Key Takeaways:
- Digital Realty is expanding its global data center footprint to serve growing demand from cloud, AI, and enterprise customers across six continents.
- DLR stock could reasonably reach $446 per share by December 2029, based on our valuation assumptions.
- This implies a total return of 167.2% from today’s price of $167, with an annualized return of 28.6% over the next 3.9 years.
Digital Realty Trust, Inc. (DLR) operates one of the largest global data center platforms, and it supports mission-critical workloads for cloud, communications, financial, and enterprise customers.
The company’s 311 facilities, including 89 held through unconsolidated investments, span about 42.7 million square feet and provide colocation and interconnection services in North America, Europe, South America, Asia, Australia, and Africa.
Digital Realty continues to appear in investor focus because revenue and EBITDA are projected to grow at double-digit compound rates over the next two years, even though earnings per share growth has been more volatile.
Forward two-year revenue and EBITDA CAGRs stand at 10.0% and 11.3%, respectively, while forward EPS CAGR is estimated at 65.6% after several years of pressured profitability.
Here’s why Digital Realty stock could provide notable returns through the remainder of this decade as it scales its global data center platform while navigating a capital-intensive expansion cycle.
What the Model Says for Digital Realty Trust Stock
We evaluated the upside potential for Digital Realty stock using valuation assumptions that reflect its projected revenue growth, margin profile, and current valuation multiples as a large-cap data center REIT.
Based on our valuation assumptions, the model projects Digital Realty Trust stock could rise from $167 to $238 per share by December 2028.
That would be a 42.6% total return, or a 20.5% annualized return over the next 1.9 years.
Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for Digital Realty Trust stock:
1. Revenue Growth: 10.5%
Based on analysts’ consensus estimates, we assume Digital Realty’s revenue grows 10.5% annually through December 31, 2027. This sits slightly above its 3‑year historical revenue CAGR of 7.9% and is close to the 10.0% forward two‑year revenue CAGR shown in TIKR’s growth metrics.
Recent years have seen steady top-line expansion supported by demand for colocation, interconnection, and hyperscale capacity across its global portfolio.
Because revenue is closely tied to cloud, AI, and broader digital transformation trends, it remains sensitive to macro conditions and enterprise IT spending.
2. Operating Margins: 15.1%
Digital Realty’s latest twelve‑month EBIT margin is 13.7%, reflecting high capital intensity, utilities costs, and development spending.
Based on analysts’ consensus estimates, we assume an operating margins improve to 15.1% by 2027, implying modest operating leverage as new data centers stabilize and higher‑margin services grow.
Supporting this view, TIKR shows a 54.8% LTM gross margin and an 11.3% forward two‑year EBITDA CAGR, indicating gradual efficiency gains as the platform scales.
Nonetheless, returns remain modest, with LTM ROIC at 1.7% and ROE at 5.8%, so disciplined capital allocation is still crucial.
3. Exit P/E Multiple: 64.7x
Digital Realty currently trades at a forward P/E of 64.71x, versus a 43.13x last twelve‑month P/E. The Guided Valuation uses a 64.7x exit P/E for 2027, effectively assuming the stock maintains a premium multiple as a large, global data center REIT with durable cash flows.
This assumption is consistent with expectations for faster EPS growth, as indicated by the 65.6% forward two‑year EPS CAGR in TIKR.
However, REIT valuation multiples can move materially with changes in interest rates and sector sentiment, so this exit multiple is an important swing factor in the model’s results.
Build your own Valuation Model to value any stock (It’s free!) >>>
What Happens If Things Go Better or Worse?
Different scenarios for DLR stock through 2030 show varied outcomes based on revenue growth, margin performance, and valuation multiples (these are estimates, not guaranteed returns):
- Low Case: Revenue growth slows, and margins face pressure from higher energy and financing costs → 20.4% annual returns
- Mid Case: Digital Realty executes on its development pipeline and maintains stable margins → 28.6% annual returns
- High Case: Stronger-than-expected demand for AI and cloud capacity drives higher pricing and improved profitability → 41.3% annual returns
Even in the conservative low-case scenario, the model still indicates annual returns above 20%, which would be considered very attractive under the framework where over 10% annualized is appealing and over 15% is especially interesting.
These modeled outcomes, however, depend heavily on sustained demand for digital infrastructure, disciplined capital deployment, and a supportive financing environment given Digital Realty’s leverage and ongoing development requirements.
See what analysts think about DLR stock right now (Free with TIKR) >>>
How Much Upside Does Digital Realty Trust Stock Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
From there, TIKR calculates the potential share price and total returns under Bull, Base, and Bear scenarios so you can quickly see whether a stock looks undervalued or overvalued.
See a stock’s true value in under 60 seconds (Free with TIKR) >>>
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
