Global Data Trends And 5G Rollout Will Fuel Digital Infrastructure

Key Takeaways

• Accelerating demand for AI, cloud, and data infrastructure is driving robust growth and expanding DigitalBridge’s margins through higher utilization and strengthened pricing power.
  
• Strategic capital deployment and portfolio expansion are enhancing returns, diversifying revenue streams, and solidifying the company’s leadership in global digital infrastructure.
  
• Escalating costs, regulatory hurdles, market saturation risks, and dependence on external capital threaten DigitalBridge’s margins, growth prospects, and ability to expand internationally.

Catalysts

DigitalBridge is an infrastructure investment firm specializing in digital infrastructure assets.

• The rapid proliferation of AI workloads, cloud computing, and surging global data consumption are materially increasing demand for data centers, fiber, and towers—the core assets in DigitalBridge’s portfolio. This sustained, structural demand supports double-digit revenue growth projections and expanding margins as utilization rates rise and pricing power strengthens.
  
• The company’s active deployment of over $28 billion in committed capital into new data center and digital infrastructure projects over the next two years positions it to capture outsized growth from the ongoing digital transformation of global industries, which directly fuels top-line growth and creates significant operating leverage.
  
• Recent large-scale, accretive transactions such as Zayo’s acquisition of Crown Castle’s fiber business meaningfully expand DigitalBridge’s addressable market, enhance portfolio diversification, and lower the company’s effective entry multiples, which should improve long-term returns on equity and support higher carried interest and distributable earnings.
  
• DigitalBridge is successfully growing third-party assets under management, with a robust pipeline in both flagship equity and private credit strategies, ongoing fundraising momentum, and $4 billion of signed but not yet fee-earning capital set to convert. As this capital is deployed and activated, it will immediately increase recurring management fees, leading to upward revisions in revenue and earnings estimates.
  
• The accelerating adoption of 5G, edge computing, and the integration of energy transition strategies (such as renewable-powered data centers) is expanding DigitalBridge’s growth runway across both developed and emerging markets. This positions the company to aggressively scale revenues and margins by capturing new verticals and geographies, while capitalizing on increased investor allocations to alternative, infrastructure-focused asset managers.

DigitalBridge Group Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on DigitalBridge Group compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming DigitalBridge Group's revenue will decrease by 1.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 11.3% today to 51.9% in 3 years time.
• The bullish analysts expect earnings to reach $277.1 million (and earnings per share of $1.63) by about May 2028, up from $64.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 17.6x on those 2028 earnings, down from 24.2x today. This future PE is lower than the current PE for the US Capital Markets industry at 25.0x.
• Analysts expect the number of shares outstanding to grow by 1.43% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.59%, as per the Simply Wall St company report.

DigitalBridge Group Future Earnings Per Share Growth

Risks

• Rising interest rates and tighter global monetary policy could increase borrowing costs for DigitalBridge’s aggressive acquisition and construction strategy, compressing net margins and reducing future profitability as the company continues to commit large amounts of CapEx to new site developments.
  
• Heightened geopolitical tensions and regulatory nationalism may restrict the company’s ability to expand its digital infrastructure footprint in key international markets, potentially limiting revenue growth opportunities and diversification benefits that management cites as core to the investment case.
  
• A possible saturation in core data center and tower markets, along with intensifying competition and the risk of commoditization, could erode DigitalBridge’s pricing power and lead to margin compression, negatively impacting long-term earnings growth.
  
• Growing ESG scrutiny and evolving regulatory requirements around digital infrastructure, including higher environmental and compliance standards, could increase operational and capital expenses, thereby pressuring margins and inhibiting expansion in regions with stricter rules.
  
• The company's heavy reliance on continuous external fundraising for both flagship and credit strategies exposes it to the risk that investor appetite for long-dated infrastructure vehicles could wane, especially if market conditions deteriorate or sector returns disappoint, which would in turn place downward pressure on management fees and overall revenue growth.

Valuation

• The assumed bullish price target for DigitalBridge Group is $20.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of DigitalBridge Group's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $20.0, and the most bearish reporting a price target of just $10.5.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $534.1 million, earnings will come to $277.1 million, and it would be trading on a PE ratio of 17.6x, assuming you use a discount rate of 7.6%.
• Given the current share price of $8.79, the bullish analyst price target of $20.0 is 56.0% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.