[DLR] Digital Realty: Q3 2026 earnings preview, backlog conversion vs. share dilution

Digital Realty (DLR), a data center real estate investment trust (REIT) that leases power, space and interconnection to cloud providers, enterprises and network operators, will hold its earnings call on 2026-10-22 to report results for the third quarter of 2026, ending September 30, 2026[1]. Heading into this Digital Realty Q3 2026 earnings preview, the latest disclosed quarter was the second quarter of 2026: total operating revenue was $1.924 billion, up 29% year over year, but it included $201 million of one-time promote income, the performance fee the company earns when a joint-venture fund clears its return hurdles[2][3]. Core FFO per share excluding net promote was $2.13, up 14%, and the signed-but-not-commenced backlog at Digital Realty's share reached $1.4 billion at quarter end[4]. On July 23 the company raised its 2026 guidance for Core FFO per share excluding net promote to $8.15–$8.20 and for revenue excluding promote income to $6.85–$6.95 billion[5]. Subtracting the first-half actual of $4.17[6] leaves roughly $3.98–$4.03 for the two second-half quarters combined; that figure is simple arithmetic on the full-year guidance, not quarterly guidance from the company. The consensus recorded in the Drillr earnings calendar for the third quarter is on a GAAP basis, at $0.518 of earnings per share and $1.757 billion of revenue, which differs from the company's Core FFO per share measure; the same source expected $0.483 and $1.660 billion for the second quarter, while the actual $1.21 and $1.924 billion included promote income and an insurance settlement[1].

Three things matter most in this report. The first is whether rental revenue can keep growing about 14% year over year: second-quarter rental revenue was $1.146 billion, up 14.2% from $1.004 billion a year earlier[7], but the third quarter is the first full quarter after the three Northern Virginia assets were consolidated, so reported growth will be lifted by consolidation, and only the 10-Q split between non-stabilized and acquired assets will show whether the $1.4 billion backlog is commencing on schedule[8]. The second is whether the 25.4% cash renewal spread and 7.2% constant-currency same-capital cash NOI growth of the second quarter can last: both figures were pushed up mainly by one greater-than-1-megawatt renewal in Singapore, while the cash spread on 0–1 megawatt renewals was only 5.2%[9][10], so the level in a quarter without such a deal will show how solid the pricing power is. The third is whether Core FFO per share, stripped of one-off items, can hold at about $2.00 a quarter: shares and units rose from 346.6 million to 376.7 million in one year[11], and full-year net capital spending guidance was raised to $4.25–$4.75 billion[5], so new projects must commence faster than the share count and interest costs grow for the double-digit per-share growth management described to materialize[12].

Company Background and Business Structure

Digital Realty runs a global data center platform under the PlatformDIGITAL brand, owning, developing and operating data centers through its operating partnership for customers that range from global enterprises to service providers[13]. At the end of 2025 its portfolio held 310 data centers, including 89 held through unconsolidated joint ventures or funds; by region, 118 were in the United States, 113 in Europe, 36 in Latin America, 16 in Africa, 18 in Asia, six in Australia and three in Canada[13]. At the same date the company ran about 232,500 cross-connects, rising to 235,500 by the end of June 2026[11]. The company divides its business into three growth lines: 0–1 megawatt colocation and connectivity, greater-than-1-megawatt hyperscale leasing, and strategic private capital, which manages joint ventures and funds.

The company sells power, space and connectivity, and its two lease types have very different economics. At Digital Realty's share at the end of June 2026, 0–1 megawatt leases carried $1.587 billion of annualized rent, or 33.0%, at an average of $327 per kilowatt per month, while greater-than-1-megawatt leases carried $3.004 billion, or 62.5%, at $135 per kilowatt per month[14]. The first group consists of smaller deployments by enterprises, network operators and cloud on-ramp customers, whose renewals average a term of only 1.4 years[9]; they pay high unit rents and generate cross-connects billed per connection. The second group consists of whole buildings or floors built for cloud providers and large AI model customers, at lower unit rents that begin only after construction is complete. Second-quarter consolidated revenue of $1.924 billion comprised $1.146 billion of rental revenue, $353 million of utility reimbursements, $45 million of other tenant reimbursements, $130 million of interconnection and other revenue and $249 million of fee income[7], and fee income included the $201 million one-time promote[3]. Customer concentration is high: the top 20 customers account for 53.1% of annualized recurring revenue, the largest customer, a Fortune 50 software company, accounts for 10.8%, and Oracle accounts for 10.0%[15]. By region, the Americas had 1,809 megawatts of IT load at 95.7% occupancy, including 842 megawatts in Northern Virginia at 98.6%; Europe, the Middle East and Africa (EMEA) had 978 megawatts at 82.1%; Asia Pacific had 315 megawatts at 84.1%; and the whole portfolio had 3,102 megawatts at 90.2%[16].

Several transactions in the first half of 2026 materially changed the asset base. For about $1.2 billion in cash plus about 12.3 million shares, the company bought Blackstone's 64% stake in three fully leased hyperscale data centers in Northern Virginia with 288 megawatts of capacity and a gross value of about $7.8 billion, which are expected to stabilize in the first half of 2027 and the first half of 2028[17]; the three buildings are fully leased to three different investment-grade hyperscale customers on 15-year leases[18]. The company also paid about $475 million for land near Kansas City, where the local utility has agreed to deliver 600 megawatts of power by early 2028, rising to two gigawatts at full delivery[17][19], and announced that it would lift its stake in the African platform Teraco to 77% for about $650 million and acquire the digital infrastructure investor Columbia Capital for about $485 million, both paid mainly in stock[19]; an 8-K filed on August 19 shows that the Columbia Capital consideration shares had been issued and registered for resale[20]. At the end of the second quarter, development capacity under construction totaled 1,402 megawatts at 100% share, 54% pre-leased, with total investment of about $20.18 billion ($13.61 billion at Digital Realty's share) and an expected average stabilized yield of 11.5%[21].

Financial History and Current Position

The fiscal 2025 annual report shows steady revenue growth, while net income depended heavily on gains from asset sales. Total operating revenue in 2025 was $6.113 billion, up 10.0% from $5.555 billion in 2024; rental and other services revenue was $5.969 billion and fee income and other was $144 million, up 98.3%, and the $447 million increase from completed development projects and lease-up drove non-stabilized revenue, with Northern Virginia, Johannesburg and Portland contributing the most[22]. Net income attributable to the company was $1.309 billion, including $996 million of gains on property dispositions, with interest expense of $438 million[23]. Operating cash flow for the year was $2.412 billion, against $3.181 billion of improvements to real estate and $1.620 billion of proceeds from asset sales[24], showing that development spending already clearly exceeded internal cash flow and that the gap had to be filled with asset sales and external capital.

Growth accelerated in 2026, but the reported figures mix in one-off items. First-quarter revenue was $1.635 billion[7], and Core FFO per share was $2.04, up from $1.77 a year earlier[25]. Second-quarter revenue was $1.924 billion, up 29% year over year including $201 million of promote income; rental revenue was $1.146 billion, up 14.2%[7][3]. Second-quarter Core FFO per share excluding net promote was $2.13, compared with $1.87 in the second quarter of 2025 and $1.89 in the third quarter of 2025[6]; Core FFO per share including net promote was $2.65, and GAAP diluted earnings per share were $1.21, compared with $2.94 a year earlier, when gains on asset sales lifted the result[4]. The second quarter also included a $94 million after-tax insurance settlement, of which about $27 million was recognized in Core FFO as business interruption recovery[2]. Adjusted EBITDA was $978 million, and net debt to adjusted EBITDA was 4.7 times, compared with 5.1 times a year earlier[11].

First-half cash flows and the balance sheet show that growth has been funded mainly with outside equity. Operating cash flow in the first half of 2026 was $1.595 billion, up from $1.040 billion a year earlier, while improvements to real estate were $1.784 billion, acquisitions used $2.170 billion, net proceeds from common stock issuance were $2.496 billion and dividends and distributions were $1.326 billion[26]. Total shares and units rose from 346.6 million at the end of June 2025 to 376.7 million at the end of June 2026[11]. Total debt at the end of June was $18.6 billion, of which $17.0 billion was unsecured[27], and about $3.6 billion was available under the revolving credit facilities as of July 29[28]. The 2026 guidance raised on July 23 includes revenue excluding promote income of $6.85–$6.95 billion, adjusted EBITDA of $3.75–$3.85 billion, Core FFO per share excluding net promote of $8.15–$8.20, cash renewal spreads of 9%–11%, constant-currency same-capital cash NOI growth of 4.25%–5.25% and net development capital spending of $4.25–$4.75 billion[5].

Operating Model

Rental revenue is the core of the revenue base, and it moves with occupied load, rent per kilowatt, and acquisitions and dispositions. Consolidated revenue consists of rental revenue, utility reimbursements, other tenant reimbursements, interconnection and other revenue, and fee income, which in the second quarter were $1.146 billion, $353 million, $45 million, $130 million and $249 million respectively[7]. Occupied IT load rose from 2,602 megawatts at the end of the third quarter of 2025 to 2,799 megawatts at the end of the second quarter of 2026[11], and the 10-Q attributed a $145 million increase in second-quarter non-stabilized revenue to completed development and lease-up[29]. New leases commence with a clear lag: the weighted-average gap between signing and commencement was 19 months in the first quarter, when the company signed the largest single lease in its history at 200 megawatts[30], and nine months in the second quarter[31]. Of the $1.427 billion backlog at Digital Realty's share at the end of the second quarter, $635 million is expected to commence in 2026, $480 million in 2027 and $312 million in 2028 or later, and about $380 million came from the Northern Virginia acquisition[8]. Unit rents from 0–1 megawatt customers run at about 2.4 times those of hyperscale leases[14] and bring per-connection cross-connect fees, so interconnection revenue follows bookings in that line; fee income includes fund and joint-venture management fees, construction and development fees and promotes recognized once when a fund clears its return hurdle, which is why the company guides revenue excluding promote income[5].

Property-level margins are not very sensitive to power prices, and the measure of pricing power on existing assets is same-capital cash NOI. Utilities are the largest cost item, at $396 million in the second quarter[7]; the annual report says the vast majority of that expense is passed directly through to customers[32], and the first-quarter call put the reimbursed share at about 90%[33], so higher power prices mainly raise both revenue and cost rather than compress margins. Same-capital cash NOI rose 8.9% year over year in the second quarter, or 7.2% in constant currency[34], compared with constant-currency growth of only 2.5% in the first quarter[35]; the drivers were a rise in same-capital occupancy from 91.5% to 92.5%, renewal price increases and growth in interconnection revenue[11][34]. Room for repricing on renewal comes from the lease-expiry schedule: 11.9% of annualized rent at Digital Realty's share expires in 2026 and 18.2% in 2027[14]. Moving from NOI to Core FFO per share adds fee income and subtracts G&A, interest, taxes and noncontrolling interests; second-quarter Core FFO excluding net promote was $768 million, which divided by 360.6 million diluted shares gives $2.13[6]. The gap between GAAP net income and FFO is mainly about $500 million a quarter of real estate depreciation and amortization plus gains on asset sales[7].

The key constraint in the cash model is that operating cash flow leaves little after dividends and falls far short of development spending, so each round of capital spending dilutes first and adds to earnings later. In the first half of 2026 operating cash flow was $1.595 billion and dividends were $1.326 billion, while development capital spending was $1.477 billion and cash acquisitions were $2.170 billion[26][36]; the gap was filled with ATM equity issuance, asset sales, contributions of development projects to a fund and the revolving credit facilities, including $447 million of proceeds from contributing two development projects to the fund in May[28]. In July the company raised full-year net capital spending guidance from $3.5–$4.0 billion to $4.25–$4.75 billion, lifted dispositions and joint-venture capital guidance to $1.0–$1.5 billion, and assumed $1.5–$2.0 billion of long-term debt issuance, with the assumed rate rising from 4.0%–4.5% to 4.5%–5.5% and the timing pushed to the second half[5]. Development projects contribute NOI at the expected stabilized yield of about 11.5% only after their leases commence[21]; the company said the Northern Virginia purchase should add to Core FFO per share in 2027 and 2028, not in 2026[18].

Industry and Competitive Position

Digital Realty's competitive position differs between its two product lines. The annual report names Equinix, NTT, various private operators in the U.S., and Global Switch and regional operators in Europe, Asia, Latin America, Africa and Australia as its main competitors[37]. In 0–1 megawatt and interconnection, network-dense campuses give the company high customer switching costs: bookings in this line reached $108 million in the second quarter, a record for the third consecutive quarter[34], and about 20% came from smaller AI-related deployments[38]. In greater-than-1-megawatt leasing, the company behaves more like a developer with land, power commitments and access to capital; competitors are numerous, but powered land and utility supply contracts are scarce in themselves, and cash spreads on large-customer renewals reached 66.7% in the second quarter[9].

The company's competitive limits are equally clear. Large leases are concentrated among a small number of investment-grade hyperscale cloud providers, and the company said it serves only that type of customer in greater-than-1-megawatt leasing[38]; shortages of electricians, delayed utility power delivery and local community pushback can stretch construction timelines[33]; and the annual report warns that continued growth in data center supply could reduce rents or delay leasing[37]. Occupancy in EMEA and Asia Pacific is clearly lower than in the Americas, at 82.1% and 84.1% in the second quarter, with London at only 71.9% and Amsterdam down from 87.0% to 79.7%[16]. With development at a larger scale, more than $4 billion a year of capital spending has to be funded continuously through share issuance, joint-venture funds and borrowing[5].

Core Debates

Can Digital Realty's $1.4 billion signed-but-not-commenced backlog, together with the newly consolidated Northern Virginia assets, keep rental revenue growing about 14% year over year in the third quarter?

This question matters because rental revenue makes up roughly 60% of total revenue and is the starting point for NOI, EBITDA and Core FFO per share. Digital Realty's growth depends increasingly on hyperscale leases that are signed first, built next and commenced last: new leases signed in the first quarter waited an average of 19 months to commence[30], and the backlog at Digital Realty's share at the end of the second quarter equaled about 30% of in-place data center rent[8]. Whether the backlog turns into rent on time determines whether growth in the second half of 2026 and in 2027 is more than a promise on paper.

Current evidence shows organic commencements still moving forward. Second-quarter rental revenue was $1.146 billion, up 14.2%, and the third-quarter comparison base is $1.046 billion from the third quarter of 2025[7]; the 10-Q attributed $145 million of higher non-stabilized revenue to completed development and lease-up, with Northern Virginia, Frankfurt, Paris and Johannesburg contributing the most[29]. Occupied IT load rose from 2,602 megawatts at the end of the third quarter of 2025 to 2,799 megawatts[11]. The backlog at Digital Realty's share rose from $1.0 billion at the end of the first quarter to $1.427 billion[25][8]; about $380 million of that came with the Northern Virginia acquisition, and two hyperscale leases signed in July, worth $205 million at Digital Realty's share, are not yet included[39].

The financial path runs from new leases into backlog, then to rent starting on commencement once development is complete, which lifts occupied load and rental revenue and then property NOI and adjusted EBITDA; the Northern Virginia acquisition consolidates the three assets at 100%, so rental revenue and depreciation will jump together[17]. The unresolved alternative is that the jump in reported third-quarter rent may come mainly from consolidation rather than organic commencements, since the three assets will not stabilize until the first half of 2027 and the first half of 2028[18]; if growth slows once consolidation is stripped out, organic commencements have not accelerated. The company has not disclosed quarterly revenue for the three assets, so telling the two apart depends on the 10-Q split of revenue among stabilized, non-stabilized and acquired assets.

The third-quarter report should answer three points: whether rental revenue growth stays at or above 14% and how much non-stabilized and acquired assets each contribute; whether the backlog stays above $1.4 billion after the July leases are added and whether the portion due in 2026 commences at the $635 million pace[8]; and whether occupied capacity keeps rising by about 60 megawatts a quarter[11]. The main risk is that power delivery, electrician shortages and community pushback lengthen construction and push commencements later[33]. If third-quarter rental growth falls below 10%, or the company discloses delays in major project completions, the view that the backlog is converting into rent on schedule would be overturned.

Were the 25%-plus renewal spreads and 7.2% same-capital cash NOI growth in the second quarter a durable sign of pricing power, or a one-off jump driven by a single Singapore renewal?

Same-capital cash NOI measures how much more existing assets earn without new construction or acquisitions, which makes it the most direct test of a data center landlord's pricing power. Of annualized rent at Digital Realty's share, 11.9% expires in 2026 and 18.2% in 2027[14]; if market rents truly sit well above old contracts, renewals will keep lifting NOI over the next two years, but if the second quarter reflected only a few large deals, the full-year guidance of 4.25%–5.25% is already the ceiling[5].

The second-quarter figures rested heavily on one renewal. The cash renewal spread was 25.4%, but 0–1 megawatt renewals, 55% of renewal volume, rose only 5.2%, while greater-than-1-megawatt renewals, 44% of volume, rose 66.7%[9][8]. On the call, management explained that a Singapore lease with a fixed renewal rate was repriced to market because the customer asked for a longer term, called 66.7% an outsized quarterly result and said it saw healthy repricing as a regular dynamic going forward[38]. Constant-currency same-capital cash NOI growth was 2.5% in the first quarter[35], 7.2% in the second and 4.9% for the first half[10]. The company then raised its full-year renewal spread guidance from 6.5%–8.5% to 9%–11% but raised NOI growth guidance by only 25 basis points to 4.25%–5.25%[5], which shows it did not assume the second-quarter pace would continue.

The financial path runs from tight supply and rising market rents at network-dense campuses to renewals at market rates, which together with higher occupancy and cross-connects from small customers lift same-capital revenue; because most power cost is passed through, the cost side moves little, so revenue growth flows fairly directly into same-capital cash NOI and then into Core FFO per share[32]. Other evidence of pricing power comes from the 0–1 megawatt line, where bookings set a record for the third straight quarter at $108 million in the second quarter[39] and same-capital occupancy rose from 91.5% to 92.5%[11]. What remains unresolved is whether 0–1 megawatt renewal spreads and same-capital growth stay above first-quarter levels in a quarter without a large deal.

The third-quarter report should show whether constant-currency same-capital cash NOI growth is at least 4.25%, whether the cash renewal spread is at least 9% with 0–1 megawatt renewals holding above 4.5%, and whether 0–1 megawatt plus interconnection bookings stay around $100 million[9][5]. The risk is weaker European occupancy and new supply pushing rents down[37]. If same-capital growth falls back below 3% and renewal spreads drop below 5%, the second quarter would look more like a one-off jump than durable pricing power.

After growing its share count by roughly 8% in a year and lifting 2026 capital spending to $4.25–4.75 billion, can Digital Realty keep Core FFO per share, stripped of one-off gains, growing near double digits?

What data center REIT shareholders ultimately receive is FFO per share and dividends. Digital Realty is speeding up both development and acquisitions, while internal cash flow leaves little after dividends, so every $100 million of capital spending has to be funded with equity, funds or debt[26]. Whether growth reaches the per-share level depends on whether new projects commence faster than share count and interest costs rise.

Per-share results remain strong, but the implied second-half level is below the second quarter. Core FFO per share excluding net promote was $2.04 in the first quarter and $2.13 in the second, up 15% and 14% year over year, against a third-quarter 2025 base of $1.89[6]; the company raised full-year guidance to $8.15–$8.20, with the midpoint implying about 10% growth[12]. The second quarter, however, included about $27 million of business interruption insurance recovery[2], and full-year guidance minus the first-half $4.17 leaves only $3.98–$4.03 for the second half, or about $2.00 a quarter. Meanwhile, shares and units rose from 346.6 million a year earlier to 376.7 million[11], ATM sales in the first half totaled about 13.5 million shares for about $2.5 billion of net proceeds[27], and the Teraco and Columbia Capital deals will issue about 5.7 million more shares[19]; quarterly development capital spending rose from $533 million in the third quarter of 2025 to $747 million in the second quarter[36].

The financial path runs from development spending and acquisitions, funded through ATM issuance, fund contributions, asset sales and debt, to more shares and higher interest, which dilute first; once projects are complete and leases commence, they contribute NOI at an expected stabilized yield of about 11.5%, which adds to earnings later[21]; private funds and joint ventures feed Core FFO through management fees and one-time promotes. The alternative reading is that the company is trading current dilution for growth in 2027 and 2028: it expects the Northern Virginia assets to add to Core FFO per share in both years[18], and management said it was confident of extending double-digit growth into 2027 and beyond[12]. What remains unresolved is how large the gap is between per-share results excluding one-off items and the full-year guidance, and whether new shares go beyond the announced transactions.

The third-quarter report should show whether Core FFO per share excluding net promote is at least $2.00 and full-year guidance is maintained; how much shares and units rise from 376.7 million, and whether the increase is limited to the Teraco and Columbia Capital consideration shares[20]; whether quarterly development capital spending stays between $700 million and $1.2 billion with net debt to adjusted EBITDA within 5.0 times; and whether fee income excluding promote is at least $48 million[7]. The risk is higher funding costs and equity dilution outpacing the earnings added by commencements. If third-quarter Core FFO per share falls below $1.95 or full-year guidance is cut, the view that per-share growth can outrun dilution would be overturned.

Risks and Falsifiers

Customer concentration is the first risk, because it affects bookings, backlog and renewals at the same time. The top 20 customers account for 53.1% of annualized recurring revenue, with the largest customer at 10.8% and Oracle at 10.0%, together about $1.059 billion of annualized recurring revenue[15]; at the end of 2025 the top three customers accounted for about 26%, and 20 data centers were occupied by single customers[40]. The company leases greater-than-1-megawatt space only to investment-grade hyperscale customers, but a change in the expansion pace or credit of a few customers would still show up heavily in revenue[38]. If the third-quarter report shows the top-20 share no longer rising, no shortening in the remaining lease terms of the largest customer and Oracle, and no disclosure of major customers delaying commencement or terminating early, this risk has not materialized.

The second risk is that one-off gains distort comparisons, with reported revenue and GAAP earnings per share the most misleading measures. Second-quarter consolidated revenue included $201 million of promote income[3] and a $94 million after-tax insurance settlement[2], and GAAP earnings per share of $1.21 were far above the $0.483 recorded in the earnings calendar[1]. Neither item will repeat from the third quarter, so reported revenue and GAAP earnings per share will show a clear sequential decline, while the calendar's third-quarter revenue figure of $1.757 billion is already close to a basis that excludes promote income[1]. If the third-quarter report clearly separates core and non-core items, and revenue and Core FFO per share excluding promote and insurance are consistent with full-year guidance, the distortion is only a comparison-base issue.

The third risk is delay in development and power delivery, which would push back rental revenue and NOI directly. The annual report lists inadequate power as a risk that could leave the company unable to meet customer obligations or grow[41], and notes that it has built out a large amount of space on a speculative basis[42]; the first-quarter call said electrician shortages, delayed utility power and community pushback can stretch construction timelines[33]. Only 54% of the 1,402 megawatts under construction is leased[21], and $635 million of backlog at the end of the second quarter is expected to commence during 2026[8]; any quarter of delay pushes revenue back, while unleased capacity under construction carries capitalized interest and depreciation without revenue. If the third-quarter report confirms that major projects are finishing on schedule, occupied capacity rises by at least 60 megawatts from the second quarter and the portion of backlog due in 2026 is not cut, this risk has not materialized.

The fourth risk is low occupancy in Europe and Asia Pacific, where new supply could push rents down. The annual report warns that continued building by competitors could reduce rents or delay leasing[37]; in the second quarter EMEA occupancy was 82.1%, Amsterdam fell from 87.0% to 79.7% and London stood at 71.9%, and EMEA annualized rent at 100% share was $1.837 billion, so each one-point drop in occupancy corresponds proportionally to about $22 million of annualized rent[16]. Lower renewal spreads would directly reduce same-capital NOI growth. If third-quarter EMEA occupancy is at least 82.1%, data center churn is no higher than 1.1% and 0–1 megawatt renewal spreads are at least 4.5%[9], this risk has not grown.

The fifth risk is higher funding costs and equity dilution, which act directly on Core FFO per share. Development spending and acquisitions rely mainly on equity, funds and debt, and in July the company raised its assumed rate on long-term debt issuance to 4.5%–5.5%[5]; the quarterly dividend is unchanged at $1.22 per share, and first-half dividends of $1.326 billion already used most of operating cash flow[26]. Shares and units rose about 8.7% in a year[11], and with Core FFO unchanged, each 1% increase in shares lowers Core FFO per share by about 1%. If third-quarter Core FFO per share excluding net promote is at least $2.00, share growth is limited to announced transactions and net debt to adjusted EBITDA is no higher than 5.0 times, this risk remains contained.

What to Watch Next

• Backlog conversion: rental revenue growth, against a base of $1.046 billion in the third quarter of 2025 and 14.2% growth in the second quarter of 2026. Watch the 10-Q split between non-stabilized and acquired assets; growth of at least 14% confirms the view, while growth below 10% or delays in major projects would overturn it.
• Backlog conversion: backlog at Digital Realty's share and occupied capacity, against $1.427 billion and 2,799 megawatts at the end of the second quarter. Watch the balance after adding the $205 million of July leases and the portion due in 2026; a balance above $1.4 billion and about 60 megawatts of quarterly growth in occupied capacity confirm the view.
• Renewal pricing: constant-currency same-capital cash NOI growth, against 7.2% in the second quarter and 2.5% in the first. Watch the level without a large deal; at least 4.25% confirms the view, while below 3% points to a one-off jump.
• Renewal pricing: cash renewal spreads, against 25.4% overall and 5.2% for 0–1 megawatt in the second quarter. At least 9% overall and 4.5% for 0–1 megawatt confirm the view; below 5% overall would overturn it.
• Per-share growth: Core FFO per share excluding net promote, against $1.89 in the third quarter of 2025 and $2.13 in the second quarter of 2026. At least $2.00 with guidance maintained confirms the view; below $1.95 or a guidance cut would overturn it.
• Per-share growth: shares and units, development capital spending and leverage, against 376.7 million shares, $747 million of quarterly development spending and 4.7 times. Watch whether share growth comes only from announced deals; quarterly spending of $700 million to $1.2 billion and leverage no higher than 5.0 times confirm the view.

Conclusion

Digital Realty's results are driven by three things: converting hyperscale leases from signing to commencement, repricing renewals at existing campuses, and funding expansion with outside capital. In the second quarter, Core FFO per share excluding net promote was $2.13, up 14%, the backlog reached $1.427 billion and the cash renewal spread was 25.4%[6][8][9]; but those figures came alongside $201 million of promote income, about $27 million of insurance recovery counted in Core FFO, and shares and units that rose from 346.6 million to 376.7 million in one year[3][2][11]. The central unresolved relationship is whether NOI growth from commencements and repricing can outrun the per-share dilution from continued equity issuance and higher funding costs.

Since the second-quarter results, two independent outside views have focused on the quality of growth and the need for capital, with different emphases. In an August 2 note, Simply Wall St described the quarter as an earnings split: on one side, record 0–1 megawatt bookings, a $1.9 billion backlog and renewal spreads above 25% showed tight supply turning into higher cash flow per megawatt; on the other, the skeptical view held that the company may be over-earning on one-offs, that insurance recovery and joint-venture promote in Core FFO blur the underlying run rate, and that a development pipeline of about 1.4 gigawatts costing about $20 billion keeps execution and funding discipline in focus[43]. That note called $2.73 per share Core FFO, but on the company's definition $2.73 is FFO, Core FFO per share was $2.65 and $2.13 excluding net promote[4]. On September 4, Chris Lange of 24/7 Wall St described the company as a global landlord to the hyperscalers and credited its $707 million of first-quarter bookings and record second-quarter backlog, but placed his bear case on development capital intensity: the company has sold shares through its ATM and raised capital spending guidance, and he argued that a flat dividend during heavy equity issuance is the cost of growth and that an AI capex slowdown would expose the unfunded pipeline[44]. The two views agree on funding discipline, which maps to the third core debate; Simply Wall St also touches on one-off items and renewal pricing, which map to the first and second debates, while 24/7 Wall St does not discuss renewal pricing. They are outside interpretations, not facts, and they do not represent the market as a whole.

The current understanding would be materially strengthened if several observations held together: third-quarter rental revenue still grows at double digits after stripping out consolidation, constant-currency same-capital cash NOI growth is at least 4.25% with 0–1 megawatt renewal spreads above 4.5%, Core FFO per share excluding promote and insurance is at least $2.00, and share growth comes only from announced transactions. Conversely, if rental growth comes mainly from the Northern Virginia consolidation, same-capital growth falls back below 3%, Core FFO per share drops below $1.95 or full-year guidance is cut, dilution would be outrunning commencements and repricing, and the current understanding would be clearly weakened.

Sources

[1] Drillr earnings calendar (updated 2026-09-23) · DLR 2026-10-22 call and 3Q26 estimates · 2026-09-23 · Drillr earning_call_calendar · https://gateway.drillr.ai/mcp/private

[2] DLR 8-K filed 2026-07-23 · 2Q26 financial results, promote and insurance settlement · 2026-07-23 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926086270/dlr-20260723xex99d1.htm

[3] DLR 10-Q filed 2026-07-31 · promote income from the June 2026 acquisition · 2026-07-31 · 10-Q · https://www.sec.gov/Archives/edgar/data/1297996/000110465926089296/dlr-20260630x10q.htm

[4] DLR 8-K filed 2026-07-23 · 2Q26 earnings release highlights · 2026-07-23 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926086270/dlr-20260723xex99d1.htm

[5] DLR 8-K filed 2026-07-23 · 2026 outlook as of July 23, 2026 · 2026-07-23 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926086270/dlr-20260723xex99d1.htm

[6] DLR 8-K filed 2026-07-23 · FFO to Core FFO reconciliation · 2026-07-23 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926086270/dlr-20260723xex99d1.htm

[7] DLR 8-K filed 2026-07-23 · consolidated quarterly statements of operations · 2026-07-23 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926086270/dlr-20260723xex99d1.htm

[8] DLR 8-K filed 2026-07-23 · 2Q26 presentation backlog and commencement timing · 2026-07-23 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926086270/dlr-20260723xex99d2.htm

[9] DLR 8-K filed 2026-07-23 · renewal leasing activity and churn · 2026-07-23 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926086270/dlr-20260723xex99d1.htm

[10] DLR 8-K filed 2026-07-23 · 2Q26 same-capital operating trend · 2026-07-23 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926086270/dlr-20260723xex99d1.htm

[11] DLR 8-K filed 2026-07-23 · key quarterly data (shares, leverage, portfolio) · 2026-07-23 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926086270/dlr-20260723xex99d1.htm

[12] DLR 2Q26 earnings call 2026-07-23 · Drillr structured summary of guidance · 2026-07-23 · earnings-call · https://investor.digitalrealty.com/events-and-presentations

[13] DLR 10-K filed 2026-02-13 · business overview and portfolio · 2026-02-13 · 10-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926015365/dlr-20251231x10k.htm

[14] DLR 8-K filed 2026-07-23 · lease expirations and rent per kW by deal size · 2026-07-23 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926086270/dlr-20260723xex99d1.htm

[15] DLR 8-K filed 2026-07-23 · top 20 customers by annualized recurring revenue · 2026-07-23 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926086270/dlr-20260723xex99d1.htm

[16] DLR 8-K filed 2026-07-23 · occupancy by region · 2026-07-23 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926086270/dlr-20260723xex99d1.htm

[17] DLR 8-K filed 2026-07-23 · 2Q26 investment activity including Northern Virginia stake · 2026-07-23 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926086270/dlr-20260723xex99d1.htm

[18] DLR 8-K filed 2026-06-29 · purchase of Blackstone interests in three Northern Virginia data centers · 2026-06-29 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000119312526288761/d100507d8k.htm

[19] DLR 8-K filed 2026-06-22 · Kansas City land, Teraco stake and Columbia Capital transactions · 2026-06-22 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000119312526276844/d50837dex991.htm

[20] DLR 8-K filed 2026-08-19 · Columbia Capital acquisition share resale registration · 2026-08-19 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000119312526357083/d145363d8k.htm

[21] DLR 8-K filed 2026-07-23 · development lifecycle · 2026-07-23 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926086270/dlr-20260723xex99d1.htm

[22] DLR 10-K filed 2026-02-13 · FY2025 revenue composition and drivers · 2026-02-13 · 10-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926015365/dlr-20251231x10k.htm

[23] DLR 10-K filed 2026-02-13 · FY2025 income statement below operating income · 2026-02-13 · 10-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926015365/dlr-20251231x10k.htm

[24] DLR 10-K filed 2026-02-13 · FY2025 cash flows · 2026-02-13 · 10-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926015365/dlr-20251231x10k.htm

[25] DLR 8-K filed 2026-04-23 · 1Q26 earnings release highlights · 2026-04-23 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926047702/dlr-20260423xex99d1.htm

[26] DLR 10-Q filed 2026-07-31 · six-month 2026 cash flows · 2026-07-31 · 10-Q · https://www.sec.gov/Archives/edgar/data/1297996/000110465926089296/dlr-20260630x10q.htm

[27] DLR 8-K filed 2026-07-23 · 2Q26 balance sheet and ATM equity issuance · 2026-07-23 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926086270/dlr-20260723xex99d1.htm

[28] DLR 10-Q filed 2026-07-31 · liquidity and fund contribution · 2026-07-31 · 10-Q · https://www.sec.gov/Archives/edgar/data/1297996/000110465926089296/dlr-20260630x10q.htm

[29] DLR 10-Q filed 2026-07-31 · 2Q26 revenue drivers (MD&A) · 2026-07-31 · 10-Q · https://www.sec.gov/Archives/edgar/data/1297996/000110465926089296/dlr-20260630x10q.htm

[30] DLR 8-K filed 2026-04-23 · 1Q26 leasing, commencement lag and renewals · 2026-04-23 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926047702/dlr-20260423xex99d1.htm

[31] DLR 8-K filed 2026-07-23 · 2Q26 leasing activity, backlog and renewal spreads · 2026-07-23 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926086270/dlr-20260723xex99d1.htm

[32] DLR 10-K filed 2026-02-13 · utilities pass-through and inflation · 2026-02-13 · 10-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926015365/dlr-20251231x10k.htm

[33] DLR 1Q26 earnings call 2026-04-23 · Drillr structured summary · 2026-04-23 · earnings-call · https://investor.digitalrealty.com/events-and-presentations

[34] DLR 2Q26 earnings call 2026-07-23 · Drillr structured summary of results and growth pillars · 2026-07-23 · earnings-call · https://investor.digitalrealty.com/events-and-presentations

[35] DLR 8-K filed 2026-04-23 · 1Q26 same-capital operating trend · 2026-04-23 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926047702/dlr-20260423xex99d1.htm

[36] DLR 8-K filed 2026-07-23 · historical capital expenditures · 2026-07-23 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926086270/dlr-20260723xex99d1.htm

[37] DLR 10-K filed 2026-02-13 · competition and pricing risk · 2026-02-13 · 10-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926015365/dlr-20251231x10k.htm

[38] DLR 2Q26 earnings call 2026-07-23 · Drillr structured summary of Q&A on customer credit and Singapore renewal · 2026-07-23 · earnings-call · https://investor.digitalrealty.com/events-and-presentations

[39] DLR 8-K filed 2026-07-23 · 2Q26 presentation bookings mix and post-quarter leases · 2026-07-23 · 8-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926086270/dlr-20260723xex99d2.htm

[40] DLR 10-K filed 2026-02-13 · customer concentration · 2026-02-13 · 10-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926015365/dlr-20251231x10k.htm

[41] DLR 10-K filed 2026-02-13 · power availability risk factor · 2026-02-13 · 10-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926015365/dlr-20251231x10k.htm

[42] DLR 10-K filed 2026-02-13 · development and speculative construction risk · 2026-02-13 · 10-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926015365/dlr-20251231x10k.htm

[43] Simply Wall St 2026-08-02 · Digital Realty (DLR) Stock Faces Earnings Split As AI Backlog Hits Record · 2026-08-02 · Simply Wall St · https://simplywall.st/stocks/us/real-estate/nyse-dlr/digital-realty-trust/news/digital-realty-dlr-stock-faces-earnings-split-as-ai-backlog

[44] 24/7 Wall St 2026-09-04 · 3 REITs Getting Paid as Big Tech Builds Out AI (Chris Lange) · 2026-09-04 · 24/7 Wall St · https://247wallst.com/investing/2026/09/04/3-data-center-reits-collecting-rent-from-the-ai-buildout/