Digital Realty Q3 2025: $1.58B Revenue and $852M Backlog Signal the New Era of Scarcity Pricing
Record Q3 results confirm Digital Realty’s strategy of monetizing scarce, power-ready capacity and high-margin interconnection while staging the next wave of AI campuses for 2026–2027 delivery.
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Digital Realty’s third quarter results underscore a fundamental shift in how data center operators are creating value in the age of AI infrastructure scarcity. The company’s performance wasn’t just a quarterly beat—it was a validation of a strategy built on monetizing constrained power, deepening interconnection ecosystems, and recycling capital into future-ready capacity.
Revenue climbed to approximately $1.58 billion, up 10% year-over-year and 6% sequentially, while Core FFO per share reached a record $1.89, marking a 13% increase from last year. Adjusted EBITDA expanded 14% year-over-year to $868 million, reflecting strong operating leverage and disciplined cost control. Total bookings of $201 million (100% share; $162 million Digital Realty share) added another layer of strength, and a near-record $852 million backlog of signed-but-not-commenced leases provides high visibility into 2026 revenue.
Yet, the deeper signal lies in pricing power and mix shift. Renewal leases rose 8% on a cash basis and 11.5% on a GAAP basis, and the high-margin 0–1MW plus interconnection segment contributed $85 million of bookings—proof that energized capacity and ecosystem density have become Digital Realty’s most profitable assets.
Earnings Breakdown and Infrastructure Strategy
Digital Realty’s Q3 results confirmed that the platform is monetizing scarcity while scaling for the next phase of AI growth. The company’s Core FFO/share of $1.89 exceeded expectations and reinforced guidance for the full year, now raised to $7.32–$7.38 per share, alongside higher ranges for both revenue and adjusted EBITDA. Operating income grew faster than the top line, demonstrating margin expansion as interconnection revenues and fee income increased.
Operationally, the company maintained momentum across key markets with $201 million in annualized GAAP rental revenue bookings and $852 million in backlog, representing future commencements stretching into 2026. The backlog includes roughly $165 million of leases set to commence in Q4 2025 and more than $550 million scheduled through 2026. This deferred revenue pipeline ensures sustained growth even as new development deliveries remain gated by utility power availability.
Digital Realty’s ability to command higher spreads on renewals highlights the market’s imbalance between energized supply and immediate demand. In its hyperscale segment, the company achieved cash re-leasing spreads nearing 20%, one of the highest in its history. These gains, coupled with low churn at 1.6%, drove an 8% same-capital cash NOI increase year-over-year, underscoring the operating leverage embedded in its existing portfolio.
Capital Deployment and Development Trajectory
The third quarter marked another phase of disciplined but accelerated capital deployment. Digital Realty invested approximately $900 million in gross CapEx, including partner shares, with $700 million at its own share, focused on expanding AI-ready campuses across North America and Europe. The company delivered roughly 50 megawatts of new capacity, 85% of which was pre-leased, while initiating another 50 megawatts of new projects to replenish the development pipeline.
That pipeline now totals 730 megawatts under active construction with a gross value of $9.7 billion and expected stabilized yields near 11.6%. In addition to the active builds, Digital Realty controls more than five gigawatts of future developable IT capacity globally, including large contiguous parcels in Northern Virginia, Atlanta, and Dallas. Land acquisitions during the quarter—including five acres in Los Angeles and two parcels near the Franklin Park campus in Chicago—will support an additional 70+ megawatts of incremental capacity.
Non-core asset sales continued as part of capital recycling efforts, generating nearly $90 million in proceeds from divestments in Atlanta, Boston, and Miami, followed by a $33 million post-quarter sale in Dallas. These dispositions, combined with proceeds from the company’s At-The-Market equity program, strengthened liquidity and enabled reinvestment into power-secured development sites.
Digital Realty’s strategic discipline allows it to “sweat” existing energized megawatts through higher spreads and interconnection income while simultaneously funding the next generation of large-scale AI data centers slated for delivery between late 2026 and 2027.
Regional Momentum and AI Workload Dynamics
North America remains the center of gravity, with leasing activity strongest in Northern Virginia, Chicago, and Dallas. However, discussions for large contiguous capacity blocks are already extending into 2027 as power allocation in key metros tightens further. The bottleneck is no longer customer demand—it’s the ability to energize new capacity fast enough to meet it.
The workload mix continues to bifurcate: hyperscale AI training clusters concentrate on massive, power-intensive campuses, while inference workloads are migrating toward smaller, latency-sensitive sites near population centers. Digital Realty’s PlatformDIGITAL® framework—spanning wholesale hyperscale, colocation, and interconnection—positions it to bridge both.
Internationally, the company continues to pursue interconnection-led expansions in EMEA and Asia-Pacific. These deployments emphasize connectivity-rich facilities adjacent to cloud on-ramps, cable landing stations, and enterprise hubs. Such assets begin monetizing earlier than full-scale campuses and create stickier ecosystem value once large substations come online.
Scaling Through Capital Innovation
Digital Realty’s evolution into a global AI infrastructure operator is being underwritten by innovative capital partnerships. Its hyperscale development vehicles, including the $3 billion U.S. Hyperscale Data Center Fund, enable the company to execute multi-gigawatt build programs while maintaining investment-grade balance sheet metrics.
The fund structure allows Digital Realty to recycle capital efficiently, retain a minority equity stake in select projects, and earn recurring management and development fees. It also provides a template for replication in other regions, particularly where sovereign wealth funds and institutional investors seek exposure to the AI infrastructure theme. These partnerships allow the REIT to pursue scale comparable to hyperscalers while preserving its capital-light financial profile.
Balance Sheet Strength and Liquidity Position
The company ended the quarter with approximately $18.2 billion in total debt, including $17.4 billion unsecured, and a net debt-to-adjusted EBITDA ratio of 4.9x, comfortably below its long-term target of 5.5x. Liquidity exceeded $7 billion, including full availability under revolving credit facilities.
Digital Realty’s debt portfolio remains well-structured, with 94% fixed-rate exposure and an average maturity of 4.6 years at a weighted average cost of 2.7%. The company continues to manage its 2026 maturities—roughly $1.5 billion—well in advance, supported by strong cash flow coverage and rising EBITDA.
The capital structure flexibility achieved through non-core asset sales, equity issuance, and fund-level financing provides headroom to continue investing in both ongoing construction and power procurement. The balance sheet strength remains a key differentiator in a capital-intensive industry increasingly constrained by rising project costs and supply-chain delays.
Forward Outlook and Strategic Close
Management’s updated guidance for 2025 reflects confidence in the durability of both demand and pricing power. The company now expects Core FFO per share between $7.32 and $7.38, total revenue between $6.025 and $6.075 billion, and Adjusted EBITDA between $3.3 and $3.35 billion—each raised from prior levels.
Looking to 2026, management projects top-line growth around 10%, driven by backlog commencements and expanding interconnection margins. However, power constraints and permitting timelines will remain the critical execution risks. The first large-scale AI campuses are scheduled to energize beginning in late 2026, with phased activation extending through 2027 and beyond.
If Digital Realty delivers these new megawatts on time, the company could unlock a steep acceleration in cash flow and maintain its lead as the world’s largest independent provider of carrier-neutral, cloud-connected, AI-ready infrastructure.