Digital Realty Leases Its Way To A Blowout Quarter

Digital Realty opened the door to one of its strongest quarters yet as customers lined up to plug in. The data-center real estate investment trust reported second-quarter revenue of $1.92 billion, up 29% from a year earlier and well above the roughly $1.66 billion analysts expected. Core funds from operations excluding net promote income increased 14% to $2.13 per share, topping the $1.98 consensus, while adjusted EBITDA climbed 19% to $978 million. Shares closed approximately 11% higher Friday at roughly $199 after reaching $207.41, their biggest one-day gain since March 2009, as investors rewarded a company whose AI demand is already arriving in signed leases.

The quarter’s most valuable number had not reached the income statement yet. Digital Realty signed bookings expected to generate $307 million of annualized rent at full project ownership, or $208 million at the company’s share. That pushed its signed-but-not-started backlog to a record $1.9 billion at full ownership and $1.4 billion at Digital Realty’s share, approximately 75% higher than at the beginning of the year. The latter figure equaled roughly 30% of the company’s existing data-center rent and still excluded two hyperscale leases signed in July representing another $410 million of annualized rent at full ownership.

Scarce capacity also gave Digital Realty considerable room to raise the rent. The company renewed leases representing approximately $262 million of annualized cash revenue at rates 25.4% higher than the expiring agreements. Larger leases covering more than one megawatt produced an especially striking 66.7% increase, led by supply-constrained markets such as Singapore. Meanwhile, Digital Realty doubled its development pipeline during the first half to 1.4 gigawatts of capacity representing more than $20 billion of investment. After accounting for the July signings, approximately 63% is already leased, with more than 80% of the construction located in the Americas to support cloud and AI workloads.

That visibility persuaded Digital Realty to raise its 2026 revenue outlook to $6.85 billion to $6.95 billion from $6.65 billion to $6.75 billion and lift its adjusted EBITDA forecast to $3.75 billion to $3.85 billion. Its core FFO outlook excluding promote income increased to $8.15 to $8.20 per share from $8.00 to $8.10, while its projected development spending climbed by $750 million to as much as $4.75 billion. Financing all that construction will require additional debt, asset sales and newly issued shares, but Digital Realty is already carrying signed leases alongside the blueprints.

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