Digital Realty Stock Rallies 18% in 3 Months: Will the Momentum Last?

Digital Realty DLR shares have risen 18% in the past three months compared with the industry’s 3.7% growth.The company is well-poised to gain from its unmatched global footprint of data centers with growing digital transformation, cloud computing and the proliferation of artificial intelligence. A diverse tenant base assures stable revenues. Accretive buyouts and investments in land and infrastructure globally and a robust development pipeline, bode well for long-term growth. A solid balance sheet with ample liquidity will aid future expansion.Early this month, DLR entered Portugal with the acquisition of a data center in Lisbon, marking another step in its strategy to expand across fast-growing digital infrastructure markets.Analysts seem positive about this Zacks Rank #3 (Hold) company, with the Zacks Consensus Estimate for its 2026 funds from operations (FFO) per share revised marginally northward to $7.96 over the past month.Image Source: Zacks Investment ResearchFactors Behind DLR Stock’s Price Surge: Will This Continue?With the growth of the Internet of Things and Big Data, and an increasing number of companies opting for third-party IT infrastructure, data center REITs like Digital Realty are experiencing a booming market. Demand is strong in top-tier data center markets, and despite enjoying high occupancy, these markets are absorbing new construction at a faster pace. In the fourth quarter of 2025, the company signed $175 million of new leases, including a $77 million of 0-1-megawatt leases and $19 million of interconnection bookings.Digital Realty has a high-quality, diversified customer base comprising tenants from cloud, content, information technology, network, other enterprise and financial industries. It has a global presence, with 310 data centers in more than 50 metros with decent occupancy. The majority of the tenants are investment-grade, and numerous customers use multiple locations across the portfolio. This assures stable revenue generation for the company.Digital Realty is expected to ride on its growth curve, backed by strategic investments in land, infrastructure and acquisitions. In March 2026, Digital Realty expanded into Bulgaria through the acquisition of Telepoint, a highly connected interconnection hub in Sofia. The deal adds two data centers to its portfolio and strengthens its presence in Southeast Europe. Such expansionary efforts will bring in future revenue growth for the company.DLR is undertaking efforts to enhance its portfolio by carrying out various development and redevelopment activities. As of Dec. 31, 2025, it had 9.7 million square feet of space under active development and 4.7 million square feet of space held for future development. For 2026, the company expects to incur capital expenditures for its development activities (net of partner contributions) in the range of $3.25-$3.75 billion.Digital Realty has a solid balance sheet with ample liquidity. The company exited the first quarter of 2025 with cash and cash equivalents of $3.45 billion. Its net debt-to-adjusted EBITDA was 4.9X, while its fixed charge coverage was 4.5X as of the end of the fourth quarter of 2025. Digital Realty currently enjoys BBB (Stable Outlook), BBB (Stable Outlook) and Baa2 (Stable Outlook) credit ratings from Fitch, S&P and Moody's, respectively, which provide it with favorable access to the debt market and lower borrowing costs.Key Risks for DLR StockCompetition from other industry players is likely to lead to aggressive pricing pressure and weigh on Digital Realty’s prospects. A substantial debt burden and high interest rates add to its woes.Stocks to ConsiderSome better-ranked stocks from the broader REIT sector are Chatham Lodging Trust REIT CLDT, sporting a Zacks Rank #1 (Strong Buy), and Cousins Properties CUZ, 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 Zacks Consensus Estimate for CUZ’s full-year FFO per share is pinned at $2.93, which calls for an increase of 3.2% 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.Just Released: Zacks Top 10 Stocks for 2026Hurry – you can still get in early on our 10 top tickers for 2026. Handpicked by Zacks Director of Research Sheraz Mian, this portfolio has been stunningly and consistently successful.From inception in 2012 through November, 2025, the Zacks Top 10 Stocks gained +2,530.8%, more than QUADRUPLING the S&P 500’s +570.3%.Sheraz has combed through 4,400 companies covered by the Zacks Rank and handpicked the best 10 to buy and hold in 2026. You can still be among the first to see these just-released stocks with enormous potential.See New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Cousins Properties Incorporated (CUZ): Free Stock Analysis Report Digital Realty Trust, Inc. (DLR): Free Stock Analysis Report Chatham Lodging Trust (REIT) (CLDT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks