Digital Realty Trust, Inc. (DLR) Q3 2026 Earnings Report, Transcript and Summary

Good afternoon, and welcome to Digital Realty Third Quarter 2026 Earnings Call. Please note, this event is being recorded. [Operator Instructions] I would now like to turn the call over to Jordan Sadler, Digital Realty's Senior Vice President of Public and Private Investor Relations. Please go ahead.

Thank you, operator, and welcome, everyone, to Digital Realty's Third Quarter 2026 Earnings Conference Call. Joining me on today's call are President and CEO, Andy Power; and CFO, Matt Mercier. Chief Investment Officer, Greg Wright; Chief Technology Officer, Chris Sharp; and Chief Revenue Officer, Colin McLean, are also on the call and will be available for Q&A. Management will be making forward-looking statements, including guidance and underlying assumptions on today's call. Forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to materially differ. For a further discussion of risks related to our business, see our 10-K and subsequent filings with the SEC. This call will contain certain non-GAAP financial information. Reconciliations to the most directly comparable GAAP measures are included in the supplemental package furnished to the SEC and available on our website. Before I turn the call over to Andy, let me offer a few key takeaways from our third quarter results. First, exceptionally strong execution across our global platform drove upside to revenues, adjusted EBITDA and core FFO. 11% core FFO per share growth exceeded our expectations, and we are raising our full year guidance range by almost 2%, now anticipating nearly 13% bottom line growth. Second, total leasing for the quarter was a blowout at $855 million or $627 million at our share, with new records set across several metrics. Signings in the 0-1 megawatt plus interconnection category exceeded last quarter's record by 40%. Total greater than a megawatt leasing reached $689 million or $474 million at our share, driven by a new high watermark in pricing. Third, these bookings pushed our total backlog to a new record of $2.5 billion or $1.8 billion at Digital Realty share, which provides us with strong visibility through next year and into 2028, bolstering our confidence in our multiyear double-digit growth expectation. And lastly, we achieved another important milestone within our strategic private capital initiative in the last week, closing over $1.4 billion of initial cornerstone equity commitments to our new perpetual capital strategy focused on stabilized hyperscale data centers in North America. This capital will further fuel our efforts to support our customers' fast-growing requirements for digital infrastructure. With that, I'd like to turn the call over to our President and CEO, Andy Power.

Thanks, Jordan, and thanks to everyone for joining our call. Digital Realty delivered an outstanding quarter, highlighted by strong execution across our global platform, robust financial results, record leasing activity and continued progress against our long-term growth strategy. The digital infrastructure industry continues to evolve rapidly. The adoption of artificial intelligence is driving unprecedented demand for capacity, while simultaneously increasing the value of highly connected environments, strategic locations and global reach. As enterprises, cloud providers, network operators and AI innovators continue to expand their digital infrastructure footprints, they increasingly require partners that can provide capacity and connectivity together with the capital, expertise and operational capabilities necessary to execute at scale. Uniquely, our global platform spans 6 continents, bringing together colocation and connectivity hubs, hyperscale data centers and strategic private capital capabilities. Over the past several years, we have deliberately strengthened these 3 core growth pillars to better serve our growing customer base. Together, they create a differentiated platform that combines global scale, connectivity-rich environments, development expertise and capital flexibility, together with a 20-plus year track record that is increasingly important as development, power procurement, community engagement and operations become more complex. This combination distinguishes Digital Realty in a market where reliable execution, speed to market and connectivity have become just as important as capacity itself. The third quarter's record leasing activity demonstrates the power of this differentiated global platform and the value proposition it delivers to customers around the world. We achieved record total bookings of approximately $855 million or $627 million at Digital Realty's share, driven by record performance in each of our leasing categories. Importantly, demand was broad-based across geographies, customer segments and deployment types, demonstrating the growing appeal of PlatformDIGITAL. We continue to see the benefits of artificial intelligence extending well beyond large-scale training deployments and into enterprise adoption, inference workloads, connectivity-rich environments and new geographies. We believe this broadening demand profile further strengthens Digital Realty's competitive position and long-term growth outlook. Pricing was strong throughout the quarter, particularly within our greater than 1-megawatt category, reflecting robust and sustained demand and growing constraints around the development of new capacity. These results add to our already substantial backlog and provide additional visibility into our growth over the next several years. The strength of our results this quarter reflects contributions from each of our 3 core growth pillars. Starting with colocation and connectivity. Connectivity is becoming increasingly important as digital infrastructure architectures grow more distributed and data-intensive. Today, that trend is being accelerated by AI, cloud adoption and the increasing need to move, access and exchange data across multiple environments. While AI is often discussed in terms of large-scale compute deployments, the reality is that AI workloads increasingly depend on a broader digital infrastructure architecture that connects compute and storage with cloud platforms, networks, customers and inference locations. As AI deployments become more distributed, connectivity becomes increasingly important to performance, user experience and scalability. AI agent and coding workloads make many round trips per task, placing capacity close to end users and cloud zones improves performance and supports in-region data handling. Today's AI infrastructure build-out is driving demand for our connected environments in strategic locations around the world. Digital Realty's growing global footprint of connectivity-rich environments and growing roster of more than 6,000 customers position us to help customers deploy increasingly distributed enterprise, cloud and AI architectures. These trends were clearly reflected in our results during the quarter. Bookings within our 0-1 megawatt plus interconnection category exceeded $150 million at Digital Realty's share, increasing 80% year-over-year and 40% from the second quarter, marking our fourth consecutive quarterly record in this category. Matt will provide additional details in a few moments. These results reinforce our conviction that colocation and connectivity will continue to be a critical driver of long-term growth. Turning to our second growth pillar, hyperscale data centers. Demand for large-scale deployments was exceptionally strong during the quarter, reflecting the continued expansion of cloud platforms, AI infrastructure and larger enterprise deployments. While AI is driving unprecedented levels of demand, delivering that capacity has become increasingly challenging. Customers today increasingly recognize the value of experienced partners with the technological and engineering capabilities, development expertise and financial position required to deliver and operate critical infrastructure at scale. Our leasing results during the quarter clearly reflected these dynamics. Total hyperscale bookings of $689 million or $474 million at Digital Realty's share set another quarterly record. Hyperscale demand was broad-based across our footprint, further demonstrating customers' expanding needs for capacity beyond the U.S. In addition to 2 sizable hyperscale leases signed in early July in Northern Virginia, leasing was strong in APAC and exceeded our prior regional record by more than 600%. When combined with the record pricing achieved in this category and our growing backlog of contracted leases, these results provide increased visibility into our future growth. Turning to our third growth pillar, strategic private capital. Unprecedented demand for digital infrastructure and the extraordinary scaling of AI have clearly driven a corresponding increase in capital requirements across our industry. As infrastructure deployments grow larger, more complex and more capital intensive, access to capital is becoming an increasingly important competitive differentiator. While newer entrants to the hyperscale data center field have emerged, most lack the scale, balance sheet strength or funding sources necessary to pursue opportunities at the scale required by hyperscale customers today. In this sense, Digital Realty has spent the last 2 decades positioning for the current opportunity. We received our first investment-grade ratings in 2009, completed our first private capital venture in 2013 and have spent the last 4 years scaling our strategic private capital franchise to support the massive growth in hyperscaler demand that appeared on the horizon. Further accelerating these efforts, in the third quarter, we closed on the acquisition of Columbia Capital, a 30-plus year digital infrastructure-focused investment platform. Columbia's experienced investment team and established portfolio complement Digital Realty's global platform and strengthen investment capabilities to take advantage of the expanding AI infrastructure ecosystem. Today, our strategic private capital platform provides additional sources of capital, enhances our investment flexibility and financing options and enables us to pursue a broader set of opportunities, all while accelerating Digital Realty's core FFO growth and maintaining its balance sheet strength. Subsequent to quarter end, we successfully completed our initial cornerstone closing on a new strategy focused on stabilized hyperscale data centers in North America, and we welcome these partners to PlatformDIGITAL. Thank you for your partnership. We expect our strategic private capital platform to play an important role in the perpetual capitalization of hyperscale data centers and to drive long-term value creation for both our private institutional partners and Digital Realty shareholders. During the third quarter, we continue to see enterprises and hyperscalers expand across PlatformDIGITAL as AI inference continues to emerge around the world. A few examples include: a major AI platform is leveraging PlatformDIGITAL's robust interconnection capabilities and global footprint by deploying inference and low-latency edge hubs in 15 different metros to enhance their ability to serve their customers' needs. A global medical device and services provider is deploying distributed AI data hubs in 4 locations across our 3 global regions to enable faster capture and analytics. A global financial services company chose to deploy on PlatformDIGITAL in 3 major financial centers around the world to meet low latency requirements and support increasing demand from a growing customer base. And a leading global auto manufacturer is expanding on PlatformDIGITAL to support their immediate growth needs for computing infrastructure while leveraging robust network and cloud connectivity to meet growing demand. Together, these wins show the value of a single platform that can serve customers wherever demand takes them from large-scale AI capacity to low-latency edge, and that breadth is what converts today's demand into durable long-term growth. Before turning the call over to Matt, I'd like to address the increased public attention our industry is receiving and how Digital Realty approaches its responsibility as a member of the communities where we operate. The concerns we hear from communities, elected officials and regulators are understandable, and we welcome these conversations. The scale of the data center build-out is historic, and it is only natural that people want to know how data centers affect their utility bills, water resources, air quality, noise and the overall fabric of their communities. And they want to understand the benefits created by a data center project in their city or town. At Digital Realty, we believe those are the right questions to ask, and we are at the table answering them openly and with transparency. We believe stakeholders should expect responsible development, the highest level of resource stewardship, job opportunities and a committed partner in return for welcoming us into their community. Our perspective is informed by more than 20 years of developing and operating data centers around the world. During that time, we have learned that successful projects are built on transparency, partnership and a commitment to creating tangible community benefits alongside long-term shareholder value. That experience also led us together with other like-minded providers to launch Infrastructure for America, recognizing that our industry needs to do a better job of engaging transparently with communities, listening to their concerns and sharing the facts about both the impacts and benefits of digital infrastructure. One of the most common concerns involves energy consumption and electric grid capacity. It is undisputed that data centers require significant power, which is why we work closely with utilities, regulators and local stakeholders long before construction begins. We have also signed the Ratepayer Protection Pledge, reflecting our commitment that the cost of infrastructure required to serve new data center demand should not be borne by residential customers and small businesses. We also procure renewable energy to support our operations and continue to invest in solutions that improve efficiency and support grid reliability. Last year, 93% of our global electricity consumption was covered by clean energy. For 25 years, the grid in America has been starved of investment. Today, due to demand for digital products and services, billions of dollars are being invested in the grid across the nation. Everyone will benefit from these infrastructure investments in the form of a stronger and more resilient grid. We can support grid reliability during peak demand events by relying on on-site backup generation, reducing our demand on the grid, thereby helping preserve capacity for other users. Water usage is another area of focus. Approximately 75% of our data centers utilize highly efficient closed-loop cooling systems or do not use water for cooling. Closed-loop systems are designed to limit the amount of water consumed to cool data centers. As technology continues to evolve, we remain committed to responsible water stewardship and ongoing efficiency improvements across our portfolio. We also believe the economic benefits of data centers should be tangible and local. Data centers generate substantial recurring property tax revenue while requiring relatively limited ongoing demand for public services. Those revenues support schools, transportation infrastructure, public safety and other community priorities. And these benefits help build and sustain communities for decades. We have seen this firsthand in Loudoun County, Virginia, home to data center alley, the largest concentration of data centers in the world. While many factors contribute to its success, decades of digital infrastructure investment have played an important role in supporting the county's economic strength and tax base. Today, Loudoun County has the highest median household income in the United States and consistently ranks among the nation's leading communities for schools, quality of life and economic opportunity. Today, at Fort Gillem near Atlanta, Digital Realty is helping transform and remediate a former military installation, returning long unused land to productive use as a major center for technology investment, employment and economic activity. Similarly, in De Soto, Kansas, outside of Kansas City, we've engaged with community stakeholders to ensure our development plans for the former Sunflower Army Ammunition Plant site aligned with local priorities and contribute to the community's long-term vision for growth while supporting new infrastructure investment, job creation and economic development opportunities. We're also working to address misconceptions surrounding our industry. Over the last year, we have opened our doors around the world to provide data center tours to policymakers, students, community groups and the media, so they can see firsthand our world-class operations and commitment to transparency. We believe this approach will help separate fact from fiction surrounding data centers. In our view, informed dialogue leads to better decisions and better outcomes. We remain committed to earning the trust of the communities where we operate through transparency, responsible resource stewardship and measurable local investment. Our annual impact report provides transparency into those efforts and helps hold us accountable for the commitments we make. And with that, I'll now turn the call over to our CFO, Matt Mercier.

Thank you, Andy. Digital Realty delivered better-than-expected results across the board in the third quarter with a dramatic acceleration in colocation and interconnection leasing and a new record in overall leasing that exceeded the prior record by 20%, which drove an almost 30% sequential increase in our backlog. We achieved these results while continuing to invest with conviction in future growth, further expanding our development and investment platform, advancing our private capital initiatives and maintaining pro forma leverage below 5x at quarter end, comfortably below our long-term target. Turning to our operating performance. We continue to see strong momentum across our global platform, supported by healthy customer demand, improving occupancy, favorable renewal spreads and increasing contributions from new leasing commencements. Starting with our same-capital portfolio. Cash NOI increased approximately 6% year-over-year in the third quarter, bringing year-to-date constant currency growth to approximately 5%. The underlying fundamentals remain very strong. Stabilized occupancy increased nearly 90 basis points sequentially to 93.4%, churn reached a record low of just 0.7% and cash re-leasing spreads approached 12%, our third highest quarterly result on record. We also saw notable strength in our 0-1 megawatt business, which together with strong retention and favorable pricing is helping drive occupancy gains and organic growth across our existing portfolio. And importantly, that strength extends well beyond our stabilized portfolio. Across our broader global platform, recurring revenue increased nearly 16% year-to-date or more than 14% on a constant currency basis with double-digit reported growth across all 3 regions. Taken together, these results highlight the strength and diversity of our global platform with multiple drivers of organic growth and expanding portfolio and a substantial backlog of contracted future revenue supporting our confidence in continued bottom line growth. Turning to leasing activity. Bookings across our platform were robust, highlighted by another record quarter in our 0-1 megawatt plus interconnection business and increasingly global demand for hyperscale capacity. In the 0-1 megawatt plus interconnection category, we generated a record $165 million of total bookings or $151.8 million at DLR share during the quarter, representing a 40% increase over last quarter's record. This segment saw new records across all 3 regions, demonstrating the importance of highly connected infrastructure around the world. This quarter, the 500-kilowatt to 1 megawatt subsegment was particularly strong, driven by large enterprise and service provider deployments. We also saw a large network architecture deployment by one of the leading AI labs across 15 of our sites in EMEA. The sites serve as interconnection hubs, giving the customer direct private connectivity to cloud providers, network carriers and enterprise customers within each region. We expect to see similar space and power deployments across our portfolio as AI inference use cases continue to emerge with 2 drivers gaining momentum. Agentic AI, where general purpose agents are rolling out and massive user uptake is just beginning to unfold, and sovereign AI, where governments and regulated enterprises need in-region capacity and connectivity to keep models and data within their borders. Interconnection bookings totaled a record $23.9 million or $22.2 million at DLR share, exceeding the previous quarterly record by approximately 8%. Importantly, AI inference-related deployments span more than 15 separate markets during the quarter, further demonstrating that AI adoption is accelerating beyond large training deployments and into a broader set of enterprise and inference-oriented use cases. We also marked a new record in the greater than a megawatt category during the quarter as strong global demand drove $689 million of total bookings or $474 million at Digital Realty share. Activity in this segment was driven by the 2 previously disclosed hyperscale leases in Northern Virginia as well as record signings in APAC with large leases in Seoul, Chennai and Sydney. Renewal activity turned out strong once again in the third quarter as well. We signed another $261 million of renewals at a blended average 11.8% cash re-leasing spread, reflecting the value that our customers realize in our facilities, the tight availability in our markets and our ability to capture pricing as contracts roll. Year-to-date cash renewal spreads are up over 14%. Combined with limited churn and record new leasing activity, these results continue to demonstrate the favorable supply-demand dynamics across our key markets and support another increase to our full year guidance. Renewals in the 0-1 megawatt category accounted for 61% of total renewals and contributed a 4.7% cash mark-to-market. Greater than a megawatt renewals accounted for 36% of the total and delivered a robust 26.3% mark-to-market, led by multiple hyperscale renewals in Northern Virginia. We commenced $207 million of annualized GAAP rent in the third quarter, consistent with the prior 3 quarters, providing a steady stream of new rental revenue over the past year. Commencements are expected to accelerate over the next 2 quarters given an uplift from newly signed 0-1 megawatt leases and over 250 megawatts of upcoming pre-lease deliveries. These commencements will continue to drive revenue growth, further supporting the multiyear earnings growth forecast we provided last quarter. Combining strong leasing activity with minimal churn and steady commencements, our backlog reached a new record of $2.5 billion at quarter end or $1.8 billion at Digital Realty share. Our booked-not-billed backlog now represents almost 40% of in-place rental revenue. As for earnings, we reported core FFO of $2.10 per share for the third quarter, an 11% increase year-over-year. This quarter's results reflect strong commencements over the past several quarters, the uplift from the growing mark-to-market opportunity and growing fee income. The third quarter also included a full quarter's impact from the acquisition of a development partner's interest in 3 assets that closed at the very end of last quarter and nearly a half quarter contribution from Columbia Capital. With continued operational momentum and our record backlog, we remain confident in our outlook for the remainder of 2026 and 2027. Turning to investment activity. We continue to deploy capital in support of the significant demand that we see across our platform. During the third quarter, we invested $1.5 billion in development CapEx, bringing year-to-date capital spending to $3.3 billion out of our partner share. We continue to acquire sites for future organic development, investing over $700 million across 7 different locations in the U.S. and Europe. These investments include expansion capacity for both colocation and hyperscale, including a 1 gigawatt development in the Greater Indianapolis metro area. We also expanded our footprint into Turkey, our 65th global metro through a development joint venture with one of Turkey's largest infrastructure development and investment conglomerates. The first project is for 22 megawatts of IT capacity in Ankara with meaningful expansion potential. The JV will then focus on expansion into Istanbul. The addition of Turkey further extends our presence in Southern Europe and the Eastern Mediterranean, providing another avenue for future growth in this strategically important region. These activities reflect our continued focus on expanding the markets where we see strong customer demand and positioning the platform for future growth. During the quarter, we delivered 50 megawatts of new IT capacity, which was 95% pre-leased. We also commenced development of 112 megawatts of capacity, including projects in 5 different countries in APAC, along with other projects in EMEA and the Americas. As a result, our development pipeline expanded to 1.5 gigawatts under construction at a total expected cost of $22 billion, representing a 9% increase quarter-over-quarter. The development pipeline remains 63% pre-leased at an 11.6% average expected stabilized yield. Turning to the balance sheet. Our investment-grade balance sheet, seasoned public shareholder base and growing strategic private capital initiatives have developed into a broad, diversified funding model with access to capital that is unique among global data center providers. Over the last several weeks, we accessed capital across the stack, raising approximately $3.5 billion, further scaling the quantum of capital available to support our customers' digital infrastructure requirements. During the quarter, we raised $450 million of common equity under the ATM. And in early October, we raised $1.7 billion of total debt proceeds at a 4% blended average coupon from a 10-year euro bond and a multi-tranche Swiss franc bond with a weighted average term of nearly 5.5 years. In the last week, we achieved another important milestone within our strategic private capital business, closing over $1.4 billion of initial cornerstone equity commitments from a variety of institutional investors, pension funds, insurance companies and consultants, advancing a new perpetual capital strategy focused on stabilized hyperscale data center in North America. The strategy leverages the institutional demand for digital infrastructure investments and significantly expands our access to long-term private capital. We view this access to a broad and diverse array of public and private capital sources as a strategic advantage that should continue to create opportunity for Digital Realty. Reflecting the company's balance sheet position and demonstrated access to capital as well as the company's strong operating performance in September, Moody's upgraded our long-term issuer rating to Baa1. At the end of the third quarter, Digital Realty's leverage [ heads ] up to 5.2x on a headline basis or 4.9x pro forma for the upcoming stabilization of the 3 100% leased Northern Virginia developments we acquired at the end of last quarter. We estimate that Digital Realty maintains over $20 billion of capital available to support future development when combining our current liquidity and leverage capacity as well as funding available through our private development venture, our closed-end fund and our most recent perpetual capital strategy. I will conclude with guidance. We are raising our 2026 core FFO per share guidance, excluding net promote income by $0.15 or nearly 2% to a new range of $8.30 to $8.35 per share. The midpoint of the updated range represents almost 13% growth over 2025, which would mark our second consecutive year of double-digit core FFO per share growth. We also expect cash renewal spreads of 10% to 12%, up another 100 basis points from last quarter, driven by strong performance year-to-date. Same-capital cash NOI growth of 5.25% to 5.75% on a constant currency basis, up 75 basis points at the midpoint. CapEx net of partner contributions remains consistent with our prior range at $4.25 billion to $4.75 billion, and we are raising our capital recycling guidance by another $500 million to a range of $1.5 billion to $2 billion to reflect the success of our new perpetual private capital strategy. Importantly, strong execution across the 0-1 megawatt category, a record backlog of contractual commencements, expanding development pipeline and recent strategic initiatives provide increased confidence in our ability to extend our double-digit core FFO per share growth trajectory into 2027 and beyond. This concludes our prepared remarks. And now we'll be pleased to take your questions. Operator, would you please begin the Q&A session?

[Operator Instructions] One moment for our first question that comes from Jon Petersen with Jefferies.

Congrats on the strong leasing and the strong quarter. I wanted to ask some questions around the land bank. So you refilled or you added quite a bit to your land bank buying in Indianapolis and Charlotte this quarter, and you did a big acquisition in Kansas earlier this year. Can you just remind us how you think about which markets you want to go into? And if you can give us maybe some more color on who's selling this land? Do these people intend on building data centers themselves and decided they couldn't do it or something else?

Thanks, Jon. So we -- I would call the playbook of where we've been growing and expanding our markets is consistent in terms of focusing on places where we see both robust and diverse customer demand. That's in terms of workloads serving digital transformation for the enterprise, cloud computing and AI. Kansas City is a great example where we see a market where numerous fiber optic routes, a market where the cloud hyperscalers have been landing and expanding with self-builds and a place where we could, call it, land and essentially create a runway for growth. Our expansion into Charlotte is also a similar example of that. We had operated in that market with a carrier connectivity location downtown, which we are expanding, but then expanded out by the airport with a larger footprint and had one of our largest leases in the history of the company at the beginning of this year, supporting AI inference for a top strong investment-grade hyperscaler. I'll let Greg touch on who are some of the sellers and what some of this land was before we're going to turn into data centers, which was also highlighted in our prepared remarks.

Yes. Thanks, Andy. Look, I think as Andy touched on, Jon, we've addressed in the past sort of our logic and strategic rationale for both Charlotte, Kansas City and the like. But I think when you think about Indiana, it's not dramatically different, right? It's consistent with these other large new market entries. It's strategically located land in markets where we believe there's going to be multiple use cases, whether it's cloud, AI or digital transformation. But in the case of Indianapolis, right, you have a robust economy and significant corporate preference -- presence. It's home to numerous Fortune 500 companies, including companies like Eli Lilly and Cummins. Advanced manufacturing is the cornerstone of that economy. It's a $500 billion economy in that element alone, which makes up 25% of the state's GDP. And it ranks first nationally in terms of manufacturing jobs per capita and really boasts a skilled trade workforce and supplier base. But that's sort of the general dynamics or economics -- or excuse me, characteristics. But when you look, Indiana is quickly becoming a top Midwest hyperscale market. You have more than 70 data center facilities there now, and it ranks sixth in the U.S. in terms of number of data centers. And if you look back over the last 3 years, it attracted more than $25 billion of hyperscale investment from the likes of AWS, Microsoft, Google, Meta and others. And then it's also benefiting from the fact that you have these long queues and power constraints across Ohio. You have numerous moratoriums across Michigan. And for example, you have Illinois BIPA legislation is pushing hyperscalers out of that state. So as a result, Indiana and outside of Indianapolis, in particular, has become very well placed to capture these large deployments. And finally, back on Andy's latency theme, if you will, you have strong latency, really what I would say is sitting at the crossroads of America. Indiana sits within a day's drive of 80% of the U.S. population. And then you have long-haul fiber providers from groups like Zayo, Lumen, Great Plains and Meta, which deliver sub-10 millisecond latency to places like Chicago, Indianapolis, Columbus and St. Louis. And then finally, it's really a low power cost. So you look at power rates of roughly $0.09 per kilowatt hour, and it's below, in some instances, significantly below most competing markets across the U.S. So that's just to highlight a couple of the points.

And just one other thing. You asked about who's selling this land, I mean these are great stories where we worked with, call it, local real estate developers, specifically Kansas City, Atlanta, taking sites that were industrialized. Those 2 in particular were former, call it, Army use cases years and years ago and really were able to revitalize the community with a great investment that's going to benefit all the broader community there.

Our next question comes from the line of Michael Elias with TD Securities.

Andy, on the call, I felt like you focused a lot on connectivity. As I consider the market landscape, I mean, we're seeing edge and network nodes approaching, call it, 40 megawatts for some of the hyperscalers. You have edge AI inference nodes getting as large as 20 megawatts on a distributed basis in a bunch of different markets. And then you're highlighting AI labs doing network nodes with you. As I consider the form factor of this against the broader landscape of data center developers, it does seem like you're uniquely positioned to capture the opportunity. I mean how do you think about the medium- to long-term opportunity on the edge inference side? And as part of that, what does that imply for the interconnection opportunity for digital?

Thanks, Michael. I mean, I kind of boiled down the value proposition to the enterprise or the connectivity service provider and relates for prior use cases or AI into 3 buckets that we check all. One, global reach and scale. We're now with our entry into Turkey up to 65 global markets. We obviously have tremendous scale. Two, connectivity-rich environments. You could see that in terms of our cross-connect signings, which were a record, call it, $22 million, up 13% year-over-year. And that's both physical and virtual cross-connects. And then three, a trend that I think is our friend at Digital Realty is called AI-ready infrastructure. So we've got increasing footprints, increasing power densities and greater needs for liquid cooling. I can tell you today, we're already operationalized live with liquid cooling for the AI use cases in north of 25 different locations, different customers. At least half of that is in the, call it, 500-kilowatt to 5-megawatt size blocks in addition to some of the larger footprints. And what we've, call it, sold but not yet delivered called in that backlog, call it, doubles those customer counts and location counts and brings us close to 1 gigawatt of operational expertise in that category. Inside our 0-1 megawatt bookings, lots of great records in there, 4 in a row, up 40% quarter-over-quarter, 80% year-over-year. If you kind of unpack the top signings just real quickly, number one was actually an enterprise signing, believe it or not, an enterprise signed with us outside the U.S. Number two was a traditional hyperscale signing. And number three and the next several were AI use cases, including what we highlighted in the prepared remarks was a 15-site basically backbone build-out for one of the major AI labs. So I think we are very well positioned, and this quarter really highlights that.

One moment for our next question that comes from Eric Luebchow with Wells Fargo.

Maybe just touch on kind of the recent changes in cost of capital that we've seen across really the whole industry. And just wondering if you look at market rent growth today, do you think that's rising faster than your implied cost of development? It looks like that's around -- averaged around $15 million a megawatt across your global portfolio. And then maybe you could just touch on things you're doing to try to mitigate development cost inflation, whether that comes from procuring long lead time equipment, procuring labor supply or anything else that Digital is doing?

Thanks, Eric. So lots to unpack in there. I'm going to try to tag team this and work it backwards with Matt for a second. You've obviously seen great strength in our rates across our segments, across our geographies always a little bit mixed depending on what the quarter is, but definitely seeing great pricing increases. I look at it at a high level, our development pipeline is up, call it, from $10 billion now to $22 billion, so 100% increase or more since just the beginning of the year. And our net yields are really, call it, have gone up, call it, over 11.5%. And our pre-leasing or derisking of that has been maintained, call it, north of 63%. And if you net the colo, which is more of a, call it, more closer to delivery sign and move in, you're probably close to 70% pre-leasing on that pipeline. So I think we've been able to press rates to really recognize the value we're delivering with these precious capacity blocks in addition to what we value we're delivering to our enterprises and outpacing the inflationary environment that we and the broader industry is experiencing. I think our team is doing a very nice job getting ahead of that on supply chain, our consistency in markets. We're growing to 65 markets, but we're actually only operating in 58. We've got 8 that are, call it, in the works, including those recent announcements. We're basically bringing on new capacity in 35 of those. So significant breadth of new growth for our customers. But being consistent, having extended supply chains, vendor managed inventory programs. And I think we're faring better than many or most when it comes to that, given our scale and breadth and consistency and track record in the capacity. I don't think we want to waste time on the broader capital markets dynamic that everyone is seeing with interest rates and the like. But I think Matt can speak to just in the last few weeks or months, what we've done in terms of bolstering our liquidity at fairly attractive cost of capital.

Yes. Eric, I mean, as hopefully you saw, I mean, the fact that we have global recent scale has given us an ability to access a diverse set of capital sources, both on as recently on the debt side. Hopefully, you saw we raised basically $1.7 billion at an average rate of close to 4%, both through the euro and Swiss market. On top of that, given the expansion in our, call it, our private capital strategy, as was noted on the call, raised another $1.4 billion of equity that will be able to be leveraged as well. So it gives us a significant amount, I think, of capital to continue to pursue what has been a great opportunity ahead of us.

One moment for our next question, please. It comes from Michael Ng with Goldman Sachs.

I wanted to ask about the stabilized hyperscale data center acquisition strategy. Could you talk a little bit about the buybox and opportunities that you have to drive additional returns, whether that be value-add or other things?

Thanks, Michael. So the -- I think I'll have Greg speak to really what the evolution of our funding model here that's led up to some pretty big milestones from the beginning of this year until just weeks ago to address that question.

Yes. Thanks, Michael. Look, I think let's go back and just -- I mean, this -- where we are right now is really the next evolution of our strategic capital platform. As you recall, we completed our closed-end fund earlier this year with an initial target of $2.5 billion, and we ultimately raised $3.25 billion. That's -- the strategy for that vehicle is geared more towards development. It would be more development opportunities like you would expect, high teens, low 20s and the like. So that kind of vehicle is geared towards that kind of risk return. I think when you look and see what we're doing now, again, this is the next evolution of our strategic private capital platform, and this is focused more on a perpetual life strategy that's designed really to match, call it, long-term duration institutional capital with long-lived stabilized data center assets, quite frankly, that gets to partner with an industry leader that's got a 20-plus year track record. Look, with these initial closings, we're going to continue. And again, it's perpetual. This is just the first closing of a cornerstone process. There'll be several closings between now and the beginning of next -- or excuse me, the first quarter of next year. But again, as a perpetual strategy, we're going to continue to raise capital around that over time. So it's not just -- it's a living, breathing vehicle as growth opportunities come around, and that will be geared towards more stabilized core plus type returns.

Our next question is from Aryeh Klein with BMO Capital Markets.

I wanted to follow up just on the 0-1 megawatt business. It's clearly inflected higher here in terms of how you see things moving forward and kind of what the -- is this the level which you kind of expect to grow off of? And then just relatedly, your peer talked about some of the pricing opportunities in 0-1 specifically. How are you thinking about that or seeing that?

Thanks, Aryeh. So I'll have Colin walk through what was really a fantastic quarter to cap off what's been tremendous progress this year. And we're already out of the gates in 4Q stronger than we ever have been. So Colin, why don't you speak to that?

Thanks, Aryeh, for the question. Appreciate that. Yes, we're really pleased with Q3. Obviously, fourth quarter -- fourth consecutive quarter of record bookings, up 40% from a record quarter in Q2. A bunch of key drivers that we're seeing in this digital transformation and hybrid cloud continue to be resilient. Use cases, data sovereignty and localization are really standing up, particularly in EMEA. And Andy highlighted infrastructure is becoming more and more distributed with higher density requirements across the globe. So that really fits the use case that we support across the globe. And as it relates to the pipeline of activity, we're seeing more and more partner contribution there, where really a full solution offering is particularly important with our partners. As we think about pipeline on the whole, remarkably coming off a record quarter, we have a strong pipeline as we've had in the 0-1 megawatt category. And that really is across-the-board commentary that's across all the regions are seeing particular strengths. And as Andy highlighted, that's across all use cases, but just to highlight, AI is becoming a more and more prevailing piece of that 0-1 megawatt conversation. So 44% of our bookings in Q3 were associated with AI. So again, we're seeing strength both in current activity and futures and really pleased with what we've seen thus far in Q4, where we're already at 60% of our 0-1 megawatt booking number.

Our next question is from Michael Rollins with Citi.

Congratulations. If I could just ask about hyperscale for a couple of moments. So on the hyperscale side, curious if you could talk a bit more of the pricing yields that you achieved in the quarter and whether that's bouncing off point of where things are going or if there are some specific factors that influence the significant level that you achieved on a per kilowatt basis. And then just taking a step back, curious if you could give us an update with the development pipeline now at about 10 gigawatts, curious if you could frame how much is left to sell for '27 vintage, '28 and '29 vintages as we think about the kind of that flywheel that you're generating on a go-forward basis?

Thanks, Michael. So I mean really standout quarter and a standout year when it comes to hyperscale as well. So I mentioned already the total development pipeline now stands at $22 billion, north of 11.5% ROI, 63% leased. If you look at just the signings, we did $855 million total share signings, that's 18% higher than our prior quarterly record roughly 2 years ago. If you look at our total signings year-to-date, we're, call it, up 40% from the prior full year record, and that's just with 3 quarters, not 4. So really dramatic volumes. Another standout is the weighted average lease length of the total signings, we call it 16 years. As you know, our enterprise colo are on the shorter end, meaning our hyperscaler is on the higher end to blend down to only 16 years, which is another standout. Great. So great customer mix. If you look at the, call it, the last 7 quarters, we've had 6 different great hyperscale customers as our top signing customer. The markets -- I mean, the mix throughout the quarter, I think we had the 3 biggest signings [ from ] each 3 different contracts, each 60-plus megawatts each. We started, as you mentioned -- or you may remember from the last quarter's call with some strong contribution in Northern Virginia. We ended the quarter with some strong contribution in APAC and with some great wins in between as well. I think this call goes back to really focusing on delivering for the hyperscalers where we can add the most value. We've, call it, stayed to those markets where we see robust and diverse demand, where supply and constraints are tight and not really improving and making sure that we can curate to all these hyperscale customers who we are already serving in 30, 40, 50 plus locations, the growth capacity that they really need. Going to the second part of your question. So our, call it, '27, '28 hyperscale-oriented capacity blocks roughly total just shy of the 1.5 gigawatts that we currently have under development right now. So we've got a lot of conversations going as we speak as those capacity blocks are becoming much more of a focus for our customers.

Our next question comes from Matt Niknam with Truist.

Congrats on a great quarter. A high-level question. What's the latest you're seeing on the M&A front in terms of opportunities and valuations? And I guess the reason I'm asking is you've got much cleaner balance sheet than you had several years ago. You've got global scale. And I'm wondering if that affords a more unique opportunity to introduce value through M&A amidst the current market backdrop.

Thanks, Matt. So I mean, I don't think we've got a great -- we're obviously in a very dynamic world with the cost of capital really changing as we speak. We've been very active on all things, inorganic M&A that I'll have Greg walk you through and that all of those have been with a strategic lens towards our growth pillars.

Yes. Thanks, Andy. Thanks, Matt. Look, I think as Andy mentioned, look, our M&A strategy, again, I just want to be clear, has been and will continue to be aligned to the 3 pillars of growth that Andy outlined, and it's really across the globe with a continued strategic focus on expanding in existing markets and entering new markets. The first pillar, colocation enterprise, as you may recall, just going around the globe in APAC in early '25. We entered Jakarta in Indonesia with a partnership, Bersama Digital Infrastructure. We then in the second quarter of '26 entered into Cyberjaya, Malaysia. Going over to EMEA. In the fourth quarter of '25, we entered into Lisbon, Portugal, and then in the first quarter of '26, Milan, Italy. Also in the first quarter of '26, we did a strategic acquisition of a business called Telepoint in Sofia, Bulgaria. And in this quarter, you saw we entered into Turkey through a partnership with a group called Ronesans Infrastructure, which is really a leading infrastructure construction group based in Turkey. We then had existing market expansion in Frankfurt as well as in Crete. Then coming over to the Americas, we had -- you can recall, just again, this is on the colocation side. We had expansion in Franklin Park, Chicago in the fourth quarter of '24, Uptown Charlotte in the first quarter of '25, again, an expansion in the existing market, a new submarket and with an expansion in Fort Gillem, Atlanta because there's a component there that's colocation as well. And then Vernon, California. And then finally -- not finally, but on the hyperscale side, again, good activity in Europe. We, in the first quarter of '26, went into Milan, Italy. We expanded in Marseille, France in the second quarter of '26. Then this quarter, we acquired a freehold from a large hyperscale asset we have outside of Paris. Then in America, we've mentioned this somewhat on the call already, but expansion of our hyperscale business in Charlotte, Fort Gillem, Atlanta; Cartersville, Atlanta in the first quarter of '26; Kansas City. We had the Blackstone acquisitions of the 3 assets in Northern Virginia. In this quarter, we're expanding again in Charlotte, North Carolina and then the Indianapolis acquisition that I already discussed. And then finally, for the third leg of the stool, which is the strategic private capital, in the second quarter, as you recall, we acquired strategic acquisition of Columbia Capital. So I would say M&A has been and continues to be an important part of our business, and that's how we align it.

One moment for our question, it comes from the line of Michael Funk with Bank of America.

With widely reported development delays across the industry, curious if Digital Realty is seeing any delays? And if you're not, how you're managing and avoiding delays others are experiencing?

Thanks, Mike. So we really are leaning into our expertise, our heritage and just 2-plus decades of solely focused on this. So whether it's an existing market where we've been operating or building for years or new markets, it's making sure that we, call it, get on the ground. We work with the local community. We make sure all the benefits that we're going to deliver as a thriving member of that community, make sure that we are explaining that we're supporting mission-critical infrastructure that is running their daily lives and making sure we're giving back and doing it in a sustainable long-term fashion. It's about making sure our vendors and partners know that we're in this together with them. When hiccups happen, we can respond and use our supply chains and the fact that we're building across so many markets in our various regions always gives us, call it, swing capacity for certain components, whether it's on the electrical side or the data center side. And that planning ahead and that expertise has allowed us, by and large, to really, call it, to keep our track record intact. Yes, there's always here and there a delay. Often a customer needs some type of rework, and we'll work with them. But I think this is what our business has really shined in that operational excellence, and that's why we're going to continue to deliver for our customers.

Thank you. And this will conclude our Q&A portion of today's call. I would like to turn the call back to Andy Power for his closing remarks.

Thank you, Carmen. Digital Realty's momentum continued in the third quarter with strong execution, record leasing and double-digit core FFO per share growth that supports another increase to our full year guidance while our record backlog provides strong visibility into 2027 and beyond. We are seeing strong demand across customers, geographies and deployment types with the emergence of AI inference, enterprise adoption and the increasingly distributed architectures. These trends play directly to our strengths and our global full spectrum platform and reinforce our confidence in the opportunity ahead. We are also strengthening our ability to capitalize on that opportunity as our scale and strategic private capital platform and investment-grade balance sheet provide the capital needed to support our customers as their requirements grow in size and complexity. These results are a team effort, and I am incredibly proud of our talented colleagues around the world. Our momentum is strong, and I've never been more excited about the opportunity ahead. Thank you all for joining us today, and thanks to our dedicated team to keep the Digital world turning.

Thank you, ladies and gentlemen, and this concludes our conference. You may now disconnect.