Digital Realty Trust (DLR) has drawn fresh attention after reporting second quarter 2026 results that combined higher sales and revenue with lower net income, while management simultaneously raised full year revenue and earnings guidance.

Digital Realty Trust’s share price has eased in the short term, with a 1-day return of 2.42% down and a 7-day return of 5.30% down, yet it still shows a 30-day share price return of 6.92% and a year to date share price return of 21.60%. Over a longer horizon, the total shareholder return of 12.63% over one year and 72.50% over three years suggests momentum has been building as investors weigh stronger revenue figures against lower recent net income and the higher 2026 guidance.

If the renewed interest in data center real estate has you thinking about related growth themes, it may be a good moment to scan 57 AI infrastructure stocks for other potential ideas.

Digital Realty Trust’s recent pullback sits against a strong multi year share price run and upbeat 2026 guidance. Is this latest move really about changing views on the business, or just sentiment swinging around the story?

Most Popular Narrative: 13.8% Undervalued

Analyst consensus on Digital Realty Trust points to a fair value of $218.72 compared with a last close of $188.52, which frames the stock as materially below that narrative estimate and puts the focus on what is driving that gap.

Digital Realty's record backlog of leases, which have not yet commenced, indicates strong future revenue potential and earnings growth due to steady demand for data center capacity, particularly from AI and cloud service providers. The successful formation of Digital Realty's first U.S. hyperscale fund is expected to fuel future growth with up to $10 billion in investments, leading to enhanced revenue and returns through fees, highlighting its significant potential impact on long-term earnings sustainability.

Want to see what sits behind that backlog and hyperscale fund story? The narrative leans on projected revenue expansion, changing margins and a future earnings profile that supports a higher valuation multiple. Curious which specific assumptions pull the fair value up to $218.72 and how a 7.87% discount rate shapes that number.

Result: Fair Value of $218.72 (UNDERVALUED)

However, this hinges on demand keeping pace with new capacity and on financing conditions staying supportive, since oversupply or higher funding costs could undercut the Digital Realty Trust narrative.

Another View On Digital Realty Trust’s Valuation

The first narrative paints Digital Realty Trust as undervalued, yet the current P/E of 92x stands well above the estimated fair ratio of 40.9x and the North American Specialized REITs average of 28.8x, as well as a 64x peer average. That rich gap suggests valuation risk if sentiment cools. Where do you think the market eventually settles?

Next Steps

The split between enthusiasm for Digital Realty Trust’s growth story and concern over its risks is clear, so it makes sense to move quickly and test the numbers for yourself. To see how the key issues and potential upsides balance out, start with a closer look at the 3 key rewards and 2 important warning signs.

Looking For More Investment Ideas Beyond Digital Realty Trust?

If you like the Digital Realty Trust story but want options, cast the net wider now so you do not miss opportunities setting up elsewhere.

• Target potential mispricings by scanning companies on the 55 high quality undervalued stocks that combine stronger fundamentals with prices that sit below many investors’ radar.
• Strengthen your income focus and check out resilient payers through the 9 dividend fortresses, especially if consistent distributions matter in your portfolio.
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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.