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Realty Income reported third-quarter revenue above the consensus, even though both figures rounded to $1.6 billion. Adjusted earnings per share were $1.12, above the $1.11 consensus estimate. The company reported $1.6 billion in revenue, up from $1.5 billion a year earlier, while diluted earnings per share rose to $0.43 from $0.35.
The filing attributes higher interest and dividend income from loans and preferred equity investments primarily to acquisitions. It also says tenant reimbursements increased as the portfolio grew, bringing higher reimbursable property taxes and maintenance costs. Non-reimbursable property expenses fell, while real estate impairment provisions rose, primarily because of vacant and expected vacancies.
Realty Income’s operating margin increased to 20.7% from 19.2%, while gross margin was 92.5%, compared with 92.7% a year earlier. The company reported free cash flow of $926.0 million, up from $252.7 million.
| Q3 FY2026 | Q3 FY2025 | Change | |
|---|---|---|---|
| Revenue | $1.6 billion | $1.5 billion | 10.3% |
| Diluted EPS | $0.43 | $0.35 | 22.9% |
| Gross margin | 92.5% | 92.7% | −0.3 percentage points |
| Operating margin | 20.7% | 19.2% | 1.5 percentage points |
| Free cash flow | $926.0 million | $252.7 million | 266.4% |
| Against the consensus | Reported | Consensus | Result |
|---|---|---|---|
| Adjusted EPS | $1.12 | $1.11 | Beat by 0.90% |
| Revenue | $1.6 billion | $1.6 billion | Beat by 2.48% |
Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.
What management said on the call
CEO Sumit Roy said higher long-term interest rates had shifted investment economics toward Europe, credit investments and co-investments managed with private capital. He said European industrial properties accounted for much of the company’s real estate investment there during the quarter, while credit investments offered another way to gain exposure to real estate in a higher-rate environment.
Roy said industrial was the company’s largest investment area in the quarter. He pointed to demand across uses including e-commerce and manufacturing, and said Realty Income had acquired a logistics park near DFW Airport with in-place rents below market. On data centers, he said the company remained selective, focusing on constrained markets, experienced operators, long leases and properties whose residual value it understands.
Asked about the investment mix, Roy said the company had increased its focus on industrial and data centers as planned but could not give precise percentages for the future mix. He said credit investments had provided an alternative as higher, more volatile borrowing costs created a headwind for U.S. property purchases.
Chief Investment Officer Mark Hagan said industrial and data centers accounted for much of the potential investment volume sourced during the quarter. Responding to a question about selectivity, he cited competition for industrial assets and the company’s criteria for data centers.
CFO Jonathan Pong said the company was diversifying funding so investment decisions would not depend on any one source of capital. On the European joint venture with KKR, he said it was unlevered and that such partnerships were part of the funding toolkit. Realty Income also used property sales and internally generated cash to fund investments; Roy said disposition activity was expected to remain elevated in the fourth quarter. He added that the fourth-quarter investment pipeline was pre-funded.
Guidance
Realty Income raised its FY2026 adjusted funds from operations per-share guidance. CFO Jonathan Pong also said the company increased its occupancy outlook to above 98.5%, reduced expected non-reimbursable expense leakage to 1.30%–1.50%, and lowered its expected credit loss to approximately 0.30%.
| Metric | For | Guide | Previous guide | Change |
|---|---|---|---|---|
| Revenue, Lease Termination Income | FY2027 | Realty Income expects its lease termination income run rate to hold in FY2027. | — | — |
| Operating expenses growth, Credit Loss | FY2026 | 0.30% | — | New |
| Operating expenses growth, Non Reimbursable Expense Leakage | FY2026 | 1.30%–1.50% | — | New |
| Capex, Investment Volume | FY2026 | $10.0 billion | — | New |
| Revenue, Lease Termination Income | FY2026 | $45.0 million–$50.0 million | — | New |
| Capex, Investment Volume At 100 Percent | FY2026 | $10.0 billion | — | New |
| Tax rate, Income Tax Expenses | FY2026 | $100.0 million–$110.0 million | — | New |
| Operating expenses growth, Non Reimbursable Property Expenses | FY2026 | 1.50%, Approx | — | New |
| Market share, Occupancy | FY2026 | 98.5%, Approx | — | New |
| Revenue growth, Same Store | FY2026 | 1.10%–1.30% | — | New |
| EPS, non-GAAP | FY2026 | $4.44–$4.45 | — | New |
| EPS, GAAP | FY2026 | $1.59–$1.60 | — | New |