Digital Realty (DLR) Q1 FY26 earnings call: guidance and Q&A

How do AI-deal economics and pricing escalators compare to prior hyperscale deals, and when is the training-vs-inference inflection?

No dramatic economic difference between use cases; economics driven by robust demand in supply-constrained markets. Hyperscale contracts ~15 years with 3%+ escalators. Demand has converted from pilot to production; the 200MW Charlotte build is inference. Agentic AI seen as a 5x-30x token-per-task demand multiplier; portfolio is workload-agnostic with low latency and dense interconnection.

“demand has definitely converted from pilot to production... as agents come to market, it's a demand multiplier. And so that represents to us a 5x to 30x more tokens per task”

asked by Erik Rasmussen · answered by Andrew Power / Chris Sharp

Details on the newly secured gigawatt of capacity — locations, number of sites and power-availability timing.

The Atlanta parcel is one contiguous ~870+ acre piece in the greater Atlanta metro; power arrangements still being worked through with the utility with a couple of alternatives (more guidance later). Also acquired Hillsboro land to support hyperscale development. Growth capacity increased to 6GW.

“this asset is one contiguous piece of parcel... it's, call it, north of 870 acres, Frank, but it's all contiguous. It's in the greater Atlanta metropolitan area.”

asked by Frank Louthan · answered by Andrew Power / Gregory Wright

What drove the ~19-month commencement lag, over 2x recent periods — the record lease, utility delays, or earlier booking?

Driven by the largest lease in company history, which just started and will deliver over a phased period from 2027 into 2028, elongating the sign-to-commence window.

“this is driven by what was our largest lease this quarter and our largest lease in the company history... that's why you're seeing a slightly elongated period of time between sign and commence.”

asked by Matthew Niknam · answered by Matt Mercier

Given strength, is there a pathway to $100M in 0-1MW signings, and what does that mean for interconnection?

Pleased with momentum — up 40% YoY off a record 2025 (up 35%). Interconnection was a top-5 (not top) contributor. Management declined a specific $100M target but signaled continued upside, citing record bookings in 3 of the last 4 quarters, strength in Silicon Valley/Chicago/Frankfurt, and AI at north of 20% of bookings.

“we're not anywhere near done yet”

asked by Vikram Malhotra · answered by Andrew Power / Colin McLean

If hyperscalers move to hybrid AI/cloud designs, will existing cloud data centers be redesigned and will that expand the opportunity to reprice fixed-price renewal options?

The odds of hitting full mark-to-market on capped renewals keep moving in DLR's favor as customers change configurations; even with advantageous renewal options customers increasingly opt to work together and bring rates to market. Small sample this quarter but the cash mark-to-market outlook was raised, expecting stronger spreads in the back half. Sharp noted silicon advances across GPUs/CPUs, modularity (up to 150kW/rack), and AI being additive to cloud.

“more often than not, we're seeing the customers, even with an advantageous renewal option, not take advantage of that and say, hey, let's work together.”

asked by Michael Elias · answered by Andrew Power / Chris Sharp

What operating-expense line items pulled constant-currency cash NOI growth down to 2.5%, if not energy?

Largely a low prior-year opex comp — driven by repairs & maintenance and labor — expected to smooth over the next three quarters. Full-year guidance of 4%-5% is unchanged; Q1 came in on budget and same-store growth should accelerate.

“it was largely a result of a low operating expense comp in the prior year same quarter. So that was driven by R&M and labor largely.”

asked by Jonathan Petersen · answered by Andrew Power

Are power/equipment/labor/community constraints extending construction timelines, and is market rent growth still outpacing development-cost inflation?

Market rent growth still outpaces build-cost inflation. Incredible demand and competition over supply chain and skilled labor (electrician shortages in parts of the country) pressure costs, but rates run ahead. DLR's 20+ year track record and high 'say-do ratio' shine amid utility delivery delays.

“we're still seeing market rent growth outpacing inflationary pressure in build costs.”

asked by Eric Luebchow · answered by Andrew Power

How far down the size spectrum is AI going in >1MW leasing, and why does Core FFO growth slow from ~11% constant-currency in Q1 to a 9% full-year midpoint?

AI now spans sub-1MW enterprise to hundreds of megawatts hyperscale, with 10-plus MW leases in Dallas/Sao Paulo/Tokyo alongside the 200MW record; much stabilized-portfolio vacancy is pre-leased but not yet commenced. Mercier attributed the cadence to a Q2 step-down then Q3/Q4 rebound, driven by ramping Q2/Q3 opex, continued investment/land spend, and planned capital recycling.

“we are expecting a step down, call it, in the second quarter, starting to rebound in the third and ending on a high note”

asked by Michael Rollins · answered by Andrew Power / Matt Mercier

What is total leased and under-development inventory of space/power, and what is the long-term growth target?

~3GW operating today plus another ~6GW owned but not operating; 1.2GW of that 6GW is under construction — a ~40% near-term expansion of the installed base — and highly (~60%) pre-leased, with more development being activated and the investment team continually adding.

“we just shy or roughly 3 gigawatts is operating today... we have another 6 gigawatts that we own today. Within that 6 gigawatts under construction... there's 1.2 gigawatts.”

asked by Timothy Horan · answered by Andrew Power

Why did Americas development cost per MW rise to ~$14M from ~$12.5M, and how tough are the 6GW of future markets amid rising local pushback?

Cost per MW rose on build-cost inflation, higher land values, supply-chain tightness, and a shift to higher-priced liquid-cooling designs; strong market rates still preserve ~11% unlevered returns. On community pushback, DLR emphasizes its value proposition — grid investment/backup generation, large property-tax contributions, and industry job creation exceeding the top-15 US automakers — and its role in mission-critical workloads.

“you're seeing, obviously, inflation in build costs... we are able to have great market rates, exceed those inflationary pressures to at least maintain rates or returns... now at record under development. Still have, call it, close to 11% unlevered returns”

asked by Aryeh Klein · answered by Andrew Power