Digital Realty (DLR) Q3 2026 Earnings: Record $1.85B Backlog, Rent Up 17%

Digital Realty (DLR) Q3 2026 earnings, released on October 29, 2026 through 8-K results materials and the earnings call, showed rent growth and profit from existing data centers running ahead of prior baselines, while cash generation still relies on outside funding[1][2]. Three questions were open going into the quarter: whether the signed-but-not-commenced backlog would convert into rent on schedule, whether the second quarter's jump in same-capital profit came from a single renewal, and whether core FFO per share could hold up after heavy share issuance and development spending. The quarter confirmed the first two. Rental revenue grew 17.1% year over year, the backlog rose to $1.846 billion, and same-capital cash NOI grew 5.9%[1][3]. The third question produced a mixed answer: core FFO per share grew 11%, but leverage rose to 5.2 times and AFFO per share grew only 2.8%[1].

Digital Realty is the world's largest cloud-neutral data center REIT. It leases powered, network-connected data center space to cloud providers, enterprises and network operators[4]. Most revenue is rent billed on leased IT load, which totaled $1.225 billion in the third quarter, or 64% of operating revenue; the company passes most of its electricity cost through to customers[1][5].

The backlog grew by about $419 million and rent growth accelerated

Signings far outpaced commencements in the quarter, so the backlog kept growing. New leases signed at Digital Realty's share carry $627 million of annualized rent, about three times the $207 million that commenced in the quarter, and the backlog now equals about 40% of in-place rental revenue[1][2][3]. Signings included the two Northern Virginia hyperscale leases announced in July and large leases in Asia Pacific[2].

The growth already shows up in reported results. Third-quarter rental revenue growth exceeded the second quarter's 14.2%, leased IT load rose by 75 megawatts from the prior quarter, and total portfolio occupancy rose to 91.1%[1][6]. Management attributed the growth to earlier lease commencements and the first full quarter of consolidating three Northern Virginia assets[2]. Same-capital rental revenue grew only 6.2%, and the split between commencements and acquisitions will not be clear until the 10-Q[1].

Much of the new backlog will start paying rent later. The average gap between signing and commencement was 17 months. Of the backlog, $371 million is scheduled to commence in the fourth quarter, $831 million in 2027 and $643 million in 2028 or later[1][3]. Management said commencements will accelerate over the next two quarters[2]. The amount left to commence in 2026 is about $57 million lower than the second-quarter schedule implies, and the company did not explain the difference.

Same-capital growth came from occupancy and renewal pricing

Third-quarter results confirmed that existing data centers are growing profit. Same-capital cash NOI, the cash operating profit of stabilized assets, grew 5.9% on a constant currency basis. Management attributed the gain to same-capital occupancy rising to 93.4%, churn falling to 0.7% and an 11.8% cash renewal spread[1][2].

Renewal pricing no longer depends on a single contract. The second quarter's high spread came mainly from one renewal in Singapore. In the third quarter, renewals above 1 megawatt rose 26.3%, driven by multiple renewals in Northern Virginia, while renewals in the 0-1 megawatt category rose 4.7%[1][2][7]. The company raised its full-year same-capital cash NOI growth guidance from 4.25%-5.25% to 5.25%-5.75%[1][8].

Demand from smaller customers accelerated, but electricity costs cut into profit. New 0-1 megawatt plus interconnection bookings reached $152 million, up 40% from the prior quarter, and 44% were AI-related; same-capital interconnection revenue, however, fell 0.9% from the prior quarter[1][2]. Same-capital utility expense grew 20.7% while utility reimbursement revenue grew only 16.8%, widening the net gap by about $17.5 million. The company did not explain why[1].

Core FFO per share guidance rose, but leverage and cash measures are weaker

Per-share growth beat the pace implied by guidance, with caveats on its quality. Core FFO per share, excluding fund performance fees, was $2.10, and the company raised full-year guidance from $8.15-$8.20 to $8.30-$8.35[1][8]. Capitalized interest, the interest charged to projects under construction, rose from $37.1 million to $71.0 million and lifted current-period profit[1]. Leverage rose to 5.2 times; the company said it would be 4.9 times once the Northern Virginia assets stabilize, and its $1.7 billion October debt raise carried a coupon of about 4%[2].

Conclusion

The quarter strengthens the growth case, although more of the new contracts will start paying rent in 2027 and 2028[1][3]. Profit conversion ran ahead of guidance, but the capitalized interest is an accounting effect and the utility gap is eroding profit at existing data centers. Cash generation still depends on share sales, debt, joint-venture funds and $1.4 billion of perpetual capital commitments[1][2]. The next annual report will show whether fourth-quarter commencements clearly exceed $207 million, whether the utility gap narrows, and whether leverage falls and AFFO growth catches up.

Sources

[1] DLR 8-K filed 2026-10-29 · EX-99.1 3Q26 earnings release and financial supplement · 2026-10-29 · Digital Realty 8-K Exhibit 99.1 · https://www.sec.gov/Archives/edgar/data/1297996/000110465926120212/dlr-ex99d1.htm [2] DLR Q3 2026 earnings call 2026-10-29 · 2026-10-29 · Digital Realty earnings call (Drillr transcript) [3] DLR 8-K filed 2026-10-29 · EX-99.2 3Q26 results presentation · 2026-10-29 · Digital Realty 8-K Exhibit 99.2 · https://www.sec.gov/Archives/edgar/data/1297996/000110465926120212/dlr-ex99d2.htm [4] DLR 10-K filed 2026-02-13 · business overview and portfolio · 2026-02-13 · Digital Realty 10-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926015365/dlr-20251231x10k.htm [5] DLR 10-K filed 2026-02-13 · utilities pass-through and inflation · 2026-02-13 · Digital Realty 10-K · https://www.sec.gov/Archives/edgar/data/1297996/000110465926015365/dlr-20251231x10k.htm [6] DLR 8-K filed 2026-07-23 · consolidated quarterly statements of operations · 2026-07-23 · Digital Realty 8-K [7] DLR 2Q26 earnings call 2026-07-23 · Drillr structured summary of Q&A on customer credit and Singapore renewal · 2026-07-23 · Digital Realty earnings call summary · https://investor.digitalrealty.com/events-and-presentations [8] DLR 8-K filed 2026-07-23 · 2026 outlook as of July 23, 2026 · 2026-07-23 · Digital Realty 8-K