Our $200 target price for Digital Realty is based on the simple average of a P/AFFOPS multiple, a cap-rate applied to our Cash NOI per share estimate, and our DCF valuation framework:

Our DCF analysis incorporates our revenue outlook for 2030 of $9.9 billion with an EBITDA margin of 48%. Using a WACC of 5.9%,we arrive at an operating EV of $85 billion. From this, we subtract year-end 2025E net debt and preferred equity of $18 billion and adjust for minority holdings to derive an equity value of $71 billion, or $203 per fully diluted share.

On a Cash NOI per share basis, we apply a 4.00% cap rate on our 2026 Cash NOI per share estimate of $9.74 per share and adjust our estimate for net debt, preferred equity, and options and warrants to arrive at an equity value of $196 per share. We estimate a 3-year Cash NOI CAGR between 26-29E of 11.1%.

On an AFFO basis, we believe Digital Realty should trade at 29x our 2026 estimate of $7.05 per share. This method yields a value of $201 per share. 

Risks to Digital Realty's target price being achieved include: 1) while Digital’s large portfolio of assets provides plenty of opportunities to improve and optimize revenue yield and return on capital, we also recognize the risk that the large portfolio will dull the impact of small improvements for equity holders; 2) Digital's existing data center portfolio is older than many of its competitors which could lead to higher maintenance capital intensity over time or less flexible power resiliency configurations that could hurt Digital's ability to win customers over time; 3) Digital has a higher percentage of lower-yielding power-based-building assets in its portfolio which could drag down returns over time; 4) Digital is exposed to foreign currencies as they have a significant presence in Europe and Asia and unfavorable currency movements could impact reported financial performance; and 5) rising rates create a risk for a higher cost of capital and potential dilution to future FFOPS and AFFOPS that could put pressure on DLR shares.


Risks to Digital Realty and the category more broadly clearly relate to the supply and demand dynamics that govern pricing for the industry. The challenge is that industry demand for bits is difficult to quantify into bookings and the supply demand dynamics sit at the micro-market level, whereas we are looking at performance on a national or global level. The balance between supply and demand could also be impacted by changes in technology that can create sudden shifts in either supply, demand, or both. Most of these concerns are expressed as longer-term risks for the data center stocks that result in stranded capital either temporarily or permanently. We generally believe that it is hard to find a technology change that becomes an absolute positive or absolute negative for the nature of communications infrastructure-based business models like towers and data centers, and we believe each development needs to be generally considered in the context of the growth prospects for the secular demand underlying those services. Economic weakness/strength could cause revenue and cash flow to fall below/above our expectations.


The potential for faster deployment of capital into its Hyperscale Investment Fund, higher development yields from its retail-centric assets, and stronger sales and pricing from the limited supply hyperscale portfolio could provide opportunities for higher estimates and/or multiples that could result in a higher share price relative to our target price.