Digital Realty Trust, Inc.

New York Stock Exchange
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Bullish +75

Analysts Raise Digital Realty Trust (DLR) Price Target Due to Strong AI Infrastructure Demand

Scotiabank analyst Maher Yaghi raised Digital Realty Trust (DLR) price target to $222 from $195, citing strong demand for AI infrastructure.

JPMorgan concurrently increased its DLR price target to $230 while maintaining an Overweight rating due to robust Q1 results.

Digital Realty reported first-quarter 2026 total revenues of $1.6 billion, representing a 16% year-over-year increase.

Net income for the quarter reached $175 million, with net income available to common stockholders at $169 million.

Core Funds From Operations (FFO) per share rose 15.3% to $2.04, surpassing analyst consensus estimates.

The company achieved record 0–1 megawatt interconnection leasing and signed its largest hyperscale lease in history during the quarter.

Management highlighted a weighted average lag of 19 months for new leases, extending growth visibility into 2027 and 2028.

Renewal lease activity showed significant pricing power with rental rates rising 5% on a cash basis during the quarter.

Portfolio occupancy ended the first quarter at 90.1%, demonstrating sustained high demand across the platform.

Digital Realty invested $910 million in development capital expenditures while reporting 1.2 gigawatts under construction.

The balance sheet improved with net debt to Adjusted EBITDA dropping to 4.7X from 4.9X in the previous year.

DLR expanded its geographic footprint by acquiring an 873-acre land parcel in Atlanta and a 30-acre site in Portland.

Corporate investment also included the Telepoint acquisition in Sofia to enhance connectivity across global markets.

The average analyst price target stands at $220, implying approximately 9.6% upside from the current stock price.

CEO Andy Power attributed growth trajectory acceleration to swift advancement of hyperscale AI-oriented capacity in the U.S.

Analysts note that strong enterprise AI demand and hyperscale inference bookings are key drivers for the company's prospects.

Bullish Signals
  • Scotiabank analyst Maher Yaghi raised Digital Realty Trust's price target to $222 from $195, while JPMorgan increased its target to $230 from $210, both maintaining Overweight/Outperform ratings due to strong demand for digital infrastructure.
  • Digital Realty reported a 16% gain in total revenues for the first quarter of 2026, reaching $1.6 billion against a consensus estimate of $1.57 billion.
  • Net income available to common stockholders reached $169 million, while Core FFO per share surged 15.3% year-over-year to $2.04, beating the earnings surprise margin.
  • The company secured record demand including interconnection leasing and signed its largest hyperscale lease in company history, contributing significantly to Core FFO growth.
  • Signed total bookings are expected to generate $707 million of annualized GAAP base rent, with the backlog growing to a record $1.8 billion representing 23% of in-place annualized rent.
  • Renewal activity demonstrated a firm pricing environment, with rental rates rising 5% on a cash basis and 6.3% on a GAAP basis during the quarter.
  • Adjusted EBITDA increased by 16% year-over-year to $920 million, driven by double-digit revenue growth and continued operating momentum.
  • Portfolio occupancy remains strong at 90.1%, while the company improved its balance sheet metric of net debt to Adjusted EBITDA to 4.7X from a prior high of 4.9X.
  • Digital Realty continues investing in long-term growth by acquiring an 873-acre Atlanta-area land parcel for $95 million to support over 1 GW of IT capacity.
Risk Factors
  • Digital Realty Trust posted approximately $910 million in development capital expenditures during the first quarter, raising concerns about whether aggressive expansion will sustainably support long-term profitability given the high cost of land acquisition (e.g., $95 million for Atlanta, $50 million for Portland).
  • While backlog growth extends visibility to 2027 and 2028, the weighted average lag between new lease signings and contractual commencement was 19 months, creating significant timing risk where revenue recognition may not align with immediate cash flow needs.
  • Management noted that pricing for larger deployments remained healthy at $181 per kilowatt, but any potential market downturn could leave the company with overhang risk from such expensive long-term infrastructure investments.
  • Despite improved net debt to Adjusted EBITDA leverage (4.7X), the total debt outstanding remains substantial at $18.14 billion, leaving the balance sheet vulnerable to rising interest rates or a contraction in AI-related capital demand.
Full Analysis
Scotiabank analyst Maher Yaghi raised his price target on Digital Realty Trust (NYSE: DLR) to $222 from $195, maintaining an Outperform rating due to robust demand for digital infrastructure. JPMorgan followed suit, increasing its target to $230 with an Overweight rating, citing strong Q1 results driven by enterprise AI and hyperscale inference bookings. As of the report date, DLR trades around $200.70, implying roughly 9.6% upside according to CNN's compilation of 33 analyst ratings, though another source cites a mean target near $217 based on overweight consensus. Digital Realty reported first-quarter results in April 2026, with core FFO reaching $2.04 per share, up 15.3% from $1.77 the prior year and exceeding consensus estimates of $1.94. Total operating revenues grew 16.2% to $1.635 billion, surpassing the consensus expectation of $1.609 billion. This growth was fueled by record demand in smaller deployments, interconnection services, and what management calls the largest hyperscale lease in company history, which contributed significantly to Core FFO per share growth. The company ended the quarter with a record backlog of $1.8 billion in annualized GAAP base rent at 100% share, representing 23% of in-place annualized rent, which provides growth visibility through 2027 and 2028. Portfolio occupancy stood at 90.1%, and development activity continued with $910 million in capital expenditures for 1.2 gigawatts under construction. Balance sheet health improved as net debt to Adjusted EBITDA declined to 4.7X from 4.9X, supported by $18.14 billion in total debt and strong cash flow retention. Looking ahead, Digital Realty is investing heavily in land acquisition and connectivity; it purchased an 873-acre parcel near Atlanta for $95 million expected to support over 1 GW of capacity and a 30-acre Portland site for $50 million supporting 160 MW. The company also expanded its connectivity footprint by acquiring Telepoint in Sofia for approximately €66.5 million, equivalent to $76.6 million at the time of the announcement. CEO Andy Power highlighted acceleration in data center demand and the expansion of hyperscale AI-oriented capacity as key strategic priorities to extend the runway for growth.