Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported July 16, 2026 · Beat 7 of last 7 quarters
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Prologis is increasingly a direct beneficiary of the AI infrastructure buildout, with its data center development pipeline expanding to 5.8 GW and over 10 GW of opportunity over the next decade. The company's logistics platform is also seeing incremental demand from data center construction and supporting supply chains, with each $1 trillion of data center CapEx estimated to generate 30-40 million sq ft of logistics demand. This dual exposure positions Prologis to capture value across both digital and physical infrastructure.
Prologis delivered another strong quarter, with record leasing of 67 million sq ft and occupancy improving 20 bps to 95.5%. Core FFO of $1.63 per share beat expectations, helped by $83 million of promote income. The company started $1.6 billion of new development, including a 260 MW data center build-to-suit, and acquired $1.8 billion of real estate at an estimated 20% discount to replacement cost. The data center power pipeline expanded to 5.8 GW, and the company completed a 100 MW power land sale at an 82% margin. U.S. net absorption hit 66 million sq ft, the highest since 2022, with vacancy declining to 7.2%.
Management raised full-year guidance, citing strengthening demand and a market that has transitioned into its next phase of growth. Core FFO guidance was raised to $6.22-$6.30 per share (including and excluding promotes), a 100 bps increase at the midpoint. Average occupancy guidance was raised to 95.25%-95.75%, with same-store NOI growth expected at 5.25%-5.75% net effective and 6.75%-7.25% cash. Development starts guidance was increased to $5.5B-$6.5B, incorporating $2.1B of data center starts in the first half. Management sees over 10 GW of data center development opportunity over the next decade, with the power pipeline representing up to $87B of turnkey investment potential. The tone was confident, with management noting the market inflection is now in the rearview mirror and that rent growth could reach inflation-plus levels over time.
“We signed a record 67 million sq ft of leases during the quarter, and after several quarters of sustained demand, we believe the market is entering its next phase.”
on Market inflection
“Our research estimates that each $1 trillion of data center CapEx will generate 30 million sq ft-40 million sq ft of incremental logistics demand, creating a durable multiyear source of growth.”
on Data center logistics spillover
“We see over 10 GW of development opportunity over the next 10 years.”
on Data center opportunity
How much market rent growth is needed for your embedded mark-to-market to start expanding again? Is your portfolio ahead of the curve in capturing higher rents?
Tim Arndt noted the mark-to-market fully leveled out this quarter, which was interesting, but it should normalize to a low double-digit run rate over time. Expansion would occur if market rent growth exceeds rent change on rollover. Dan Letter added that continued occupancy outperformance shows Prologis taking market share.
Is the leasing demand you're seeing more pent-up demand or new customers entering the market?
Dan Letter highlighted the record leasing and pipeline replenishment, with customers focused on growth and making longer-term decisions. Chris Caton cited e-commerce, advanced manufacturing, and supply chain reconfiguration as drivers, with housing and related sectors representing future upside.
Was the 70 bps market rent growth quarter-over-quarter or year-over-year? What happened to average occupancy in the quarter?
Chris Caton confirmed the 70 bps was quarter-over-quarter and pointed to a new consensus source on the IR website. Tim Arndt explained the average occupancy dip was typical seasonality and lease roll, with occupancy rebuilt during the quarter and confidence in the balance of the year.