Shares of Digital Realty DLR have gained 15.8% over the past three months, comfortably outpacing the industry’s 1.3% growth. This performance is supported by strong demand for data centers and steady execution of its expansion strategy. The rally reflects investor confidence in the company’s ability to scale its platform amid rising cloud, AI and digital transformation needs.
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A key catalyst has been its capital strategy. Digital Realty recently closed a $3.25 billion U.S. hyperscale data center fund, backed by global institutional investors such as pensions, sovereign wealth funds and asset managers. The company retains a 20% stake and will manage the assets, ensuring recurring income streams while expanding capacity. The fund targets major Tier I markets like Northern Virginia, Dallas and New York, helping the company meet growing hyperscale demand.
This move is important because it allows Digital Realty to scale without fully relying on its balance sheet. The private capital platform supports its PlatformDIGITAL strategy, which focuses on delivering large-scale infrastructure for cloud and AI customers. Management has highlighted that demand for hyperscale capacity remains strong, driven by structural trends in digital transformation and artificial intelligence.
Expansion across geographies is another growth lever. The company has been actively strengthening its presence in Europe through entries into Portugal and Bulgaria, along with broader Mediterranean expansion. These additions improve connectivity and extend its footprint in high-growth regions, complementing its global network of more than 300 data centers across 55+ metros in more than 30 countries.
On the innovation front, Digital Realty continues to invest in its platform, including expanding its innovation labs in Asia to support evolving enterprise needs. Its fourth-quarter 2025 results reflected steady leasing activity and demand, though, like peers, it operates in a higher interest rate environment that can affect financing costs.
Wrapping Up on DLR
Overall, Digital Realty’s recent stock gains are backed by solid fundamentals, capital inflows and global expansion. While long-term demand drivers remain intact, valuation concerns and macro pressures suggest that the recent momentum may stabilize, supporting a neutral near-term outlook.
The Zacks Consensus Estimate revisions also suggest a similar view, with the current year FFO per share mark being revised upward over the past two months, while the same for 2027 has been tweaked downward.
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Stocks to Consider
Some better-ranked stocks from the broader REIT sector are Chatham Lodging Trust REIT CLDT, sporting a Zacks Rank #1 (Strong Buy), and Terreno Realty TRNO, carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CLDT’s 2026 FFO per share is pegged at $1.20, which indicates year-over-year growth of 17.7%.
The consensus estimate for TRNO’s full-year FFO per share is pinned at $2.79, which calls for a marginal increase from the year-ago period.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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SeeDigital Realty Trust, Inc. (DLR) : Free Stock Analysis Report
Terreno Realty Corporation (TRNO) : Free Stock Analysis Report
Chatham Lodging Trust (REIT) (CLDT) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
