Digital Realty (NYSE: DLR), the data center real estate investment trust and one of the world's largest data center landlords, reported the strongest leasing quarter in its history and raised its full-year guidance for core funds from operations after signing leases worth a record $855 million in annualized GAAP base rent—the yearly rent value of the signed leases—during the third quarter.

Third-quarter results, released on October 29, 2026, showed bookings running 20% above the company's previous quarterly high—a striking acceleration for a business typically described as steady. The $855 million figure is measured at 100% share, meaning it counts the full value of leases signed across the platform; at Digital Realty's own share, bookings totaled $627 million. The gap reflects stakes held by partners in projects developed jointly, a funding structure that has become common for large-scale data center construction.

The deals spanned hyperscale transactions serving major cloud and AI operators as well as the company's colocation and interconnection business, which rents space, power, and connectivity to a broader set of enterprise customers.

The company credits artificial intelligence for much of the momentum. Organizations building AI infrastructure need somewhere to put their hardware, and the supply of ready-to-use data center capacity keeps tightening—new facilities take years to plan and build, and securing sufficient grid power has become one of the industry's central constraints. Scarcity strengthens a landlord's pricing power, and that leverage is now feeding directly into Digital Realty's organic growth.

The Numbers Behind the Beat

Core funds from operations came in at $2.10 per share for the quarter, up 11% from the same period a year earlier. Funds from operations is the earnings measure real estate investment trusts use in place of conventional net income: it strips out real estate depreciation, making it a cleaner read on the cash a landlord actually generates.

Management lifted its full-year core FFO forecast to a range of $8.30 to $8.35 per share, implying growth of nearly 13% over the prior year.

The backlog of signed leases that have not yet started paying rent swelled to a record $2.5 billion at 100% share, or $1.8 billion at Digital Realty's share. That pile represents roughly 40% of in-place data center rental revenue and, according to the company, gives it revenue visibility well into 2027 and 2028.

Tenants Aren't Leaving—and They're Paying More

The operating metrics beneath the headline numbers were arguably even more telling. Churn, the share of rent lost to departing tenants, fell to a record low of 0.7%, an unusually sticky tenant base for a market where capacity is tight.

Renewals also came with higher price tags. Cash re-leasing spreads hit 11.8%, meaning customers who renewed agreed to pay meaningfully more than under their prior contracts.

Same-capital cash net operating income, which tracks income from properties the company already owned and operated and therefore separates organic growth from gains delivered by new construction or acquisitions, grew about 6% year over year. Stabilized occupancy, a measure that counts properties operating at normal levels, reached 93.4%.

A $22 Billion Construction Bet

To meet that demand, Digital Realty is building at scale. The company has 1.5 gigawatts of capacity under construction at an expected cost of approximately $22 billion, and 63% of that pipeline is already pre-leased. Locking in tenants before construction finishes limits the speculative exposure of a build this size. Management projects an average stabilized yield of 11.6% on the development—the annual operating income it expects relative to its investment once the projects are up and running.

Why the AI Build-Out Keeps Landing Here

Digital Realty describes itself as a cloud- and carrier-neutral data center platform. Neutrality means customers can connect to multiple cloud providers and network carriers under one roof, rather than being locked into a single vendor's ecosystem.

Third-quarter demand was broad, with AI infrastructure contributing heavily alongside traditional cloud computing and enterprise workloads. AI hardware draws far more power per rack than conventional servers, which raises the premium on capacity that is already built, powered, and ready to occupy.

What It Means for Investors and the Data Center Market

For shareholders, the most consequential number may not be the record bookings at all. It is the $2.5 billion backlog sitting at roughly 40% of in-place data center rental revenue, which underpins the company's revenue trajectory well beyond this quarter.

The risks sit mostly on the execution side. A pipeline with an expected cost of approximately $22 billion requires power, equipment, and construction crews to show up on schedule. The 37% of capacity not yet pre-leased also depends on demand holding up through completion.

What to watch next: whether the company can keep bookings near this record pace, how quickly the backlog converts into paying rent through 2027 and 2028, and whether pre-leasing on the 1.5 GW pipeline climbs above its current 63%.