Digital Realty's Q1 2025 Results: A Foundation for Dominance in the AI-Driven Data Center Era

Julian WestFriday, Apr 25, 2025 5:02 am ET
16min read

Digital Realty Trust, Inc. (NYSE: DLR) has delivered a quarter that underscores its position as a leader in the global data center industry. With record leasing volumes, a surging backlog, and strategic expansions into high-growth markets, the company is not just weathering current macroeconomic challenges—it’s capitalizing on them. Here’s why investors should take note.

Leasing Surge and Backlog: The Engine of Future Growth

Digital Realty’s Q1 leasing performance was nothing short of exceptional. Total bookings (including partner shares) hit nearly $400 million, the second-highest in company history, with $242 million attributable directly to the company. The standout was the $69 million in the 0-1 MW plus interconnection segment—the second-best quarter on record—which reflects growing demand for hybrid cloud and edge computing solutions. Meanwhile, the >1 MW segment contributed $172 million, highlighting the sustained pull from hyperscalers and enterprises.

The real story, however, is the backlog, which soared to a record $919 million at Digital Realty’s share—a 7% sequential increase. Notably, the 2026 backlog grew over 40% year-to-date, now more than double what it was a year ago. This forward visibility is critical in an uncertain macro environment, as it locks in multi-year revenue streams.

Financial Strength and Resilience

The company’s financial metrics reinforce its operational excellence. Core FFO per share rose 6.1% year-over-year to $1.77, with constant currency growth hitting $1.79. Same-capital NOI increased 5% on a constant currency basis, driven by a 5.7% jump in data center revenue. Renewal leases, totaling $147 million, delivered a blended cash uplift of 5.6%, with over 85% of leases featuring fixed escalators (≥4%) or CPI-linked terms—a testament to pricing power and long-term stability.

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Development Pipeline: Scaling for Hypergrowth

Digital Realty’s development pipeline has never been stronger. At $9.3 billion, it’s now 63% preleased, with an expected stabilized yield of 12.5%—a compelling figure in a low-yield world. The addition of 219 MW of new projects in Q1, including 200 MW in Northern Virginia (50% preleased), highlights the company’s focus on high-demand markets.

The launch of its first U.S. hyperscale fund—a $1.7 billion equity commitment (targeting $2.5 billion)—is a game-changer. This vehicle aims to deploy up to $10 billion in hyperscale infrastructure, with Digital Realty retaining a 20%+ stake to align interests with investors. This model not only mitigates capital risks but also positions the company to capture a disproportionate share of the hyperscale boom.

Global Expansion and Strategic Partnerships

Digital Realty is doubling down on geographic diversification. In Q1, it entered Indonesia via a partnership with Persama Data Centers, creating Digital Realty Persama to serve Jakarta’s booming digital economy. Meanwhile, its Heracleion One data center in Crete—positioned to link Europe, Africa, and the Middle East—highlights its connectivity-driven strategy.

The expansion of its Service Fabric, which now includes 100+ third-party data centers and 75+ cloud on-ramps, underscores its role as a connectivity hub. New Azure on-ramps in Atlanta, Brussels, and Vienna further solidify its position in the cloud infrastructure ecosystem.

AI: The Catalyst for Pricing Power

Over two-thirds of Q1 leasing was tied to AI-driven demand, a trend that has pushed pricing to a record $244 per kW/month—a 10% increase from prior highs. This surge reflects the premium enterprises are willing to pay for high-density, low-latency infrastructure. Digital Realty’s focus on hyperscale and AI-ready facilities isn’t just strategic; it’s a necessity in an era where data is the new oil.

Navigating Risks, Maintaining Flexibility

Despite risks like potential U.S. tariffs on digital infrastructure components, management estimates cost impacts at less than 5%. This is mitigated by vendor-managed inventory programs and supply chains within U.S.-aligned trade agreements. Leverage remains conservative at 5.1x, with liquidity exceeding $5 billion—a buffer that allows the company to recycle capital without compromising balance sheet health.

Guidance and the Path Forward

Digital Realty has raised its full-year 2025 Core FFO guidance to $7.05–$7.15 per share, a 6% increase year-over-year. Revenue and EBITDA guidance were also bumped by $25 million each, reflecting confidence in its execution. With $1.5 billion in disposition proceeds expected in Q2, the company is primed to reinvest in high-return projects while maintaining a fortress balance sheet.

Conclusion

Digital Realty’s Q1 results are a masterclass in execution. The combination of record leasing, a fortress backlog, and strategic investments in hyperscale and AI-ready infrastructure positions it to dominate a $200 billion global data center market. Its 12.5%-yielding pipeline, global footprint, and innovative capital-light models (like the hyperscale fund) create a moat against competitors.

Investors should take note of the $244/kW/month pricing milestone, the doubling of 2026 backlog, and the $9.3 billion pipeline—these are not just numbers; they’re indicators of a company thriving in a secular growth trend. While macro risks linger, Digital Realty’s diversified revenue streams, low leverage, and geographic reach make it a rare defensive growth stock. For long-term investors, this quarter’s results are a clear signal: the data center leader is just getting started.