Artificial intelligence is creating enormous demand for computing power, electricity, networking, cooling, and data center capacity.
Investors looking for exposure to that trend often focus on semiconductor companies such as NVIDIA or cloud computing giants such as Microsoft, Amazon, and Alphabet.
But there is another way to invest in the AI infrastructure boom:
owning the real estate where the computing happens.
Digital Realty Trust, Inc. (NYSE: DLR) is one of the world’s largest data center real estate companies and has become an important infrastructure provider for cloud computing, hyperscale customers, enterprise IT, and increasingly artificial intelligence workloads.
The company entered the second half of 2026 with strong momentum.
Digital Realty reported second-quarter revenue of approximately $1.9 billion, up 29% from the same period a year earlier. It also ended the quarter with a record $1.9 billion backlog of annualized GAAP base rent at 100% share, while renewal lease rates increased 25.4% on a cash basis. Management raised its 2026 Core FFO guidance following the results. se numbers help explain why DLR stock has attracted attention from both growth investors and income-oriented REIT investors.
But Digital Realty also faces meaningful risks.
Data centers require enormous amounts of capital. The company carries billions of dollars of debt, regularly raises equity, depends on access to power in key markets, and must continue investing aggressively to satisfy hyperscale and AI customers.
So is Digital Realty stock one of the better ways to invest in the AI data center boom?
Let’s take a closer look.
What Is Digital Realty Trust?
Digital Realty Trust is a real estate investment trust, or REIT, focused primarily on data centers.
The company trades on the New York Stock Exchange under the ticker symbol:
DLR
Unlike a traditional office or apartment REIT, Digital Realty owns infrastructure designed to house servers, networking equipment, cloud platforms, and high-performance computing systems.
Its global platform includes more than 300 facilities across more than 55 metropolitan areas in over 30 countries on six continents. ital Realty serves a wide range of customers, including:
- Cloud computing companies
- Hyperscale technology companies
- Enterprises
- Telecommunications providers
- Financial institutions
- Network providers
- Artificial intelligence companies
Its primary global platform is known as PlatformDIGITAL.
The basic business model is relatively straightforward.
Digital Realty invests large amounts of capital to develop or acquire data center infrastructure and then leases that capacity to customers.
Those customers may rent a relatively small amount of space and power, or they may lease enormous hyperscale facilities requiring hundreds of megawatts.
That combination makes Digital Realty both a real estate company and a critical part of global digital infrastructure.
Why AI Matters So Much for Digital Realty Stock
The investment thesis for DLR has changed considerably with the rapid expansion of generative artificial intelligence.
Training and running advanced AI models requires large numbers of GPUs and other specialized computing systems.
Those systems require:
power
cooling
high-speed networking
physical security
low-latency connectivity
and increasingly,
very large data center campuses.
Building this infrastructure is difficult.
Power availability alone can become a major bottleneck.
That creates an opportunity for established data center operators that already have land, utility relationships, connectivity, customers, and experience building high-density computing environments.
Digital Realty is attempting to position itself directly in that infrastructure layer.
The company already works with NVIDIA as a DGX-ready AI colocation provider, offering infrastructure designed to support high-performance AI and machine-learning workloads. AI opportunity is therefore not simply a marketing story.
Digital Realty is already signing leases and developing capacity designed for increasingly power-intensive computing workloads.
Digital Realty Q2 2026 Earnings: A Strong Quarter
Digital Realty’s second-quarter 2026 results provided several encouraging signals.
Revenue reached approximately:
$1.9 billion
That represented an increase of:
18% quarter over quarter
and
29% year over year.
Adjusted EBITDA reached approximately $978 million, up 19% from the same quarter a year earlier. company reported FFO of approximately $982 million, or:
$2.73 per share
However, that number included significant promote income related to development joint ventures.
For evaluating the underlying business, investors may find Core FFO excluding net promote income more useful.
Digital Realty reported:
Core FFO excluding net promote: $2.13 per share
That compared with $1.87 per share in the same quarter of 2025. REIT investors, this distinction is important.
Why FFO Matters More Than EPS for DLR Stock
Traditional companies are often valued using earnings per share and the price-to-earnings ratio.
REITs are different.
Because accounting rules include substantial depreciation on real estate assets, GAAP net income can make a REIT’s operating economics difficult to interpret.
That is why REIT investors commonly focus on:
Funds From Operations, or FFO
and
Core FFO
instead of relying only on EPS.
For Digital Realty, Core FFO provides investors with a clearer view of the cash-generating potential of the underlying real estate and data center operations after adjusting for certain non-core items.
Digital Realty raised its full-year 2026 guidance after the second-quarter results.
The company now expects:
2026 Core FFO per share excluding net promote:
$8.15 to $8.20
The previous guidance following Q1 had been lower. agement also increased its expected 2026 revenue range excluding promote income to:
$6.85 billion to $6.95 billion
and its Adjusted EBITDA outlook to:
$3.75 billion to $3.85 billion. upward revisions are important because they suggest that the current demand environment is translating into improving operating results rather than remaining only a long-term AI narrative.
Digital Realty’s Record Backlog May Be Even More Important
Perhaps one of the strongest indicators in the Q2 report was not current revenue.
It was future contracted revenue.
At the end of the second quarter, Digital Realty reported a record signed-but-not-commenced backlog of:
$1.9 billion in annualized GAAP base rent at 100% share
Digital Realty’s proportionate share was approximately:
$1.4 billion. acklog consists of signed leases that have not yet begun contributing fully to revenue.
That means part of Digital Realty’s future growth is already contractually committed.
In other words, the company is building capacity today that customers have already agreed to lease in the future.
This can provide investors with greater visibility into future revenue growth.
July Hyperscale Leasing Added Another Major Catalyst
The momentum continued after the quarter ended.
Digital Realty disclosed that in July it signed two hyperscale leases representing approximately:
$410 million of annualized GAAP base rent at 100% share
or approximately:
$205 million at Digital Realty’s share. t is a significant amount of contracted rent from only two transactions.
For investors trying to understand the AI and hyperscale data center cycle, deals of this size are important.
They indicate that major customers are still committing to very large amounts of future capacity.
Existing Data Centers Are Also Becoming More Valuable
New construction is only one part of Digital Realty’s growth story.
Existing facilities are benefiting from stronger pricing.
During Q2 2026, renewal lease rates increased:
25.4% on a cash basis
and
32.0% on a GAAP basis. t is an unusually large pricing increase for a real estate business.
It suggests that capacity in certain Digital Realty markets is valuable enough that customers are willing to pay substantially higher rates when leases renew.
Management subsequently raised its full-year assumption for cash renewal pricing growth to a range of 9% to 11%. shareholders, higher rents on existing assets can be especially attractive because the company does not necessarily need to build an entirely new facility to generate that growth.
Digital Realty and Mistral AI
A useful example of Digital Realty’s direct exposure to AI infrastructure came in May 2026.
European AI company Mistral AI selected Digital Realty’s Paris South campus for a 10-megawatt AI compute cluster.
The infrastructure is designed to support high-density computing and advanced cooling while allowing Mistral AI to expand localized AI services in Europe. s deal illustrates why Digital Realty could benefit regardless of which individual AI model ultimately wins.
Digital Realty does not necessarily need to predict the winning chatbot, GPU architecture, or software platform.
Its opportunity is providing infrastructure to the companies that need computing capacity.
This resembles the old “picks and shovels” investment concept.
Instead of trying to pick every AI winner, DLR provides part of the infrastructure many of those companies require.
Digital Realty Is Building Much More Capacity
Demand is strong, but Digital Realty needs enough land and power to meet it.
That is why the company’s current expansion strategy is important.
During Q2 2026, Digital Realty acquired land in the Atlanta metropolitan area that, together with an adjacent parcel, is expected to support more than:
1 gigawatt of IT capacity.
The company also acquired land in the Kansas City area for approximately $475 million that could ultimately support:
up to 2 gigawatts of utility power. se are enormous campuses.
For comparison, one gigawatt equals 1,000 megawatts.
Digital Realty is effectively securing the land and electrical capacity needed for future generations of hyperscale and AI infrastructure.
It also acquired land in Marseille capable of supporting up to 48 megawatts of IT capacity and expanded its presence in Malaysia through data center and land acquisitions.
Northern Virginia Remains Strategically Important
Northern Virginia is one of the world’s most important data center markets.
In 2026, Digital Realty increased its ownership of three fully leased Northern Virginia data centers.
The facilities contain a combined:
288 megawatts of IT capacity
and are fully leased to three investment-grade hyperscale customers.
Digital Realty reported a gross asset value of approximately $7.8 billion for the three facilities and expects an initial stabilized cap rate above 6.5%. se assets are expected to stabilize over 2027 and 2028.
That means some of the earnings contribution from today’s investment activity may not become fully visible immediately.
This is a common feature of the data center development model:
capital spending happens first, while revenue and cash flow arrive later.
The $3.25 Billion Hyperscale Data Center Fund
Digital Realty is trying to solve one of the biggest challenges in the data center industry:
How do you finance enormous growth without putting all of the capital burden on shareholders?
One answer has been strategic private capital.
In March 2026, Digital Realty announced the final closing of its first U.S. hyperscale data center fund with:
$3.25 billion in total equity commitments.
The fund includes institutional investors such as pensions, sovereign wealth funds, insurers, asset managers, and other large capital providers.
It will focus primarily on hyperscale data centers in major U.S. markets including Northern Virginia, Santa Clara, Dallas, Atlanta, Charlotte, and New York. s strategy matters because data center development is extremely capital intensive.
Partner capital can allow Digital Realty to build more infrastructure while reducing the amount of money it must provide entirely from its own balance sheet.
How Much Is Digital Realty Spending?
A lot.
Following Q2 earnings, Digital Realty increased its 2026 development capital expenditure guidance, net of partner contributions, to:
$4.25 billion to $4.75 billion. agement expects stabilized development yields of more than 10%.
If those returns are achieved, the spending could create significant long-term value.
However, this level of investment also explains why balance-sheet management is so important for DLR shareholders.
AI data centers may offer attractive economics, but they are not inexpensive to build.
Digital Realty’s Balance Sheet
As of June 30, 2026, Digital Realty reported approximately:
$18.6 billion in total debt
including approximately:
- $17.0 billion of unsecured debt
- $1.6 billion of secured and other debt
Its net debt-to-Adjusted EBITDA ratio was:
4.7x
while fixed-charge coverage was approximately:
5.2x. t is not unusual for a REIT.
Real estate companies routinely use leverage to finance assets.
The issue for investors is whether that leverage remains manageable while interest rates, development spending, and capital needs change.
At the moment, Digital Realty is simultaneously investing aggressively and using several sources of capital to finance that growth.
DLR Is Also Issuing New Shares
Investors should understand another side of Digital Realty’s financing strategy.
The company has been issuing common stock.
Through June 30, Digital Realty had sold approximately 13.5 million shares under its at-the-market equity program during 2026 at a weighted average price of approximately $184.94 per share.
Those sales generated approximately:
$2.5 billion in net proceeds. ity issuance can create dilution for existing shareholders.
However, dilution is not automatically negative if management can invest the new capital at attractive returns.
The key equation is relatively simple.
If Digital Realty can issue equity at an attractive valuation and reinvest the proceeds into projects generating strong long-term returns, shareholders may still benefit.
But if development returns fall short, repeated equity issuance can become less attractive.
That makes capital allocation one of the most important factors to monitor with DLR.
Digital Realty Dividend
Digital Realty is also a dividend-paying REIT.
The company currently pays a quarterly common-stock dividend of:
$1.22 per share
which translates to:
$4.88 per share annually
if the quarterly dividend remains unchanged. important detail is that the dividend has remained at $1.22 per quarter since 2022. while Digital Realty offers income, investors looking specifically for rapid dividend growth should recognize that the payout has been flat for several years.
On the positive side, the current $4.88 annualized dividend represents roughly 60% of the midpoint of Digital Realty’s latest 2026 Core FFO per-share guidance, leaving room between operating cash generation and the current distribution.
That gives the company flexibility to retain capital for its enormous development pipeline.
For a capital-intensive AI infrastructure REIT, retaining some cash may ultimately be more valuable than maximizing the dividend in the short term.
The Bull Case for Digital Realty Stock
There are several reasons investors could remain bullish on DLR.
1. AI Requires Physical Infrastructure
Artificial intelligence may be software, but it runs on physical hardware.
That hardware requires data centers, electricity, cooling, and connectivity.
Digital Realty owns infrastructure positioned directly in that value chain.
As AI computing demand expands, the physical infrastructure layer could continue benefiting.
2. Backlog Provides Future Revenue Visibility
Digital Realty ended Q2 with a record $1.9 billion annualized rental backlog at 100% share. se signed but not yet commenced leases provide a pipeline of future revenue that should become visible as capacity comes online.
3. Pricing Power Is Strong
Cash renewal rents increased 25.4% during Q2. ong renewal pricing can drive organic growth without requiring an equivalent increase in new construction.
4. Hyperscale Demand Remains Strong
Two hyperscale deals signed in July represented $410 million in annualized base rent at 100% share. t provides evidence that large customers continue making long-term infrastructure commitments.
5. Digital Realty Has Global Scale
A footprint of more than 300 facilities across over 55 metropolitan markets gives Digital Realty geographic diversification and relationships across major digital infrastructure ecosystems. y smaller competitors cannot easily replicate that scale.
6. Strategic Capital Could Extend Growth
The $3.25 billion U.S. hyperscale fund allows Digital Realty to combine its development expertise with outside institutional capital. successful, this model could allow DLR to expand without funding every project entirely from its own balance sheet.
The Bear Case and Risks for DLR Stock
The AI story is attractive, but Digital Realty is not a risk-free investment.
1. Data Centers Are Extremely Capital Intensive
Digital Realty expects to spend $4.25 billion to $4.75 billion on development in 2026, net of partner contributions. ignificant slowdown in demand could leave the company with expensive development commitments.
2. Interest Rate Risk
REIT valuations are sensitive to interest rates.
Higher rates can increase borrowing costs and make dividend-paying real estate stocks less attractive relative to bonds and other income investments.
With billions of dollars in debt, financing conditions matter.
3. Equity Dilution
Digital Realty raised approximately $2.5 billion through ATM stock issuance during the first half of 2026. t capital supports expansion, but shareholders should continue monitoring how quickly the share count grows relative to FFO per share.
4. Power Availability Could Limit Growth
Data center development increasingly depends on access to enormous amounts of electricity.
Owning land is not enough.
Utilities must be able to deliver power, transmission infrastructure must exist, and regulatory approvals may be required.
The AI infrastructure boom may therefore be constrained as much by electricity as by demand.
5. AI Spending Could Eventually Slow
Current hyperscale spending levels are enormous.
Investors should not automatically assume that AI infrastructure spending will increase at the same rate forever.
A slowdown in cloud or AI capital expenditure could eventually affect data center leasing.
6. Development Timing Risk
Digital Realty can spend money today on facilities that may not fully contribute to revenue for several years.
Construction delays, equipment shortages, power delays, customer changes, or cost inflation can affect expected returns.
7. The Dividend Is Not Currently Growing
Digital Realty’s quarterly dividend has remained at $1.22 since 2022. estors primarily seeking dividend-growth stocks should take that into account.
How Should Investors Value DLR Stock?
Digital Realty should generally not be valued like a normal technology company.
And because it is a REIT, a traditional P/E ratio is not necessarily the best metric either.
One useful measure is:
Price-to-Core FFO
With Digital Realty forecasting approximately $8.15 to $8.20 of Core FFO per share excluding net promote for 2026, investors can compare the current share price with expected Core FFO to estimate the valuation multiple. t multiple should then be considered alongside:
- Expected FFO growth
- Interest rates
- Dividend yield
- Development returns
- Balance-sheet leverage
- Backlog growth
- Renewal pricing
- AI and hyperscale demand
The central valuation question is not simply whether AI demand is strong.
It is:
How much of that future growth is already reflected in DLR’s share price?
A great business can still generate disappointing investment returns if purchased at an excessively high valuation.
What Should DLR Investors Watch Next?
For Digital Realty investors, several metrics deserve particular attention over the next few quarters.
Core FFO Per Share
This shows whether growth is reaching shareholders on a per-share basis after considering financing and new share issuance.
Backlog
The record $1.9 billion backlog is a major future growth indicator.
Investors should watch whether it continues growing and how quickly signed contracts begin contributing to revenue. Hyperscale Leasing
Large AI and cloud deals can materially change future revenue.
Renewal Pricing
Q2’s 25.4% cash renewal increase was exceptionally strong.
The durability of that pricing power will be important. Development Returns
Management currently expects stabilized yields above 10% on development spending. estors should watch whether actual returns match those expectations.
Debt and Equity Issuance
Future growth should be evaluated against the capital required to finance it.
AI Customer Announcements
Deals such as the 10 MW Mistral AI deployment provide direct evidence that Digital Realty is participating in the AI infrastructure cycle.
Is Digital Realty Stock a Buy in 2026?
Digital Realty occupies an attractive position in the global technology infrastructure ecosystem.
The company provides something that AI developers cannot simply create with software:
physical infrastructure at scale.
The latest operating numbers are encouraging.
Revenue is growing.
Core FFO is increasing.
Management has raised guidance.
The backlog is at a record level.
Renewal pricing is strong.
Hyperscale customers continue signing large leases.
And Digital Realty is aggressively acquiring powered land and building capacity for the next generation of cloud and AI demand. the same time, none of that growth comes cheaply.
Digital Realty requires billions of dollars in annual investment.
It carries substantial debt.
It is issuing shares to fund expansion.
And investors must consider whether the valuation already reflects much of the expected AI growth.
That makes DLR an interesting middle ground between a traditional income REIT and a high-growth technology infrastructure investment.
My View on the Digital Realty Investment Thesis
The most compelling part of the Digital Realty story is that investors do not have to predict exactly which AI company wins.
OpenAI could grow.
Mistral could grow.
Cloud providers could grow.
New AI companies that do not exist today could become major customers.
All of them ultimately need infrastructure.
That gives Digital Realty a potentially durable position in the AI ecosystem.
The strongest part of the current thesis is not simply that management talks about artificial intelligence.
It is that the financial and leasing numbers are beginning to show the demand.
A record backlog, strong renewal pricing, major hyperscale agreements, and increased FFO guidance provide tangible evidence that digital infrastructure demand remains strong. key risk is capital efficiency.
Digital Realty has to spend enormous amounts of money to capture the opportunity.
Therefore, long-term shareholder returns will depend on whether management can build facilities at attractive returns while keeping debt and equity dilution under control.
That is what DLR investors should watch most closely.
Digital Realty Stock FAQ
What is Digital Realty’s stock symbol?
Digital Realty Trust trades on the New York Stock Exchange under the ticker symbol DLR.
What does Digital Realty do?
Digital Realty owns and operates data centers and provides colocation, connectivity, and digital infrastructure services to cloud companies, enterprises, telecommunications companies, hyperscale customers, and AI workloads. Its global footprint includes more than 300 facilities across more than 55 metropolitan markets in over 30 countries. Is Digital Realty an AI stock?
Digital Realty is not an AI software or semiconductor company, but it provides physical data center infrastructure used to support AI computing. It has AI-focused infrastructure relationships including NVIDIA DGX-ready facilities and a 10 MW deployment with Mistral AI in Paris. Is Digital Realty a REIT?
Yes. Digital Realty Trust is structured as a real estate investment trust focused primarily on data centers and digital infrastructure.
Does Digital Realty pay a dividend?
Yes. Digital Realty currently pays a quarterly common dividend of $1.22 per share, equivalent to $4.88 annually if maintained for four quarters. Has Digital Realty increased its dividend recently?
The quarterly common dividend has remained at $1.22 per share since 2022. What is Digital Realty’s 2026 FFO guidance?
Following its second-quarter 2026 results, Digital Realty raised its Core FFO per-share guidance excluding net promote to approximately $8.15 to $8.20. How much debt does Digital Realty have?
Digital Realty reported approximately $18.6 billion of total debt as of June 30, 2026, with net debt-to-Adjusted EBITDA of approximately 4.7x. How large is Digital Realty’s backlog?
At the end of Q2 2026, Digital Realty reported a record $1.9 billion of annualized GAAP base rent in signed-but-not-commenced leases at 100% share. Digital Realty’s proportionate share was approximately $1.4 billion. What are the biggest risks for DLR stock?
Major risks include higher interest rates, large capital requirements, debt, equity dilution, power availability constraints, construction delays, weaker hyperscale demand, and the possibility that expected AI growth is already reflected in the stock’s valuation.
Is Digital Realty stock good for long-term investors?
Digital Realty offers exposure to data centers, cloud infrastructure, AI computing demand, and dividend income. However, long-term returns will depend on future FFO growth, capital allocation, leverage, development returns, and the valuation investors pay for the stock.
Final Thoughts
Digital Realty is increasingly difficult to classify as simply a traditional real estate company.
Its buildings have become part of the infrastructure powering cloud computing and artificial intelligence.
That gives DLR exposure to one of the largest technology investment cycles in the market while still offering the recurring rental economics and dividend structure of a REIT.
The Q2 2026 results strengthened the investment case.
Revenue increased sharply.
Core FFO improved.
Guidance moved higher.
The leasing backlog reached a record.
Renewal pricing accelerated.
And large hyperscale customers continued committing to future capacity. Digital Realty’s opportunity comes with a major requirement:
capital.
Billions of dollars must be invested before new data centers generate revenue.
For DLR shareholders, the long-term outcome will therefore depend not only on how quickly AI demand grows, but also on how efficiently Digital Realty finances and builds the infrastructure required to meet that demand.
If management can continue growing FFO per share while controlling leverage and earning attractive returns on new developments, Digital Realty could remain one of the more compelling infrastructure plays on the AI and cloud computing cycle.
For investors researching AI data center stocks, data center REITs, dividend stocks, or DLR stock, Digital Realty deserves a place on the watchlist.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial, investment, tax, or trading advice. REITs and individual stocks involve risk, including potential loss of principal. Investors should review Digital Realty’s latest SEC filings, earnings reports, debt profile, valuation, and personal financial objectives before making any investment decision.