Should Digital Realty Trust’s (DLR) Raised 2025 Outlook Prompt Investors to Reevaluate Data Center Demand?

• Digital Realty Trust recently reported second quarter and first half 2025 financial results, showing substantial year-over-year growth in revenue and net income, and raised its full-year 2025 guidance for both total revenue (now expected between US$5.93 billion and US$6.03 billion) and net income per diluted share (now expected between US$3.45 and US$3.55).
• An interesting insight is the significant increase in net income compared to the prior year, reflecting management’s optimism about continued business expansion and strong demand for data center capacity.
• We'll now examine how Digital Realty Trust's upgraded earnings guidance strengthens its investment narrative centered on robust demand for data center services.

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Digital Realty Trust Investment Narrative Recap

To own shares of Digital Realty Trust, investors typically need confidence in the long-term demand for data center capacity and the company’s ability to capture growth from cloud and AI adoption. The recent boost to 2025 revenue and earnings guidance supports the narrative of robust short-term demand, but it does not eliminate important risks, such as the possibility that rapid expansion could result in oversupply, or that volatile capital markets could make financing costlier. Right now, while the improved outlook highlights momentum, it does not fundamentally change the fact that access to affordable capital remains the key short-term catalyst, and any shock to funding costs or debt markets could quickly change the outlook.

Among recent announcements, Digital Realty’s raised corporate guidance on July 24 stands out as most relevant to the current momentum. The upgraded outlook reflects the company’s success in capturing strong leasing and demand trends, providing support for future revenue streams and near-term earnings, especially as customers in AI and cloud drive a record lease backlog.

However, it is important for investors to be mindful that, despite positive signals, the risks tied to supply potentially outpacing demand in core markets like Northern Virginia persist if expansion accelerates faster than customer commitments...

Read the full narrative on Digital Realty Trust (it's free!)

Digital Realty Trust's outlook points to $7.4 billion in revenue and $893.3 million in earnings by 2028. This scenario is based on annual revenue growth of 10.5% and a $503.1 million increase in earnings from the current $390.2 million.

Uncover how Digital Realty Trust's forecasts yield a $187.00 fair value, a 5% upside to its current price.

Exploring Other Perspectives

Simply Wall St Community members provided three fair value estimates for Digital Realty, ranging from US$110.45 to US$269.97 per share. While guidance has been raised, some still point to rapid expansion as a risk that could pressure future profitability, illustrating why your own due diligence on growth assumptions matters.

Explore 3 other fair value estimates on Digital Realty Trust - why the stock might be worth 38% less than the current price!

Build Your Own Digital Realty Trust Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Digital Realty Trust research is our analysis highlighting 4 key rewards and 3 important warning signs that could impact your investment decision.
• Our free Digital Realty Trust research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Digital Realty Trust's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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