Behind every AI model and cloud platform sits the infrastructure making it possible.
Digital Realty is one of the companies who own and operate the infrastructure. It has a market cap of US$58 billion.
By market position, it is the second largest in the operator-REIT space.
It also counts some of the largest cloud providers as part of its key customers
The Mag Seven reported yet another quarter of stellar results. How has a company like Digital Realty performed? Let’s dive in.
A solid quarter of revenue and new demand generation
The company reported another solid quarter of growth. This was powered by steady demand and disciplined expansion.
Topline numbers highlight these: It reported $1.6 billion in revenue, up 6% from last quarter, and a 10% y/y increase.
Lease signings within the quarter will contribute $162 million at Digital Realty’s share. At 100% share, total leases would bring in $201 million in annualised rent.
Strong renewal performance was also noted. Those signed across the quarter represented $192 million of annualised rental revenue.
This is the breakdown of their revenue across their different deal types.
Digital Realty’s revenue pie highlights its business model. This leans heavily towards the capacity-selling, or colocation business.
This is versus the interconnection segment, which contributes just 12%.
However, Digital Realty noted this category marked a new record, surpassing last quarter’s record by 13%.
The colocation business is made up of its 0 to 1 megawatt (0-1 MW) and its greater than one megawatt (>1 MW) category of deals.
Megawatt is a measurement of data centre compute power volume. Meanwhile, revenue from these two sources make up nearly 90% of Digital Realty’s revenue.
The >1 MW category signed US$76 million. This category of deals represents customers who have each bought a larger volume of data centre compute power.
Big technology companies such as cloud services or social content would fall in this category.
Pricing in this category was strong. This averaged over $200 per kilowatt per quarter. The top three performing markets were Silicon Valley, Amsterdam and Singapore.
The EMEA region, in particular, saw strong performance in this category for the quarter as well.
Meanwhile, the 0-1 MW segment saw $65 million in bookings this quarter. Record bookings in the Americas as well as strong performance in EMEA was noted.
Management especially noted that there was a record AI bookings in 3Q2025. This highlighted the “continued emergence of AI-oriented demand among [its] enterprise customers”.
Tech meets real estate
Digital Realty stands out because it runs more like a real estate business. You’ll notice this in their terms of reporting new business for instance.
Beyond the measurement per kilowatt, it’s measured mainly in psf terms. This highlights how data centres are the true landlords of the digital economy.
Digital Realty’s focus on continuous development of its portfolio is clear. This quarter, it bought new land in Los Angeles and Chicago.
Meanwhile, it sold older, non-core sites in some of the metros in the Americas. Purchased land would support a total of 72 MW of IT capacity.
In total, US$687 million was set aside to upgrade existing facilities and develop new ones in the quarter.
The company’s model is clear: grow the rental base and steadily increase the value of its owned portfolio.
These activities at the land asset level are a small snapshot of its development portfolio that spans globally.
In total, Digital Realty has more than 5 Gigawatts of capacity, which is an incredible scale. This is spread across the major metros in every region.
Furthermore, it is also distributed based on the blocks of capacity it has planned at each of its sites.
More than half of the capacity blocks are in the greater than 100 MW category. This shows clearly that it is preparing itself for and to attract AI customer demand.
Digital Realty is scaling up through partnerships and M&A
Partnerships and JVs continue to support Digital Realty’s growth. We can see this in its revenue, as past deals and shared ownership keep adding steady rental income across the portfolio.
These partnerships also let Digital Realty grow faster without paying all the upfront costs alone. This model is useful for large builds that serve hyperscale and AI demand where cost of development is high.
Digital Realty boasts some big investors and developer names among its JV partners across the Americas, APAC and EMEA.
This includes names such as Blackstone NoVa, TPG Real Estate, MapleTree and Lumen.
These partnerships have powered its available capital for investment. At reporting, Digital Realty had more than $15 billion in available funds for hyperscale data centre development.
M&A is also another way in which Digital Realty has sought to expand market share over the years. For instance, it previously acquired Teraco in South Africa.
This was a move to acquire market share and strengthen regional coverage and connectivity in the continent.
In all, these are clear examples of how the company ensures capital flexibility to keep pace with rising demand.
Headwinds for Digital Realty: Power and Permitting Costs
Across the data centre industry, power access and permitting delays are the key challenges.
Management very much recognises this. CEO Andy Power noted that “Power availability, permitting challenges and infrastructure constraints are making it harder to bring new supply online at the pace our customers require.”
Clearly demand is not quite the challenge, but getting enough supply, on time, is.
For Digital Realty, the team has counted on relationships with utilities and local governments. This has led to a proven development track record thus far.
It is confident in building out the development pipeline they have as per their client needs.
That is, clients who have lease requirements in the hundreds of megawatts do not expect the full order on the first day.
They will instead require capacity in a phased approach. This allows Digital Realty to time their delivery of capacity accordingly.
My final thoughts
Management reaffirmed full-year 2025 guidance, expecting revenue of roughly $6 billion.
AI and cloud demand are expected to remain strong into 2026, helping drive further leasing growth.
Digital Realty may not have the buzz of an AI stock. But, it’s part of the group of companies who have been steadily and quietly powering the entire digital economy.
Its model blends the stability of real estate with the growth potential of technology.
For investors, it represents a steady way to join in the AI and cloud boom through income-generating assets.
