Digital Realty
Owns/develops/operates 300+ data centers across 55+ metros in 30+ countries on six continents; leases wholesale capacity (space, power, cooling) to hyperscalers and large enterprises plus interconnection/colocation via PlatformDIGITAL. Revenue is recurring rent-plus-power under multi-year leases; growth funded by development capex, JV capital-recycling, and the balance sheet.
Earnings, margins, COGS & capex
A scaled, investment-grade data-center REIT in an up-cycle. FY2025 revenue ~$6.05B with Core FFO $7.39/sh (+10%); Q1 2026 accelerated to $1.635B revenue (+16% YoY) and $2.04 Core FFO/sh, prompting a full-year guidance raise (to $8.00-8.10). The story is demand-led scarcity pricing: hyperscaler AI capex is inflating rents on power-constrained capacity, driving a record ~$1.8B signed backlog (100% share) and double-digit development yields (~11.9% expected stabilized on the under-construction pipeline). The offset is capital intensity - ~$3B/yr development capex and a ~$10B construction pipeline keep reported FCF negative and require continual external funding, though leverage sits comfortably at 4.7x (Q1 2026).
Income statement — where each revenue dollar goes
% of revenueOf every $1 of revenue, ~40¢ is cost of goods and ~6¢ operating expense, leaving ~54¢ of operating profit.
Revenue trend
Margins
stable-to-up as scale + pricing improve
up
stable
elevated (scarcity pricing)
COGS structure
Property operating costs are dominated by electricity/power (largely passed through to hyperscale tenants), cooling, staffing, and maintenance; plus very large depreciation & amortization on the owned real-estate/equipment base. Power procurement and utility rates are the key variable-cost swing.
Capex
~$3B development capex in FY2025; ~$10B gross-value / 769MW pipeline under construction at ~11.9% expected stabilized yield. Capital recycling via hyperscale JVs / private capital (inaugural private fund with >$3.2B of LP commitments) supplements the balance sheet.
Latest earnings
Revenue beat ($1.635B, +16% YoY); Core FFO $2.04 beat ~$1.95 consensus; net income available to common $169M ($0.46/sh); raised full-year guidance
FY2026 raised: Core FFO $8.00-8.10/sh, revenue $6.65-6.75B, Adjusted EBITDA $3.65-3.75B (>10% normalized/constant-currency growth)
- Q1 2026 revenue
- $1.635B (+16% YoY)
- Core FFO / share
- $2.04
- Adjusted EBITDA
- ~$920M
- Net income avail. to common
- $169M ($0.46/sh)
- Signed leasing backlog
- ~$1.8B at 100% share (~$1.0B at DLR share; record)
- Net debt / Adj. EBITDA
- 4.7x (vs 5.5x target)
Growth drivers
- Hyperscaler AI/cloud capex surge — big-tech 2026 AI infra spend estimated in the hundreds of billions, well above 2025
- Power-constrained supply lets DLR command scarcity pricing / positive re-leasing spreads on renewals
- Record ~$1.8B signed backlog (100% share) converting to revenue as capacity is delivered
- Development pipeline (769MW, ~$10B) at ~11.9% expected yields expanding NOI
- Capital-light JV / private-fund vehicles recycling capital while retaining fee + operating income
- Interconnection/PlatformDIGITAL cross-connect growth (record 0-1MW + interconnection bookings) adding higher-margin recurring revenue
Reported financials — SEC EDGAR
Audited GAAP figures pulled from SEC filings · latest filing 2026-02-13. The audited primary-source spine — not financial advice.
Revenue — annual (GAAP)
Margins & balance sheet — FY’25
Bull & bear
DLR is a scaled, investment-grade landlord of the scarcest input to AI - powered, connected data-center capacity - at the start of a multi-year hyperscaler capex supercycle, with pricing power, a record backlog, and double-digit development yields translating into accelerating Core FFO.
- Demand is structural, not cyclical: hyperscaler AI capex ramping sharply into 2026, well above 2025 levels
- Power scarcity gives DLR pricing power - positive re-leasing spreads and ~11.9% expected stabilized development yields
- Record ~$1.8B backlog (100% share) + strong pre-leasing provide visibility into forward NOI growth
- Guidance raised in Q1 2026 (Core FFO to $8.00-8.10) signals accelerating, not decelerating, momentum
- Fortress balance sheet (4.7x, ~94% fixed at ~2.9%) funds growth cheaply and defensively
- Capital-recycling JVs / a >$3.2B inaugural private fund let DLR grow the pipeline without over-relying on dilutive equity
DLR is a capital-hungry REIT whose ~$3B/yr development spend produces negative free cash flow, whose largest tenants can self-build, and whose valuation is levered to AI-capex durability and long rates - a demand air-pocket or higher-for-longer rates would hit both growth and the multiple, as the post-Q1 secondary-offering de-rating already showed.
- Reported FCF is negative - growth depends on continuous access to debt/equity/JV capital at favorable cost (a discounted secondary already pressured the stock)
- Hyperscalers (Microsoft, Amazon, Alphabet, Meta, Oracle) are increasingly self-building, pressuring wholesale demand and pricing long-term
- AI capex could digest or air-pocket; a slowdown de-rates a stock priced for sustained double-digit growth
- Rate sensitivity - a REIT with an ~$18B debt stack re-rates on long-yield moves and refi costs
- Power, grid, permitting, water, and community constraints can delay deliveries and inflate development cost
- Overbuild risk if the industry adds MW faster than absorption, compressing scarcity-driven pricing
What it is worth
REIT multiples - Price/Core FFO and EV/EBITDA, cross-checked vs EQIX and the private-market value of powered data-center capacity
AI-capex air-pocket, accelerating hyperscaler self-build, and/or higher-for-longer rates compress both growth and the multiple; negative FCF forces dilutive funding - meaningful de-rating from ~23x forward Core FFO.
Double-digit near-term FFO growth per FY2026 guidance decelerates toward high-single-digits as the cycle matures; the stock roughly tracks FFO growth plus a ~3% dividend, premium multiple broadly intact.
Sustained AI capex + power scarcity keep re-leasing spreads and development yields high; FFO compounds low-double-digits for years, supporting a premium multiple and re-rating higher.
At ~$185/sh (~$62-67B mkt cap in early July 2026, down from ~$200/~$69B at the Q1 print) on FY2026 Core FFO guide of $8.00-8.10, DLR trades ~23x forward Core FFO - a growth premium justified by AI-driven scarcity pricing, a record backlog, and double-digit development yields, but leaving limited margin of safety if AI capex digests or rates rise. EV/EBITDA is elevated on ~$3.65-3.75B guided EBITDA plus ~$18B net debt. Value hinges on sustained double-digit FFO growth and continued cheap access to capital; the post-Q1 secondary-offering pullback underlines the funding-cost sensitivity.
SWOT
Strengths
- Global scale — 300+ data centers across 55+ metros / 30+ countries on six continents; hard to replicate footprint
- Investment-grade balance sheet - 4.7x leverage, ~94% fixed-rate debt at ~2.9%, ample liquidity (~$7B)
- Record backlog (~$1.8B at 100% share) and strong pre-leasing de-risk the pipeline
- Power/land control in constrained markets confers pricing power and positive re-leasing spreads
- Diversified tenancy - hyperscalers plus thousands of enterprises via PlatformDIGITAL/interconnection
Weaknesses
- Capital intensity - ~$3B/yr development capex keeps reported FCF negative; growth needs external funding
- Rate sensitivity - REIT valuation and cost of capital swing with long rates
- Tenant concentration risk in the top hyperscalers, who also self-build
- Lower interconnection density and per-cabinet economics than Equinix's retail/colocation model
- FX exposure - large international footprint drags reported (vs constant-currency) growth
Opportunities
- AI training/inference demand structurally expanding wholesale capacity needs for years
- Scarcity pricing on power lifts renewal spreads and development yields
- Capital-recycling JVs / private funds fund growth while limiting equity dilution
- Higher-margin interconnection and private-AI/enterprise workloads
- Selective new-market and campus expansion where power + fiber are securable (~5GW power bank)
Threats
- Hyperscaler self-build - the largest tenants are also the largest competitors for power/land
- Power availability and grid/permitting constraints could cap deliveries or inflate costs
- A sharp rise in rates or an AI-capex digestion/air-pocket compressing demand and multiples
- Overbuild risk if the industry adds capacity faster than absorption
- Regulatory/community pushback on data-center power and water consumption
Moats, dependencies & bottlenecks
Moats
300+ facilities, 55+ metros / 30+ countries; capital + time + land/power to replicate is enormous
Secured power capacity (incl. a ~5GW power bank) is the binding constraint; controlling it is the durable edge in the AI cycle
Migrating live workloads and interconnections is costly/risky; multi-year leases with renewals
Network-effect cross-connects, but density trails Equinix's retail model
IG rating + ~94% fixed low-cost debt lets DLR fund at a scale smaller peers can't
Dependencies
Amazon/AWS, Alphabet/Google, Meta, Oracle, IBM) Customer / revenue concentration Largest source of demand and backlog - also the biggest self-build competitors
Power availability gates every new MW; grid/permitting delays cap growth
Negative-FCF growth model needs ongoing external capital; sensitive to rates/credit spreads
chillers, transformers; GPUs indirectly) Long-lead electrical/cooling gear can slip delivery timelines
REIT valuations and refi costs move with long yields
Advantages
- Owns the scarce asset - powered, connected, permitted capacity - at global scale
- Pricing power from supply scarcity translating into positive re-leasing spreads
- Investment-grade, low-cost, mostly-fixed debt stack with ample liquidity
- Record backlog + strong pre-leasing gives forward-revenue visibility
- Capital-recycling JV / private-fund model extends the pipeline with partner capital
Weaknesses
- Structurally negative free cash flow while in build mode
- Concentrated exposure to a handful of hyperscalers who can self-build
- Lower interconnection density / per-unit economics than Equinix
- Rate- and FX-sensitive reported results
- Execution risk delivering ~769MW of pipeline on time and on budget
Bottlenecks
- Securing grid power and utility interconnection in target metros
- Long-lead electrical/cooling equipment (transformers, generators, chillers)
- Permitting, zoning, water, and community approvals for large campuses
- Cost of capital to fund a ~$10B construction pipeline without over-diluting
- Skilled construction/operations labor for rapid multi-metro build-out
Top signals & trends
Top signals
Management confident enough to lift the year one quarter in
Demand visibility well beyond current revenue
Balance-sheet headroom to fund growth
Growth is capital-dependent; equity issuance pressured the stock
Largest customers building their own capacity long-term
Low speculative-vacancy risk and accretive development spreads
Trends
Industry AI-infra capex ramping sharply into 2026 vs 2025
Favors incumbents controlling powered land; supports scarcity pricing
Largest tenants internalize capacity, pressuring long-run wholesale demand
Raises REIT cost of capital but scarcity pricing offsets on the demand side
Needs capex retrofits but lifts revenue-per-facility and differentiates AI-ready capacity
Regulatory and community friction on new-build power/water use
Ecosystem & competitor graph
Suppliers feed the company; customers pull from it. Line thickness shows the strength of each tie (supply-chain dependency, customer earnings contribution). Hover to isolate a tie.
Power capacity - the binding input to every new MW
Power distribution, UPS, and data-center electrical infrastructure (Euronext Paris SU / OTC ADR)
Thermal management, power, and cooling systems for data centers
GPUs drive tenant demand and rack-density/cooling requirements (indirect)
Backup generators and prime-power gensets
Backup power gensets and engines for data centers
Anchor hyperscale tenant
Major cloud tenant
Hyperscale tenant
Hyperscale/AI tenant
Fast-growing cloud/AI tenant
Enterprise/hybrid-cloud tenant (DLR's original spin heritage)
Thousands of enterprises + network/carrier tenants Colocation + interconnection via PlatformDIGITAL
Premier retail/interconnection data-center REIT; denser cross-connect ecosystem and higher recurring-revenue quality. The closest large-cap peer.
Legacy records/storage REIT pivoting into data centers; higher-beta AI-infra exposure but smaller DC scale.
Tower REIT with data-center exposure via CoreSite; adjacent digital-infra competitor for enterprise workloads.
Hyperscaler tenant that is also a major self-builder of AI data-center capacity - customer and long-run competitor.
Largest cloud provider; self-builds most capacity - key tenant and structural competitor.
Hyperscaler self-builder and tenant; internalizes large AI capacity.
Massive self-built AI data-center program; occasional wholesale tenant.
OCI build-out is a major hyperscale demand source and partial self-builder.
Well-capitalized private/PE-backed wholesale developers (some Blackstone/DigitalBridge-owned) competing directly for hyperscale leases and power.