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Realty Income's Data Center Bet: What Does It Mean for Growth?
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Key Takeaways
Realty Income expands its data center strategy to broaden growth beyond traditional net-lease real estate.
The strategy could support future hyperscale data-center investments across the U.S. and Europe.
Long leases and investment-grade tenants provide predictable cash flows and broaden Realty Income's market.
Realty Income’s (O - Free Report) push into data centers is beginning to take on greater strategic importance as the company looks to broaden its growth avenues beyond traditional net-lease real estate. A key component of that strategy is its existing partnership with Cloud Capital, under which Realty Income expects to invest up to $1.4 billion for a 45% stake in an initial three-asset Northern Virginia portfolio valued at more than $6 billion. The assets have less than 400 MW of capacity, are fully leased or pre-leased, and carry 15-20-year triple-net leases with investment-grade hyperscale tenants.
The partnership is designed to be more than a one-time transaction. Realty Income describes it as a programmatic platform that could support future hyperscale data center investments across the United States and Europe.
The Cloud Capital venture also builds on Realty Income’s existing data center relationship with Digital Realty. The company invested about $200 million in a build-to-suit data center joint venture in 2023 and held an 80% interest in two properties as of June 30, 2026.
The strategy gives Realty Income access to a global data center market estimated at more than $1 trillion in real estate value. For Realty Income, this could diversify its heavily retail-focused portfolio, broaden its addressable market and create a scalable source of long-term growth. The long-term leases and investment-grade tenants could also support predictable cash flows, while the partnership provides an avenue to deploy capital across the United States and Europe.
How Are Realty Income's Peers Adopting Data Center Strategy?
Prologis (PLD - Free Report) is aggressively expanding beyond logistics into data centers. In second-quarter 2026, its data center power pipeline expanded to 5.8 GW. Prologis started $1.6 billion of development across logistics and data centers, highlighting its focus on leveraging its global land bank and infrastructure to capture growing demand for AI and digital infrastructure.
Iron Mountain (IRM - Free Report) has already made data centers a meaningful growth business. In second-quarter 2026, it signed 13 MW of data center leases, taking year-to-date leasing to 110 MW, including 75 MW signed in July. Data center, digital and ALM businesses collectively grew over 50% year over year.
Realty Income’s Price Performance, Valuation and Estimates
Shares of Realty Income have risen 0.5% over the past three months, underperforming the broader industry and the S&P 500 Index.
Image Source: Zacks Investment Research
In terms of forward 12-month Price/Earnings (P/E), Realty Income is currently trading at 13.72X, which is at a discount to the industry average of 17.1X.
Image Source: Zacks Investment Research
Realty Income’s estimate revisions reflect a positive trend. The Zacks Consensus Estimate for fiscal 2026 EPS has been revised marginally upward over the past two months. The consensus estimate calls for 4% growth year over year.
View the Zacks #1 Rank List
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Realty Income's Data Center Bet: What Does It Mean for Growth?
Key Takeaways
Realty Income’s (O - Free Report) push into data centers is beginning to take on greater strategic importance as the company looks to broaden its growth avenues beyond traditional net-lease real estate. A key component of that strategy is its existing partnership with Cloud Capital, under which Realty Income expects to invest up to $1.4 billion for a 45% stake in an initial three-asset Northern Virginia portfolio valued at more than $6 billion. The assets have less than 400 MW of capacity, are fully leased or pre-leased, and carry 15-20-year triple-net leases with investment-grade hyperscale tenants.
The partnership is designed to be more than a one-time transaction. Realty Income describes it as a programmatic platform that could support future hyperscale data center investments across the United States and Europe.
The Cloud Capital venture also builds on Realty Income’s existing data center relationship with Digital Realty. The company invested about $200 million in a build-to-suit data center joint venture in 2023 and held an 80% interest in two properties as of June 30, 2026.
The strategy gives Realty Income access to a global data center market estimated at more than $1 trillion in real estate value. For Realty Income, this could diversify its heavily retail-focused portfolio, broaden its addressable market and create a scalable source of long-term growth. The long-term leases and investment-grade tenants could also support predictable cash flows, while the partnership provides an avenue to deploy capital across the United States and Europe.
How Are Realty Income's Peers Adopting Data Center Strategy?
Prologis (PLD - Free Report) is aggressively expanding beyond logistics into data centers. In second-quarter 2026, its data center power pipeline expanded to 5.8 GW. Prologis started $1.6 billion of development across logistics and data centers, highlighting its focus on leveraging its global land bank and infrastructure to capture growing demand for AI and digital infrastructure.
Iron Mountain (IRM - Free Report) has already made data centers a meaningful growth business. In second-quarter 2026, it signed 13 MW of data center leases, taking year-to-date leasing to 110 MW, including 75 MW signed in July. Data center, digital and ALM businesses collectively grew over 50% year over year.
Realty Income’s Price Performance, Valuation and Estimates
Shares of Realty Income have risen 0.5% over the past three months, underperforming the broader industry and the S&P 500 Index.
Image Source: Zacks Investment Research
In terms of forward 12-month Price/Earnings (P/E), Realty Income is currently trading at 13.72X, which is at a discount to the industry average of 17.1X.
Image Source: Zacks Investment Research
Realty Income’s estimate revisions reflect a positive trend. The Zacks Consensus Estimate for fiscal 2026 EPS has been revised marginally upward over the past two months. The consensus estimate calls for 4% growth year over year.
Image Source: Zacks Investment Research
Currently, Realty Income carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.