DIGITAL REALTY TRUST (DLR)·Q4 2025 Earnings Summary

Digital Realty Beats on Revenue and FFO as Data Center Demand Accelerates

February 5, 2026 · by Fintool AI Agent

Digital Realty (NYSE: DLR) reported Q4 2025 results that exceeded analyst expectations on both revenue and FFO, driven by record leasing activity in its 0-1 megawatt plus interconnection category and strong rental rate growth. The company introduced 2026 guidance slightly above consensus, though shares dipped 1.3% as investors digested a mixed outlook on development yields and capex intensity.

Did Digital Realty Beat Earnings?

Yes — DLR beat on all key metrics:

Revenue grew 14% year-over-year, accelerating from the prior quarter's 10% growth rate. Core FFO per share of $1.86 grew 8% YoY, with full-year 2025 Core FFO of $7.39 up 10% over 2024 and finishing above the high end of original guidance.

What Did Management Say?

CEO Andy Power struck a confident tone on the earnings call, emphasizing 2025 as a "pivotal year" for the company:

"2025 was a pivotal year for the data center industry and for Digital Realty. Data centers moved firmly into the global spotlight as AI adoption accelerated, cloud platforms continued to scale, and power became the industry's primary constraint."

Power highlighted several strategic priorities driving performance:

1. Record Leasing Momentum — For the second consecutive year, Digital Realty signed over $1 billion in new leases, with $1.2 billion of total bookings in 2025—nearly 70% above the five-year average.

2. 0-1 MW Outperformance — The interconnection/colocation segment posted nearly $340 million in bookings for 2025, a full-year record and 35%+ above 2024 levels.

3. Private Capital Evolution — The company closed over $3.2 billion of LP equity commitments to its oversubscribed inaugural closed-end hyperscale fund, marking Digital Realty's official entry into private capital markets.

4. AI Private Exchange Platform — Early but encouraging customer adoption of a platform enabling enterprises to connect compute, data, and models privately across clouds, campuses, and partners for AI inference workflows.

On the competitive environment, Power emphasized Digital Realty's differentiated development approach:

"We're probably one of the few in the industry actually taking a little bit more risk in the development... getting pad-ready, greenlighting shells, and even greenlighting suites before we have a customer in hand. Most of the other private capital folks are waiting for that lease to get signed."

What Did Digital Realty Guide?

Digital Realty introduced 2026 guidance that came in slightly above consensus on Core FFO:

Key assumptions underlying the 2026 outlook:

• Same-Capital Cash NOI Growth: +4% to +5% (constant currency)
• Rental Rate Growth: +6% to +8% on cash basis
• Net CapEx: $3.25B - $3.75B (net of partner contributions)
• Development Yields: Double-digit expected yields
• Dispositions/JV Capital: $500M - $1.0B
• Power-Based Occupancy: +50 to +100 bps improvement from ~89% year-end 2025

The midpoint of Core FFO guidance ($7.95) represents nearly 8% year-over-year growth, despite outperforming original 2025 guidance by almost 500 basis points.

Disclosure Enhancement: Management announced they will transition to power-based occupancy metrics starting Q1 2026. On a square footage basis, occupancy was 84.7%, but on an IT load basis, total portfolio occupancy was approximately 89%—improving 50+ bps year-over-year.

How Did the Stock React?

Despite the beat, DLR shares fell 1.3% to close at $164.65 in after-hours trading.

Why the muted reaction?

1. Beat was priced in — The stock had rallied from $143 in March 2025 to $172 in September before pulling back, suggesting strong Q4 expectations were already embedded.

2. CapEx intensity concerns — Net development CapEx of $3.25B-$3.75B represents a significant investment commitment, and investors may be questioning capital allocation given rising interest rates.

3. Slower occupancy gains — Portfolio occupancy was flat at 84.7% vs. 84.8% in Q3, with same-capital occupancy unchanged at 83.7%.

The stock is trading at 21.4x forward Core FFO (based on guidance midpoint), compared to its 5-year average of approximately 19x.

What Changed From Last Quarter?

Bookings accelerated — Q4 bookings of $175M at Digital Realty's share ($400M at 100% share) improved from $148M in Q3, driven by strong 0-1 MW demand.

Core FFO dipped sequentially — Despite revenue growth, Core FFO per share declined from $1.89 to $1.86 due to higher transaction and integration expenses ($36M vs. $87M in Q3, but still elevated) and a $79M impairment provision.

Rental rates remained strong — Renewal rental rates increased 6.1% on a cash basis and 12.0% on a GAAP basis, consistent with prior quarters.

Q&A Highlights: What Analysts Asked

The earnings call Q&A provided rich insight into hyperscaler demand, inference trends, and competitive dynamics.

On Hyperscaler Demand Diversity (Eric Luebchow, Wells Fargo):

CEO Andy Power noted unprecedented breadth in hyperscale demand: "We're at 7 straight consecutive quarters where our largest signing is from a different hyperscaler or different customer. When we're looking at customers looking at those larger capacity blocks... you're seeing more customers call for the same capacity blocks."

Key markets seeing strong hyperscale interest: Northern Virginia, Charlotte, Atlanta, Dallas, Paris, Tokyo, Osaka.

On Inference Scaling in 2026 (Michael Rollins, Citi):

Power explained how inference demand is materializing across both hyperscale and enterprise: "The dialogue on the designs with our customers, the latest evolutions of cloud, is a mix-up of cloud and AI inside the same exact building. So they're looking at cooling that's a mixture of air and liquid and blending both use cases together."

On enterprise AI adoption: "We had a fantastic year... nearly 19% of the 0-1 megawatt and interconnection category was enterprise AI contribution. You're seeing more enterprises coming to Digital Realty and thinking about AI use cases."

On Supply Bottlenecks and Pricing Power (Timothy Horan, Oppenheimer):

Power acknowledged inflationary pressures but emphasized Digital Realty's positioning: "There's no question this race for scaling critical digital infrastructure comes with a cost. It's a cost of labor, it's a cost in our build costs... We pick our spots where we think we can have the greatest value to our customers. That's based on our track record, our supply chain, our runway for growth."

On Public vs. Private Valuations (Nick Del Deo, MoffettNathanson):

CIO Greg Wright addressed valuation differentials: "What's driving that... you're looking at a demand profile that's expected to increase 2.5-3 times over the next five years. You're looking at a supply environment... severely constrained. Those things are going to drive value for existing product in the market."

Power added that the private capital strategy "lets us pull on both private and public capital levers to fund the growth of our customers."

On Enterprise AI and 5-15 MW Demand (Michael Elias, TD Cowen):

CRO Colin McLean highlighted emerging enterprise AI appetite: "We have as strong a pipeline in 0-1 as we've seen... Our enterprise clients are seeing more and more value in contiguous blocks above 500 kW. And there's an emerging conversation around that kind of 5-megawatt block as inference starts to emerge."

On Escalators and Contract Terms (Michael Funk, Bank of America):

Power confirmed aggressive escalator strategy: "We've been pushing on the escalators. We're living in an inflationary environment... pushing to escalators of minimum 3%, as high as 4% or just above that, CPI-linked."

Leasing Highlights

Q4 leasing activity demonstrated continued momentum across Digital Realty's product categories:

New Leases Signed (at DLR Share):

At 100% share (including joint ventures), total bookings reached $400M — a strong quarter driven by continued hyperscale and enterprise demand.

Backlog: At DLR's share, the signed-but-not-commenced backlog stood at $817M of annualized GAAP base rent. At 100% share, the record backlog reached nearly $1.4 billion—a better representation of aggregate demand across PlatformDIGITAL.

Looking ahead, $634 million of leases are scheduled to commence in 2026, with another $152 million to commence in 2027 and beyond.

0-1 MW Record: The 0-1 megawatt-plus interconnection category set a new quarterly leasing record of $96 million, 7% higher than the previous record set in Q2 2025. For full-year 2025, this segment averaged $85 million of quarterly leasing.

Interconnection: Interconnection bookings of $18.9 million approached the prior quarter's record, driven by record bookings in EMEA and momentum within ServiceFabric. Full-year interconnection bookings increased 22% year-over-year.

Development Pipeline

Digital Realty has 769 MW of capacity under construction with 64% pre-leased:

Development Investment: The gross development pipeline underway sits at just over $10 billion at an 11.9% expected stabilized yield.

Northern Virginia Positioning: Availability across the nearly 800 MW in-place portfolio in Northern Virginia remains very limited. Strong demand is queuing for the 300 MW of capacity being readied for delivery in the 2027-2029 timeframe.

Key development markets include:

• Northern Virginia: 348 MW under construction, 86% leased
• Chicago: 66 MW under construction, 73% leased
• Dallas: 100 MW under construction, 68% leased
• Frankfurt: 31 MW under construction, 11% leased

Power Bank: Digital Realty continues to leverage its 5-gigawatt power bank to position capacity for development in some of the world's most power-constrained markets.

Balance Sheet and Capital Allocation

Digital Realty ended Q4 with a solid balance sheet:

• Total Debt: $18.4B
• Net Debt/Adjusted EBITDA: 4.9x
• Fixed Charge Coverage: 4.5x
• Debt-to-Enterprise Value: 26.1%

Capital Activity in Q4:

• Issued €1.4B in a dual-tranche green Eurobond offering: €600M at 3.75% due 2033 and €800M at 4.25% due 2037
• Redeemed €1.075B of 2.50% notes due January 2026 (160 bps spread increase creates modest interest expense headwind in Q1 2026)
• Contributed another 40% stake in five stabilized seed assets into the fund, increasing fund stake to 80% and generating €427M of net proceeds

Private Capital Strategy: The inaugural closed-end fund closed €3.225B of LP equity, with a final €25M closing anticipated before Q1 2026 earnings. Combined with other private capital partnerships, Digital Realty maintains approximately $15 billion of dry powder to support hyperscale development.

Credit Ratings: Investment grade across all agencies — BBB+ (S&P), Baa2 (Moody's), BBB (Fitch).

Top Customer Concentration

Digital Realty's top 20 customers represent 50.9% of annualized recurring revenue:

The top two customers (likely Microsoft and Oracle) represent 20.7% of revenue with long-duration leases averaging 9.8 years.

Risks and Concerns

1. NIMBYism and Regulatory Pushback — CEO Power acknowledged the industry is "facing a tremendous amount of Nimbyism or pushback on data centers." He pushed back on misconceptions, noting Digital Realty's 300+ data centers use less water than 18 California golf courses.

2. Labor and Supply Chain Tightening — Power noted "labor is getting more challenging by the day" for data center construction. The company mitigates this through long-term relationships and bundling work across campuses.

3. EMEA Leasing Lag — The EMEA development pipeline is only 23% pre-leased vs. 81% in the Americas, reflecting softer demand in European markets.

4. Interest Rate Headwinds — The 160 bps spread between new and redeemed Eurobonds will cause a modest interest expense headwind starting in Q1 2026.

5. Impairment Charges — Q4 included a $78.6M impairment provision, suggesting some assets may be underperforming.

Forward Catalysts

• Record Pipelines: Management cited record pipelines across both 0-1 MW and larger segments, with "2027s pretty exceptional and sought after" and "2028 going to be at that same level of attractiveness."
• Inference Scaling: With inference expected to scale in 2026, Digital Realty sees continued expansion of private AI exchange use cases as a durable driver of interconnection demand.
• Malaysia & APAC Expansion: Acquisition of one of Malaysia's most highly connected data centers with 10x expansion capacity, plus continued Southeast Asian expansion through Indonesia JV.
• PlatformDIGITAL Scale: ServiceFabric now enables access to over 300 cloud on-ramps and 700+ interconnected data centers globally.
• Development Deliveries: Major campuses in Northern Virginia (300 MW for 2027-2029) and other markets expected to deliver capacity throughout 2026.
• Dividend: Current annual dividend of $4.88/share represents a 3.0% yield at current prices

Key Takeaways

1. Strong operating quarter — Revenue and FFO beat, capping a year where Digital Realty exceeded full-year guidance by nearly 500 bps on Core FFO
2. Back-to-back $1B+ leasing years — $1.2B of total bookings in 2025, nearly 70% above the five-year average
3. Record interconnection momentum — 0-1 MW category posted $340M for the year (+35% YoY), with Q4 setting a new quarterly record at $96M
4. Inference positioned — Private AI exchange platform seeing early adoption; management expects inference to scale in 2026
5. Demand diversity unprecedented — 7 straight quarters with different largest customer signing; multiple hyperscalers seeking same capacity blocks
6. Private capital strategy validated — $3.2B+ fund closed, $15B total dry powder for hyperscale development
7. Power-based metrics transition — New disclosure framework better reflects utilization (~89% IT load occupancy vs. 84.7% on sq ft basis)

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For the full earnings release and supplemental financial information, see Digital Realty's Q4 2025 8-K filing.

For the Q4 2025 earnings call transcript, see Digital Realty Transcripts. l transcript, see Digital Realty Transcripts.*