Digital Realty Trust, Inc. 2026 Q3 Earnings Call

Please go ahead. Thank you, operator, and welcome everyone to Digital Realty's third quarter 2026 earnings conference call.

Joining me on today's call are President and CEO, Andy Power, and CFO, Matt Mercier. Chief Investment Officer, Greg Wright, Chief Technology Officer, Chris Sharp, and Chief Revenue Officer, Colin McLean, are also on the call and will be available for Q&A. Management will be making forward-looking statements, including guidance and underlying assumptions on today's call. Forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to materially differ. For further discussion of risks related to our business, see our 10-K and subsequent filings with the SEC. This call will contain certain non-GAAP financial information. Reconciliations to the most directly comparable GAAP measures are included in the supplemental package furnished to the SEC and available on our website.

Before I turn the call over to Andy, let me offer a few key takeaways from our third quarter results. First, exceptionally strong execution across our global platform drove upside to revenues, Adjusted EBITDA, and Core FFO. 11% Core FFO per share growth exceeded our expectations, and we are raising our full year guidance range by almost 2%, now anticipating nearly 13% bottom-line growth. Second, total leasing for the quarter was a blowout at $855 million, or $627 million at our share, with new records set across several metrics. Signings in the zero to one megawatt plus interconnection category exceeded last quarter's record by 40%. Total greater than a megawatt leasing reached $689 million, or $474 million at our share, driven by a new high water mark in pricing.

Third, these bookings pushed our total backlog to a new record of $2.5 billion, or $1.8 billion at Digital Realty share, which provides us with strong visibility through next year and into 2028, bolstering our confidence in our multi-year double-digit growth expectation. Lastly, we achieved another important milestone within our strategic private capital initiative in the last week, closing over $1.4 billion of initial cornerstone equity commitments to our new perpetual capital strategy focused on stabilized hyperscale data centers in North America. This capital will further fuel our efforts to support our customers' fast-growing requirements for digital infrastructure. With that, I'd like to turn the call over to our President and CEO, Andy Power.

Thanks, Jordan, and thanks to everyone for joining our call. Digital Realty delivered an outstanding quarter, highlighted by strong execution across our global platform, robust financial results, record leasing activity, and continued progress against our long-term growth strategy. The digital infrastructure industry continues to evolve rapidly. The adoption of artificial intelligence is driving unprecedented demand for capacity while simultaneously increasing the value of highly connected environments, strategic locations, and global reach. As enterprises, cloud providers, network operators, and AI innovators continue to expand their digital infrastructure footprints, they increasingly require the partners that can provide capacity and connectivity together with the capital, expertise, and operational capabilities necessary to execute at scale. Uniquely, our global platform spans six continents, bringing together colocation and connectivity hubs, hyperscale data centers, and strategic private capital capabilities.

Over the past several years, we have deliberately strengthened these three core growth pillars to better serve our growing customer base. Together, they create a differentiated platform that combines global scale, connectivity-rich environments, development expertise, and capital flexibility together with a 20-plus year track record that is increasingly important as development, power procurement, community engagement, and operations become more complex. This combination distinguishes Digital Realty in a market where reliable execution, speed to market, and connectivity have become just as important as capacity itself. The third quarter's record leasing activity demonstrated the power of this differentiated global platform and the value proposition it delivers to customers around the world. We achieved record total bookings of approximately $855 million, or $627 million at Digital Realty's share, driven by record performance in each of our leasing categories.

Importantly, demand was broad-based across geographies, customer segments, and deployment types, demonstrating the growing appeal of PlatformDIGITAL. We continue to see the benefits of artificial intelligence extending well beyond large-scale training deployments and into enterprise adoption inference workloads, connectivity-rich environments, and new geographies. We believe this broadening demand profile further strengthens Digital Realty's competitive position and long-term growth outlook. Pricing was strong throughout the quarter, particularly within our greater than 1 megawatt category, reflecting robust and sustained demand and growing constraints around the development of new capacity. These results add to our already substantial backlog and provide additional visibility into our growth over the next several years. The strength of our results this quarter reflects contributions from each of our three core growth pillars. Starting with colocation and connectivity. Connectivity is becoming increasingly important as digital infrastructure architectures grow more distributed and data intensive.

Today, that trend is being accelerated by AI, cloud adoption, and the increasing need to move, access, and exchange data across multiple environments. While AI is often discussed in terms of large-scale compute deployments, the reality is that AI workloads increasingly depend on a broader digital infrastructure architecture that connects compute and storage with cloud platforms, networks, customers, and inference locations. As AI deployments become more distributed, connectivity becomes increasingly important to performance, user experience, and scalability. AI agent and coding workloads make many round trips per task. Placing capacity close to end users and cloud zones improves performance and supports in-region data handling. Today's AI infrastructure build-out is driving demand for our connected environments in strategic locations around the world. Digital Realty's growing global footprint of connectivity-rich environments and growing roster of more than 6,000 customers position us to help customers deploy increasingly distributed enterprise, cloud, and AI architectures.

These trends were clearly reflected in our results during the quarter. Bookings within our zero to 1 MW plus interconnection category exceeded $150 million at Digital Realty share, increasing 80% year-over-year and 40% from the second quarter, marking our fourth consecutive quarterly record in this category. Matt will provide additional details in a few moments. These results reinforce our conviction that colocation and connectivity will continue to be a critical driver of long-term growth. Turning to our second growth pillar, hyperscale data centers. Demand for large-scale deployments was exceptionally strong during the quarter, reflecting the continued expansion of cloud platforms, AI infrastructure, and larger enterprise deployments. While AI is driving unprecedented levels of demand, delivering that capacity has become increasingly challenging.

Customers today increasingly recognize the value of experienced partners with the technological and engineering capabilities, development expertise, and financial position required to deliver and operate critical infrastructure at scale. Our leasing results during the quarter clearly reflected these dynamics. Total hyperscale bookings of $689 million, or $474 million at Digital Realty share, set another quarterly record. Hyperscale demand was broad-based across our footprint, further demonstrating customers' expanding needs for capacity beyond the U.S. In addition to two sizable hyperscale leases signed in early July in Northern Virginia, leasing was strong in APAC and exceeded our prior regional record by more than 600%. When combined with the record pricing achieved in this category and our growing backlog of contracted leases, these results provide increased visibility into our future growth. Turning to our third growth pillar, strategic private capital.

Unprecedented demand for digital infrastructure and the extraordinary scaling of AI have clearly driven a corresponding increase in capital requirements across our industry. As infrastructure deployments grow larger, more complex and more capital intensive, access to capital is becoming an increasingly important competitive differentiator. While newer entrants to the hyperscale data center field have emerged, most lack the scale, balance sheet strength, or funding sources necessary to pursue opportunities at the scale required by hyperscale customers today. In this sense, Digital Realty has spent the last two decades positioning for the current opportunity. We received our first investment-grade ratings in 2009, completed our first private capital venture in 2013, and have spent the last four years scaling our strategic private capital franchise to support the massive growth in hyperscaler demand that appeared on the horizon.

Further accelerating these efforts, in the third quarter, we closed on the acquisition of Columbia Capital, a 30-plus year digital infrastructure-focused investment platform. Columbia's experienced investment team and established portfolio complement Digital Realty's global platform and strengthen investment capabilities to take advantage of the expanding AI infrastructure ecosystem. Today, our strategic private capital platform provides additional sources of capital, enhances our investment flexibility and financing options, and enables us to pursue a broader set of opportunities, all while accelerating Digital Realty's Core FFO growth and maintaining its balance sheet strength. Subsequent to quarter end, we successfully completed our initial cornerstone closing on a new strategy focused on stabilized hyperscale data centers in North America, and we welcome these partners to PlatformDIGITAL. Thank you for your partnership.

We expect our strategic private capital platform to play an important role in the perpetual capitalization of hyperscale data centers and to drive long-term value creation for both our private institutional partners and Digital Realty shareholders. During the third quarter, we continued to see enterprises and hyperscalers expand across PlatformDIGITAL as AI inferences continue to emerge around the world. A few examples include a major AI platform is leveraging PlatformDIGITAL's robust interconnection capabilities and global footprint by deploying inference and low latency edge hubs in 15 different metros to enhance their ability to serve their customers' needs. A global medical device and services provider is deploying distributed AI data hubs in four locations across our three global regions to enable faster capture and analytics.