Digital Realty Trust [DLR] has emerged as a linchpin in the global data-center ecosystem, owning and operating carrier-neutral facilities that support cloud, connectivity and enterprise workloads across more than 25 countries.
Its proprietary PlatformDIGITAL infrastructure and interconnection fabric enable high-density deployments, and the company is being swept forwards by artificial intelligence (AI) tailwinds.
In the first week of October, Digital Realty announced a strategic collaboration with Dell Technologies [DELL] and DXC Technology [DXC]. Earlier, it secured linkage with Nvidia [NVDA] and global capital partnerships valued near $40bn to expand data center capacity.
While demand is strongest around hyperscale and AI workloads, the broader real estate market remains stressed.
Let’s unpack how the company remains well positioned for the digital infrastructure boom, but execution and cost control will matter as competition and capital intensity ramp up.
DLR stock is up 6.94% over the last 12 months. Prior to the great tariffs upset in the earlier portion of the year, it was trading noticeably higher than it is currently, suggesting there may yet be some ground to retake.
New Partnership
Digital Realty’s recently announced partnership with Dell Technologies and DXC Technology has been a major driver of excitement around the stock.
The collaboration aims to accelerate enterprise adoption of AI by bringing AI directly to where customer data resides, combining scalability with strict governance around security and compliance.
“AI is transforming how organizations operate and innovate, but realizing its full potential requires infrastructure, strategy and operational expertise to work together seamlessly,” Colin McLean, Chief Revenue Officer at Digital Realty, said in the press release.
At the core of the partnership is the deployment of the Dell AI Factory within Digital Realty’s PlatformDIGITAL, enhanced by DXC’s operational expertise. This integration gives enterprises a secure and flexible environment for designing and deploying private AI infrastructure. The trio has also created a library of validated use cases.
What to Expect from Q3 Earnings
Digital Realty is set to release its Q3 2025 earnings after the market closes on October 23, with analysts expecting modest but steady growth. Consensus forecasts see EPS of $1.78 and revenue of $1.52bn — representing year-over-year increases of 6.6% and 6.4%, respectively. The gains are being driven by continued demand for data center capacity, particularly from AI workloads and hyperscale cloud customers. Analysts also expect rental revenue to reach about $1.03bn, up 7.7% from Q3 2024, while interconnection and other service revenue is projected to rise 8.4% to roughly $122m.
The general sentiment remains positive, reflecting Digital Realty’s consistent leasing momentum and its ability to raise rental rates across key markets. However, there has been a slight downward revision to the consensus EPS estimate over the past month, suggesting some caution around near-term profitability. Much of this reflects higher power and construction costs as the company scales capacity to meet surging AI-related demand.
Some analysts have noted that, while funds from operations growth remains strong, a Q3 earnings beat appears less likely given an Earnings ESP of -1.05%, according to Nasdaq. Even so, investors remain focused on Digital Realty’s longer-term positioning as one of the primary beneficiaries of the AI-driven infrastructure boom, balancing cyclical pressures with structural growth potential.
Peer Comparison: DLR vs EQIX vs LMT
Equinix [EQIX] is a leading global data-center real estate investment trust (REIT) specializing in interconnection and colocation infrastructure. The company continues to expand its footprint, recently acquiring facilities in Manila and directing capital toward its global xScale portfolio aimed at hyperscale and AI workloads. Its valuation is rich: EQIX currently trades with a P/E ratio near 80. Analysts view the stock as reflecting high growth expectations, especially given its strong positioning in the AI/data infrastructure wave. However, the aggressive capex outlook has raised concerns about margin pressure in the near term.
Iron Mountain [IRM] started as a physical records storage business but has increasingly pivoted into data center and digital infrastructure assets. It offers diversification for investors looking at adjacent digital REIT exposure and trades at more moderate valuation multiples compared to high-growth hyperscaler peers. Its P/S ratio is lower, reflecting its slower growth trajectory and more established business model, which can appeal to investors seeking stability rather than breakout growth.
Here is how the stocks’ fundamentals compare:
| DLR | EQIX | IRM |
Market Cap | $59.26bn | $75.61bn | $30.51bn |
P/S Ratio | 10.30 | 8.40 | 4.74 |
Estimated Sales Growth (Current Fiscal Year) | 7.83% | 5.86% | 11.65% |
Estimated Sales Growth (Next Fiscal Year) | 11.38% | 8.37% | 9.60% |
Source: Yahoo Finance
DLR Stock: The Investment Case
The Bull Case for Data Realty
Digital Realty is well positioned to benefit from surging demand for data center capacity, particularly driven by AI, cloud and hyperscaler infrastructure growth. Its PlatformDIGITAL interconnection capabilities and global footprint provide scalable, secure solutions for enterprise clients. Partnerships with Dell and DXC to accelerate private AI adoption further reinforce its market leadership. Trading at a P/E of around 45 and a P/S near 10, investors are pricing in robust long-term growth, but the company’s strong cash flow, high occupancy rates and expansion into high-density AI workloads make it an attractive play on the digital infrastructure boom.
The Bear Case for Data Realty
Despite strong secular tailwinds, Digital Realty faces risks from high valuation multiples, rising construction costs and cyclical downturns in enterprise IT spending. Near-term earnings could be pressured by margin compression in new AI-focused deployments, and incremental capex may reduce free cash flow. With a P/E and P/S reflecting premium growth expectations, any slowdown in leasing momentum, AI demand or macroeconomic pressures could trigger sharp downside, leaving the stock exposed to volatility and investor repricing.
Conclusion
Earlier this week, Wolfe Research upgraded DLR stock from ‘peerperform’ to ‘outperform’, and set a price target of $194, which is just below the broader analyst consensus and represents an upside of 13.03%. If tomorrow’s earnings prove to be as rosy as some anticipate, the stock could potentially outdo these targets.
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