Key Stats for Digital Realty Stock
- This Week Performance: -0.9%
- 52-Week Range: $ to $
- Current Price: $
What Happened?
Digital Realty (DLR) colocation business — the segment that leases smaller, highly connected data center suites to enterprises rather than bulk capacity to cloud giants — posted record bookings in 2025, signaling a platform shift that pushed full-year Core FFO per share to $7.39, 10% above 2024 and above the high end of original guidance, with shares at $177.80 reflecting growing conviction that AI infrastructure demand has a longer runway than the market priced a year ago.
Digital Realty’s Q4 2025 earnings, reported February 5, delivered $1.63B in revenue against a $1.58B consensus estimate and Core FFO of $1.86 per share versus a $1.58 estimate, while management set 2026 Core FFO guidance of $7.90–$8.00 per share, implying roughly 8% bottom-line growth at the midpoint despite a known interest expense headwind from refinancing EUR 1.075B of 2.5% Eurobonds at approximately 4%.
The 0–1 MW plus interconnection segment — the colocation and connectivity business that serves enterprises deploying AI inference workloads rather than hyperscale training clusters — posted a Q4 quarterly record of $96M in bookings, capping a full year that ran 35% above 2024 levels and left a record backlog of $1.4B at 100% share, with $634M of leases already scheduled to commence in 2026.
Chief Financial Officer Matt Mercier stated at the Morgan Stanley Technology, Media and Telecom Conference on March 2 that “in 2025, we saw roughly 20% of those bookings within that category were driven by AI had some level of inference workload,” up from mid-single digits in 2024, directly linking the colocation segment’s record output to accelerating enterprise AI adoption.
A record $10B-plus gross development pipeline at an 11.9% expected stabilized yield, a 5 GW future capacity runway, $3.225B in LP equity commitments to Digital Realty’s inaugural hyperscale closed-end fund, and continued geographic expansion into Malaysia, Bulgaria, and Portugal position the company to compound Core FFO growth well into the decade as enterprise inference demand scales from 20% of colocation bookings today toward the majority share that cloud workloads now represent.
Wall Street’s Take on DLR Stock
The record $1.4B backlog — with $634M of leases already scheduled to commence in 2026 — converts Digital Realty’s leasing momentum directly into guided Core FFO growth of $7.90–$8.00 per share, making 2026 earnings unusually visible for a company of this scale.
Revenue is forecast to grow from $6.1B in 2025 to $6.7B in 2026 and $7.4B in 2027, driven by backlog commencements, 6%–8% cash renewal spreads, and a colocation segment growing 35% annually, with EBITDA margins holding near 54%–55% across the same period.
Meanwhile DLR’s normalized EPS — the per-share earnings figure stripped of one-time items — is estimated to jump 129.4% to $3.61 in 2026 as backlog commencements accelerate and fee income from the $3.2B closed-end hyperscale fund, a private investment vehicle Digital Realty launched to co-fund large data center builds, flows through the income statement.
Wall Street has grown steadily more constructive: 24 analysts currently carry buy or outperform ratings against 8 holds and 1 underperform, with a mean price target of $198.38 implying roughly 10.3% upside from $179.85, anchored to the backlog visibility and the 8% guided FFO growth rate.
The $170 low target reflects the bear case that refinancing headwinds from the EUR 1.075B Eurobond rollover at roughly 4% versus the prior 2.5% coupon compress near-term FFO, while the $220 high target prices in faster-than-expected colocation bookings growth as enterprise AI inference — the use of deployed AI models to generate outputs in real time — scales beyond the current 20% share of segment bookings.
What Does the Valuation Model Say?
The TIKR mid-case model prices DLR at $268.48 by December 31, 2030, implying a 49.3% total return and 8.7% annualized IRR, supported by a 9.5% revenue CAGR assumption that the $634M of 2026 lease commencements and expanding Innovation Lab network across Singapore, Japan, and London are already beginning to validate.
The market prices DLR at 1.22x net asset value today, a premium that understates the earnings power embedded in a $10B-plus development pipeline yielding 11.9% on a stabilized basis.
AI-driven bookings in the 0–1 MW colocation segment rose from mid-single digits in 2024 to 20% in 2025, the operational confirmation that inference demand is compounding inside the segment the TIKR model relies on most.
CFO Matt Mercier confirmed on March 2 that inference adoption is “still in the early innings,” signaling that the 20% AI share of colocation bookings is a floor, not a ceiling, for the model’s growth assumptions.
The key assumption at risk is sustained 6%–8% cash renewal spreads; any softening in data center pricing, particularly in Northern Virginia where supply constraint is the primary driver, would directly compress same-capital NOI growth and erode the FFO trajectory.
Q1 2026 earnings will confirm whether the $634M of scheduled 2026 lease commencements are tracking on time and whether the 0–1 MW segment sustains its record quarterly run rate above $96M.
Should You Invest in Digital Realty Trust, Inc.?
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