question, please press 11 again. One moment for our first question. Our first question will come from the line of Analyst from Stifel. Your line is open.

Analyst: Yes, thanks, and congrats on the strong results, especially leasing. Maybe you could just comment on the economics that you are seeing with AI deals versus prior hyperscale deals, maybe comment on pricing, escalators, and, as AI demand continues to show strength, what the portfolio looks like with training versus inferencing, and at what point you think we might be at an inflection. Thanks.

Andrew P. Power: Thanks. Speaking to economics, I do not think we are seeing a dramatic difference between the use cases, and that specifically goes to the markets where we are supporting these use cases that have cloud, hyperscale use cases for compute, or, more likely, AI inference than training, given the proximity to data, GDP, and population. The economics really are coming down to a robust and diverse demand backdrop in markets where it continues to be challenging to bring on supply. Fortunately, we have been very well positioned there, and you have seen those flow through to our results with robustness in rates.

On the bigger end, our hyperscale contracts are, call it, 15 years, and escalators are certainly 3% or maybe even higher in certain scenarios. Going to your second question, maybe I will tag team this with Chris a little bit. We are obviously supporting hyperscale use cases for cloud computing. We had a large AI inference lease, our largest lease of the quarter for the hyperscaler, but we are also seeing budding use cases in the enterprise.

Not only did we have a record quarter to start the year, off a second record at the end of last year, but AI ticked up to, call it, 21% in that zero to one megawatt category, and I honestly think we are just getting going here based on actual enterprise adoption and where this could take us on a broad base. I think our portfolio is well situated. Chris, do you want to speak to the inference inflection point?

Christopher Sharp: Absolutely, appreciate the question. Demand has definitely converted from pilot to production. We have seen that both in Andrew's remarks and in the 200 megawatt build that is inference. In the enterprise segment, customers are migrating to larger committed capacity blocks. I think that is a key element to be successful in bringing that type of scaled inference to market. Our portfolio, as we have been talking about for some time now, is workload agnostic. We can provide low-latency metro proximity and dense interconnection, which is an absolute requirement for this inference inflection.

One point to appreciate is that as agents come to market, it is a demand multiplier, representing roughly 5x to 30x more tokens per task, and that is the fundamental driver of what AI is delivering. That is going to drive another inflection point, not just on the training to inference shift, but also as agents and agent tech come into the market. We are very excited about that. The last piece I would add is the economics associated with private AI, where you really start to see a change in consumption by being able to own the infrastructure and then rent the spike, if you will.

That will represent material savings similar to what we saw with cloud and cloud-hybrid connectivity and multi-cloud. We are at the inflection point of multiple trends coming into the market and are very excited about our portfolio supporting both the hyperscaler and large portions, as well as that enterprise demand.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Frank Garrett Louthan from Raymond James. Your line is open.

Frank Garrett Louthan: Great, thank you. I wanted to talk to you about the expansion of the land bank. Can you give us an idea of the additional gigawatt that you have secured? How many locations is that, and what is the time frame that the power is available for it and the regions? That would be great. Thanks.

Andrew P. Power: Thanks, Frank. I will have Greg walk you through the great work the team has been doing. To set the table, our under-development is up dramatically—call it up 60% to 16.5 billion—while maintaining the preleasing. We are bringing forth capacity for customers from the enterprise to the hyperscalers, and at the same time, we are now increasing our growth capacity up to six gigawatts. So we are activating near term and building for long-term growth. Greg, walk through some of the highlights.

Gregory S. Wright: Yes, thanks, Frank. This asset is one contiguous parcel. It is large—call it north of 870 acres—but it is all contiguous and in the greater Atlanta metropolitan area. In terms of power, we are still working through things with the power company and will give you additional guidance later. We are looking at a couple of different alternatives on the power front, so I would say stay tuned. When we look at where it is located, we think it is a product-agnostic market where you are seeing availability in the zones heading that way. We feel very fortunate. We worked this site for quite some time, and we really think it is a rare large-scale parcel of land.

We also, during the quarter, acquired land in Hillsboro, in Portland as well, to support hyperscale development. It was a very active quarter, as you can see.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Analyst from Truist Securities. Your line is open.

Analyst: Hey, thanks so much for taking the question. Congrats on the quarter. I had a question about the commencement lags for new leases signed. It was about 19 months this quarter, a little over 2x what you have seen in recent periods. Is this primarily due to the record lease that was signed, or are you seeing extensions driven by utility power delivery delays in bigger markets? Are customers just booking capacity even more in advance? I am trying to get a better sense of what drove that. Thanks.

Matthew R. Mercier: Thanks. I think you nailed it. This is driven by what was our largest lease this quarter—and our largest lease in company history. That project essentially just started, as you can see in our development lifecycle: over 200 megawatts that will be delivering over a phased period starting next year into 2028. We feel great about that project. Given that it just started, that is why you are seeing a slightly elongated period of time between sign and commence.

Operator: Thank you. One moment for our next question. Next question will come from the line of Vikram L. Malhotra from Mizuho. Your line is open.

Vikram L. Malhotra: Hi, thanks for taking the question. On the zero to one megawatt segment, you have had really strong strength. I remember at our conference last year, you had talked about a run rate in 90 million. Given the strength, is there a pathway now to 100 million, and can you extrapolate and remind us what that means for the interconnection business, the flow-through? Thank you.

Andrew P. Power: Thanks, Vikram. I will tag team this with Colin. We are very pleased with the continued momentum to get out of the gates in the first quarter, which can have some seasonal lows given various activities, and we put up another quarter upon a prior quarter. This quarter was up 40% year over year, and we are coming off a record 2025 that in itself was up 35%. Interconnection was a major contributor. Not a top quarter contribution for interconnection, but a top five. There are a lot of good pieces to this. I will have Colin speak to what is next because we are not anywhere near done yet.

Colin McLean: Thanks, Andy, and Vikram, thanks for the question and the acknowledgment. We are pleased with our execution and how this manifests in the enterprise space. Strong bookings—record three of the last four quarters—and that is really across our platform. Our resiliency in core markets continues to remain strong. We had a strong booking quarter in Silicon Valley, Chicago, and Frankfurt, and we are seeing industries show up across our portfolio.

Our value proposition of being an open, neutral, global platform is taking shape in the enterprise space, both in the bookings, which you saw, and in the pipeline and use cases showing up consistently across the board: hybrid multi-cloud (the de facto standard for deployment), data localization and sovereignty, and AI. As Andy highlighted, AI is becoming an emerging part of our portfolio of conversations—north of 20% of bookings this quarter. We are getting to show that off in tangible ways, like the Digital Realty Trust, Inc. Innovation Lab, which we just launched another one in Japan. The success and the response we are getting from customers and partners alike—we are really pleased with.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Michael Elias from TD Securities. Your line is open.

Michael Elias: Great, thanks for taking the question, and also congratulations on the quarter. This one is a bit of a two-parter: first for Andy and then for Chris. In the past, I believe, Andy, your commentary had been that while there were fixed-price renewal options in the larger contracts, if there was a change in design, the renewal option was less relevant. We are seeing some of the largest hyperscalers signaling intentions for a hybrid design—AI and cloud in a single data center. To the extent we see that, do you think that means we will see the existing set of cloud data centers go through a change in design?

If that is the case, then for Andy, do you think that increases the long-term opportunity set to reprice contracts?

Andrew P. Power: Thanks, Mike. As a refresher, when markets were not at this position of supply-demand dynamics, we essentially had contracts, some inherited, with provisions that prevented us from getting to the full mark-to-market potential upon renewal. We handicapped how many of those would actually be hit as we moved through those expiration schedules. Over time, the odds have continued to move in our favor on those caps. Often the customer is changing configurations or choosing different durations of renewal.

In the backdrop of a rapidly changing design with a mix of GPUs and CPUs, the percentage of liquid cooling versus air cooling, and the pervasiveness of growth, more often than not we are seeing customers—even with an advantageous renewal option—not take advantage of that and say, “Let us work together.” That is an opportunity for us to bring those rates to market more and more often. This quarter, we had good results in that category—no question—but it was a small sample set. We raised the outlook a little bit for our cash mark-to-markets because we think we will see even stronger cash mark-to-markets, largely driven from that category, come through the back half of this year.

Chris, do you want to add anything about what you are seeing on the forefront of design changes?

Christopher Sharp: One hundred percent, and I appreciate the question, Michael. Your reference to silicon and the advancements of silicon is across the entire stack. It is not just about GPUs; it is about CPUs, and there is even new equipment coming to market for inference particularly. There is a broad spectrum of infrastructure driving demand. There are two key underlying things we have been watching for some time. Modularity allows us to densify power and cooling according to the workload. That is a key element we have been working with in our HD colo program and being able to retrofit and pre-engineer the ability to go up to 150 kilowatts per rack in a relatively quick period of time.

Second, AI is additive to cloud today. Cloud is comprised of a lot of data assets, and AI absolutely requires that data. We are seeing a lot of additional demand with AI infrastructure trying to be proximate to those availability zones. That is where Greg’s expanded hub-and-spoke land banks come into play. A lot of that is being married together in a contiguous way. Lastly, it all has to be engineered from the start for bulk connectivity. Beyond the four walls of the data center, it is about the connected campus, which we pioneered in this industry for some time.

That represents a unique footprint for our customers to get benefit out of the leases they have today and, as they renew, from some of the new designs we are bringing to market for them tomorrow.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Analyst from Jefferies. Your line is open.

Analyst: Great, thank you, and congrats on the great leasing quarter. I wanted to talk about organic growth. The constant currency cash NOI growth was 2.5% this quarter. You mentioned operating expenses were a bit higher. People’s knee-jerk reaction is going to be energy costs, but you talked through that. Can you talk through what operating expense line items are pulling down organic growth to be a little slower than we might expect?

Matthew R. Mercier: Sure. It was largely a result of a low operating expense comp in the prior-year same quarter, driven by R&M and labor. We expect that to smooth out as we go through the next three quarters, in line with what we were talking about on our renewals. Despite being at 2.5% in the first quarter, we are still guiding to 4% to 5% for the year. We have not moved that at all. The first quarter came in as expected per our budget, and we expect accelerating same-store growth over the next three quarters.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Eric Thomas Luebchow from Wells Fargo. Your line is open.

Eric Thomas Luebchow: Great, thanks for taking the question, guys. There have been a lot of reports recently around data center delays and projects getting pushed out. Can you talk about any incremental constraints around the supply chain, whether it is utility power, equipment, labor availability, local community pushback—anything that is extending construction timelines? And second, how are these supply chain constraints translating into market rent growth? Are you still seeing positive momentum there, and do you still think market rents are growing above development cost inflation? Thank you.

Andrew P. Power: Thanks, Eric. Taking it in reverse, the punch line is we are still seeing market rent growth outpacing inflationary pressure in build costs. We are at a point of incredible demand and competition over supply chain and labor. Certain parts of the country have shortages of skilled labor, particularly electricians. The industry is moving at an incredible pace to deliver critical digital infrastructure, and that puts pressure on costs, but we are seeing rates ahead of that. At the same time, these challenges make our value-add—having a 20-plus-year track record and consistency of building and operating in our markets—shine in the eyes of our customers and all constituents.

Our execution, our say-do ratio, is something we pride ourselves on at Digital Realty Trust, Inc., and that shows through time and again. We are working through every step with all constituents—utility partners who may have delays, where we can get creative—and making sure we navigate when the stakes are incredibly high so that Digital Realty Trust, Inc.'s value proposition shines, flowing through to the value we deliver to our customers and ultimately shareholders.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Michael Ian Rollins from Citi. Your line is open.

Michael Ian Rollins: I was thinking about some of the opening comments about the diversity of leasing. Of course, you have the 200 megawatt lease, but you said there were also multiple 10-plus megawatt leases and record one to three megawatt leases. As you look at the AI composition of the over one megawatt leasing, how far down the size level is AI going right now, and what does that mean for trying to fill any remaining capacity that is available in your portfolio now that you have the new disclosures on utilization on power versus square footage? And if I could squeeze in one other quick thing, just a clarification on the guidance.

It looks like core FFO per share on a constant currency basis was 11% year over year, and given the commencements that you are planning for this year and the midpoint of guidance you mentioned at 9%, why does core FFO per share need to slow on average for the remaining nine months of the year versus what you did in the first quarter on a constant currency basis? Thanks.

Matthew R. Mercier: Hey, Mike, thanks. First off, we have put ourselves in a great position coming out of an exceptional start to the year—record zero to one, and the second-highest signings in greater-than-a-megawatt—really putting us in place to improve our guidance this early in the year. As you noted, we are expecting a step down in the second quarter, starting to rebound in the third and ending on a high note, putting us in position to continue overall growth into 2027 and beyond. A couple of reasons. On same-store, our OpEx is expected to ramp in the second and third quarters.

Second, we expect to continue our investments tied to our increase in development spend, as well as the potential for other land to continue our growth runway. We also have capital recycling planned, which is in our guidance. All of those impact the quarterly trend for core FFO. The punch line is we have increased guidance and expect close to 9% growth for the year.

Andrew P. Power: On the diversity of demand, we put up total signings just shy of our prior record, north of 700 million, and that total is about 70% higher than our next-highest quarter. We were pleased to sign the largest lease in company history with a AA-rated hyperscaler for AI inference. Right behind that, we signed 10-plus megawatt leases in Dallas, São Paulo, and Tokyo, speaking to the diversity of demand. On the other end of the spectrum, we had a record zero to one megawatt plus interconnection quarter off a record prior quarter. Within that, AI contribution stepped up to, call it, 21%.

So you are seeing AI in the tens to hundreds of megawatts, and you are seeing AI in the less-than-a-megawatt category. We are rapidly filling capacity in both vacant and under-construction sites. Not only did our development pipeline step up dramatically to 16.5 billion, but the preleasing remained roughly constant, which is quite a feat. Looking at the largest vacancy pockets in our stabilized portfolio, much of that vacancy is already preleased and has not commenced yet, hence it has not showed up in the reported occupancy just north of 90%.

We are attacking this on both ends of the spectrum—raising the bar in 2026 and building that record backlog, now 1.8 billion, that will deliver in 2027 and even in 2028.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Irvin Liu from Evercore ISI. Your line is open.

Irvin Liu: Hi, thank you for the question. I would also like to extend my congrats on the strong bookings. Andy, you brought up a second 200 megawatt building in Charlotte and another 200 megawatt facility in Atlanta. With these developments in mind, can you give us a sense of how you think your greater-than-one-megawatt bookings will trend for the balance of the year?

Andrew P. Power: Thanks, Irvin. We are really excited about everything going on in Charlotte. It is a strategic move because we have long operated the interconnection hub supporting enterprise customers in Uptown Charlotte, and we have been expanding that. Astonishingly, 18 months ago or less, we announced what we just leased—200 megawatts in the first half of that campus, abutting the Charlotte airport. We have another 200 megawatts that I view as very attractive to customers under construction. In Atlanta, we have a larger project, but before that, we have another 200 megawatts targeting 2028 delivery in a great location.

That campus will have an extension of our colo footprint and be prized for hyperscale customers looking to grow cloud availability zones and AI inference in that market. Those are just two snapshots. To the left of that development cycle—shells or land—there are numerous other markets where we are well positioned for incremental demand, even for large hyperscale use cases. As noted in prepared remarks—Northern Virginia (this was a light Northern Virginia leasing quarter; you can see that in the weighted average rates), with roughly 275 megawatts priced in the 2027–2028 timeframe—Dallas is a similar story.

Outside the U.S.: Frankfurt, Paris, Amsterdam, Tokyo, Osaka, São Paulo, and Johannesburg—numerous markets with larger capacity blocks illustrated on the map in our slide deck. We think we will continue to build upon the record pipeline and continue to de-risk that growth algorithm for years to come. Thank you.

Operator: One moment for our next question. Our next question will come from the line of Timothy Horan from Oppenheimer. Your line is open.

Timothy Horan: Thanks, guys. A lot of moving parts. Can you give us what you think your total inventory of space and power is, both leased and what is under development? What do you think you can grow that at, or do you have a target where it will be five, ten years from now? Thank you.

Andrew P. Power: Sure. Speaking in gigawatts, we are roughly at three gigawatts operating today. On top of that—not operating—we have another six gigawatts that we own today. Within that six gigawatts, under construction—from moving dirt to opening doors and commissioning—there is 1.2 gigawatts. That means, fairly near term, that is a 40% expansion (1.2 over three gigawatts) to our installed base today. That 1.2 just went up; it is highly preleased—around 60%. We are leasing to that and activating more development as we speak. There is a pretty good runway, and our investment team is busy adding along the way.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Ari Klein from BMO Capital Markets. Your line is open.

Ari Klein: Thanks and good afternoon. It looks like the cost per megawatt in the Americas development pipeline increased to about 14 million from 12.5 million per megawatt. Can you talk about that? And there seems to be a lot more NIMBYism and local pushback. When you look at the six gigawatts of future capacity, is any of that in markets that may be tougher to deliver in? Or, in general, how are you approaching dealing with that?

Andrew P. Power: Thanks, Ari. On cost per megawatt, you are seeing inflation in build costs—a product of rising land values, significant construction activity and tight supply chains—and design moving more toward higher-priced designs with more liquid cooling infrastructure. Those all influence the basis per megawatt. The good thing is, given the demand and supply backdrop, market rates exceed those inflationary pressures to at least maintain returns. You can see that even at a record level under development, we still have close to 11% unlevered returns on our investment. On broader community reaction to digital infrastructure and what Digital Realty Trust, Inc. is doing: it is a reality of the times.

The burden is on us, as an industry leader, to make sure our value proposition to all stakeholders is well articulated, advanced, and that our doors are open to communities. I am proud of Digital Realty Trust, Inc.'s history as dedicated community members. We invest our own dollars to make the grid more reliable and sustainable—and on hot summer nights, we switch to backup generation to take pressure off the grid. We are long-time real estate taxpayers, contributing to strong local services. The new news is we are a big job driver too. As an industry, permanent jobs exceed those of the top 15 automakers in the U.S., plus the engineers and electricians building today’s facilities.

Lastly, Digital Realty Trust, Inc. supports mission-critical workloads—keeping devices running, financial systems flowing, healthcare systems operating, research happening, and cloud computing and AI inference. We will continue to be a leading voice on this topic everywhere we operate.

Operator: Thank you. That concludes the Q&A portion of today's call. I would now like to turn the call back over to President and CEO, Andrew P. Power, for closing remarks. Andrew, please go ahead.

Andrew P. Power: Thank you, operator. Digital Realty Trust, Inc. saw a record start to 2026, with core FFO coming in better than we expected and translating into a full-year guidance raise. We posted record zero to one megawatt plus interconnection bookings combined with stronger greater-than-a-megawatt leasing, including our largest lease to date. This activity pushed our backlog to a new all-time high, improving our visibility for long-term growth. At the same time, we grew our footprint of highly connected assets in the Mediterranean and APAC regions while adding land for hyperscale development, underscoring our commitment to serve our customers' needs across our global, full-spectrum platform.

We also scaled our development pipeline to new heights, and we have done all this while bringing our leverage down to multiyear lows. These outstanding results are a team effort, and I am incredibly proud of our talented and dedicated colleagues who continue to execute at a high level. I am excited by the opportunities that lie ahead, yet remain focused on delivering for our customers and shareholders. Thank you all for joining us today.

Operator: The conference has now concluded. Thank you for joining today's presentation. You may now disconnect. Everyone, have a great day.

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