Digital Realty Trust (DLR) Bank of America 2026 Media,Communications & Entertainment Conference summary

Financial performance and growth outlook

• Guidance for 2024 was initially low single-digit bottom line growth, impacted by deleveraging and rising rates, but improved leasing and development led to 10% growth delivered versus 6% expected last year.

• Current guidance is for 8% growth, with strong signings in 1H leading to a $2.3 billion backlog, representing over 30% of in-place data center revenue.

• Management now expects double-digit growth this year, next year, and potentially beyond, driven by signed but not commenced leases and robust demand.

• Confidence in the sustainability of the AI demand cycle has increased, supporting a more optimistic long-term outlook.

• Re-leasing spreads reached 25% in the quarter, with expectations for 10% for the year, and significant upside potential as 40% of hyperscale rents roll through 2032.

Business strategy and capital management

• Growth is anchored on three pillars: zero-to-one plus interconnection, hyperscale leasing, and strategic private capital.

• Raised $3.25 billion in LP equity for a closed-end fund, supporting over $10 billion in data center investments.

• Maintains low leverage (4.7x debt-to-EBITDA) and uses private capital to fund hyperscale development, de-risking future growth.

• Capital recycling remains a strategy, with assets moving off balance sheet via JVs and recapitalizations, while retaining management fees and long-term ownership preference.

• Recent $5 billion acquisition of JV assets from Blackstone at a 6.5% cap rate, with plans to use these as inventory for future private capital initiatives.

Operational execution and market dynamics

• Demand for immediate capacity is high, with customers seeking accelerated delivery and full utilization from day one, especially for AI workloads.

• Labor shortages are addressed by building long-term GC relationships, expanding internships, and aggressive hiring across markets.

• Targets 10%+ unlevered development yields, with $20 billion under construction and 11.5% expected initial cash yield.

• Controls development risk through vendor-managed inventory, standardized design, and locking in costs with GMP contracts.

• Zero-to-one plus interconnection leasing hit a record $108 million in the quarter, with AI-related leasing doubling as a share of total.