DLR Digital Realty Trust 10-Q 2026-09-30 section summaries

Digital Realty (DLR) — Q3 and nine months ended September 30, 2026

Consolidated results

Q3 revenue grew 20.6%; 9M revenue grew 22.0%. Q3 earnings improved with higher operating income before disposition gains and lower interest expense, partly offset by lower other income and disposition gains. The 9M decline in reported operating income and earnings primarily reflects the much smaller disposition gain in 2026. Nine-month foreign-currency translation was a $50.5M loss, versus a $770.8M gain in 2025.

DLR reports one global operating segment. Geographic revenue illustrates the business mix:

Balance sheet and capitalization

Net property investments rose to $34.653B from $26.434B. Construction in progress and space held for development increased to $10.635B from $4.977B, and land held for future development to $769.4M from $91.1M. DLR’s balance-sheet other intangible-assets figure is distinct from the acquired intangible balances detailed below. Debt’s weighted-average interest rate rose to 3.07% from 2.90%; 62.4% of debt was euro-denominated. Maturities include $2.604B in 2027, $2.531B in 2028 and $4.520B in 2029, with $7.916B thereafter. The company reported compliance with its covenants, which cap leverage at 60% (secured debt leverage at 40%), require interest coverage above 1.50x and unencumbered assets of at least 150% of unsecured debt.

Cash flow and investment

The investment program substantially exceeded operating cash generation and was funded partly through equity issuance and financing. Construction-contract commitments were approximately $4.1B, including $314.0M reimbursable by customers.

Acquisitions, equity and financing developments

Q3 acquisitions totaled approximately $802.8M, largely land and development investments. In June, DLR acquired the remaining 64% blended interests in two joint ventures, consolidating them at 100% ownership; accumulated cost was approximately $5.2B, including $3.5B cash and equity consideration and $726M of assumed debt at fair value. No gain or loss was recognized on the previously held interests.

The August Columbia Capital acquisition expanded DLR’s digital-infrastructure investment-management platform. Consideration was $690.1M, comprising $453.0M in shares, $17.1M cash and $220.0M of stock-settled contingent consideration. It added $499.1M of goodwill and $194.3M of identifiable intangibles; purchase accounting remains preliminary.

Common shares outstanding increased from 343.557M at year-end 2025 to 374.888M at September 30, 2026. The company issued 15.855M shares for $2.953B net proceeds, alongside shares issued for acquisitions. Its new $7.5B ATM program generated $1.6B net proceeds through September from 8.6M shares, leaving $5.9B available. In October, a Teraco shareholder put was settled with 3,425,031 shares, raising DLR’s ownership from 61% to 77%.

After quarter-end, subsidiaries issued CHF 510M of guaranteed notes due 2029–2036, generating CHF 508.4M net proceeds, and €1.0B of 5.125% guaranteed notes due 2036, generating approximately €985.8M net proceeds. These offerings added long-term CHF- and euro-denominated funding.

Digital Realty (DLR) — Q3 and 9M 2026

Results

Revenue grew 20.6% in Q3 and 22.0% in 9M. Stabilized rental growth reflected leasing and renewals, utility reimbursements, and stronger foreign exchange. Non-stabilized rental growth was driven by lease-up and recently completed developments, which added $183.8 million in Q3 and $468.6 million in 9M, led by Northern Virginia, Frankfurt, Paris and Johannesburg; 9M revenue was reduced by $64.0 million from dispositions and contributions. Fee income included $201 million of promote income in 9M after performance hurdles were achieved in connection with the June acquisition.

Property-level expenses rose 19.2% in Q3 and 16.0% in 9M, with utilities the largest driver: $477.5 million versus $375.6 million in Q3 and $1,246.4 million versus $1,028.3 million in 9M. Higher power prices, especially in EMEA and APAC, and consumption at newly completed sites contributed. Other operating expenses increased 4.6% in Q3 and 9.9% in 9M. G&A rose 22.3% in Q3 and 21.1% in 9M, reflecting higher headcount and IT costs; transactions and integration expense declined, though 2026 included $22.7 million related to the Columbia Capital Acquisition.

FFO grew substantially faster than 9M GAAP net income, in part because prior-year 9M net income included much larger real-estate disposition gains: the FFO adjustment for disposition gains was $(16.617) million in 9M 2026 versus $(952.721) million in 9M 2025. FFO is management’s supplemental measure of property operating trends, not a substitute for GAAP net income; it excludes depreciation and disposition gains or losses and does not capture property value changes or ongoing capital and leasing costs.

Portfolio and development

Capacity growth included 233,967 kW transferred from non-stabilized to stabilized, 97,575 kW from acquisitions and 95,643 kW from development and reconfigurations; dispositions reduced capacity by 4,500 kW. Northern Virginia accounted for 22.6% of annualized rent, making the portfolio exposed to changes in demand and supply in key markets. Management expects positive aggregate rental-rate changes on 2026-expiration renewals versus current rates, on both GAAP and cash bases, but outcomes depend on local market conditions.

Projects under development totaled 1,464 MW—about 90% more than at year-end 2025—with 63% pre-leased. DLR estimates an approximately 11.6% pre-tax stabilized cash yield for the construction pipeline and has more than 8 GW of additional development capacity. Open construction commitments were approximately $4.1 billion, including $314.0 million reimbursable; expected remaining-2026 capital expenditures are $0.8–$1.2 billion. These estimates are subject to completion, cost, demand and financing risks.

Cash flow and capital spending

Higher operating cash flow reflected revenue growth as development projects were completed and leased. Investing outflow increased with acquisitions, development spending and contributions to unconsolidated entities; real-estate sale and contribution proceeds were approximately $180 million versus approximately $1.2 billion. Financing cash flow benefited from higher short-term borrowings, lower debt repayments and greater equity issuance. Net cash, cash equivalents and restricted cash decreased $2.681 billion, compared with a $416.9 million decrease in 9M 2025. Capitalized indirect costs were $276.3 million versus $195.3 million, including $143.7 million versus $92.4 million of capitalized interest.

Transactions, funding and debt

Acquisitions were approximately $2.9 billion in 9M 2026 versus $0.3 billion in 9M 2025. In June, DLR acquired partners’ 64% interests in two data-center projects for approximately $3.5 billion, including $1.2 billion cash and 12.3 million common shares; the assets are expected to stabilize in H1 2027 and H1 2028. The Columbia Capital Acquisition consideration had an acquisition-date fair value of approximately $690.1 million. In May, two development projects with $439 million aggregate carrying value were contributed to a fund for $447 million gross proceeds and an approximately $8 million gain.

The ATM programs generated approximately $2.9 billion net in 9M through issuance of approximately 15.9 million shares; $5.9 billion remained available at September 30. Operating Partnership cash and cash equivalents were $802.9 million, excluding $3.4 million restricted cash. Revolving facilities provide $4.5 billion of commitments, with approximately $4.0 billion available to borrow as of October 27; capacity may increase by another $1.8 billion subject to conditions.

The Operating Partnership’s pro-rata share of secured debt at unconsolidated entities was approximately $2.1 billion. Unsecured-note covenants had substantial headroom: debt/assets was 36% and 31% against a limit below 60%; secured debt/assets was 5% and 2% against below 40%; unencumbered assets/unsecured debt was 289% and 318% against above 150%; and EBITDA/interest was 4.6x against above 1.50x. Subsequent to quarter-end, finance subsidiaries issued CHF510 million of notes and €1.0 billion of guaranteed notes, with approximately $611 million and $1.1 billion, respectively, in net proceeds.

DLR targets average-through-cycle debt/Adjusted EBITDA of about 5.5x, fixed-charge coverage above 3x and floating-rate debt below 20%. Key risks include power and utility costs that may not be fully passed through to customers, development delays or cost overruns, regional concentration, customer defaults or nonrenewals, interest rates and refinancing, and reliance on external capital.

Market risk

Debt and interest-rate exposure

As of September 30, 2026, Digital Realty had $19.619B of outstanding debt with an estimated fair value of $18.536B.

The filing’s hypothetical sensitivity analysis reports that a 10% decrease in interest rates would reduce the fair value of interest-rate swaps by $1M. For fixed-rate debt, the reported fair-value changes are $(240)M for a 10% decrease in rates and $(224)M for a 10% increase. A 10% decrease in rates would reduce annual interest expense on unhedged variable-rate debt by $8M; the sensitivity table extraction omits the result for a 10% increase in rates and the swap fair-value result for a 10% increase. These scenarios assume no change in the company’s financial structure and no mitigating actions.

Digital Realty manages interest-rate exposure through fixed-rate debt and interest-rate swaps. It does not use derivatives for trading or speculation and says it selects major financial-institution counterparties based on credit ratings and other factors.

Foreign-exchange exposure

Foreign-exchange exposure primarily relates to the euro, Japanese yen, British pound, Singapore dollar, South African rand, and Brazilian real. Brazilian-real exposure is limited to Digital Realty’s share of Ascenty’s operations and financial position. The company finances investments in local currencies to reduce transaction exposure and uses cross-currency interest-rate swaps designated as net-investment hedges to convert some U.S.-dollar fixed-rate debt into foreign-currency fixed-rate debt. It may also use foreign-currency forwards or options for defined transaction exposures, though it does not assure that these hedges will be effective.

Currency movements may affect revenues, operating margins, distributions, asset book values, and stockholders’ equity.

Disclosure controls and internal control

Management of Digital Realty Trust, Inc. and Digital Realty Trust, L.P., with the participation of the CEO and CFO, concluded that disclosure controls and procedures were effective at the reasonable-assurance level as of quarter-end. No changes during the quarter materially affected, or were reasonably likely to materially affect, either entity’s internal control over financial reporting.

Controls over equity-method unconsolidated entities may be substantially more limited than those over consolidated subsidiaries because the company and operating partnership do not control or manage those entities. The controls provide reasonable, not absolute, assurance.

The risk factors described in Digital Realty Trust’s and its Operating Partnership’s Form 10-K for the year ended December 31, 2025, and elsewhere in that report, continue to apply. This section identifies no new or changed risks.

During the three months ended September 30, 2026, no directors or Section 16 officers adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements. This section reports no financial metrics or other material business developments.