Digital Realty Trust, Inc. (NYSE:DLR) saw its shares climb 12.4% to $201.64 in regular U.S. trading on Friday, July 24, 2026, outperforming the broader market as the data-center real estate investment trust (REIT) reported a surge in smaller, higher-premium lease bookings and raised its full-year outlook. The stock was the top performer in the S&P 500 for the session.
Record Small-Scale Bookings Drive Growth
The company disclosed that colocation and interconnection bookings for leases under 1 megawatt (MW) reached a record $108.3 million in the second quarter, up 11% from $97.6 million in the first quarter. These smaller agreements now account for 52% of total bookings, a significant jump from 23% in the prior period. This shift toward smaller, higher-density leases is seen as a key driver of near-term revenue growth, as these agreements command a substantial premium over larger hyperscale deals.
Reported base rent for sub-1 MW leases stood at $280 per kilowatt, compared to $157 per kilowatt for larger leases, representing a 78% premium. Despite accounting for only 33% of the power booked, sub-1 MW space generated 47% of non-interconnection base rent, underscoring its higher revenue density. Chief Executive Andy Power noted that the record for smaller deals is "boosting near-term growth" and reducing reliance on hyperscale campuses.
Guidance Raised Despite Lower Total Bookings
Total bookings for the second quarter fell 51% quarter-over-quarter to $208.5 million, down from $422.8 million in Q1. However, the mix of smaller, higher-margin leases and shorter lease-start lags boosted investor confidence. The average weighted lease-start delay decreased to nine months from 19 months in the prior quarter, indicating faster revenue recognition. The signed backlog also rose to $1.4 billion from $1.0 billion in March, providing greater visibility into future cash flows.
Digital Realty raised its core funds from operations (FFO) outlook for 2026 to $8.15–$8.20 per share, up from the previous range of $8.00–$8.10. The midpoint of the guidance was lifted by 1.6%, but the share price jumped roughly eight times that percentage, reflecting investor enthusiasm for the leasing mix. The company also increased its revenue guidance by $200 million at both the top and bottom ends.
Strong Quarterly Results
For the second quarter, revenue rose 29% year-over-year to $1.92 billion, surpassing the consensus estimate of $1.66 billion from LSEG. Core FFO, excluding net promote income, climbed 14% to $2.13 per share. Including $188 million in net promote income, core FFO reached $2.65 per share, which also included $27 million from a $94 million insurance settlement.
The company also secured two hyperscale leases in July, valued at $205 million at Digital Realty's share, further bolstering its pipeline.
Market Context and Valuation
Shares traded at $201.64, representing 24.7 times the revised core FFO midpoint, compared to 22.3 times the previous midpoint at Thursday's close. The preliminary implied expansion of the multiple was 10.7%. The broader data-center and REIT sectors also rallied, with Equinix Inc. (NASDAQ:EQIX) rising 5.8% and the Real Estate Select Sector SPDR Fund (NYSEARCA:XLRE) gaining 2.2%. This suggests a company-specific revaluation amid a sector-wide upswing.
Risks and Challenges
Despite the positive momentum, Digital Realty faces several risks. Net development spending is forecast to increase to between $4.25 billion and $4.75 billion, and net debt to adjusted EBITDA stands at 4.7 times. The company has issued 13.5 million shares through its at-the-market (ATM) equity program year-to-date, introducing dilution risk. The key challenge remains converting the backlog into cash flow while balancing higher capital requirements with faster lease commencements.
