Digital Realty Trust, Inc.

DLR · NYSE · USD

Can Digital Realty keep signing leases at record prices and deliver the powered capacity behind them before new supply, local opposition or rising costs weaken the pricing that drives its growth?

Last 4 earnings calls · through Q2 FY2026

Bull case

  • Leasing outruns available capacity

    Demand from hyperscalers and enterprises keeps arriving faster than Digital Realty can add powered space, so growth depends on construction rather than on finding customers.

  • Record backlog converts to rent

    Leases already signed but not yet billing give the company unusual visibility, so revenue should keep rising even if new leasing slows for a while.

  • Private capital funds the build

    Partner money from the hyperscale fund and joint ventures lets Digital Realty start large projects without carrying all the cost, and it earns fees on that capital.

  • Aging leases reprice to market

    Leases signed years ago at lower rates keep rolling to current market levels, lifting rent on space the company already owns with little new spending.

Bear case

  • Construction and power delivery risk

    Building at this pace depends on power, labor and equipment arriving on time, and delays would push out the rent those projects are meant to produce.

  • Spending outpaces cash generation

    Development spending is rising faster than the cash the business generates, so projects are funded by partners, asset sales and new shares before they produce rent.

  • Hyperscalers build their own sites

    The largest customers build their own campuses and can move demand between markets, which limits how much Digital Realty can charge once supply catches up.

  • Local opposition and permitting

    Community pushback, permitting and utility connections increasingly decide where and when data centers can be built, adding risk to the development pipeline.

Bull and bear points

Growth & Execution

In short: Bookings and backlog are at records, while delivery depends on power and construction timing.

Bull · 2

  • Colocation bookings doubled the two-year target

    Signings in the 0-1 megawatt plus interconnection set hit a record $108 million in Q2 2026, roughly double the pace of two years earlier, the third straight record.

    Q2 FY2026 call

  • Hyperscale signings already beat all of 2025

    Management said first-half hyperscale signings of about $1.4 billion, including a $400 million signing in early July, already exceeded total signings for all of last year.

    Q2 FY2026 call
Bear · 2

  • Capital spending guidance raised three times

    In February management guided 2026 development spending of $3.25 billion to $3.75 billion; in July it moved the range to $4.25 billion to $4.75 billion as project starts multiplied.

    Tone shiftQ4 FY2025 → Q2 FY2026

  • Development pipeline only partly pre-leased

    Management builds shells and suites ahead of signed leases, so a meaningful share of what is under construction still needs tenants or depends on speculative demand.

    Q4 FY2025 call

Profitability & Financial Strength

In short: Leverage is at a multiyear low and fee income is rising, but free cash flow is negative on building spending.

Bull · 2

  • Full-year 2026 guidance raised twice

    The core FFO range for 2026 started at $7.90 to $8 per share in February and reached $8.15 to $8.20 in July, a midpoint management describes as double-digit growth.

    Tone shiftQ4 FY2025 → Q2 FY2026

  • Fee income more than doubled in 2025

    Management, development and promote fees from the hyperscale fund and joint ventures reached roughly $45 million in Q2 2026, earned without owning more assets outright.

    Q2 FY2026 call
Bear · 2

  • Free cash flow negative as building accelerates

    Trailing-twelve-month free cash flow is negative $507 million, so growth is funded by partners, asset sales and new capital rather than by the cash the business generates.

    Filed financials

  • Share count up 16.7% in three years

    Digital Realty paid for Blackstone's stake in three Northern Virginia data centers with 12.3 million new shares, and plans stock consideration for Teraco and Columbia Capital.

    Q2 FY2026 call

Market Position

In short: Capacity sits in the tightest metro markets, while new supply and local opposition could ease that scarcity.

Bull · 2

  • Renewal spread guidance raised to 9% to 11%

    Management lifted its 2026 cash renewal spread outlook from 6% to 8% in February to 9% to 11% in July, after second-quarter renewals repriced more than 25% higher.

    Tone shiftQ4 FY2025 → Q2 FY2026

  • Rent growth outpaces construction cost inflation

    Management says market rents are still rising faster than build costs, keeping development returns in double digits even as land, labor and equipment get more expensive.

    Q1 FY2026 call
Bear · 2

  • Local moratoria and permits constrain development

    Government authorities have imposed moratoria and efficiency rules on data center development, and local pushback can delay projects the company has already bought land for.

    10-K, filed 2026-02-13

  • Top three customers are 26% of revenue

    The 20 largest customers produced about 51% of annualized recurring revenue and the top three about 26% at year-end, so a single hyperscaler pulling back would matter.

    10-K, filed 2026-02-13