Digital Realty Trust is executing strongly with record bookings, a $1.4B backlog at its share, and 2026 core FFO guidance of $8.15 to $8.20 per share. The stock still screens expensive, but the data center growth runway and pre-leased development pipeline support a Buy view.
Digital Realty Trust Inc (DLR) offers a Buy setup for moderate-risk investors seeking medium-term exposure to data center growth. The investment case rests on record bookings, a $1.4B backlog at DLR's share, 2026 core FFO guidance of $8.15 to $8.20 per share, and a 1.4 GW development pipeline that was 63% pre-leased at an 11.5% expected stabilized yield.
The business is executing well. Q2 2026 revenue reached $1.92B, up 29% year over year, while core FFO excluding net promote income reached $2.13 per share, up 14% year over year. Renewal spreads exceeded 25%, interconnection bookings reached a record $20.5M, and the company signed $108M of 0-1 megawatt plus interconnection bookings.
The main restraint is valuation and capital intensity. DLR trades at 85.6x trailing earnings, 66.2x forward earnings, and 12.9x enterprise value to revenue. Annual 2025 free cash flow was negative $769M because capital expenditures of $3.18B exceeded operating cash flow of $2.41B. The growth engine is powerful, but it is also expensive to build.
Digital Realty is a global data center REIT founded in 2004 and headquartered in Austin, Texas. It owns, develops, acquires, and operates data centers through Digital Realty Trust, L.P., its operating partnership. The company had 4,282 employees and trades on the NYSE under DLR.
The platform spans more than 300 facilities in 55-plus metros across more than 30 countries and six continents. The investor presentation reported approximately 3 GW of in-place IT capacity and approximately 9 GW of future development capacity, creating a total platform of roughly 12 GW.
DLR serves approximately 6,000 cloud, network, enterprise, and service provider customers. Its customer verticals include cloud and information technology services, social networking, communications, financial services, manufacturing, energy, healthcare, and consumer products. That mix gives the company exposure to both large hyperscale deployments and smaller, connectivity-intensive enterprise workloads.
DLR reports two primary revenue categories. Rental and other services generated $5.97B, or 97.6% of 2025 revenue. Fee income and other generated $143.8M, or 2.4%. Total revenue reached $6.11B in 2025, compared with $5.55B in 2024 and $5.48B in 2023.
Rental revenue remains the economic foundation, but fee income is becoming more relevant. Q2 included roughly $200M of promote income tied to the Blackstone transaction, with $188M, or $0.52 per share, included in core FFO. Management excludes net promote income from its 2026 guidance, which provides a cleaner view of recurring operating performance.
The operating pillars are colocation and connectivity, hyperscale, and strategic private capital. Q2 bookings produced $307M of annualized rent at 100% share and $208M at DLR's share. The company also reported $1.9B of total backlog at 100% share and $1.4B at its share, equal to approximately 30% of in-place data center rent.
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PlatformDIGITAL is DLR's flagship operating platform. It combines data center space, power, cloud access, network access, and interconnection. The company describes the platform as a secure meeting place for data and applications, a positioning that becomes more valuable as customers connect private infrastructure, public clouds, AI systems, and end users.
ServiceFabric is the platform's software-defined interconnection product. The September 2026 investor presentation cited more than 179 connected DLR facilities, more than 310 available on-ramps, and more than 530 enabled third-party data centers. The same presentation reported more than 235,500 cross connects across the broader platform.
Product traction was visible in Q2. The 0-1 megawatt plus interconnection category produced $108M of bookings, compared with an average of approximately $50M per quarter about two years earlier. Interconnection bookings of $20.5M increased 18% from the prior year. These figures connect the product narrative to actual leasing activity.
Digital Realty Innovation Lab, or DRIL, adds an AI-ready testing and demonstration environment for proof-of-concept evaluations, hybrid cloud design, AI benchmarking, and partner showcases. It gives customers a way to test infrastructure configurations before committing to larger deployments.
DLR's advantage is the combination of physical scale and network density. Its 300-plus facilities and 6,000-plus customers create a broad ecosystem, while carrier-neutral infrastructure allows customers to connect multiple cloud, network, and service providers. The 10-K identifies connectivity, data center scale, and customer relationships as central parts of the competitive model.
The company is also using private capital to extend growth without relying entirely on its balance sheet. The announced Columbia Capital transaction would add more than $9B of fund commitments and expand exposure to fiber, mobility, and enterprise technology. DLR also formed a $3.25B U.S. hyperscale data center fund earlier in 2026.
That is the strategic core of the AI opportunity. DLR is not selling computing chips or AI software. It is selling the powered, connected real estate that allows those systems to operate. The distinction matters because infrastructure providers can benefit from multiple technology winners, although the company still carries substantial construction and financing risk.
Power availability is a major operating constraint, and DLR has been securing capacity ahead of customer demand. In Kansas City, the company secured 600 MW of utility power beginning in early 2028, with a long-term runway of up to 2 GW. The market has more than 25 network providers and latency below 10 milliseconds to more than 50% of the U.S. population.
DLR invested $1.1B in development capital expenditures during Q2, bringing first-half spending to $2B. It delivered 76 MW of new IT capacity during the quarter, with approximately 60% pre-leased. The active development pipeline expanded to 1.4 GW at a total cost of $20B, with more than 80% located in the Americas.
The company is also adding supply through acquisitions and partnerships. In June, DLR acquired Blackstone's interest in three Northern Virginia hyperscale facilities totaling 288 MW. The transaction included $1.2B of cash, 12.3 million shares valued at approximately $2.3B, and the assumption of DLR's share of a $725M loan.
Sustainability metrics support the operating case. During 2025, DLR achieved 93% global renewable energy coverage, matched 205 sites with 100% renewable and emissions-free energy, and expanded its contracted renewable portfolio to approximately 1.7 GW. From 2023 to 2025, portfolio capacity increased more than 24% while water consumption increased 3%.
The addressable market is expanding through cloud migration, AI training, AI inference, and enterprise hybrid computing. JLL estimates that the data center sector may require up to $3T of infrastructure investment by 2030, including approximately 100 GW of new capacity from 2026 through 2030.
More directly relevant to DLR, Mordor Intelligence estimates the global data center real estate market at $82.5B in 2026 and $142.4B in 2031, a 11.5% compound annual growth rate. Its global colocation estimate rises from $93.5B in 2026 to $164.1B in 2031.
Demand is becoming more power dense. Gartner expects global data center electricity consumption to reach 565 TWh in 2026, up 26% year over year, with AI-optimized servers accounting for 31% of data center power consumption. DLR's Kansas City expansion, Northern Virginia development, and 1.4 GW construction pipeline directly address this demand profile.
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DLR serves a wide customer base, but the current growth mix is increasingly shaped by hyperscalers, cloud platforms, AI infrastructure providers, financial institutions, and network operators. The company cited a multinational financial firm deploying private AI inference capabilities, a GPU-as-a-Service provider expanding in Barcelona, and a global cloud and content distribution provider entering a new metro.
Customer requirements differ by workload. Enterprise and service provider tenants often value interconnection, cloud access, and proximity to networks. Hyperscalers require large blocks of power and space. DLR's combination of 0-1 megawatt colocation and greater-than-1-megawatt hyperscale capacity allows it to serve both groups.
The Q2 renewal figures show customer retention has pricing value. DLR signed more than $261M of renewals with cash re-leasing spreads above 25%. Greater-than-1-megawatt renewals produced a 66.7% mark-to-market, while the 0-1 megawatt category accounted for 55% of total renewals and produced a 5.2% cash mark-to-market.
DLR competes with Equinix, NTT Global Data Centers, Global Switch, regional operators, and private U.S. data center developers. The 2025 10-K also identifies private operators as competitors across multiple international markets.
Equinix is the closest public comparison in global colocation and interconnection. Its positioning is particularly strong in retail colocation and interconnection density. DLR has greater emphasis on hyperscale, wholesale deployments, and large development campuses. That makes DLR a broader hybrid platform, but it also exposes the company to construction, power procurement, and large-tenant execution risk.
Private competitors can benefit from flexible ownership structures and access to specialized capital. DLR counters that advantage through its REIT capital markets access, global operating platform, strategic joint ventures, and private capital initiative. Its reported $6B of liquidity and more than $12B of remaining hyperscale development capacity strengthen that response.
The macro opportunity is tied to digital infrastructure investment rather than a single software cycle. JLL projects approximately 97 GW of global capacity growth from 2025 to 2030, while Gartner expects data center power demand to rise to 132 GW in 2026 from 104 GW in 2025.
The same growth creates constraints. Gartner identifies grid limitations, permitting friction, component shortages, community resistance, and sustainability mandates as factors affecting new data center construction. DLR's 600 MW Kansas City power commitment and its renewable energy coverage address portions of this supply challenge, but development timing remains a material risk.
International exposure adds currency and regulatory complexity. DLR operates across Europe, APAC, Latin America, and Africa, with functional currencies that include the euro, Japanese yen, British pound, Singapore dollar, South African rand, and Brazilian real. The company reported a $0.02 per share foreign exchange benefit in Q2, showing that currency can affect quarterly results.
DLR generated negative $769M of free cash flow in 2025 as $3.18B of capital expenditures outpaced $2.41B of operating cash flow, underscoring the capital intensity behind its growth.
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Get Full Access →Q2 2026 revenue rose 29% year over year to $1.92B, while core FFO excluding net promote income increased 14% to $2.13 per share.
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Get Full Access →Management’s 2026 core FFO guidance of $8.15 to $8.20 per share excludes net promote income, giving investors a cleaner view of recurring operating momentum.
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Get Full Access →DLR trades at 85.6x trailing earnings, 66.2x forward earnings, and 12.9x EV/revenue, leaving little room for execution missteps.
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Get Full Access →The report’s fair value framework points to $190, with upside tied to record bookings, a 1.4 GW pipeline that is 63% pre-leased, and continued AI-driven demand.
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Get Full Access →Digital Realty has built one of the broadest global platforms for connected data center infrastructure. Its Q2 2026 results showed record interconnection bookings, strong renewal pricing, a growing backlog, raised guidance, and a development pipeline that is already more than half pre-leased.
The stock is not a low-cost value play. Its 85.6x trailing P/E, 66.2x forward P/E, heavy capital spending, and $19.55B of year-end debt demand disciplined position sizing. Still, the $190 fair value estimate is supported by measurable leasing momentum, contracted commencements, power access, and the expanding role of private capital.
For a medium-term investor, DLR's advantage is that the growth story is increasingly visible in signed leases and committed infrastructure rather than promotional language alone. The Buy recommendation remains appropriate while the share price stays near or below the $190 fair value estimate.
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Digital Realty Trust posted record 2Q26 bookings, stronger renewal pricing, and raised guidance as AI and hyperscale demand continue to support growth. Valuation remains the main debate, but operating momentum is clearly improving.
Digital Realty Trust, Inc. (DLR) jumps after a strong earnings report lifted full-year FFO guidance and highlighted record leasing momentum. Investors are reacting to a bigger backlog, fresh hyperscale deals, and growing confidence in the company’s AI infrastructure exposure.
Digital Realty’s latest drop looks far more like a financing reaction than a demand problem. The market is choking on fresh equity supply even as hyperscale leasing, backlog, and growth metrics still point in the right direction.