DIGITAL REALTY TRUST, INC. (DLR): what the price requires
At today's price, DIGITAL REALTY TRUST, INC. (DLR) is priced for +6.5% FFO growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/DLR
Headline
| Field | Value |
|---|---|
| Ticker | DLR |
| Company | DIGITAL REALTY TRUST, INC. |
| Current price | $177.85/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | reit |
| Implied FFO growth | 6.5% |
| Price-to-FFO | 19.3x |
| FFO yield | 5.2% |
Solve inputs: computed at a 9.7% cost of equity with 4% terminal growth over a 5-year stage; each 1pp of cost of equity moves the implied growth ~4.2pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.33σ |
| cohort percentile (of 88 peers) | 75 |
| sustained it ~5 years at this level | 65% |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple; asset-based/earnings-power land below the price.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 9.84x | 3 | expensive |
| Earnings | 1.98x | 4 | expensive |
| Relative | 1.22x | 6 | expensive |
| Growth | 1.38x | 5 | expensive |
Families that justify the price: Relative Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.3%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $118.55 | 1.50x | yes | FCF base $2.8B, growth 13% (input: historical growth), terminal g 4.0%, WACC 9.3%, 6yr projection |
| DCF Exit Multiple | Growth | $128.80 | 1.38x | yes | Exit EV/EBITDA: 20.8x / 22.8x / 24.8x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $262.78 | 0.68x | yes | P/E 35x (static sector reference · 2026-04), scenarios: 28.8x / 35.0x / 41.2x (bear / base = reference held flat / bull), EV/EBITDA 20x |
| Simple DDM | Growth | $150.51 | 1.18x | yes | DPS $9.87, g=2.5% (sustainable: ROE (TTM) × retention; not the terminal-growth assumption), ke=9.3% |
| Two-Stage DDM | Growth | $287.21 | 0.62x | yes | Stage 1: 15% for 5yr, Stage 2: 3.5% perpetual |
| Simple Excess Return | Asset | $18.08 | 9.84x | yes | BV/sh $66.15, ROE (TTM) 2.5%, ke 9.3% |
| Two-Stage Excess Return | Asset | $10.47 | 16.99x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $101.21 | 1.76x | yes | Rev $6.3B, growth 13% (input: historical growth; tapered), Terminal P/S: 8.2x / 9.9x / 11.7x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $137.55 | 1.29x | yes | FFO/share $9.17, growth 15% (input: historical FFO/share growth, 10y median), PEG=7.09 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $12.40 | 14.34x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.66B × (1−21%) / WACC 9.3% → EPV (no growth) |
| Residual Income | Asset | $7.70 | 23.10x | yes | BV $66.15 + 5yr PV of (ROE (TTM) 2.5% − Kₑ 9.3%) × BV; BV grows 1.6%/yr (excluded from median) |
| Graham Number | Asset | $116.83 | 1.52x | yes | √(22.5 × FFO/share $9.17 × BVPS $66.15) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $156.31 | 1.14x | yes | EBITDA $2.68B × sector EV/EBITDA 20.0x |
| FCF Yield | Earnings | $82.39 | 2.16x | yes | FCF $2545.5M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $295.89 | 0.60x | yes | FFO/share $9.17 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $6.93 | 25.66x | yes | BV $66.15 × (ROIC 1.0% / WACC 9.3%) (excluded from median) |
| P/Sales Sector | Relative | $107.69 | 1.65x | yes | Revenue $6.34B × sector P/S 6.0x |
| PEG Fair Value | Relative | $206.33 | 0.86x | yes | FFO/share $9.17 × (PEG 1.5 × growth 15.0% (input: historical FFO/share growth, 10y median)) → PE 22.5x |
| Earnings Yield | Earnings | $99.14 | 1.79x | yes | FFO/share $9.17 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | $130.08 | 1.37x | yes | FFO/share $9.17 × 14.2x P/FFO (route cohort median, n=85); FFO $3.24B (FFO incl. D&A + impairments, FY2025, companyfacts), shares 353M |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt (REIT basis) | $13.6b |
| Net debt / FFO | 4.19x |
| Fixed-charge coverage (FFO basis) | 8.4x |
| Funds from operations (trailing) | $3.2b |
| Share count CAGR (dilution) | 4.6% |
| Burning cash | no |
REIT basis: leverage is read against funds from operations (FFO), not depreciation-gutted operating income. The header's implied growth runs on ADJUSTED FFO — FFO minus recurring maintenance capex — so the header's multiple and this leverage ratio use bases that differ by that capex; neither substitutes for the other.
Bullet Takeaways
- Digital Realty owns and develops data centers leased to hyperscalers and enterprises, and at $188 the stock trades near 22 times adjusted funds from operations, a premium multiple that prices the company as a growth developer riding AI-driven demand rather than a steady-state landlord.
- The headline bet is durable AFFO growth: the price embeds adjusted funds from operations compounding around 8% a year, and the company is backing that with a record $1.8 billion leasing backlog and 1.2 gigawatts under construction, 61% of it already pre-leased.
- The risk is the multiple, not the balance sheet: at 22 times AFFO the price requires the AI build-out to keep filling the development pipeline, and any slowdown that pulls implied growth lower compresses a premium multiple hard; the next read comes around July 22, 2026.
Bull Case
A single lease tells the bull story better than any multiple. In the first quarter Digital Realty signed a 200-megawatt AI inference contract with a AA-rated hyperscaler in Charlotte, the largest lease in the company's history. That is not an incremental win. It is a customer of the highest credit quality committing to a block of computing capacity at a scale that did not exist as a category two years ago, and it lands in a portfolio purpose-built to deliver exactly that. The bull case for Digital Realty is that it sits at the physical chokepoint of the AI build-out: the models need power, cooling, and connectivity at gigawatt scale, and the companies training and running them would rather lease that capacity than build it. Digital Realty is one of the few landlords on the planet that can deliver it.
The pipeline backs the demand with contracted, visible growth. Total leasing bookings reached $707 million in the quarter, the backlog hit a record $1.8 billion, and the development pipeline runs to 1.2 gigawatts under construction with 61% already pre-leased. Pre-leasing is the part that de-risks the bet. The company is not building speculatively into hope; the majority of what it is constructing already has a signed tenant, which converts the capital spending into cash earnings on a known schedule. That is why core funds from operations grew 15% year over year to $2.04 a share in the quarter, and why management raised full-year 2026 core FFO guidance to a $8.00 to $8.10 range, implying about 9% growth.
The financing is built for the scale of the opportunity. Management cited leverage falling to a multiyear low near 4.7 times and roughly $10 billion of capacity to fund hyperscale development. A REIT growing into the strongest demand cycle its sector has seen, with an investment-grade tenant base, a record pre-leased pipeline, and the balance sheet to fund it, is the textbook setup for a developer. The fixed-charge coverage near eight times says the cash the existing portfolio produces covers its obligations comfortably while the new capacity ramps. At 22 times adjusted funds from operations the bull is paying a developer's multiple for a developer's growth, and the contracted backlog is the evidence the growth is real rather than hoped for.
Bear Case
No standard way of valuing a REIT reaches $188. The asset lens, which marks the real estate, lands a full order of magnitude below the price. Peer multiples sit well under it. Even the forward-growth methods, the ones that credit next year's expansion, do not quite get there. The price is a bet beyond what any conventional frame supports, and that is the bear case in one line: every method that does not assume the AI build-out runs for years says the stock is expensive, and only a continued boom justifies the quote. At roughly 22 times adjusted funds from operations the price embeds AFFO compounding around 8% a year, and the question is not whether 8% is achievable in a good year. It is whether it persists long enough, across enough years, to earn a multiple that doubles where the asset and peer lenses land.
The mechanism of the downside is multiple compression, and it is unforgiving at this starting point. A premium multiple is a coiled spring. If the implied growth rate steps down, if hyperscaler capital spending cools, if a wave of competing data-center supply tightens lease pricing, then the market repays a lower growth assumption with a lower multiple, and at 22 times the percentage move down is large. A stock priced for durable 8% AFFO growth that delivers 4% does not just grow slower; it reprices to the multiple that 4% growth warrants, and that is a long way below $188. The asset value provides no floor here the way it does for a discounted office REIT, because the price sits so far above it that a reversion has room to run.
The financing carries its own dilution cost. The share count has grown at roughly 5.5% a year over the trailing window, which is how a developer funds a capital-intensive build-out: by issuing equity. That is rational while the new capacity earns returns above the cost of that equity, but it means per-share AFFO growth lags the company-level growth, because the gains are split across a steadily larger share base. The bull owns the best-positioned landlord in the strongest demand cycle its sector has seen. The bear's point is narrower and harder to dismiss: at a multiple no static method reaches, the entire return depends on the AI capital cycle staying hot, and capital cycles in infrastructure have a long history of overbuilding precisely when demand looks most certain.
Valuation
Unlike most REITs, the price here is paying for growth, and the cleanest way to see what it assumes is to invert it. At $188 Digital Realty trades near 22 times adjusted funds from operations, the cash earnings net of the capital its data centers require, and that multiple embeds adjusted funds from operations compounding around 8% a year. That is the bet stated plainly: the market is paying a developer's price for durable, mid-to-high single-digit growth in cash earnings, not for the steady, low-growth income a mature property landlord throws off. The gross funds-from-operations multiple sits a touch lower, near 20 times, and the adjusted figure is actually implied to grow slightly faster than the gross one, which is the signal that the maintenance capital is not eating into the growth. For a data-center REIT in the middle of an AI-driven demand cycle, that is the right frame; reading this price against trailing income would miss the entire point of the asset.
The methods we use to triangulate all agree the price is rich, and the pattern is the information. No family reaches $188. The asset-value lens, marking the real estate, sits a full order of magnitude below the price. Peer multiples land well under it, and even the forward-growth methods, which credit the expansion, fall short. This is not the office-REIT pattern where the value lenses say cheap and only growth is demanding. It is the opposite: the price is a bet beyond what any standard method supports, defensible only if the demand cycle that fills the development pipeline persists for years rather than quarters. The premium is real and the report does not pretend it away. It is the price of optionality on the AI build-out, isolated so the buyer can see exactly what they are paying for it.
Solvency is a source of strength rather than strain, which is what lets the multiple stand. Fixed-charge coverage runs near eight times, so the cash the existing portfolio generates clears its obligations comfortably while new capacity ramps, and management cited leverage falling to a multiyear low around 4.7 times with roughly $10 billion of capacity to fund development. The one cost the buyer pays for that growth is dilution: the share count has grown about 5.5% a year as equity funds the build-out, so per-share growth runs behind the company-level figure. The Street's average target sits above the current price, with Truist lifting its target to $225 in late June; that premium credits the same AI-leasing momentum the backlog reflects, and the gap between it and the value-method lenses is precisely the durability-of-growth question the whole valuation turns on. What a buyer underwrites at $188 is not a discount waiting to close. It is a wager that contracted backlog and pre-leased construction keep the 8% growth coming long enough to earn a multiple no static method reaches.
Catalysts
The first quarter was a step-change, not a steady beat. Core funds from operations rose 15% year over year to $2.04 a share, and management raised full-year 2026 core FFO guidance by $0.10 to a $8.00 to $8.10 range, implying about 9% growth at the midpoint. The leasing behind the raise was the standout: $707 million in total bookings, the second-highest quarterly total ever, anchored by a 200-megawatt AI inference lease with a AA-rated hyperscaler in Charlotte, the largest single lease in company history. The smaller enterprise and interconnection segment also set a record at $98 million in new signings, with AI-related deals making up a fifth of that.
The development engine is where the forward growth gets built. The backlog reached a record $1.8 billion and the construction pipeline ran to 1.2 gigawatts, 61% pre-leased, funded against leverage at a multiyear low near 4.7 times and roughly $10 billion of stated development capacity, with net capital spending guided to $3.5 to $4.0 billion. The board declared a quarterly dividend of $1.22 per share, and the Street has stayed constructive, with Truist raising its price target to $225 in late June. The next read is the second-quarter print, expected around July 22, 2026, where investors will watch whether bookings momentum held, whether the pre-leasing rate on new construction stayed high, and whether management nudges the core FFO guide higher again. Those three signals are the direct test of the durable-growth assumption the price depends on.
Peer Cohorts (Per Segment, With Filing Citations)
Data centers (single reportable segment) (reported)
- EQIX (EQUINIX INC)
- (no filing in the citation store)
- AMT (AMERICAN TOWER CORP /MA/)
- (no filing in the citation store)
- CCI (CROWN CASTLE INC.)
- (no filing in the citation store)
- SBAC (SBA COMMUNICATIONS CORPORATION)
- (no filing in the citation store)
- IRM (IRON MOUNTAIN INC)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
DLR Q1 2026 earnings release · DLR Q1 2026 earnings release / earnings calendar · DLR Q1 2026 earnings call · Truist Securities, June 2026