Digital Realty (DLR) Stock Faces Earnings Split As AI Backlog Hits Record

Digital Realty Trust stock came into today on the back of a modestly higher 30‑day run, yet the latest close near US$188 left shares about 2.4% lower on the session. That pullback sits uncomfortably beside a quarter built around one clear headline. Core funds from operations, the key profit yardstick for data center real estate investment trusts, reached US$2.73 per share, and management lifted full year core FFO guidance.

The market is reacting to price while the results center on power. Record bookings and a record backlog signal that Digital Realty Trust just put another big marker down in the data center build out story.

Is Digital Realty Trust a rare case of a stock that screens expensive on a 92x P/E yet screens cheap against a DCF fair value estimate closer to US$297? Compare that gap directly in the valuation analysis for Digital Realty Trust.

Q2 2026 Earnings Summary

• Revenue (Q2 2026 vs. Q2 2025) US$1,924.08m vs. US$1,481.09m (up about 30%)
• Net Income (Excl. Extra Items, Q2 2026 vs. Q2 2025) US$443.11m vs. US$1,021.98m (down about 57%)
• Basic EPS (Earnings Per Share, Q2 2026 vs. Q2 2025) US$1.25 vs. US$3.03 (down about 59%)
• Funds From Operations (FFO, Q2 2026 vs. Q2 2025) US$981.91m vs. US$600.33m (up about 64%)

Prefer clean charts instead of another wall of earnings tables and raw figures? See Digital Realty Trust's full valuation picture laid out in an easy visual format through the company report for Digital Realty Trust.

Digital Realty bull case leans on backlog and pricing

Fans of Digital Realty argue that AI and cloud demand, plus tight power markets, support a long runway of profitable growth. Q2 gives some firm proof points. Record bookings in the 0 to 1 MW segment and a record US$1.9b backlog, worth about 30% of current data center revenue, show that customers are committing real dollars to this story. Cash re-leasing spreads above 25%, and roughly 66.7% mark to market on larger renewals, indicate that supply constrained markets are translating into higher cash flow per megawatt, not just higher volumes. Core FFO per share of US$2.73 and higher full year core FFO guidance back up the idea that this demand is already feeding earnings rather than sitting as distant optionality.

Bear case focuses on earnings quality and capital intensity

The skeptical view is that Digital Realty is over-earning on one-offs while taking on heavy growth commitments. Q2 contains some fuel for that worry. Net income excluding extra items dropped about 57% year on year to US$443.11m, and basic EPS fell about 59% to US$1.25, even as revenue and FFO rose. Part of core FFO included insurance recovery and JV promote income, which flatters the headline trend and complicates the read-through for underlying run-rate profitability. At the same time, the development pipeline of about 1.4 GW with a roughly US$20b cost and higher 2026 CapEx guidance underscores how much cash the AI build-out requires, which keeps execution risk and funding discipline firmly in focus despite the strong leasing story.

Compare how Digital Realty Trust's record backlog, higher cash re-leasing spreads, and core FFO guidance stack up against falling EPS, and whether analysts think the AI build out justifies the current 92x P/E. See the consensus price target analysis for Digital Realty Trust

Stay Ahead Of Your Next Move

If Digital Realty Trust's mix of a 92x P/E, record bookings, and a DCF fair value estimate closer to US$297 has your attention, register for free with Simply Wall St and add it to a Watchlist to track price against fair value and watch for your preferred entry point. Once you decide to take a position, keep your holdings organised with the Portfolio Command Center that cuts through noise and surfaces only the most important updates. For longer term conviction, use the Community to see how other investors are thinking about Digital Realty Trust and similar stocks. Spot potential catalysts and risks earlier so you can act with confidence and stay ahead of the market.

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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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