Digital Realty’s Leasing Expansion Could Face Restrictions Due to Growth Challenges, Analyst Cautions

Digital Realty Trust Faces Analyst Downgrade Amid Shifting Market Trends

Digital Realty Trust, Inc. (NYSE: DLR) has announced it will report its fourth quarter 2025 financial results on February 5, 2026.

Recently, BofA Securities analyst Michael Funk revised his outlook on the company, moving the rating from Buy to Neutral and reducing the target price from $210 to $170.

Current Status of DLR Shares

DLR shares are currently consolidating. What does the future hold for DLR?

According to Funk, Digital Realty Trust has not kept pace with the surge in demand driven by artificial intelligence, as the largest development deals for 2025 have been concentrated in new data center markets outside the company’s main areas of operation.

This pattern is expected to persist into 2026, with AI-related projects exceeding 1GW and clients emphasizing rapid deployment, the analyst notes.

Funk points out that the company’s growth is limited by its current scale and development timeline, which could negatively impact fourth-quarter leasing expectations. Additionally, the potential for valuation growth is restricted by ongoing negative sentiment toward REITs.

As major AI projects move to emerging markets, Digital Realty Trust’s focus on established regions may fall short of investor expectations for significant quarterly leasing activity.

Outlook for Data Centers and DLR

The analyst remains optimistic about the broader data center industry in 2026, citing robust demand and limited supply. However, Digital Realty Trust’s performance will hinge on its ability to execute development plans, secure lease renewals, and adapt its market strategy.

Funk has increased his earnings per share projections for the company, now estimating $7.34 for 2025 (up from $7.28), $7.92 for 2026 (previously $7.85), and $8.64 for 2027 (up from $8.58).

DLR Stock Performance

Price Update: Shares of Digital Realty Trust were trading down 1.67% at $152.28 as of Thursday’s publication.

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