Stifel Increases Digital Realty's Price Target Following Strong Q1 Results

Overview#

Stifel has raised its price target for Digital Realty Trust (NYSE: DLR) from $230 to $235, while maintaining a Buy rating on the stock. Currently, shares are trading at $200, close to their 52-week high of $205, and have seen an increase of over 30% this year.

Strong Q1 Performance#

Digital Realty's first-quarter results surpassed expectations, marking a record start to the year. The company has increased its revenue guidance for 2026, along with adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) and cash flow from operations per share. This growth is driven by rising demand for artificial intelligence (AI) services, strong leasing activity, and a growing development pipeline. Over the past year, the company generated $2.78 billion in EBITDA, with revenue growth nearing 12%.

Updated Guidance and Market Activity#

The new guidance suggests revenue growth of about 9% to 10%, EBITDA growth of around 11%, and an increase in cash flow from operations per share of 8.9% at the midpoint. Despite higher capital expenditures, leasing activity remains strong, particularly with hyperscalers and enterprise customers. Notably, a significant 200-megawatt AI deal has been highlighted, alongside record performance in smaller leasing segments.

Future Outlook#

Digital Realty's backlog has reached $1.0 billion, providing multi-year visibility for future projects. The company’s development pipeline has expanded to approximately $16.5 billion, with 1.2 gigawatts currently under construction. Stifel believes Digital Realty is well-positioned for ongoing growth, supported by a solid balance sheet and favorable market conditions. The company also offers a dividend yield of 2.44% and has consistently paid dividends for 23 years, indicating stability and commitment to shareholders.

In its recent earnings report, Digital Realty announced revenue of $1.64 billion for Q1, exceeding forecasts of $1.6 billion. Earnings per share met expectations at $0.46. Despite this positive performance, the stock saw a slight decline in after-hours trading. The raised full-year guidance suggests a promising outlook for the company.