The distributed estimation problem is solved for continuous-time observer nodes that obtain real-time measurements but communicate with their neighbors over a communication network. To this end, the digital communication between the observer nodes is modeled by the time-delay approach where variable sampling intervals, transmission delays and packet dropouts are taken into account. An LMI for the design of the observer gains is derived using Halanay’s inequality, the feasibility of which guarantees exponential stability with a selected convergence rate up to a maximum total delay. A comparison of the maximal delay on a numerical example shows the advantage of a distributed observer over a centralized one.