DLR is now positioned to achieve double-digit annual normalized core FFOPS growth

Overview

This report is a model update by Citi on Digital Realty Trust Inc. DLR's second-quarter results exceeded expectations, retail customer bookings continued to improve, and it secured favorable hyperscale customer bookings, including two large leases signed in early third quarter. The report believes data center demand driven by AI workloads remains strong, and DLR is a net beneficiary.

Core views

The core view is that DLR's core FFOPS growth trajectory has been revised upward, with double-digit growth expected in 2026 and beyond. Citi maintains its Buy rating and believes the stock may continue to move higher in the near term. The report also notes that DLR's sub-1MW retail bookings accelerated, providing a positive read-through for peer Equinix Inc.'s results next week.

Analysis framework

The report is mainly based on second-quarter results, updated company guidance, management conference call commentary, Citi model forecasts, and comparisons with Visible Alpha and First Call consensus expectations. Valuation and scenario analysis use the 2027 P/AFFO multiple and are built around variables including demand, pricing, bookings, interest rates, and asset monetization.

Methodology notes

• Earnings forecastCore FFOPS model update

  Raise core FFOPS forecasts based on second-quarter results, guidance, and management commentary.

  The report uses core FFOPS as the key metric for evaluating DLR's operations and valuation, and highlights double-digit growth from 2026 to 2028.

• Relative valuationP/AFFO multiple

  Use the 2027 P/AFFO multiple to assess upside and downside scenarios.

  The bull case references 31x 2027 P/AFFO, while the bear case references 18x 2027 P/AFFO, with drivers including pricing, demand, bookings, churn, and releasing spreads.

• Consensus comparisonCiti vs Consensus

  Compare Citi forecasts with Visible Alpha and First Call consensus expectations.

  The report shows the differences between DLR's 2026E, 2027E, and 2028E FFOPS and consensus expectations to support the forecast upgrade.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Digital Realty Trust Inc (DLR.N)

  Core covered asset

  Strengths

  Strong data center demand, incremental demand driven by AI workloads, improving retail and hyperscale customer bookings, and management optimism on growth in 2027 and 2028.

  Weaknesses

  The report mentions the impact of a one-time promote fee related to the Blackstone joint venture project in 2026, and some operating metrics and table recognition are incomplete.

  Comparison

  Citi's 2026E, 2027E, and 2028E FFOPS forecasts are all above previous forecasts and above some consensus expectations.

  Risks

  If customer churn rises, releasing spreads or pricing come in below expectations, interest rates become unfavorable, or operating investment increases, earnings and valuation may come under pressure.

• Equinix Inc.

  Industry comparable and potential beneficiary

  Strengths

  The report believes DLR's accelerating retail bookings provide a positive industry signal for EQIX's upcoming results disclosure.

  Weaknesses

  This report is not primarily focused on EQIX and does not provide a full rating or target price.

  Comparison

  EQIX is used as a peer reference for the data center demand environment.

  Risks

  Conclusions related to EQIX are mainly based on industry inference following DLR's results and still require validation from the company's own earnings.

Key data

• RatingBuyThe report maintains a Buy view.
• Current priceUS$179.34As of 16:00 on July 23, 2026.
• Target priceUS$226.00Implies expected share price return of 26.0%.
• Expected total return28.7%Includes 26.0% expected share price return and 2.7% expected dividend yield.
• Market capitalizationUS$64,144MDisclosed on the report cover page.
• 2026E FFOPSUS$8.15Above the previous US$8.06; First Call consensus is US$8.01, Visible Alpha consensus is US$7.77.
• 2027E FFOPSUS$9.03Above the previous US$8.78; First Call consensus is US$8.75, Visible Alpha consensus is US$8.61.
• 2028E FFOPSUS$10.06Above the previous US$9.59; First Call consensus is US$9.51, Visible Alpha consensus is US$9.56.
• FFOPS growth rate2026E 10.3%, 2027E 10.8%, 2028E 11.4%The financial summary in the report shows sustained double-digit growth in core funds from operations per share.

Impact & implications

From an investment perspective, data center demand, AI workloads, recovering retail bookings, and hyperscale customer leases together support upward revisions to DLR's earnings forecasts. If better pricing, demand, and bookings continue to drive revenue and AFFOPS growth, valuation has further upside potential; at the same time, peer EQIX may also benefit from industry demand signals.

Risks

• Data center bookings and revenue growth may be affected by increased customer churn, lower releasing spreads, or weaker pricing.
• Expanded operating investment may reduce operating leverage.
• Rising interest rates or a deteriorating financing environment may affect REIT valuations and cost of capital.
• Non-recurring items such as one-time promote fees may distort the comparability of revenue, Adjusted EBITDA, and core FFOPS.

What to watch

• Whether core FFOPS can continue to achieve double-digit growth from 2026 to 2028.
• Whether sub-1MW retail bookings continue to accelerate.
• The signing and delivery pace of large hyperscale customer leases.
• Whether data center demand driven by AI workloads continues to support pricing and occupancy.
• Whether asset monetization can be completed at accretive capitalization rates.
• Whether EQIX's results next week validate improving peer demand.