Digital Realty Q2 2026 Earnings Call - Record Backlog and 25%+ Renewal Spreads Signal Acute Supply Constraints

Operator: Good afternoon, welcome to the Digital Realty second quarter 2026 earnings call. Please note this event is being recorded. During today’s presentation, all parties will be in listen-only mode. Following the presentation, we will conduct a question and answer session. Callers will be limited to one question. We will aim to conclude at the top of the hour. I would now like to turn the call over to Jordan Sadler, Digital Realty’s Senior Vice President of Public and Private Investor Relations. Jordan, please go ahead.

Jordan Sadler, Senior Vice President of Public and Private Investor Relations, Digital Realty: Thank you, operator, welcome everyone to Digital Realty’s second quarter 2026 earnings conference call. Joining me on today’s call are President and CEO, Andy Power, and CFO, Matt Mercier. Chief Investment Officer, Greg Wright, Chief Technology Officer, Chris Sharp, and Chief Revenue Officer, Colin McLean, are also on the call and will be available for Q&A. Management will be making forward-looking statements, including guidance and underlying assumptions on today’s call. Forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. For a further discussion of risks related to our business, see our 10K and subsequent filings with the SEC. This call will contain certain non-GAAP financial information. Reconciliations to the most directly comparable GAAP measures are included in the supplemental package furnished to the SEC and available on our website.

Before I turn the call over to Andy, let me offer a few key takeaways from our second quarter results. First, we had an extraordinarily productive quarter, reflecting strong execution across our key growth vectors, which translated into meaningful upside versus our expectations across revenues, adjusted EBITDA, and core FFO. Core FFO, excluding net promote income, reached $2.13 per share in the second quarter, exceeding our expectations and delivering 14% year-over-year growth. Accordingly, we are once again raising our 2026 core FFO per share guidance range, implying 10% constant currency growth at the midpoint. Second, bookings in the quarter were impressive overall, with record zero to 1 megawatt plus interconnection signings that surpassed the $100 million mark. The real standout this quarter was renewal spreads, which surged to a record 25+%.

Just after quarter end, we signed 2 hyperscale leases, further demonstrating the momentum in our greater than 1 megawatt category. Third, strong bookings pushed our total backlog to a new record of $1.9 billion at 100% share or $1.4 billion at Digital Realty share, before accounting for the post-quarter signings. The backlog was roughly 30% of in-place data center revenue at the end of June, which should support multiple years of double-digit growth. Finally, we announced 4 strategic transactions across our 4 growth pillars of colo and connectivity, hyperscale, and strategic private capital. These transactions strengthen Digital Realty’s value proposition and are expected to bolster Digital Realty’s runway for growth for years to come. With that, I’d like to turn the call over to our President and CEO, Andy Power.

Andy Power, President and CEO, Digital Realty: Thanks, Jordan, thanks to everyone for joining our call. There’s a lot of good news to share this quarter, driven by broad-based momentum across our business, our global full spectrum strategy, and our team’s incredible execution. Our business is firing on all cylinders. This quarter showcases the strength and scalability of our platform. Over the last several years, we’ve been planning and executing to deliver full spectrum data center infrastructure solutions to our large and growing customer base. These efforts are clearly bearing fruit. At the same time, we continue to sow the seeds to deliver the capacity our customers require and to capture the opportunity for which Digital Realty is uniquely positioned. Digital Realty delivered record results in the second quarter of 2026, reflecting continued execution across multiple regions, products, and customer segments.

We also continue to benefit from the strongest development and leasing pipelines in the company’s history, providing confidence in our ability to meet future customer requirements well beyond 2026. Our strategic focus is on our three core pillars of growth, colocation and connectivity, hyperscale, and strategic private capital. Together, these complementary components are driving strong performance today and fortifying our foundation for the long term while enhancing our ability to support the robust demand for digital infrastructure and AI around the world. Let me begin by focusing on colocation and connectivity, which remains one of the most differentiated aspects of the Digital Realty platform. As AI deployments continue to evolve, we believe customers increasingly value environments that combine power, proximity, and connectivity. During the second quarter, we delivered yet another bookings record in our colocation and interconnection business.

Approximately two years ago, bookings in our zero to one megawatt plus interconnection business were averaging about $50 million per quarter. We set a goal of doubling that level over time by focusing on the growing importance of highly connected digital infrastructure. During the second quarter, we achieved that objective for the first time, delivering $108 million of bookings in our zero to one megawatt plus interconnection business and marking a third consecutive quarterly record. This milestone reflects strong demand and continued success in capturing highly connected enterprise and service provider deployments. Today, our customers can access a global community of approximately 6,000 cloud, network, enterprise, and service provider customers across more than 300 data centers worldwide. We are also seeing increasing levels of engagement from customers deploying AI-enabled applications.

Many AI deployments require organizations to connect data, networks, cloud platforms, and end users in efficient and scalable ways. This dynamic plays directly to the strengths of PlatformDIGITAL. Turning to hyperscale. Demand for large-scale deployments remains healthy and increasingly global, though the pace and scale of activity vary across regions. Activity during the quarter was led by the Americas, with particularly strong contributions from South America. APAC continues to support a growing pipeline of larger opportunities. We also continue to see customer engagement across Europe, albeit a generally smaller scale, reinforcing the broad-based nature of demand for digital infrastructure. Subsequent to quarter end, we signed two additional hyperscale leases in the U.S., representing another $410 million of annualized GAAP-based rent at 100% share, or $205 million at Digital Realty share.

While hyperscale leasing can be episodic from quarter to quarter, we remain encouraged by both the breadth of customer activity and the strength of our pipeline. In late June, we announced the acquisition of Blackstone’s ownership interest in three fully leased hyperscale data centers in Northern Virginia, totaling 288 megawatts of IT capacity. The transaction accretively increased our ownership in a set of best-in-class facilities that we have designed, constructed, and leased, and does so at an attractive entry point while continuing to partner with Blackstone on the remaining 400-plus megawatts in our development venture. Also in late June, we announced the expansion into the Kansas City metro, securing 600 megawatts of utility power that begins to ramp in early 2028 with a long-term runway of up to two gigawatts of utility power.

The timing of power delivery aligns well with customer deployment requirements and reflects the importance of proactively securing capacity ahead of demand. Kansas City benefits from strong connectivity supported by extensive long-haul fiber infrastructure, more than 25 network providers, and less than 10-millisecond latency to more than 50% of the U.S. population. Combined with its central location and substantial power availability, this market is proving an important hub for AI and cloud workloads, with several hyperscaler self-build deployments already underway. Together, these actions enhance our growth trajectory and extend our development runway. Coupled with the strength of our leasing pipeline, they reinforce our ability to support the expanding hyperscale cloud and AI infrastructure needs around the world. Turning to our strategic private capital business.

Digital Realty has employed private capital to fuel the company’s growth for over a decade through a series of financial and strategic joint ventures, and more recently, the successful formation of our $3.25 billion U.S. Hyperscale Fund that closed earlier this year. Using private capital, Digital Realty can scale hyperscale development capacity beyond the limits of our balance sheet to better serve the needs of our largest customers. This approach delivers near-term growth through fee income, expands our product availability and investment capacity, and enhances the return on invested capital to DLR shareholders. In June, we entered into an agreement to acquire 100% of Columbia Capital, a 30-plus-year leading asset management platform in the digital infrastructure space.

The Columbia Capital transaction will meaningfully scale our private capital platform, adding more than nine billion of fund commitments and a well-established base of hundreds of investors, including sovereign wealth funds, pension funds, insurance companies, endowments, and other institutional investors. Strategically, Columbia Capital expands our expertise and visibility into adjacent sectors that underpin our data center business, including fiber, mobility, and enterprise technology, while allowing us to participate in those opportunities alongside third-party capital rather than relying solely on our balance sheet. Columbia’s experienced investment team and established portfolio complement Digital Realty’s global operating platform and will strengthen investment capabilities to take advantage of the expanding AI infrastructure ecosystem. Lastly, this transaction will strengthen our earnings profile and position Digital Realty to drive additional long-term value creation. During the second quarter, we continue to see both enterprises and hyperscalers expand across PlatformDIGITAL.

A few examples include, a multinational financial firm is growing its PlatformDIGITAL footprint by deploying private AI inference capabilities to enable data exchange across financial, network, and cloud ecosystem partners. A GPU-as-a-service provider, together with a global AI infrastructure company, are deploying in PlatformDIGITAL’s new data center in Barcelona to increase networking capacity and reduce costs while creating a distributed inference AI-ready ecosystem to support advanced AI workloads for growing enterprise demand. A global financial service company chose PlatformDIGITAL to support next-generation AI infrastructure and inference-enabled workloads, leveraging interconnected digital ecosystems. A global cloud computing and content distribution provider is expanding into a new metro by leveraging the leading connectivity propositions available on PlatformDIGITAL.

Before turning the call over to Matt, I’d like to spend a moment on the increased public attention that data centers are receiving and how Digital Realty is doing its part to engage constructively and operate responsibly and sustainably. As an industry, we are becoming significantly more visible. That’s understandable. Demand for digital infrastructure continues to grow rapidly, and data centers are increasingly recognized as critical infrastructure. Despite the growing role data centers play in our daily lives, and the fact that we’ve been operating as a public company focused on data centers for more than two decades, most people have never visited one and may not fully appreciate the critical role these facilities play in enabling modern society. The reality is that Digital Realty’s data centers support nearly every aspect of the modern economy.

Every cloud application, video call, online class, financial transaction, AI query, streaming service, healthcare record, and social media interaction ultimately depends on digital infrastructure. Whether you’re working remotely, connecting with your family across the world, ordering and paying for coffee, food, or anything else through an app or online, navigating the globe, using connected devices to track calories, glucose levels, or overall wellness, monitoring your home via doorbell cam, keeping track of your finances and the market, or running a small, medium, or large business, data centers provide the physical foundation that makes those experiences possible. For Digital Realty, that’s something to be proud of. Digital Realty’s data centers increasingly support economic growth, innovation, education, healthcare, communication, and national competitiveness.

They also create high-quality jobs, generate substantial tax revenue for local municipalities that support schools, public safety, support improved resiliency for the utility grid, and often serve as catalysts for broader economic development within the communities where they operate. In our two decades operating data centers, we have seen these benefits firsthand across the markets we serve around the world. As the data center market grows, we believe it is equally important that our industry continues to grow responsibly. At Digital Realty, we are committed to partnering with our customers, communities, utilities, and policymakers. We believe our recently published impact report provides transparency on our performance and serves as a useful scorecard for how we’re performing against those objectives. Let me touch on a few highlights from the report.

During 2025, we achieved 93% renewable energy coverage globally, matched 205 sites with 100% renewable and emissions-free energy, and expanded our contracted renewable energy portfolio to approximately 1.7 gigawatts. These efforts reflect our commitment to supporting customer growth while remaining a responsible partner to the communities and energy systems in which we operate. Our data centers also play a constructive role in supporting grid reliability, mitigating risks during periods of peak demand, and helping to ensure the grid remains reliable for everyone. In other words, we’re not simply consumers of electricity; we also support the resiliency of the broader energy system when it is most needed. From 2023 to 2025, we expanded our portfolio capacity by more than 24% while limiting water consumption growth to just 3%, with nearly half of our water sourced from non-potable supplies.

Our 300-plus data centers globally use less water than 18 California golf courses, while there are 16,000 golf courses in the U.S. alone. We are proving that digital infrastructure can scale sustainably while using resources more efficiently. With that, I’ll now turn the call over to our CFO, Matt Mercier.

Matt Mercier, CFO, Digital Realty: Thank you, Andy. Digital Realty delivered double-digit growth across virtually every major operating and financial metric during the second quarter, reflecting continued momentum in our colocation and interconnection business, substantial commencements from our growing backlog, exceptional re-leasing spreads, modest churn, and increasing fee income. We achieved these results while continuing to invest with conviction in future growth, expanding our development and investment platform, and simultaneously maintaining leverage at 4.7 times at quarter end, well below our long-term threshold. Overall, the strong operating environment and our favorable positioning continued to translate into better than expected results. We are seeing the strength reflected not only in current earnings, but also in our growing backlog and expanding development pipeline, which have improved visibility into future revenue and earnings growth.

Turning to leasing activity, we posted another strong quarter of bookings across our platform, highlighted by record signings in our zero to one megawatt plus interconnection business and robust demand across our hyperscale product set. In the zero to one megawatt plus interconnection category, we generated a record $108 million of bookings during the quarter, representing an 11% increase over the prior record set last quarter. Leasing activity in this segment was strong across all three regions, though EMEA achieved a new quarterly record. In contrast to the first quarter, the smallest power bands were the most prominent driver in 2Q, with record levels of activity in our sub 300 kilowatt band. The zero to one megawatt business continues to provide an attractive combination of near-term revenue conversion, pricing power, and recurring growth.

Interconnection bookings of $20.5 million in the quarter also marked a new record, up 18% from the prior year, as these bookings benefit from the overall growth in our zero to 1 megawatt category. The greater than 1 megawatt product category also saw healthy leasing activity in the quarter, led by the Americas, including a record contribution from São Paulo. Customer engagements remain robust across this vertical. We continue to source and action capacity throughout our global portfolio. Subsequent to quarter end, we signed two additional hyperscale leases, representing approximately $410 million of annualized rent, or $205 million at Digital Realty share. Renewal activity was exceptional during the quarter. We signed over $261 million of renewals with cash re-leasing spreads over 25%, reflecting the growing supply-demand imbalance in certain markets, the embedded value within our portfolio, and our ability to capture pricing as contracts roll.

Combined with the modest churn and strong new leasing activity, these spreads should continue to support attractive organic growth. Renewals in the zero to 1 megawatt category accounted for 55% of total renewals and were also a strong contributor, with 5.2% cash mark-to-market. Greater than a megawatt renewals accounted for 44% of the total and delivered a remarkable 66.7% mark-to-market. Renewal strength was strongest in the APAC region, with outsized spreads realized in Singapore. These renewals highlight the continued imbalance between supply and demand for premium data center capacity and underscore the attractive repricing opportunities that are periodically presented to us in our most highly constrained markets. While the second quarter reflects an exceptional renewal outcome, it also provides a compelling illustration of the value embedded within our lease expiration schedule and the pricing opportunities available in our most supply-constrained markets. Moving to the backlog.

Our total backlog reached a new record of $1.9 billion at the end of the second quarter, further enhancing our visibility of future revenue growth. This excludes the benefit of the new $410 million of hyperscale leases signed in July. At Digital Realty share, the backlog increased by 75% since the beginning of the year to a record $1.4 billion. This backlog now represents approximately 30% of our in-place data center rent, highlighting the potential growth that will unfold in the coming years as developments are successfully delivered. During the quarter, we commenced $208 million of annualized rent, marking our third strongest commencement quarter on record. Looking ahead, commencements will accelerate meaningfully as $635 million of annualized rent is scheduled to commence in the second half of 2026, with 45% starting in the third quarter and 55% in the fourth.

Looking into 2027, we have $480 million scheduled to commence, with another $312 million already slated for 2028 and beyond. These future commencements reflect continued strong execution across our leasing, development, and delivery platforms, enhanced by the strategic transactions completed during the second quarter. With the substantial portion of future revenue already under contract, we enter the second half of 2026 with a high degree of confidence in our growth outlook and a strong foundation for continued earnings growth into 2027 and 2028. As for earnings, we reported core FFO of $2.65 per share for the second quarter, including a $0.52 benefit from net promote income. Excluding net promote income, core FFO was a record $2.13 per share, up 14% year-over-year, reflecting strong execution, elevated commencements, growing fee income associated with our strategic private capital platform, and seasonally low repair and maintenance expenses.

Core FFO also included $0.02 of upside from FX and a $0.07 per share net benefit from business interruption insurance proceeds from lost rent related to an incident in Singapore. Let me provide some additional detail. As noted, we benefited from two significant sources of upside in the quarter. First, we received $113 million of proceeds, or $94 million net of tax, associated with an insurance recovery from an event and claim made in 2024. This recovery reflects the final settlement and most significant portion of that claim that was recognized during the quarter. In terms of financial statement geography, the $113 million recovery was recognized in interest and other income, whereas the related $19 million tax liability was recorded as income tax expense. Of the $94 million net gain, approximately $67 million was related to property damage and therefore excluded from Core FFO.

The remaining $27 million, or approximately $0.07 per share, represented the business interruption component or payment for lost rent, which was included in Core FFO. The $0.07 was contemplated in our full year guidance, though timing was imprecise. Second, Digital Realty realized roughly $200 million of promote income associated with the Blackstone transaction this quarter, reflecting the value creation generated through the development and lease-up of the three joint venture assets. The $188 million, or $0.52 per share recognized in our Core FFO reconciliation, is net of $14 million of related expenses. The gross promote income was recognized in fee income and therefore included in total revenue, whereas the related expenses are reflected in other expenses.

While promote income is new to Digital Realty, it should be viewed as a value creation-oriented gain, reflecting successful outcomes for our JV partners and investors that may be realized periodically over time. The promote demonstrates the value creation potential from combining our development capabilities and operating platform with our strategic private capital business. Given the potential for additional promote income in the future, it is judged as Core FFO. However, since this promote was not reflected in our 2026 guidance, we have presented Core FFO results both including and excluding its impact. Looking forward to the third quarter, we expect reported Core FFO excluding promote to moderate slightly as strong commencements are partly balanced by the seasonal ramp in net utility and R&M expenses, a pickup in CapEx spending and asset recycling activity, as well as elimination of the $0.02 FX benefit we enjoyed in 2Q.

Same-capital cash NOI growth strengthened further in the second quarter, increasing 8.9% year-over-year, driven by 8.2% revenue growth and disciplined expense management. On a constant currency basis, same-capital cash NOI increased 7.2%, reflecting higher occupancy, robust renewal spreads, and strengthened interconnection. Moving on to investment activity, we invested $1.1 billion in development CapEx during the quarter, net of our partners’ share, bringing year-to-date capital spending to $2 billion. We also completed a handful of meaningful land acquisitions in the quarter in Kansas City, Marseille, and Atlanta that expanded our future development capacity, along with the acquisition of operating and development assets in Malaysia. These activities reflect our continued focus on disciplined capital allocation, expanding capacity in markets where we see the strongest customer demand, and positioning the platform for future growth. During the quarter, we delivered 76 MW of new IT capacity, approximately 60% of which was pre-leased.

At the same time, we commenced development of 312 MW of capacity, including significant available inventory in Northern Virginia and Marseille to support future customer deployments. These development starts reflect both the strength of customer demand and our confidence in the opportunities we see across the platform. As a result, our development pipeline expanded to 1.4 GW under construction at a total cost of $20 billion, representing a 100% increase during the first half of 2026. Pro forma, the hyperscale leasing completed in July. The development pipeline is now 63% pre-leased at an 11.5% average expected stabilized yield. More than 80% of our active development pipeline is located in the Americas, reflecting outsized demand from hyperscale cloud and AI-oriented workloads.

While Northern Virginia remains our largest development market, we also have significant activity underway in Charlotte, Atlanta, and São Paulo, and expect to begin construction in Kansas City during the second half of the year, further expanding our capacity in markets where we see the strongest long-term demand. Collectively, these projects provide both near-term deployment opportunities and substantial runway for future growth. Turning to the Blackstone transaction, we paid $1.2 billion in cash and issued 12.3 million shares valued at approximately $2.3 billion for Blackstone’s blended 64% equity interest in three fully leased hyperscale data centers in Northern Virginia, totaling 288 MW of capacity. We also assumed our partner’s share of a $725 million loan and the remaining CapEx necessary to finalize the construction and fit-out of these assets.

From a timing perspective, we expect the first two facilities to fully stabilize during the first half of 2027, with the third expected to stabilize during the first half of 2028. Despite closing on these assets pre-stabilization, we are still raising full-year 2026 guidance by another 1.5%. We also expect this transaction to be accretive to core FFO per share in both 2027 and 2028 and help support our outlook for multiple years of double-digit core FFO per share growth. In addition to this transaction, we also announced our plans to acquire a 16% interest in Teraco for roughly $650 million of DLR common stock and Columbia Capital for approximately $485 million, which are expected to close in the second half of the year.

Turning to the balance sheet, the second quarter was highlighted by a continued multiyear trough in leverage as debt to adjusted EBITDA remained at just 4.7 times at quarter end, despite completing nearly $6 billion of net new investment activity during the quarter. Notably, leverage falls below 4.6 times when adjusting for the timing of the Blackstone JV transaction, which closed on the last day of the second quarter. Over the past 12 months, leverage has declined by approximately 0.4 turns, reflecting the strength of our operating performance, increased retained capital, and tactical equity issuance to support our expanded opportunity set. We maintain approximately $6 billion of liquidity today, and ample incremental borrowing capacity below our long-term 5.5 times leverage threshold. We also continue to expand our strategic private capital platform as we build investment capacity to support the significant hyperscale opportunity ahead of us.

Along with the dry powder that remains with our hyperscale development joint venture, we estimate that we have over $12 billion of remaining capacity to support hyperscale data center development. Taken together, these initiatives strengthen our ability to support customer demand, fund our expanding development pipeline, and capitalize on future growth opportunities while maintaining financial flexibility and balance sheet strength. Let me conclude with guidance. We are raising our 2026 core FFO per share guidance, excluding net promote income, by $0.15 at the low end and $0.10 at the high end to a new range of $8.15-$8.20 per share, reflecting the continued strong execution across our data center portfolio and our high visibility for the remainder of the year. The midpoint of the updated range represents double-digit growth over 2025, which would mark our second consecutive year of double-digit core FFO per share growth.

We also expect cash renewal spreads of 9%-11%, up another 250 basis points from last quarter, driven by strong performance year to date with a healthy outlook for the remainder of the year. Same capital cash NOI growth of 4.25%-5.25% on a constant currency basis, up 25 basis points. CapEx net of partner contributions is expected to increase by $750 million from last quarter to $4.25 billion-$4.75 billion, driven by our recent leasing success and the strong demand outlook. We are also continuing to recycle capital to fund this new investment and have added another $500 million to our dispositions in JV capital guidance. Importantly, our current backlog of contracted commencements, development pipeline, and recent strategic transactions give us increased confidence in our ability to extend our double-digit core FFO per share growth runway into 2027 and beyond.

This concludes our prepared remarks. Now we will be pleased to take your questions. Operator, would you please begin the Q&A session?

Operator: Certainly. We will now open up the call for questions. In the interest of time and to allow a larger number of people to ask questions, callers will be limited to one question. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment, please. Our first question comes from the line of Eric Luebchow with Wells Fargo.

Eric Luebchow, Analyst, Wells Fargo: Hi, thanks for the question, guys. Maybe we could just touch on your comment, Matt, about double-digit FFO growth for multiple years to come. You could kind of help us walk through some of the puts and takes. First of all, obviously the Blackstone, Teraco, Columbia Capital deals, you talked about meaningful accretion starting in next year. If you could walk through any of the accretion math for us there, and then it certainly sounds like given the success you’ve had in leasing year to date, that CapEx is going to be meaningfully higher next year. Just if you could kind of talk through the balancing act between accretion on deals, continued growth, and then capital funding to hit that double-digit growth target, that’d be helpful. Thank you.

Matt Mercier, CFO, Digital Realty: Yeah. Thanks, Eric. Look, I think we’ve set the stage in terms of our growth algorithm that you’re seeing happen this year with our guidance raise that’s now putting this 10%, last year delivering 10%. Really, we’re ultimately executing across several growth levers to stack up these multiple years of 10% growth. Again, taking some examples. We got renewal execution this quarter that gives us an opportunity to drive higher value out of our operating portfolio in a very supply-constrained environment. We continue to execute on our hyperscale leasing, which is building a deeper multiyear backlog. We’re also setting another record in our zero to one and interconnection demand, which is driving not only more immediate revenue growth, but also improving our long-term revenue base. Then you add the private capital, which is giving us an ability to fund additional capacity while also generating fee income.

It’s all these things coming together that you’re seeing this year that, again, goes back to giving us confidence in our ability to extend that double-digit core FFO growth per share into not only this year, but into 2027 and beyond.

Operator: Thank you. Our next question comes from the line of Nick Del Deo with MoffettNathanson.

Nick Del Deo, Analyst, MoffettNathanson: Hi, thanks for taking my question. Looking out over the next several years, how should we think about the evolution of your asset mix kind of split between network dense colo, on-balance sheet, hyperscale or large footprint facilities, and assets held in various off-balance sheet vehicles? You’re obviously pushing hard in all three areas. I’m kind of curious as to how that is going to shift if we look out three years or five years or whatever you think the appropriate timeframe is.

Andy Power, President and CEO, Digital Realty: Hey, thanks, Nick. As you can see, these items are all firing on all cylinders here. First and foremost, colo connectivity. That’s been a part of rolling out incremental inventory in our core markets. We’ve also added numerous markets in the recent quarters, be it entering into Malaysia or Indonesia. We’re in Europe, going to Lisbon. We had a great signing into our Barcelona data center that we built from the ground up on the enterprise colo front. Rome is coming up as well as Milan. Entering more markets, more places for our enterprise customers to land as well as our connectivity customers. Within that, increasing of our addressable market execution. Three consecutive quarters in a row of records in the 0 to 1 megawatt category. This quarter was certainly a milestone of 20% year-over-year.

If you literally go back two years ago in this quarter, we’re about 2x in the productivity and signings in that category. All that activity, by and large, is really on balance sheet. Increasing our mix in that category as we add new customers, 142 new logos this quarter, expand to new markets and new services with existing customers. At the same time, we’ve also been able to expand and support our hyperscale customers. They’re off to a great start to the year, with really $1.4 billion of signings, including the $400 million signing we signed in the first days of July, which is already eclipsing basically what we did for the entirety on a total signings basis of last year. We’re just at called halftime of 2026.

That hyperscale obviously hasn’t even hit our P&L because a lot of those signings go into our development pipeline. We are looking at raising private capital to essentially create recycling vehicles. A great example of that was our inaugural U.S. Hyperscale Fund, with three and a quarter billion upsized, called $10 billion of total dry powder and spend just by itself. We seeded into that about $1 billion of assets. You can see the playbook. We’re supporting the full customer spectrum, and using the private capital as a lever for better funding our capital base and supporting our customers.

Operator: Thank you. Our next question comes from the line of Michael Rollins with Citi.

Michael Rollins, Analyst, Citi: Thanks, good afternoon. I’m curious if you could help us appreciate the timing for the development pipeline that you have. How much power has been fully committed to you guys and is coming on for each of the next few years, just to understand how much is left that you have to sell and over which periods? Also, you mentioned the strength of the fee income and the opportunity going forward. Is there a simple algorithm you can walk us through on how that fee income should scale for Digital Realty over the next few years? Thanks.

Andy Power, President and CEO, Digital Realty: Hey, thanks, Mike. I’ll touch on the development first, and then I’ll hand it off to Matt to kind of walk to some of the sequencing and the fee income, which you can see has been ramping over the last several quarters and will continue to do so as asset management fees, property management fees, construction fees come online for various projects in these vehicles. Going to development. Today, as of 6:30, we have about north of $20 billion of projects under development at full share. That’s 11.5% ROI. The leasing we did just in early July was actually into that $20 billion, and that raised the pre-leasing of that capacity to call it 63% and change pre-leased. That is called 1.4 gigawatts. Obviously, all powered, ready to go. We’re building the buildings and leasing into them.

If you look at that’s about a 45% expansion of the just over 3 gigawatts we operate today. Big needle moving capacity, highly pre-leased, strong returns, great customers, diversified over numerous markets, as you can see, and a very strong contribution to growth of new units coming online. That 1.4 of growth capacity is within an overall envelope of now it stands at 9 gigawatts of growth runway for Digital Realty’s customers around the world, which we recently added to with some of the markets that we had in the prepared remarks. The nearest term segments of what’s up, let’s just call it the what’s up next and our customers are talking to us about, we’re in active dialogue on, is probably close to 1.5 gigawatts of the 2027 and 2028 deliveries. That’s certainly on the forefront.

This is also a moving target. If you look at just 90 days ago at our first quarter results, we signed the largest lease in the history of the company, 200 megawatts, and that was into the Charlotte market where we essentially had closed on the land roughly 18 months prior. We’re continuing to support the runway of growth for our customers, and build that development pipeline, which ultimately drives that backlog of revenue that Matt walked you through. Matt, do you want to talk about the fee income?

Matt Mercier, CFO, Digital Realty: On the fee income, I think maybe a good place to start, which I think Andy hit on, is when you look at the major components of our fee income, we’ve got management fee income, development, call it construction fee income, and then we have fit-out fee income, which can be more episodic. The first two, I’d say, are generally we’re starting to hit more of a recurring phase as we expand our private capital business. In the second quarter, when you normalize for the promote, we’re around $45 million, a little bit above that of fee income. When I think about what is going to drive that going forward, it’s going to be roughly the, call it, $10 billion-$12 billion of capital that we have available to deploy within that private capital structure.

Expect that probably goes out over the next, let’s say, call it one to two years as we start to bring those assets online. From a construction standpoint, that’s going to drive our development income, and then that’s going to transition to more of an operating management fee income. I think we’ve got some runway to continue that even within the private capital vehicles today. Add on top of that for future private capital initiatives that we may pursue as well.

Operator: Thank you. Our next question comes from the line of Madison Rezaei with Bernstein.

Madison Rezaei, Analyst, Bernstein: Hey, guys. Thanks for taking the question. As the AI build-out broadens beyond the sort of traditional cloud majors, are you signing leases with a wider set of who we would consider hyperscale counterparties, thinking sort of neo clouds, AI native platform, sovereign guys? Or are you still concentrating that greater than one megawatt book in the same shortlist of IG names? I guess to the extent you’re broadening the set, how are you underwriting the contracts given that sort of giant spread in credit profiles?

Andy Power, President and CEO, Digital Realty: Thanks, Madison. When it comes to more diverse, often less than a megawatt network-oriented deployments or enterprises that want to use private AI, and call it the broader service provider ecosystem, that’s AI, which was a strong contributor. I think our zero to one megawatt category had the largest dollar volume of AI-related wins this quarter, roughly 20% of that $108 million. We are certainly supporting that, and we view that as additive to essentially our ecosystem, multiple markets, driving demand, driving connectivity, and attractiveness to our platform. When it comes to, I think, the heart of your question, the larger footprint capacity blocks, by and large, we have really supported the more traditional, strong investment-grade credit names customers. Now, we’ve done that in a more curated fashion with real diverse customer hyperscale demand.

I can tell you the last 10 quarters, our top signing was from six different top hyperscalers, all on that call strong investor grade category names with multifaceted businesses, often cloud computing being a big piece of it, in addition to AI. They landed across six different markets across those 10 quarters. In fact, the largest signing this quarter into Q26, that is a top customer of ours, but that top customer of ours hadn’t been at the podium for our largest signing in probably seven quarters back. I would say sticking to supporting the more traditional hyperscale customer base when it comes to really large footprints, but doing it really making sure numerous customers can grow on our campus fashion.

Operator: Thank you. Our next question comes from the line of Jonathan Atkin with RBC Capital Markets.

Jonathan Atkin, Analyst, RBC Capital Markets: Yeah. Related to that, leading into my question, as you think about customer credit and doing business with LLMs, and a broader array of neo clouds, are you in principle open to it, or are you looking for a look-through into who the underlying customer is? Thoughts on that philosophically. As you look at your sales pipeline, any new trends to call out around demand, verticals, types of workloads that are contributing to what you see as your near-term sales pipeline? Thanks.

Andy Power, President and CEO, Digital Realty: Thanks, John. I’ll tackle the first one, then I’ll ask Colin to touch on the sales trends, because I think there’s lots of good data and news to report on that front. Really, your question’s more hypothetical than reality for us. Like I said, we are supporting the network nodes, the smaller deployments, enterprises doing private AI on digital, and those in a very diverse fashion across numerous markets, but nothing of any sizable concentration, single site or single customer. When you look at that, call it $1.4 billion of signings in, call it first half plus days of July, that’s all really the more traditional hyperscalers. We’ve not been booking any material extent that some of those hypothetical scenarios you mentioned. Colin, why don’t you pick up on the trends?

Colin McLean, Chief Revenue Officer, Digital Realty: Great. Thanks, Andy. Appreciate the question, Jonathan. Yeah. Andy highlighted, we’re really pleased with our 0 to 1 megawatt and our over 1 megawatt progress in supporting customer needs. A little bit of color, 0 to 1. Again, the third straight quarter of record bookings, four out of five, where we’re really taking market share. We’re seeing that demand profile really across geographies and use cases, that overall demand funnel’s become much more durable. Couple of key trends to highlight. While certainly AI gets the headlines, Andy mentioned it’s certainly a growing part of our overall pipeline and bookings. Digital transformation and cloud continues to be very resilient. You’re seeing quite a bit of data localization, sovereignty, greater emphasis on repatriation, private and public cloud are really standing out. Also want to highlight interconnection becoming a greater part of the overall solution proposition.

Matt Mercier, CFO, Digital Realty: You’ll note we had record bookings for interconnection the quarter ServiceFabric, which really helps build out the platform strategy around self-service capabilities becoming more consistent conversation with clients as they stitch together solutions. For us, we’re seeing greater sales motion in the channel-centric orientation of the way that we’re delivering value to our clients. We had a record channel quarter, nearly 40% of our bookings across the platform. Last but not least, really strong new logo contributions. Now we’re now up to north of 6,000 customers who are participating in PlatformDIGITAL.

Operator: Thank you. Our next question comes from the line of Jon Petersen with Jefferies.

Jon Petersen, Analyst, Jefferies: Oh, great. Thank you. Good evening, guys. I wanted to ask a bit about Kansas City. I guess the first part of the question is, you talked about the 600 megawatts. Maybe can you help us out on timing of how quickly you could potentially sign a lease and deliver capacity there. More broadly, that’s a new market for you guys. I’m curious if we should take that as a read-through that DLR is broadening your definition of markets you’d be interested in, and whether some of these more secondary market locations, or what you might have historically considered secondary market are now core opportunities.

Andy Power, President and CEO, Digital Realty: Thanks, John. I’m going to have Greg hit on that one. I would say, albeit new, very analogous to what we just saw in our expansion in the Charlotte market, which bore fruit very quickly. Greg, why don’t you speak to Kansas City, please?

Greg Wright, Chief Investment Officer, Digital Realty: Yeah. Thanks, John. Thanks, Andy. John, look, I think when we look at this market, like any market, we did a lot of work around it before we went into it, focusing on things like digitization metrics. When you look at it, you see it’s centrally located within the U.S., which enables low latency and connectivity. I think you can cover half the country within a very low latency metric. There’s plenty of fiber, as Andy mentioned in his prepared remarks. When we look at this market, our belief is that this is going to quickly become the seventh largest data center market in the U.S. As we look at this, as Andy said, it’s very analogous to Charlotte.

We’re seeing very strong customer demand here, it’s really becoming what I would say is really a hyperscale hub or maybe a Midwest hub for both AI and cloud workloads. As we look at it, we’re excited about it. In terms of the ramp to power you asked about, the ramp is starting in 2028, it’s going linear from there on out. We’re talking about over 1,400 acres here, which are going to ultimately provide over 2 gigawatts of power. We’re very excited about this market, and we think our customers are too.

Operator: Thank you. Our next question comes from the line of Michael Ng with Goldman Sachs.

Michael Ng, Analyst, Goldman Sachs: Hey, good afternoon. Thank you very much for the question. I wanted to ask about the very strong cash rental rate renewals in the greater than 1 megawatt. I think you talked a little bit about some of the outsized spreads realized in Singapore. I was just wondering if there was something unusual about that market, perhaps leases expiring at a kind of unusually lower rate, or is this really just a function of supply-demand tightness and we could see cash rental rate renewals at this magnitude in other places in the future? Thank you.

Matt Mercier, CFO, Digital Realty: Yeah. Thanks, Michael. I think there’s probably 2 things. First off, though, I would say the overall theme here is that this is an example of a very supply-constrained market in high demand, where customers continue to want to be as high connectivity, and we had an ability on a few different leases to be able to price that according to market. In fact, one of them was actually a customer that had a fixed renewal rate and term, they wanted a longer term, that enabled us to negotiate to where market was. I think this is an example of something that I’ve talked about or we’ve talked about for probably the last several quarters, if not years, as a result of this overall supply-demand imbalance, we see an improving mark-to-market opportunity throughout our operating portfolio.

Even further noted by the fact that our expiring rates continue to drop over the next several years, while market rates continue to march up. While we might not see this every quarter, especially at this outsized %, I would say we definitely see a healthy opportunity to reprice our contracts going forward on a regular basis.

Operator: Thank you. Our next question comes from the line of Richard Chow with J.P. Morgan.

Richard Chow, Analyst, J.P. Morgan: Hi. I wanted to follow up on the kind of connectivity and interconnection part. What are you seeing in terms of connectivity and interconnection needs with AI inference or maybe agents, and how does that also, or it’s probably early days, but how does that apply to maybe the private AI deployments that you are seeing, and how do you think that might change as that evolves?

Andy Power, President and CEO, Digital Realty: Hey, thanks, Richard. I’ll tag team this with Chris. I mean, really excited about the contribution from interconnection. A record by itself, up 17% year-over-year, north of $20 million. We’ve just had a great string of quarters now, and records in that category. It’s definitely been a combination of what was touched on before about ServiceFabric being a larger contributor, where our value is really shining there. I think we had demonstrable increases in customer adoption on ServiceFabric and then usage even, call it, 2x the customers added. Then AI, which you hit on, and maybe I’ll have Chris talk to some of the elements going on there.

Chris Sharp, Chief Technology Officer, Digital Realty: Yeah. Appreciate it, Richard. There’s a couple of things playing out here, and I think your question is spot on, that we’re kind of early innings, right? Where there’s been a lot of bulk build-out and transition into inference, which in 2026, there’s more inference tokens being produced than actual training. That next step is agentic, and that agentic requires a different type of capability, which is bi-directional. What’s nice is a lot of the product offerings that we have across that full spectrum of digital transformation, cloud, AI, and private AI, we have the ability to meet them with the right product offering. A lot of the early innings has been around bulk fiber. This is where a lot of these big build-outs have been coming in and have been represented in some of our record bookings this quarter.

What you’re also starting to see is exactly what you’re pointing at, is the monetization of this inference. The consumption of agentic and these inference capabilities and ultimately services being delivered to customers, which is what’s represented inside of our broad ecosystem of the enterprise hyperscaler and AI, all meeting in a very unique place. What that ultimately represents to our customer base is a unique environment that matches the ability to deliver power, which is absolutely a critical component, all married with interconnection. It’s both of those elements coming together, which really represent a unique value proposition that our customers are very excited about being able to execute in a very short timeframe. I think that’s what Colin alluded to in the supply-demand and what we’re seeing in our customer base.

Being able to pre-engineer these capabilities with both power and interconnection is allowing us to meet a very unique value proposition in the market.

Operator: Thank you. Our next question comes from the line of Joseph Osha with Guggenheim.

Joseph Osha, Analyst, Guggenheim: Hi. Thanks for taking my question. Further to this question of strength and renewal spreads, just looking at your disclosures, it seems to me like the math actually gets better, not worse in 2027 and into 2028 if I just look at the magnitude of rolling leases and the price. Just wanted your reaction to that. It seems like the comps get easier, not harder next year. Just as a related question, I’m wondering if some of this political activity in New York State, in Loudoun County, Manassas, might potentially provide an additional tailwind to pricing in those regions. Thank you.

Andy Power, President and CEO, Digital Realty: Hey, thanks, Joseph. I think you’re spot on. We do have the attractiveness of the mark-to-market opportunity increasing in a backdrop where our expirations are stepping down, also market rates continue to be on the run. We’ve been putting up new records in relative various markets, even on our largest lease contracts, in terms of a rate standpoint. I do agree with you. The broader backdrop we’re living in is that it’s becoming more and more challenging to deliver the critical digital infrastructure that we provide to our customers, which makes our installed base and our capabilities even more precious and valuable to those customers. That is the world we’re living in. We’re doing our best to make sure the broader communities we operate in understand our value and contribution and the criticality of the workloads we’re supporting.

It also all goes back to our team at Digital and our experience for multiple decades now, solely focused on delivering this digital infrastructure for our customers and, call it, continue to raise our game as the challenges come our way.

Operator: Thank you. That concludes the Q&A portion of today’s call. I would now like to turn the call back over to President and CEO, Andy Power, for his closing remarks. Andy, please go ahead.

Andy Power, President and CEO, Digital Realty: Thank you, operator. Digital Realty’s momentum accelerated in the second quarter with record core FFO per share, supporting another increase to our full year guidance. Strong operating performance, a record backlog, and healthy customer demand give us increasing confidence in our ability to deliver double-digit earnings growth in 2027 and beyond. We delivered record zero to one megawatt plus interconnection bookings and generated strong hyperscale leasing in the quarter that continued into July, which drove our backlog to a new all-time high, de-risking future growth. We also announced a few meaningful and strategic investments that will strengthen our three core pillars of growth. Collectively, these actions will enhance our ability to serve our customers, fund future growth, and create long-term value for our shareholders.

These outstanding results are a team effort, and I am incredibly proud of our talented colleagues around the world who continue to execute at a high level. I’m excited about the opportunity ahead and confident in Digital Realty’s ability to deliver value for our customers, partners, and shareholders. Thank you all for joining us today, and thank you to our dedicated and exceptional team who keep the digital world turning.

Operator: The conference has now concluded. Thank you for joining today’s presentation. You may now disconnect.