Digital Realty raises full-year guidance after record leasing bookings

The data center landlord (NYSE: DLR) raised its full-year guidance for core funds from operations after signing leases worth a record $855 million in annualized GAAP base rent during the third quarter. That figure came in 20% above the company's previous quarterly high, marking a significant jump for a business typically characterized by steady growth.

The surge in leasing activity is directly tied to artificial intelligence infrastructure demand. Companies building AI systems require specialized data center space, and with supply becoming increasingly constrained, landlords like Digital Realty have gained substantial pricing power, which is now translating into stronger organic growth.

Strong Financial Performance

Digital Realty reported its third-quarter results on October 29, 2026. At 100% share, the $855 million in annualized rent represents the full value of leases signed across the platform. At Digital Realty's own share, the figure was $627 million, spanning both hyperscale deals and the company's colocation and interconnection business.

FFO is the metric real estate investment trusts use instead of traditional earnings, as it strips out real estate depreciation to provide a clearer view of the cash a landlord actually generates.

Management lifted its full-year core FFO forecast to a range of $8.30 to $8.35 per share, implying growth of nearly 13% over the prior year. The company's backlog of signed leases that haven't started paying rent yet swelled to a record $2.5 billion at 100% share, or $1.8 billion at Digital Realty's share—roughly 40% of in-place data center rental revenue.

Tenant Retention and Renewals

Operating metrics revealed even stronger underlying performance. Churn—the share of rent lost to departing tenants—fell to a record low of 0.7%. Tenants who renewed also agreed to pay significantly more, with cash re-leasing spreads reaching 11.8%. Same-capital cash net operating income grew about 6% year over year, while stabilized occupancy reached 93.4%.

Expansion Strategy

To meet growing demand, Digital Realty is investing heavily in new capacity. The company has 1.5 GW of capacity under construction, with an expected cost of approximately $22 billion. Crucially, 63% of that pipeline is already pre-leased, with the company projecting an average stabilized yield of 11.6% on these developments.

Digital Realty positions itself as a cloud- and carrier-neutral data center platform, allowing customers to connect to multiple cloud providers and network carriers under one roof rather than being locked into a single vendor's ecosystem. The third-quarter demand was broad, with AI infrastructure contributing heavily alongside traditional cloud computing and enterprise workloads.

For investors, the key question is whether the company can maintain this record pace of bookings and convert its backlog into paying rent through 2027 and 2028. The main risks involve executing the $22 billion construction pipeline and ensuring that the remaining 37% of capacity not yet pre-leased finds tenants by completion.