Digital Realty Trust Inc.
07/31/2026 | Press release | Distributed by Public on 07/31/2026 15:24
Quarterly Report for Quarter Ending 2026-06-30 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this report and our Annual Report on Form 10-K for the year ended December 31, 2025, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, each as filed with the United States ("U.S.") Securities and Exchange Commission ("SEC"). This report contains forward-looking statements within the meaning of the federal securities laws. In particular, statements pertaining to our capital resources, expected use of borrowings under our credit facilities, expected use of proceeds from our ATM equity program, litigation matters or legal proceedings, portfolio performance, leverage policy, acquisition and capital expenditure plans, capital recycling program, returns on invested capital, supply and demand for data center capacity, capitalization rates, rents to be received in future periods and expected rental rates on new or renewed data center capacity contain forward-looking statements. Likewise, all of our statements regarding anticipated market conditions, and results of operations are forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "seeks," "approximately," "intends," "plans," "pro forma," "estimates" or "anticipates" or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Forward-looking statements involve numerous risks and uncertainties, and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods that may be incorrect or imprecise and that we may not be able to realize. We do not guarantee that the transactions and events described will happen as described or that they will happen at all. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: reduced demand for data centers or decreases in information technology spending; decreased rental rates, increased operating costs or increased vacancy rates; increased competition or available supply of data center capacity; the suitability of our data centers and data center infrastructure, delays or disruptions in connectivity or availability of power, or failures or breaches of our physical and information security infrastructure or services; breaches of our obligations or restrictions under our contracts with our customers; our inability to successfully develop and lease new properties and development capacity, and delays or unexpected costs in development of properties; the impact of current global and local economic, credit and market conditions; increased tariffs, global supply chain or procurement disruptions, or increased supply chain costs; the impact from periods of heightened inflation on our costs, such as operating and general and administrative expenses, interest expense and real estate acquisition and construction costs; the impact on our customers' and our suppliers' operations during an epidemic, pandemic, or other global events; our dependence upon significant customers, bankruptcy or insolvency of a major customer or a significant number of smaller customers, or defaults on or non-renewal of leases by customers; changes in political conditions, geopolitical turmoil, political instability, civil disturbances, restrictive governmental actions or nationalization in the countries in which we operate; our inability to retain data center capacity that we lease or sublease from third parties; information security, cyberattacks, security breaches and data privacy breaches; difficulties managing an international business and acquiring or operating properties in foreign jurisdictions and unfamiliar metropolitan areas; our failure to realize the intended benefits from, or disruptions to our plans and operations or unknown or contingent liabilities related to, our recent and future acquisitions; our failure to successfully integrate and operate acquired or developed properties or businesses; difficulties in identifying properties to acquire and completing acquisitions; risks related to joint venture investments, including as a result of our lack of control of such investments; risks associated with using debt to fund our business activities, including re-financing and interest rate risks, our failure to repay debt when due, adverse changes in our credit ratings or our breach of covenants or other terms contained in our loan facilities and agreements; our failure to obtain necessary debt and equity financing, and our dependence on external sources of capital; financial market fluctuations and changes in foreign currency exchange rates; adverse economic or real estate developments in our industry or the industry sectors that we sell to, including risks relating to decreasing real estate valuations and impairment charges and goodwill and other intangible asset impairment charges; our inability to manage our growth effectively; losses in excess of our insurance coverage; our inability to attract and retain talent; environmental liabilities, risks related to natural disasters and our inability to achieve our sustainability goals; the expected operating performance of anticipated near-term acquisitions and descriptions relating to these expectations; our
inability to comply with rules and regulations applicable to our Company; Digital Realty Trust, Inc.'s failure to maintain its status as a REIT for U.S. federal income tax purposes; Digital Realty Trust, L.P.'s failure to qualify as a partnership for U.S. federal income tax purposes; restrictions on our ability to engage in certain business activities; changes in local, state, federal and international laws and regulations, including related to taxation, real estate and zoning laws, and increases in real property tax rates; the impact of any financial, accounting, legal or regulatory issues or litigation that may affect us; and those additional risks and factors discussed in reports filed with the SEC by us from time to time, including those discussed under the heading "Risk Factors" in our most recently filed Annual Report on Form 10-K and in other sections of this report, including under Part II, Item 1A, Risk Factors.
While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes.
The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance, including factors and risks included in our Annual Report on Form 10-K for the year ended December 31, 2025 and in other sections of this report, including under Part II, Item 1A, Risk Factors. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to identify all such risk factors, nor can we assess the impact of all such risk factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, you should not place undue reliance on forward-looking statements as a prediction of actual results.
Occupancy percentages included in the following discussion, for some of our properties, are calculated based on factors including available power, required support capacity and common area.
As used in this report: "Ascenty entity" refers to the entity which owns and operates Ascenty, formed with Brookfield Infrastructure.
Business Overview and Strategy
Digital Realty Trust, Inc., through its controlling interest in Digital Realty Trust, L.P. and its subsidiaries, delivers comprehensive space, power, and interconnection solutions that enable its customers and partners to connect with each other and service their own customers on a global technology and real estate platform. We are a leading global provider of data center, colocation and interconnection solutions for customers across a variety of industry verticals. Digital Realty Trust, Inc. operates as a REIT for U.S. federal income tax purposes, and our Operating Partnership is the entity through which we conduct our business and own our assets.
Our primary business objectives are to maximize:
| (i) | sustainable long-term growth in earnings and funds from operations per share and unit; |
| (ii) | cash flow and returns to our stockholders and Digital Realty Trust, L.P.'s unitholders through the payment of distributions; and |
| (iii) | return on invested capital. |
We expect to accomplish our objectives by achieving superior risk-adjusted returns, prudently allocating capital, diversifying our product offerings, accelerating our global reach and scale, and driving revenue growth and operating efficiencies. A significant component of our current and future internal growth is anticipated through the development of our existing space held for development, acquisition of land for future development, and acquisition of new properties.
We target high-quality, strategically located properties containing the physical and connectivity infrastructure that supports the applications and operations of data center and technology industry customers and properties that may be developed for such use. Most of our data center properties contain fully redundant electrical supply systems, multiple power feeds, above-standard cooling systems, raised floor areas, extensive in-building communications cabling and high-level security systems. Fundamentally, we bring together foundational real estate and innovative technology expertise around the world to deliver a comprehensive, dedicated product suite to meet customers' data and connectivity needs. We represent an important part of the digital economy that we believe will benefit from powerful, long-term growth drivers.
We have developed detailed, standardized procedures for evaluating new real estate investments to ensure that they meet our financial, technical and other criteria. We expect to continue to acquire additional assets as part of our growth strategy. We intend to aggressively manage and lease our assets to increase their cash flow. We may continue to build out our development portfolio when justified by anticipated demand and returns.
We may acquire properties subject to existing mortgage financing and other indebtedness or we may incur new indebtedness in connection with acquiring or refinancing these properties. Debt service on such indebtedness will have a priority over any cash dividends with respect to Digital Realty Trust, Inc.'s common stock and preferred stock. We are committed to maintaining a conservative capital structure. Our goal is to average through business cycles the following financial ratios: 1) a debt-to-Adjusted EBITDA ratio around 5.5x, 2) a fixed charge coverage of greater than three times, and 3) floating rate debt at less than 20% of total outstanding debt. In addition, we strive to maintain a well-laddered debt maturity schedule, and we seek to maximize the menu of our available sources of capital, while minimizing the cost.
Changes in political conditions, geopolitical turmoil, political instability, civil disturbances, restrictive governmental actions or nationalization in the countries in which we operate, including escalations in political and trade tensions involving the U.S. and regulatory and legislative changes, could potentially result in adverse effects on our, and our customers', operations.
Summary of 2026 Significant Activities
We completed the following significant activities during the six months ended June 30, 2026:
| ● | During the three months ended March 31, 2026, we closed on acquisitions totaling approximately $280 million in the aggregate, primarily in Investments in properties, net in Sofia, Bulgaria, Milan, Italy, Portland and Atlanta. |
| ● | In April 2026, our Operating Partnership acquired approximately 1,440 acres of development land at Astra Enterprise Park, located near Kansas City, for total consideration of $482 million, comprised of $377.6 million in cash and 517,475 common units of limited partnership interest in our Operating Partnership with a fair value of $104.0 million. |
| ● | During the three months ended June 30, 2026, we completed several additional acquisitions, including two land parcels totaling approximately 355 acres in the Atlanta metro area for $21 million, two data centers and associated land in Cyberjaya, Malaysia for $137 million, and a 27-acre site in Marseille, France for $55 million. |
| ● | In June 2026, we completed the acquisition of 64% blended partnership interests in the Digital Carver Dulles 9 JV, LLC and Digital Carver Brickyard JV, LLC joint ventures. Prior to this transaction, the Company held the remaining 36% blended partnership interests. The newly developed assets are expected to be fully stabilized in the first half of 2027 and first half of 2028. Total consideration for our joint venture partners' equity interests in the assets was approximately $3.5 billion, including $1.2 billion of cash and 12.3 million shares of Digital Realty common stock. |
| ● | In May 2026, we contributed two development projects to Digital Realty DC Partners NA Fund (the "Fund"), with an aggregate carrying value of approximately $439 million, for gross proceeds of $447 million and recognized a gain on disposition of approximately $8 million. |
| ● | During the six months ended June 30, 2026, Digital Realty Trust, Inc. generated net proceeds of approximately $2.5 billion under its ATM Equity OfferingSM program from the issuance of approximately 13.5 million common shares at an average price of $184.94 per share after payment of approximately $12.6 million of commissions to the agents. As of June 30, 2026, $6.3 billion remains available for future sales. |
Revenue Base
Most of our revenue consists of rental income generated by the data centers in our portfolio. Our ability to generate and grow revenue depends on several factors, including our ability to maintain or improve occupancy rates. A summary of our data center portfolio and the DLR Share of White Space IT Load (excluding capacity under development or held for development) is shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2026 |
|
As of December 31, 2025 |
||||||
|
Region |
|
Data Centers |
White Space IT Load (MW) (1) |
Occupancy (2) |
|
Data Centers |
White Space IT Load (MW) (1) |
Occupancy (2) |
||
|
Americas |
|
156 |
1,421 |
95.2 |
% |
|
158 |
1,324 |
93.6 |
% |
|
EMEA |
|
130 |
870 |
81.9 |
% |
|
129 |
822 |
83.8 |
% |
|
APAC |
|
24 |
225 |
85.9 |
% |
|
24 |
217 |
84.2 |
% |
|
Consolidated Portfolio |
|
310 |
2,515 |
89.8 |
% |
|
311 |
2,363 |
89.3 |
% |
Note: Table excludes data centers held for sale or contribution. Total amounts may differ due to rounding.
| (1) | White Space IT Load represents uninterruptible power systems backed utility power in megawatts dedicated to Digital Realty's operated data center capacity. |
| (2) | Occupancy excludes capacity under active development and capacity held for development. |
Leasing Activities
Due to the capital-intensive and long-term nature of the operations we support, our lease terms with customers are generally longer than standard commercial leases. As of June 30, 2026, our average remaining lease term was approximately four years.
Our ability to re-lease expiring space at rental rates equal to or in excess of current rental rates will impact our results of operations. The subsequent table summarizes our leasing activity (DLR's share) in the six months ended June 30, 2026 (net rentable square feet ("NRSF") in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0-1 MW |
|
|
> 1 MW |
|
|
Other |
|||
|
|
(Based on kW) |
|
|
(Based on kW) |
|
|
(Based on NRSF)(3) |
|||
|
Leasing Activity - New(1)(2) |
|
|
|
|
|
|
|
|
|
|
|
Annualized GAAP Rent (in thousands) |
$ |
166,774 |
|
|
$ |
424,327 |
|
|
$ |
1,060 |
|
Kilowatt Leased / NRSF |
|
52,745 |
|
|
|
202,219 |
|
|
|
22 |
|
Weighted Average Lease Term (years) |
|
4.2 |
|
|
|
12.2 |
|
|
|
4.3 |
|
GAAP rent per Kilowatt / NRSF |
$ |
263 |
|
|
$ |
175 |
|
|
$ |
47 |
|
Leasing cost per Kilowatt / NRSF |
$ |
21 |
|
|
$ |
- |
|
|
$ |
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing Activity - Renewals(1)(2) |
|
|
|
|
|
|
|
|
|
|
|
Kilowatt Leased / NRSF |
|
79,367 |
|
|
|
50,209 |
|
|
|
167 |
|
Weighted Average Lease Term (years) |
|
1.4 |
|
|
|
4.2 |
|
|
|
4.5 |
|
Expiring cash rent per Kilowatt / NRSF |
$ |
302 |
|
|
$ |
150 |
|
|
$ |
31 |
|
Renewed cash rent per Kilowatt / NRSF |
$ |
318 |
|
|
$ |
248 |
|
|
$ |
37 |
|
Leasing cost per Kilowatt / NRSF |
$ |
1 |
|
|
$ |
- |
|
|
$ |
1 |
| (1) | Excludes short-term, roof, storage, and garage leases. |
| (2) | Includes leases for new and re-leased capacity. |
| (3) | Other includes Powered Base Building shell capacity as well as storage and office space within fully improved data center facilities. |
We continue to see strong demand in most of our key metropolitan areas for data center capacity and, subject to the supply of available data center capacity in these metropolitan areas, we expect average aggregate rental rates on renewed data center leases for 2026 expirations to be positive as compared with the rates currently being paid for the same space on a GAAP basis and on a cash basis. Our past performance may not be indicative of future results, and we cannot assure you that leases will be renewed or that our data centers will be re-leased at all or at rental rates equal to or above the current average rental rates. Further, re-leased/renewed rental rates in a particular metropolitan area may not be consistent with rental rates across our portfolio as a whole and may fluctuate from one period to another due to a number of factors, including local economic conditions, local supply and demand for data center capacity, competition from other data center developers or operators, the condition of the property and whether the property, or capacity within the property, has been developed.
Geographic Concentration
We depend on the market for data centers in specific geographic regions and significant changes in these regional or metropolitan areas can impact our future results. The following table shows the geographic concentration based on annualized rent from our portfolio, including data centers held as investments in unconsolidated entities.
|
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
June 30, 2026 |
|
|
Metropolitan Area |
|
Total annualized rent (1) |
|
|
Northern Virginia |
21.9 |
% |
|
|
Frankfurt |
6.2 |
% |
|
|
Chicago |
6.2 |
% |
|
|
Singapore |
5.7 |
% |
|
|
London |
5.0 |
% |
|
|
Amsterdam |
4.6 |
% |
|
|
Dallas |
4.3 |
% |
|
|
Paris |
4.2 |
% |
|
|
New York |
4.1 |
% |
|
|
Silicon Valley |
4.0 |
% |
|
|
Johannesburg |
2.5 |
% |
|
|
Other |
31.3 |
% |
|
|
Total |
100.0 |
% |
|
| (1) | Annualized rent is monthly contractual rent (defined as cash base rent before abatements) under existing leases as of the end of the period presented, multiplied by 12. Includes consolidated portfolio and unconsolidated entities at DLR's share. The aggregate amount of abatements for the six months ended June 30, 2026 was approximately $6.8 million. |
Operating Expenses
Operating expenses primarily consist of utilities, property and ad valorem taxes, property management fees, insurance and site maintenance costs, and rental expenses on our ground and building leases. Our buildings require significant power to support data center operations and the cost of electric power and other utilities is a significant component of operating expenses.
Many of our leases contain provisions under which tenants reimburse us for all or a portion of property operating expenses and real estate taxes incurred by us. However, in some cases we are not entitled to reimbursement of property operating expenses, other than utility expense, and real estate taxes under our leases for Turn-Key Flex® facilities. We expect to incur additional operating expenses as we continue to expand.
Costs pertaining to our asset management function, legal, accounting, corporate governance, reporting and compliance are categorized as general and administrative costs within operating expenses.
Other key components of operating expenses include: depreciation of our fixed assets, amortization of intangible assets, and transaction and integration costs.
Other Income / (Expenses)
Equity in earnings of unconsolidated entities, interest expense, and income tax expense make up the majority of Other income/(expenses). Equity in earnings of unconsolidated entities represents our share of the net income/(loss) of entities in which we invest, but do not consolidate under U.S. GAAP. Refer to additional discussion of Digital Core REIT and Ascenty in the Notes to the condensed consolidated financial statements.
Results of Operations
As a result of the consistent and significant growth in our business since the first property acquisition in 2002, we evaluate period-to-period results for revenue and property level operating expenses on a stabilized versus non-stabilized portfolio basis.
Stabilized: The stabilized portfolio includes properties owned as of the beginning of all periods presented with less than 5% of total rentable square feet under development.
Non-stabilized: The non-stabilized portfolio includes: (1) properties that were undergoing, or were expected to undergo, development activities during any of the periods presented; (2) any properties contributed to joint ventures, sold, or held for sale during the periods presented; and (3) any properties that were acquired or delivered at any point during the periods presented.
A roll forward showing changes in the stabilized and non-stabilized portfolios for the six months ended June 30, 2026 as compared to December 31, 2025 is shown below:
|
|
|
|
|
|
|
|
|
IT Capacity in kW |
|
Stabilized |
|
Non-Stabilized |
|
Total |
|
As of December 31, 2025 |
|
1,378,207 |
|
746,255 |
|
2,124,462 |
|
Dispositions / Sales |
|
(2,250) |
|
(2,250) |
|
(4,500) |
|
New development and space reconfigurations |
|
(3,325) |
|
96,602 |
|
93,277 |
|
Transfers to stabilized from non-stabilized |
|
246,234 |
|
(246,234) |
|
- |
|
Transfers to non-stabilized from stabilized |
|
(2,290) |
|
2,290 |
|
- |
|
As of June 30, 2026 |
|
1,616,576 |
|
596,663 |
|
2,213,239 |
Comparison of the Results of Operations for the Three and Six Months Ended June 30, 2026 to the Three and Six Months Ended June 30, 2025
Revenues
Total operating revenues as shown on our condensed consolidated income statements were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||||||||||||||
|
|
|
2026 |
|
2025 |
|
$ Change |
|
% Change |
|
2026 |
|
2025 |
|
$ Change |
|
% Change |
||||||||
|
Stabilized |
|
$ |
1,271,639 |
|
$ |
1,175,798 |
|
$ |
95,841 |
|
8.2 |
% |
|
|
2,519,477 |
|
$ |
2,310,329 |
|
$ |
209,148 |
|
9.1 |
% |
|
Non-Stabilized |
|
|
402,994 |
|
|
281,562 |
|
|
121,432 |
|
43.1 |
% |
|
|
755,383 |
|
|
533,892 |
|
|
221,491 |
|
41.5 |
% |
|
Rental and other services |
|
|
1,674,633 |
|
|
1,457,360 |
|
|
217,273 |
|
14.9 |
% |
|
|
3,274,860 |
|
|
2,844,221 |
|
|
430,639 |
|
15.1 |
% |
|
Fee income and other |
|
|
249,407 |
|
|
35,790 |
|
|
213,617 |
|
596.9 |
% |
|
284,353 |
|
56,566 |
|
|
227,787 |
|
402.7 |
% |
||
|
Total operating revenues |
|
$ |
1,924,040 |
|
$ |
1,493,150 |
|
$ |
430,890 |
|
28.9 |
% |
|
$ |
3,559,213 |
|
$ |
2,900,787 |
|
$ |
658,426 |
|
22.7 |
% |
Total operating revenues increased by approximately $430.9 million and $658.4 million in the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025.
Stabilized rental and other services revenue increased by approximately $95.8 million and $209.1 million in the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025 primarily due to increases in new leasing and renewals and higher utilities reimbursements across all regions along with the strengthening of foreign exchange rates, primarily the Euro, British pound sterling and Singapore dollar.
Non-stabilized rental and other services revenue increased by approximately $121.4 million and $221.5 million in the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025 primarily due to:
| (i) | increases of $145.1 million and $284.7 million, respectively, due to the completion of our global development pipeline and related lease up operating activities (with the biggest contributions in Northern Virginia, Frankfurt, Paris and Johannesburg); and |
| (ii) | offset by decreases of $23.7 million and $63.2 million, respectively, related to properties sold or contributed since June 30, 2025. |
Fee income and other increased by approximately $213.6 million and $227.8 million in the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025 primarily due to $201 million of promote income related to achievement of certain performance hurdles associated with the June 2026 Acquisition.
Operating Expenses - Property Level
Property level operating expenses as shown in our condensed consolidated income statements were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||||||||||||||
|
|
|
2026 |
|
2025 |
|
$ Change |
|
% Change |
|
2026 |
|
2025 |
|
$ Change |
|
% Change |
||||||||
|
Stabilized |
|
$ |
298,503 |
|
$ |
275,249 |
|
$ |
23,254 |
|
8.4 |
% |
|
$ |
596,279 |
|
$ |
538,301 |
|
$ |
57,978 |
|
10.8 |
% |
|
Non-Stabilized |
|
97,951 |
|
64,039 |
|
|
33,912 |
|
53.0 |
% |
|
172,560 |
|
114,372 |
|
|
58,188 |
|
50.9 |
% |
||||
|
Total Utilities |
|
|
396,454 |
|
|
339,288 |
|
|
57,166 |
|
16.8 |
% |
|
|
768,839 |
|
|
652,673 |
|
|
116,166 |
|
17.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stabilized |
|
|
220,489 |
|
|
208,364 |
|
|
12,125 |
|
5.8 |
% |
|
|
428,446 |
|
|
394,433 |
|
|
34,013 |
|
8.6 |
% |
|
Non-Stabilized |
|
70,919 |
|
59,360 |
|
|
11,559 |
|
19.5 |
% |
|
129,077 |
|
111,891 |
|
|
17,186 |
|
15.4 |
% |
||||
|
Total Rental property operating and maintenance (excluding utilities) |
|
|
291,408 |
|
|
267,724 |
|
|
23,684 |
|
8.8 |
% |
|
|
557,523 |
|
|
506,324 |
|
|
51,199 |
|
10.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Rental property operating and maintenance |
|
|
687,862 |
|
|
607,012 |
|
|
80,850 |
|
13.3 |
% |
|
|
1,326,362 |
|
|
1,158,997 |
|
|
167,365 |
|
14.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stabilized |
|
49,819 |
|
44,432 |
|
|
5,387 |
|
12.1 |
% |
|
97,845 |
|
87,715 |
|
|
10,130 |
|
11.5 |
% |
||||
|
Non-Stabilized |
|
10,085 |
|
10,084 |
|
|
1 |
|
0.0 |
% |
|
21,822 |
|
20,140 |
|
|
1,682 |
|
8.4 |
% |
||||
|
Total Property taxes and insurance |
|
59,904 |
|
54,516 |
|
|
5,388 |
|
9.9 |
% |
|
119,667 |
|
107,855 |
|
|
11,812 |
|
11.0 |
% |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property level operating expenses |
|
$ |
747,766 |
|
$ |
661,528 |
|
$ |
86,238 |
|
13.0 |
% |
|
$ |
1,446,029 |
|
$ |
1,266,852 |
|
$ |
179,177 |
|
14.1 |
% |
Property level operating expenses include costs to operate and maintain the properties in our portfolio as well as property taxes and insurance.
Total Utilities
Total stabilized utilities expenses increased by approximately $23.3 million and $58.0 million in the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The increase was primarily due to higher power pricing at certain properties in the stabilized portfolio, mainly in EMEA and APAC, offset by rebates received mainly in EMEA.
Total non-stabilized utilities expenses increased by approximately $33.9 million and $58.2 million in the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025 primarily due to:
| (i) | an increase of approximately $38.3 million and $68.3 million due to higher utility consumption in a growing portfolio of recently completed development sites (with the biggest contributions in Northern Virginia, Frankfurt and Cape Town); offset by |
| (ii) | a decrease of $4.0 million and $11.2 million related to properties sold or contributed after June 30, 2025. |
The cost of electric power comprises a significant component of our operating expenses. Any additional taxation or regulation of energy use, including as a result of (i) new legislation that the U.S. Congress may pass, (ii) the regulations that the U.S. EPA has proposed or finalized, (iii) regulations under legislation that states have passed or may pass, or (iv) any further legislation or regulations in EMEA, APAC or other regions where we operate could significantly increase our costs, and we may not be able to effectively pass all of these costs on to our customers. These matters could adversely impact our business, results of operations, or financial condition.
Total Rental Property Operating and Maintenance (Excluding Utilities)
Total stabilized rental property operating and maintenance expenses (excluding utilities) increased by approximately $12.1 million and $34.0 million in the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025 primarily due to increases in building operations expense, common area maintenance expense and data center labor.
Total non-stabilized rental property operating and maintenance expenses (excluding utilities) increased by approximately $11.6 million and $17.2 million in the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025 primarily due to increases in data center labor expense throughout the portfolio.
Total Property Taxes and Insurance
Total stabilized property taxes and insurance increased by approximately $5.4 million and $10.1 million in the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025, due to timing of property tax assessments throughout our North American portfolio, primarily in Northern Virginia.
Other Operating Expenses
Other operating expenses include costs which are either non-cash in nature (such as depreciation and amortization) or which do not directly pertain to operation of data center properties. A comparison of other operating expenses for the respective periods is shown below (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||||||||||||||
|
|
|
2026 |
|
2025 |
|
$ Change |
|
% Change |
|
2026 |
|
2025 |
|
$ Change |
|
% Change |
||||||||
|
Depreciation and amortization |
$ |
507,106 |
|
$ |
461,167 |
|
$ |
45,939 |
|
10.0 |
% |
$ |
1,006,617 |
|
$ |
904,176 |
|
$ |
102,441 |
|
11.3 |
% |
||
|
General and administrative |
|
|
157,700 |
|
|
136,017 |
|
|
21,683 |
|
15.9 |
% |
|
|
312,458 |
|
|
259,557 |
|
|
52,901 |
|
20.4 |
% |
|
Transactions and integration |
|
38,703 |
|
22,546 |
|
|
16,157 |
|
71.7 |
% |
|
54,388 |
|
|
62,448 |
|
|
(8,060) |
|
(12.9) |
% |
|||
|
Other |
|
13,508 |
|
195 |
|
|
13,313 |
|
6,827.2 |
% |
|
13,531 |
|
307 |
|
13,224 |
|
4,307.5 |
% |
|||||
|
Total other operating expenses |
|
|
717,017 |
|
|
619,925 |
|
|
97,092 |
|
15.7 |
% |
|
|
1,386,994 |
|
|
1,226,488 |
|
|
160,506 |
|
13.1 |
% |
|
Total property level operating expenses |
|
|
747,766 |
|
|
661,528 |
|
|
86,238 |
|
13.0 |
% |
|
|
1,446,029 |
|
|
1,266,852 |
|
|
179,177 |
|
14.1 |
% |
|
Total operating expenses |
|
$ |
1,464,783 |
|
$ |
1,281,453 |
|
$ |
183,330 |
|
14.3 |
% |
|
$ |
2,833,023 |
|
$ |
2,493,340 |
|
$ |
339,683 |
|
13.6 |
% |
General and Administrative
General and administrative expenses increased $21.7 million and $52.9 million in the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025 due to higher head count along with increased information technology costs.
Transactions and Integration
Transactions and integration expenses increased $16.2 million and decreased $8.1 million in the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The increase was due to increased expenses for software development initiatives and higher transaction expenses, including an increase in German real estate transfer tax accrual along with expenses associated with various projects. The decrease was driven primarily by German real estate transfer taxes paid in 2025 related to the Interxion combination.
Equity in Earnings (Loss) of Unconsolidated Entities
The change in Equity in earnings (loss) of unconsolidated entities was approximately $12.1 million and $17.9 million in the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The foreign exchange remeasurement of debt associated with our unconsolidated Ascenty entity creates volatility in our equity in earnings and drove this fluctuation, as well as higher income in two of our unconsolidated joint ventures in the Americas region.
Other income, net
Other income, net increased $100.2 million and $112.8 million in the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025, driven primarily by insurance proceeds received in 2026 for business interruption lost revenue, coupled with insurance proceeds for property damage at a data center in Singapore.
Interest Expense
Interest expense increased $4.6 million and $22.5 million in the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025 driven primarily by higher unsecured senior notes interest expense tied to i) Euro Notes issued in June 2025 - €850 million aggregate principal amount of 3.875% Guaranteed Notes due 2034 and ii) Euro Notes issued in November 2025 - €600 million aggregate principal amount of 3.750% Guaranteed Notes due 2033 and €800 million aggregate principal amount of 4.250% Guaranteed Notes due 2037. This was offset by higher capitalized interest due to increased construction activity. In addition, we had lower interest expense associated with our credit facilities due to lower average balances in 2026 as compared to 2025.
Loss on Debt Extinguishment and Modifications
In March 2026, we voluntarily paid down Teraco debt of $53 million. The paydown resulted in a loss on debt extinguishment and modifications of approximately $4.1 million. We incurred no losses on debt extinguishment and debt modifications in the three months ended June 30, 2026.
We incurred no losses on debt extinguishment and debt modifications in the three and six months ended June 30, 2025.
Income Tax Expense
Income tax expense increased $20.8 million and $19.7 million in the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The increase was due to jurisdictional rate mix within the global group, mainly attributable to tax expense associated with the insurance settlement proceeds related to one of our facilities in Singapore. We carried out an analysis for the purposes of the Model GloBE Rules for Pillar Two and no material top-up tax is expected.
As of June 30, 2026, we are under examination for the taxable year ended December 31, 2021 within the United States, except that the examination of our Parent for such taxable year was closed with a no change determination on April 21, 2026. Additionally, we are under examination for various taxable years ended 2017 and onward within various foreign jurisdictions.
Liquidity and Capital Resources
The sections "Analysis of Liquidity and Capital Resources - Parent" and "Analysis of Liquidity and Capital Resources - Operating Partnership" should be read in conjunction with one another to understand our liquidity and capital resources on a consolidated basis. The term "Parent" refers to Digital Realty Trust, Inc. on an unconsolidated basis, excluding our Operating Partnership. The term "Operating Partnership" or "OP" refers to Digital Realty Trust, L.P. on a consolidated basis.
Analysis of Liquidity and Capital Resources - Parent
Our Parent does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing public equity from time to time, incurring certain expenses in operating as a public company (which are fully reimbursed by the Operating Partnership) and guaranteeing certain unsecured debt of the Operating Partnership and certain of its subsidiaries and affiliates. If our Operating Partnership or such subsidiaries fail to fulfill their debt requirements, which trigger Parent guarantee obligations, then our Parent will be required to fulfill its cash payment commitments under such guarantees. Our Parent's only material asset is its investment in our Operating Partnership.
Our Parent's principal funding requirement is the payment of dividends on its common and preferred stock. Our Parent's principal source of funding is the distributions it receives from our Operating Partnership.
As the sole general partner of our Operating Partnership, our Parent has the full, exclusive and complete responsibility for our Operating Partnership's day-to-day management and control. Our Parent causes our Operating Partnership to distribute such portion of its available cash as our Parent may in its discretion determine, in the manner provided in our Operating Partnership's partnership agreement.
As circumstances warrant, our Parent may issue equity from time to time on an opportunistic basis, dependent upon market conditions and available pricing. Any proceeds from such equity issuances would generally be contributed to our Operating Partnership in exchange for additional equity interests in our Operating Partnership. Our Operating Partnership may use the proceeds to acquire additional properties, to fund development opportunities and for general working capital purposes, including potentially for the repurchase, redemption or retirement of outstanding debt or equity securities.
Our Parent and our Operating Partnership were parties to an ATM Equity OfferingSM Sales Agreement dated December 23, 2024 (the "2024 Sales Agreement"). Pursuant to the 2024 Sales Agreement, Digital Realty Trust, Inc. could issue and sell common stock having an aggregate offering price of up to $3.0 billion through various named agents from time to time. From April 1, 2026 through May 3, 2026, Digital Realty Trust, Inc. generated net proceeds of approximately $435.2 million from the issuance of approximately 2.4 million common shares under the 2024 Sales Agreement at an average price of $181.21 per share after payment of approximately $2.2 million of commissions to the agents.
On May 4, 2026, our Parent and our Operating Partnership entered into a new ATM Equity OfferingSM Sales Agreement (the "2026 Sales Agreement"), pursuant to which, Digital Realty Trust, Inc. can issue and sell common stock having an aggregate offering price of up to $7.5 billion through various named agents from time to time. The 2024 Sales Agreement was terminated in connection with entry into the 2026 Sales Agreement, and at the time of such termination, $569.9 million remained unsold under the 2024 Sales Agreement. From May 4, 2026 through June 30, 2026, Digital Realty Trust, Inc. generated net proceeds of approximately $1.2 billion from the issuance of approximately 6.2 million common shares under the 2026 Sales Agreement at an average price of $191.63 per share after payment of approximately $6.2 million of commissions to the agents. As of June 30, 2026, $6.3 billion remains available for future sales under the 2026 Sales Agreement.
The sales of common stock made under the 2026 Sales Agreement will be made in "at the market" offerings as defined in Rule 415 of the Securities Act. Our Parent has used and intends to use the net proceeds from the program to temporarily repay borrowings under our Operating Partnership's Global Revolving Credit Facilities, to acquire additional properties or businesses, to fund development opportunities and for working capital and other general corporate purposes, including potentially for the repayment of other debt or the repurchase, redemption or retirement of outstanding debt securities.
We believe our Operating Partnership's sources of working capital, specifically its cash flow from operations, and funds available under its Global Revolving Credit Facility are adequate for it to make its distribution payments to our Parent and, in turn, for our Parent to make its dividend payments to its stockholders. However, we cannot assure you that our Operating Partnership's sources of capital will continue to be available at all or in amounts sufficient to meet its needs, including making distribution payments to our Parent. The lack of availability of capital could adversely affect our Operating Partnership's ability to pay its distributions to our Parent, which would, in turn, adversely affect our Parent's ability to pay cash dividends to its stockholders.
Future Uses of Cash - Parent
Our Parent may from time to time seek to retire, redeem or repurchase its equity or the debt securities of our Operating Partnership or its subsidiaries through cash purchases and/or exchanges for equity securities in open market purchases, privately negotiated transactions or otherwise. Such repurchases, redemptions or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions or other factors. The amounts involved may be material.
Dividends and Distributions - Parent
Our Parent is required to distribute 90% of its taxable income (excluding capital gains) on an annual basis to continue to qualify as a REIT for U.S. federal income tax purposes. Our Parent intends to make, but is not contractually bound to make, regular quarterly distributions to its common stockholders from cash flow from our Operating Partnership's operating activities. While historically our Parent has satisfied this distribution requirement by making cash distributions to its stockholders, it may choose to satisfy this requirement by making distributions of cash or other property. All such distributions are at the discretion of our Parent's Board of Directors. Our Parent considers market factors and our Operating Partnership's performance in addition to REIT requirements in determining distribution levels. Our Parent has distributed at least 100% of its taxable income annually since inception to minimize corporate level federal and state income taxes. Amounts accumulated for distribution to stockholders are invested primarily in interest-bearing accounts and short-term interest-bearing securities, in a manner consistent with our intention to maintain our Parent's status as a REIT.
As a result of this distribution requirement, our Operating Partnership cannot rely on retained earnings to fund its ongoing operations to the same extent that other companies whose parent companies are not REITs can. Our Parent may need to continue to raise capital in the debt and equity markets to fund our Operating Partnership's working capital needs, as well as potential developments at new or existing properties, acquisitions or investments in existing or newly created joint ventures. In addition, our Parent may be required to use borrowings under the Operating Partnership's Global Revolving Credit Facility (which is guaranteed by our Parent), if necessary, to meet REIT distribution requirements and maintain our Parent's REIT status.
Distributions out of our Parent's current or accumulated earnings and profits are generally classified as ordinary income whereas distributions in excess of our Parent's current and accumulated earnings and profits, to the extent of a stockholder's U.S. federal income tax basis in our Parent's stock, are generally classified as a return of capital. Distributions in excess of a stockholder's U.S. federal income tax basis in our Parent's stock are generally characterized as capital gain. Cash provided by operating activities has been generally sufficient to fund distributions on an annual basis. However, we may also need to utilize borrowings under the Global Revolving Credit Facility to fund distributions.
For additional information regarding dividends declared and paid by our Parent on its common and preferred stock for the six months ended June 30, 2026, see Note 10. "Equity and Capital" to our condensed consolidated financial statements contained herein.
Analysis of Liquidity and Capital Resources - Operating Partnership
As of June 30, 2026, we had $1,864.8 million of cash and cash equivalents, excluding $1.8 million of restricted cash. Restricted cash primarily consists of contractual capital expenditures plus other deposits and is included in Other assets on our Condensed Consolidated Balance Sheets. As circumstances warrant, our Operating Partnership may dispose of stabilized assets or enter into joint venture arrangements with institutional investors or strategic partners, on an opportunistic basis dependent upon market conditions. Our Operating Partnership may use the proceeds from such dispositions to acquire additional properties, to fund development opportunities and for general working capital purposes, including the repayment of indebtedness. Our liquidity requirements primarily consist of:
| ● | operating expenses; |
| ● | development costs and other expenditures associated with our properties, including joint ventures; |
| ● | distributions to our Parent to enable it to make dividend payments; |
| ● | distributions to unitholders of common limited partnership interests in Digital Realty Trust, L.P.; |
| ● | debt service; and |
| ● | potentially, acquisitions. |
The Global Revolving Credit Facilities provide for borrowings up to $4.5 billion (including approximately $0.3 billion available to be drawn on the Yen Revolving Credit Facility) based on currency commitments and foreign exchange rates as of June 30, 2026. The Global Revolving Credit Facility provides for borrowings in a variety of currencies and can be increased by an additional $1.8 billion, subject to receipt of lender commitments and other conditions precedent. Both facilities mature on January 24, 2029, with two six-month extension options available.
These facilities also feature a sustainability-linked pricing component, with pricing subject to adjustment based on annual performance targets, further demonstrating our continued leadership and commitment to sustainable business practices.
The Global Revolving Credit Facility provides for borrowings in a variety of currencies and includes the ability to add additional currencies in the future. We have used and intend to use available borrowings under the Global Revolving Credit Facilities to acquire additional properties, fund development opportunities and for general working capital and other corporate purposes, including potentially for the repurchase, redemption or retirement of outstanding debt or equity securities. For additional information regarding our Global Revolving Credit Facilities, see Note 8. "Debt of the Operating Partnership" in the Notes to our Condensed Consolidated Financial Statements.
Future Uses of Cash
Our properties require periodic investments of capital for customer-related capital expenditures and for general capital improvements. Depending upon customer demand, we expect to incur significant improvement costs to build out and develop additional capacity. At June 30, 2026, we had open commitments, related to construction contracts of approximately $4.1 billion, including amounts reimbursable of approximately $320.1 million.
For the remainder of 2026, we currently expect to incur approximately $2.8 billion to $3.3 billion of capital expenditures, which includes our share of joint venture contributions and is net of partner contributions for our development programs. This amount could go up or down, potentially materially, based on numerous factors, including changes in demand, leasing results and availability of debt or equity capital.
Development Projects
We are investing in our portfolio, which includes consolidated and unconsolidated projects, to organically expand our capacity. As of June 30, 2026, we had 1,402 megawatts of projects underway across multiple metropolitan areas around the world, representing an approximately 82% increase of capacity under development as compared to December 31, 2025. As of June 30, 2026, 54% of the 1,402 megawatts of projects underway was pre-leased. As of June 30, 2026, we had over 7 gigawatts of additional future development capacity, of which approximately 70% came from locations with more than 100 megawatts of buildable capacity, 20% came from locations with between 25 megawatts and 100 megawatts of buildable capacity and 10% came from locations with less than 25 megawatts of buildable capacity. As of June 30, 2026, we estimate that the pre-tax stabilized cash yields on our total 1,402 megawatts of capacity under construction across the world is approximately 11.5%. Pre-tax estimated stabilized cash yields are based on total expected investment amounts and anticipated net operating income from leases signed or other assumptions based on market conditions. We calculate the anticipated stabilized net operating income for any given project by subtracting the project's estimated stabilized operating expenses and depreciation and amortization from its estimated stabilized revenue, which we estimate based on leases signed and other assumptions based on market conditions. No assurance can be given that we will complete any of these projects on the terms currently contemplated, or at all, that the actual cost of any of these projects will not exceed our estimates or that the actual yield achieved by such projects will be consistent with our estimates.
Capital Expenditures (Cash Basis)
The table below summarizes our capital expenditure activity for the six months ended June 30, 2026 and 2025 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
||||
|
|
|
2026 |
|
2025 |
||
|
Development projects |
|
$ |
1,477,072 |
|
$ |
1,251,790 |
|
Enhancement and improvements |
|
13,673 |
|
15,822 |
||
|
Recurring capital expenditures |
|
136,339 |
|
97,388 |
||
|
Total capital expenditures (excluding indirect costs) |
|
$ |
1,627,084 |
|
$ |
1,365,000 |
Our development capital expenditures are generally funded by our available cash and equity and debt capital.
Indirect costs, including interest, capitalized in the six months ended June 30, 2026 and 2025 were $157.1 million and $126.6 million, respectively. Capitalized interest comprised approximately $72.7 million and $59.5 million of the total indirect costs capitalized for the six months ended June 30, 2026 and 2025, respectively. Capitalized interest in the six months ended June 30, 2026 increased, compared to the same period in 2025, due to an increase in qualifying activities and higher interest rates.
Excluding capitalized interest, indirect costs in the six months ended June 30, 2026 increased compared to the same period in 2025 due primarily to capitalized amounts relating to compensation expense of employees directly engaged in construction activities. See "Future Uses of Cash" for a discussion of the amount of capital expenditures we expect to incur during the year ending December 31, 2026.
Consistent with our growth strategy, we actively pursue potential acquisition opportunities, with due diligence and negotiations often at different stages at different times. The dollar value of acquisitions for the year ending December 31, 2026 will depend upon numerous factors, including customer demand, leasing results, availability of debt or equity capital and acquisition opportunities. Further, the growing acceptance by private institutional investors of the data center asset class has generally pushed capitalization rates lower, as such private investors may often have lower return expectations than us. As a result, we anticipate near-term single asset acquisitions activity to comprise a smaller percentage of our growth while this market dynamic persists.
We may from time to time seek to retire or repurchase our outstanding debt or the equity of our Parent through cash purchases and/or exchanges for equity securities of our Parent in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend upon prevailing market conditions, our liquidity requirements, contractual restrictions or other factors. The amounts involved may be material.
Sources of Cash
We expect to meet our short-term and long-term liquidity requirements, including payment of scheduled debt maturities and funding of acquisitions and non-recurring capital improvements, with net cash from operations, future long-term secured and unsecured indebtedness and the issuance of equity and debt securities and the proceeds of equity issuances by our Parent. We also may fund future short-term and long-term liquidity requirements, including acquisitions and non-recurring capital improvements, using our Global Revolving Credit Facilities pending permanent financing. As of July 29, 2026, we had approximately $3.6 billion of borrowings available under our Global Revolving Credit Facilities.
During the quarter, we sold a non-core asset in the Atlanta metro area for gross proceeds of approximately $25 million and recognized a gain on disposition of approximately $2.0 million. In May, we contributed two development projects to the Fund, with an aggregate carrying value of approximately $439 million, for gross proceeds of $447 million and recognized a gain on disposition of approximately $8 million.
Distributions
All distributions on our units are at the discretion of our Parent's Board of Directors. For additional information regarding distributions paid on our common and preferred units for the three and six months ended June 30, 2026, see Note 10. "Equity and Capital" to our condensed consolidated financial statements contained herein.
Outstanding Consolidated Indebtedness
The table below summarizes our outstanding debt as of June 30, 2026 (in millions):
|
|
|
|
|
|
|
Debt Summary: |
|
|
|
|
|
Fixed rate |
|
$ |
14,124 |
|
|
Variable rate debt subject to interest rate swaps |
|
3,442 |
|
|
|
Total fixed rate debt (including interest rate swaps) |
|
17,566 |
|
|
|
Variable rate-unhedged |
|
1,202 |
|
|
|
Total |
|
$ |
18,768 |
|
|
Percent of Total Debt: |
|
|
|
|
|
Fixed rate (including swapped debt) |
|
93.6 |
% |
|
|
Variable rate |
|
6.4 |
% |
|
|
Total |
|
100.0 |
% |
|
|
|
|
|
|
|
|
Effective Interest Rate as of June 30, 2026 |
|
|
|
|
|
Fixed rate (including hedged variable rate debt) |
|
3.03 |
% |
|
|
Variable rate |
|
2.46 |
% |
|
|
Effective interest rate |
|
2.99 |
% |
Our ratio of debt to total enterprise value was approximately 21.4% (based on the closing price of Digital Realty Trust, Inc.'s common stock on June 30, 2026 of $179.58). For this purpose, our total enterprise value is defined as the sum of the market value of Digital Realty Trust, Inc.'s outstanding common stock (which may decrease, thereby increasing our debt to total enterprise value ratio), plus the liquidation value of Digital Realty Trust, Inc.'s preferred stock, plus the aggregate value of Digital Realty Trust, L.P. units not held by Digital Realty Trust, Inc. (with the per unit value equal to the market value of one share of Digital Realty Trust, Inc.'s common stock and excluding long-term incentive units, Class C units and Class D units), plus the book value of our total consolidated indebtedness.
The variable rate debt shown above bears interest based on various one-month EURIBOR, TIBOR, SARON and JIBAR rates and 91-day CD rate, depending on the respective agreement governing the debt, including our Global Revolving Credit Facilities and unsecured term loans. As of June 30, 2026, our debt had a weighted average term to initial maturity of approximately 4.4 years (or approximately 4.5 years assuming exercise of extension options).
As of June 30, 2026, our pro-rata share of secured debt of unconsolidated entities was approximately $2.0 billion.
Covenants
The following is a summary of the key financial covenants for our senior unsecured notes, as defined and calculated per the terms of our senior notes. These calculations, which are not based on U.S. GAAP, are presented to show our ability to incur additional debt under the terms of our senior notes as well as to disclose our current compliance with such covenants and are not measures of our liquidity or performance. The actual amounts as of June 30, 2026, are:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured |
|
Unsecured |
|
|
|
|
|
Senior Notes |
|
Senior Notes |
|
Debt Covenant Ratios (1) |
|
|
|
8.25% Cap(2) |
|
7.25% Cap(3) |
|
Total outstanding debt / total assets |
|
Less than 60% |
|
35% |
|
30% |
|
Secured debt / total assets |
|
Less than 40% |
|
6% |
|
2% |
|
Total unencumbered assets / unsecured debt |
|
Greater than 150% |
|
322% |
|
354% |
|
Consolidated EBITDA / interest expense (4) |
|
Greater than 1.50x |
|
5.2 x |
|
5.2 x |
| (1) | For definitions of the terms used in the table above and related footnotes, please refer to the indentures which govern the notes, each as amended and which are filed as exhibits to our reports filed with the U.S. Securities and Exchange Commission. |
| (2) | Ratios for the Unsecured Senior Notes except for the 0.20% notes due 2026, 1.70% notes due 2027, 5.550% notes due 2028, 0.55% notes due 2029, 1.875% notes due 2029, 1.250% notes due 2031, 0.625% notes due 2031, 1.00% notes due 2032, 1.375% notes due 2032, 3.750% notes due 2033, 3.875% notes due 2033, 3.875% notes due 2034, 3.875% notes due 2035 and 4.250% notes due 2037. |
| (3) | Ratios for the 0.20% notes due 2026, 1.70% notes due 2027, 5.550% notes due 2028, 0.55% notes due 2029, 1.875% notes due 2029, 1.250% notes due 2031, 0.625% notes due 2031, 1.00% notes due 2032, 1.375% notes due 2032, 3.750% notes due 2033, 3.875% notes due 2033, 3.875% notes due 2034, 3.875% notes due 2035 and 4.250% notes due 2037. |
| (4) | Calculated as current quarter annualized consolidated EBITDA to current quarter annualized Interest Expense (including capitalized interest and debt discounts). |
Cash Flows
The following summary discussion of our cash flows is based on the condensed consolidated statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.
Comparison of Six Months Ended June 30, 2026 to Six Months Ended June 30, 2025
The following table shows cash flows and ending cash, cash equivalents and restricted cash balances for the respective periods (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|||||||
|
|
2026 |
|
2025 |
|
Change |
|||
|
Net cash provided by operating activities |
$ |
1,595,227 |
|
$ |
1,040,322 |
|
$ |
554,905 |
|
Net cash used in investing activities |
(4,246,547) |
|
(741,840) |
|
(3,504,707) |
|||
|
Net cash provided by (used in) financing activities |
980,241 |
|
(462,166) |
|
1,442,407 |
|||
|
Net decrease in cash, cash equivalents and restricted cash |
$ |
(1,671,079) |
|
$ |
(163,684) |
|
$ |
(1,507,395) |
Cash provided by operating activities increased primarily due to:
| (i) | an increase in revenues due to the completion of our global development pipeline and related lease up operating activities; |
| (ii) | offset by the net impact of properties sold and contributed in 2025 and 2026. |
The changes in the activities that comprise the increase in net cash used in investing activities for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025 consisted of the following amounts (in thousands).
|
|
|
|
|
|
Change |
|
|
|
2026 vs 2025 |
|
|
Increase in net cash used in business combinations / asset acquisitions |
$ |
(1,952,133) |
|
Increase in cash used for improvements to investments in real estate |
|
(292,603) |
|
Increase in cash contributed to investments in unconsolidated entities, net |
|
(342,422) |
|
Decrease in net cash provided by proceeds from sale of real estate |
|
(906,034) |
|
Other changes |
(11,515) |
|
|
Increase in net cash used in investing activities |
$ |
(3,504,707) |
The increase in net cash used in investing activities was primarily due to:
| (i) | an increase in spend due to acquisitions of $2,170 million in 2026 compared to $218 million in 2025, |
| (ii) | an increase in spend on development projects and recurring capital expenditures of approximately $293 million; |
| (iii) | an increase in cash contributed to various investments in unconsolidated entities; |
| (iv) | a decrease in cash provided by the sale or contributions of data centers due to: |
| ● | approximately $171 million provided for the six months ended June 30, 2026: |
| i. | $141 million from the contribution of two development projects to the Fund; and |
| ii. | $31 million from the sale of non-core data centers in the Boston and Atlanta metro areas; |
| ● | offset by approximately $1.1 billion provided for the six months ended June 30, 2025: |
| i. | a $62 million cash contribution made by Mitsubishi in January 2025, which increased their ownership in the joint venture from 65% to 80%; |
| ii. | cash provided by the contribution of development projects at the Digital Dulles campus to the joint venture with Blackstone in April 2025, for gross proceeds of approximately $77 million; and |
| iii. | cash provided by the contribution of data centers and development projects to the Fund in May 2025, for gross proceeds of approximately $937 million. |
The changes in the activities that comprise the increase in net cash from financing activities for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025 consisted of the following amounts (in thousands).
|
|
|
|
|
|
Change |
|
|
|
2026 vs 2025 |
|
|
Decrease in cash from short-term borrowings |
$ |
964,085 |
|
Decrease in cash provided by proceeds from secured / unsecured debt |
|
(1,829,600) |
|
Decrease in cash used for repayment on secured / unsecured debt |
|
439,162 |
|
Increase in cash provided by proceeds from issuance of common stock, net of costs |
|
1,890,519 |
|
Increase in cash used for dividend and distribution payments |
(43,872) |
|
|
Other changes, net |
|
22,113 |
|
Increase in net cash from financing activities |
$ |
1,442,407 |
The increase in net cash from financing activities was primarily due to:
| (i) | decrease in cash from short-term borrowings; |
| (ii) | a decrease in cash provided by proceeds from secured / unsecured debt due to the issuance of the 3.875% Guaranteed Notes due 2035 in January 2025 and the issuance of the 3.875% Guaranteed Notes due 2034 in June 2025; |
| (iii) | a decrease in cash used for repayment: |
| ● | $53 million voluntary paydown of Teraco debt in March 2026, compared to |
| ● | $496 million on the GBP notes (4.250% notes due 2025) repaid in January 2025. |
| (iv) | an increase in cash provided by proceeds from the issuance of: |
| ● | approximately 13.5 million shares of common stock, net of costs, of approximately $2.5 billion under our ATM program in 2026, compared to |
| ● | approximately 3.5 million shares of common stock, net of costs, of approximately $605 million under our ATM program in 2025; and |
| (v) | an increase in dividend and distribution payments due to an increased number of common shares and common units outstanding. |
Noncontrolling Interests in Operating Partnership
Noncontrolling interests relate to the common units in Digital Realty Trust, L.P. that are not owned by Digital Realty Trust, Inc., which, as of June 30, 2026, amounted to 1.8% of Digital Realty Trust, L.P. common units. Historically, Digital Realty Trust, L.P. has issued common units to third party sellers in connection with our acquisition of real estate interests from such third parties.
Limited partners have the right to require Digital Realty Trust, L.P. to redeem part or all of their common units for cash based on the fair market value of an equivalent number of shares of Digital Realty Trust, Inc. common stock at the time of redemption. Alternatively, Digital Realty Trust, Inc. may elect to acquire those common units in exchange for shares of its common stock on a one-for-one basis, subject to adjustment in the event of stock splits, stock dividends, issuance of stock rights, specified extraordinary distributions and similar events. As of June 30, 2026, common units and incentive units of Digital Realty Trust, L.P. are classified within equity, except for certain common units of approximately 0.2 million issued to certain former DuPont Fabros Technology, L.P. unitholders in the Company's acquisition of DuPont Fabros Technology, Inc., which are subject to certain restrictions and, accordingly, are not presented as permanent equity in the condensed consolidated balance sheet.
Inflation
Many of our leases provide for separate real estate tax and operating expense escalations. In addition, many of the leases provide for fixed base rent increases. We believe that inflationary increases may be at least partially offset by the contractual rent increases and expense escalations described above. A period of inflation, however, could cause an increase in the cost of our variable-rate borrowings, including borrowings under our Global Revolving Credit Facilities, borrowings under our Euro Term Loan Facility and issuances of unsecured senior notes.
Funds from Operations
We calculate funds from operations, or FFO, in accordance with the standards established by the National Association of Real Estate Investment Trusts (Nareit) in the Nareit Funds From Operations White Paper - 2018 Restatement. FFO is a non-GAAP financial measure and represents net income (loss) (computed in accordance with GAAP), excluding gain (loss) from the disposition of real estate assets, provision for impairment, real estate related depreciation and amortization (excluding amortization of deferred financing costs), our share of unconsolidated JV real estate related depreciation & amortization, net income attributable to noncontrolling interests in operating partnership and, reconciling items related to noncontrolling interests. Management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization and gains and losses from property dispositions and after adjustments for unconsolidated partnerships and joint ventures, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our data centers that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our data centers, all of which have real economic effect and could materially impact our financial condition and results from operations, the utility of FFO as a measure of our performance is limited. Other REITs may not calculate FFO in accordance with the Nareit definition and, accordingly, our FFO may not be comparable to other REITs' FFO. FFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance.
Reconciliation of Net Income Available to Common Stockholders to Funds From Operations (FFO)
(unaudited, in thousands, except per share and unit data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||
|
|
|
2026 |
|
2025 |
|
2026 |
|
2025 |
||||
|
GAAP Net Income Available to Common Stockholders |
|
$ |
443,108 |
|
$ |
1,021,975 |
|
$ |
612,201 |
|
$ |
1,121,768 |
|
Non-GAAP Adjustments: |
|
|
|
|
|
|
|
|
||||
|
Net income attributable to non-controlling interests in operating partnership |
|
9,000 |
|
21,000 |
|
13,000 |
|
24,000 |
||||
|
Real estate related depreciation and amortization (1) |
|
499,106 |
|
451,050 |
|
990,071 |
|
883,702 |
||||
|
Depreciation related to non-controlling interests |
|
|
(24,292) |
|
|
(21,038) |
|
|
(48,018) |
|
|
(40,518) |
|
Unconsolidated JV real estate related depreciation and amortization |
|
|
62,972 |
|
|
59,172 |
|
|
123,263 |
|
|
115,033 |
|
Gain from the disposition of real estate assets |
|
|
(7,988) |
|
|
(931,830) |
|
|
(8,214) |
|
|
(932,941) |
|
FFO available to common stockholders and unitholders (2) |
|
$ |
981,906 |
|
$ |
600,329 |
|
$ |
1,682,303 |
|
$ |
1,171,044 |
|
Basic FFO per share and unit |
|
$ |
2.73 |
|
$ |
1.75 |
|
$ |
4.73 |
|
$ |
3.41 |
|
Diluted FFO per share and unit (2)(3) |
|
$ |
2.73 |
|
$ |
1.75 |
|
$ |
4.73 |
|
$ |
3.42 |
|
Weighted average common stock and units outstanding |
|
|
|
|
|
|
|
|
||||
|
Basic |
|
360,181 |
|
343,546 |
|
355,698 |
|
343,073 |
||||
|
Diluted (2)(3) |
|
367,605 |
|
351,691 |
|
363,462 |
|
351,239 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Real estate related depreciation and amortization was computed as follows: |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization per income statements |
|
$ |
507,106 |
|
$ |
461,167 |
|
$ |
1,006,617 |
|
$ |
904,175 |
|
Non-real estate depreciation |
|
(8,000) |
|
|
(10,117) |
|
|
(16,546) |
|
|
(20,473) |
|
|
|
|
$ |
499,106 |
|
$ |
451,050 |
|
$ |
990,071 |
|
$ |
883,702 |
| (2) | As part of the acquisition of Teraco in 2022, certain of Teraco's minority indirect shareholders have the right to put their shares in an upstream parent company of Teraco to the Company in exchange for cash or the equivalent value of shares of the Company common stock, or a combination thereof. U.S. GAAP requires the Company to assume the put right is settled in shares for purposes of calculating diluted EPS. This same approach was utilized to calculate FFO per share. When calculating diluted FFO, Teraco related minority interest is added back to the FFO numerator as the denominator assumes all shares have been put back to the Company. The Teraco noncontrolling share of FFO was $19,979 and $15,022 for the three months ended June 30, 2026 and 2025, respectively, and $35,389 and $28,308 for the six months ended June 30, 2026 and 2025, respectively. |
| (3) | For all periods presented, we have excluded the effect of the series J, series K and series L preferred stock, as applicable, that may be converted into common stock upon the occurrence of specified change in control transactions as described in the articles supplementary governing the series J, series K and series L preferred stock, as applicable, as they would be anti-dilutive. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||
|
|
2026 |
|
2025 |
|
2026 |
|
2025 |
||||
|
Weighted average common stock and units outstanding |
360,181 |
343,546 |
355,698 |
|
343,073 |
||||||
|
Add: Effect of dilutive securities |
7,424 |
8,145 |
7,764 |
|
8,166 |
||||||
|
Weighted average common stock and units outstanding-diluted |
|
367,605 |
|
351,691 |
|
363,462 |
|
351,239 |
|||
Digital Realty Trust Inc. published this content on July 31, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on July 31, 2026 at 21:24 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]