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Key Reasons to Add Digital Realty Stock to Your Portfolio Now
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Key Takeaways
DLR signed $162M in Q3 leases and closed September with an $852M backlog of uncommenced deals.
DLR benefits from broad demand tied to cloud growth, IoT, Big Data and accelerating AI adoption.
DLR is expanding land holdings and building a sizable pipeline to support rising IT capacity needs.
Digital Realty (DLR - Free Report) is well-poised to gain from its unmatched global footprint of data centers with growing digital transformation, cloud computing and the proliferation of artificial intelligence. A solid tenant base assures stable revenues. Accretive buyouts and investments in land and infrastructure globally, and a robust development pipeline, bode well for long-term growth.
Last month, DLR reported third-quarter 2025 core funds from operations (FFO) per share of $1.89, beating the Zacks Consensus Estimate of $1.78. FFO also increased 13.2% year over year. Results reflected steady leasing momentum with better rental rates amid rising demand. The company raised its 2025 core FFO guidance range.
Analysts seem bullish about this Zacks Rank #2 (Buy) company, with the Zacks Consensus Estimate for its 2025 AFFO per share being raised 1.9% over the past month to $7.35.
However, over the past three months, DLR shares have declined 5.2% compared with the industry’s fall of 0.2%.
Image Source: Zacks Investment Research
Factors That Make Digital Realty Stock a Solid Pick
Booming Data Center Market: With the growth in cloud computing, the Internet of Things and Big Data and an increasing number of companies opting for third-party IT infrastructure, data-center REITs are experiencing a booming market. Also, the estimated growth rates for the artificial intelligence (AI), autonomous vehicle and virtual/augmented reality markets will remain robust over the next five to six years.
Demand is strong in top-tier data center markets, and despite enjoying high occupancy, these markets are absorbing new construction at a faster pace. In the third quarter of 2025, Digital Realty signed $162 million of new leases, of which $65 million fell into the 0-1 megawatt leases and $20 million of interconnection bookings. At 100% share, the company’s backlog of signed but not commenced leases stood at $852 million as of Sept. 30, 2025.
Diverse Tenant Base: DLR has a high-quality, diversified customer base comprising tenants from cloud content, information technology, network and other enterprise and financial industries. It has a global presence, with 310 data centers in more than 50 metros with decent occupancy. The company is poised for growth with more than 5,000 global customers.
Expansionary Efforts: Digital Realty is expected to ride on its growth curve, backed by strategic investments in land, infrastructure and acquisitions. During July-September, the company acquired a property comprising around five acres of land in the Los Angeles metro area for $49 million, expected to support 32 megawatts of IT capacity. In addition, DLR bought out two land parcels near its Franklin Park campus for $18 million. Together with the previously acquired land parcels, this acquisition is expected to support more than 40 megawatts of incremental IT capacity in the Chicago metro area.
Strong Development Pipeline: DLR is making efforts to enhance its portfolio by carrying out various development and redevelopment activities. The company has a robust development pipeline, which seems encouraging. As of Sept. 30, 2025, it had 10.2 million square feet of space under active development and 4.8 million square feet of space held for future development. For 2025, the company expects to incur capital expenditures for its development activities (net of partner contributions) in the range of $3.0-$3.5 billion.
Balance Sheet Strength: Digital Realty has a solid balance sheet with ample liquidity. The company exited the third quarter of 2025 with cash and cash equivalents of $3.30 billion. Its debt maturity schedule is well-laddered, with a 2.75% weighted average coupon as of Sept. 30, 2025. Its net debt-to-adjusted EBITDA was 4.9X, while its fixed charge coverage was 4.6X as of the end of the third quarter of 2025. In addition, Digital Realty currently enjoys BBB+ (Stable Outlook), BBB (Stable Outlook) and Baa2 (Stable Outlook) credit ratings from Fitch, S&P and Moody's, respectively, which provide it with favorable access to the debt market and lower borrowing costs.
The Zacks Consensus Estimate for CUZ’s 2025 FFO per share is pegged at $2.83, which indicates year-over-year growth of 5.2%.
The Zacks Consensus Estimate for WPC’s full-year FFO per share is pinned at $4.92, which calls for an increase of 4.7% from the year-ago period.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
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Key Reasons to Add Digital Realty Stock to Your Portfolio Now
Key Takeaways
Digital Realty (DLR - Free Report) is well-poised to gain from its unmatched global footprint of data centers with growing digital transformation, cloud computing and the proliferation of artificial intelligence. A solid tenant base assures stable revenues. Accretive buyouts and investments in land and infrastructure globally, and a robust development pipeline, bode well for long-term growth.
Last month, DLR reported third-quarter 2025 core funds from operations (FFO) per share of $1.89, beating the Zacks Consensus Estimate of $1.78. FFO also increased 13.2% year over year. Results reflected steady leasing momentum with better rental rates amid rising demand. The company raised its 2025 core FFO guidance range.
Analysts seem bullish about this Zacks Rank #2 (Buy) company, with the Zacks Consensus Estimate for its 2025 AFFO per share being raised 1.9% over the past month to $7.35.
However, over the past three months, DLR shares have declined 5.2% compared with the industry’s fall of 0.2%.
Image Source: Zacks Investment Research
Factors That Make Digital Realty Stock a Solid Pick
Booming Data Center Market: With the growth in cloud computing, the Internet of Things and Big Data and an increasing number of companies opting for third-party IT infrastructure, data-center REITs are experiencing a booming market. Also, the estimated growth rates for the artificial intelligence (AI), autonomous vehicle and virtual/augmented reality markets will remain robust over the next five to six years.
Demand is strong in top-tier data center markets, and despite enjoying high occupancy, these markets are absorbing new construction at a faster pace. In the third quarter of 2025, Digital Realty signed $162 million of new leases, of which $65 million fell into the 0-1 megawatt leases and $20 million of interconnection bookings. At 100% share, the company’s backlog of signed but not commenced leases stood at $852 million as of Sept. 30, 2025.
Diverse Tenant Base: DLR has a high-quality, diversified customer base comprising tenants from cloud content, information technology, network and other enterprise and financial industries. It has a global presence, with 310 data centers in more than 50 metros with decent occupancy. The company is poised for growth with more than 5,000 global customers.
Expansionary Efforts: Digital Realty is expected to ride on its growth curve, backed by strategic investments in land, infrastructure and acquisitions. During July-September, the company acquired a property comprising around five acres of land in the Los Angeles metro area for $49 million, expected to support 32 megawatts of IT capacity. In addition, DLR bought out two land parcels near its Franklin Park campus for $18 million. Together with the previously acquired land parcels, this acquisition is expected to support more than 40 megawatts of incremental IT capacity in the Chicago metro area.
Strong Development Pipeline: DLR is making efforts to enhance its portfolio by carrying out various development and redevelopment activities. The company has a robust development pipeline, which seems encouraging. As of Sept. 30, 2025, it had 10.2 million square feet of space under active development and 4.8 million square feet of space held for future development. For 2025, the company expects to incur capital expenditures for its development activities (net of partner contributions) in the range of $3.0-$3.5 billion.
Balance Sheet Strength: Digital Realty has a solid balance sheet with ample liquidity. The company exited the third quarter of 2025 with cash and cash equivalents of $3.30 billion. Its debt maturity schedule is well-laddered, with a 2.75% weighted average coupon as of Sept. 30, 2025. Its net debt-to-adjusted EBITDA was 4.9X, while its fixed charge coverage was 4.6X as of the end of the third quarter of 2025. In addition, Digital Realty currently enjoys BBB+ (Stable Outlook), BBB (Stable Outlook) and Baa2 (Stable Outlook) credit ratings from Fitch, S&P and Moody's, respectively, which provide it with favorable access to the debt market and lower borrowing costs.
Other Stocks to Consider
Some other top-ranked stocks from the broader REIT sector are Cousins Properties (CUZ - Free Report) and W.P. Carey (WPC - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for CUZ’s 2025 FFO per share is pegged at $2.83, which indicates year-over-year growth of 5.2%.
The Zacks Consensus Estimate for WPC’s full-year FFO per share is pinned at $4.92, which calls for an increase of 4.7% from the year-ago period.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.