DLR Jumps 9.9% in the Past Month as Leasing Momentum Accelerates

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DLR’s Record Backlog Supports Revenue Visibility

Second-quarter bookings reached $307 million of annualized GAAP base rent at 100% share, while the signed-but-not-commenced backlog climbed to a record $1.9 billion. At Digital Realty’s share, bookings were $208 million and backlog totaled $1.4 billion.

The weighted-average lag between new lease signings and contractual commencement was nine months. Two hyperscale leases signed in July added another $410 million of annualized GAAP base rent at 100% share, extending the runway for future revenue commencements.

Digital Realty’s Renewal Pricing Remains Strong

Cash rental rates on renewal leases increased 25.4% in the second quarter, while GAAP renewal rates rose 32%. Portfolio occupancy reached 90.2%, up from 89.7% a year earlier, adding another positive signal on utilization.

Management raised its 2026 Core FFO per share outlook, excluding net promote, to $8.15-$8.20. It also increased the expected 2026 cash renewal-rate range to 9%-11%, up another 250 basis points from last quarter, indicating that current pricing strength is influencing the full-year outlook.

DLR’s Development Pipeline Adds Growth Capacity

Digital Realty had about 1.4 gigawatts under construction at quarter-end, with an 11.5% average expected stabilized yield. The pipeline was 54% pre-leased at June 30 and 63% pre-leased after including the July hyperscale signings.

The company also had about 8.5 gigawatts of buildable IT capacity. Equinix, Inc. EQIX reported second-quarter annualized gross bookings growth of 23% year over year and a record backlog, underscoring broad demand for digital infrastructure. GDS Holdings Limited GDS reported an 11.7% year-over-year increase in committed and pre-committed area in the first quarter, providing another industry demand reference point.

Digital Realty’s Funding Needs Could Limit Upside

The growth program is capital intensive. Digital Realty expects 2026 development spending of $4.25-$4.75 billion, net of partner contributions, up from its prior $3.5-$4.0 billion range.

Total debt stood at about $18.6 billion at June 30. The company raised roughly $2.5 billion through its at-the-market equity program in the first half and expects $1-$1.5 billion of dispositions or joint venture capital in 2026, leaving execution sensitive to financing conditions.

DLR’s Mixed Scores Temper the Momentum Case

DLR’s 9.9% four-week gain is backed by record backlog, double-digit renewal pricing and a larger pre-leased development pipeline. Those operating trends improve visibility, but heavy spending and funding needs leave less room for execution or capital-market setbacks.

The stock currently carries a Zacks Rank #3 (Hold), pointing to a balanced near-term revision signal. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Its Growth Score of B is favorable, but the Value Score of D, Momentum Score of C and VGM Score of C show a less uniform setup. That mix supports a measured view after the recent rally.

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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research