Digital Realty Q3 2026: Record Leasing and Raised Guidance Signal Strong AI-Driven Growth

Digital Realty reported third-quarter 2026 results on October 29, highlighted by record quarterly leasing bookings of $855 million. The data center REIT also raised its full-year guidance for core funds from operations (FFO), a key profitability metric for REITs. Management attributed the strong performance to accelerating enterprise demand for artificial intelligence infrastructure.

A standout area was small-scale deployments under one megawatt, where bookings exceeded $150 million at Digital Realty's share, up 80% year-over-year and 40% sequentially. This marked the fourth consecutive quarterly record for this category, which includes high-margin interconnection revenue.

The company's contracted backlog—signed leases that haven't yet started paying rent—reached a record $2.5 billion, or $1.8 billion at Digital Realty's share. This backlog provides clear revenue visibility into 2028 and underpins expectations for double-digit earnings growth.

Additionally, Digital Realty highlighted its strategic private capital platform, which allows the company to fund large hyperscale projects without issuing dilutive equity or over-leveraging its balance sheet. This approach supports growth while maintaining financial flexibility.

Overall, the quarter demonstrated robust demand across global markets, with management expressing confidence in the company's ability to capture expanding AI workloads and sustain long-term growth.

The record leasing activity and raised guidance signal strong operational momentum for Digital Realty. As data center capacity tightens, the company's pricing power is accelerating organic growth, which should translate into higher revenues and FFO per share over time.

The $2.5 billion backlog provides exceptional revenue visibility, reducing uncertainty around future earnings. This is particularly important in a rising interest rate environment where REITs are sensitive to cost of capital. The backlog essentially locks in growth, giving investors confidence in the company's ability to deliver consistent results.

The focus on sub-1MW deployments and interconnection is strategically significant. These smaller, interconnected deployments typically carry higher margins and create stickier customer relationships, as enterprises connect cloud and AI workloads across localized markets. This mix shift could enhance overall profitability.

The private capital strategy is a key differentiator. By partnering with institutional investors, Digital Realty can scale rapidly without diluting shareholders or straining its balance sheet. This allows the company to pursue large hyperscale opportunities while preserving financial strength, which is crucial for long-term value creation.

Looking ahead, the ability to secure power availability and expand capital partnerships will determine how effectively Digital Realty scales into 2027 and beyond. Execution on these fronts will be critical for sustaining the current growth trajectory.