Digital Realty signs record data center leases in third quarter

What happened

Digital Realty Trust reported on Thursday 29 October third-quarter revenue of $1.9 billion and a record $627 million of yearly rent from new leases signed at its own share. ^{[1, 2]}

Revenue was 21 percent higher than a year earlier, the company said, and 10 percent above the second quarter once $201 million of promote income, an incentive fee from investment partners, is set aside. Net income was $194 million, against $64 million a year earlier. MT Newswires reported the rise in revenue the same evening. ^{[1, 4]}

Chief executive Andy Power said the quarter brought 'record leasing, an expanding backlog, and another quarter of double-digit earnings growth.' ^[1]

Why it matters

Bookings are rent that has not started yet: the company said new leases signed in the quarter begin on average 17 months after signing. The backlog of signed leases not yet started reached a record $1.8 billion a year at its share, or $2.5 billion counting partners' shares. Weekly Real Estate News noted that money for land, power and construction may be spent well before that rent starts. ^{[1, 3]}

Where the leases came from

Leases of more than 1 megawatt brought a record $474 million, the company reported. Smaller leases and interconnection, the links between customers inside its buildings, brought a record $152 million. The release does not say how much of the quarter's leasing came from AI customers. ^[1]

By region, Asia Pacific signed $283 million, the Americas $243 million and Europe, the Middle East and Africa $78 million, according to the release. Counting partners' shares, total bookings were $855 million. ^[1]

At Wednesday 30 September, 1,464 megawatts were under construction counting partners' shares, 63 percent of it already leased, the supplement said. The company also held land for 7,850 more megawatts and building shells for 500, and bought $742 million of land in the quarter, including sites near Indianapolis and Charlotte. ^[1]

What the company expects

The company raised its 2026 outlook for revenue, excluding promote income, to $7.05 billion to $7.125 billion, from $6.85 billion to $6.95 billion in July. It put adjusted EBITDA, a measure of earnings before interest, taxes and depreciation, at $3.8 billion to $3.85 billion, the release said. ^[1]

After the quarter ended, the company said it closed $1.4 billion of first commitments to a new fund for finished hyperscale data centers in North America. It also raised its stake in Teraco from 61 percent to about 77 percent for about $688 million, mostly in new shares. ^[1]

What settles it next

The quarterly report on Form 10-Q, with the full unaudited statements, is still to be filed. The company listed its next investor appearances at Nareit REITworld in Atlanta on Tuesday 17 and Wednesday 18 November and at a UBS conference in London on Tuesday 1 December. ^{[1, 5]}

Who it reaches

Digital Realty Trust (DLR) is direct: the results, the leases and the outlook are its own, filed on Form 8-K on Thursday 29 October. ^{[1, 2]}