Should You Hold DLR Stock in Your Portfolio Ahead of Q4 Earnings?

Digital Realty Trust DLR is slated to report fourth-quarter 2025 results on Feb. 5, after the closing bell. The quarterly results are expected to reflect year-over-year growth in both revenues and funds from operations (FFO) per share.

This Austin, TX-based data center real estate investment trust (REIT) reported a core FFO per share of $1.89 in the prior quarter, surpassing the Zacks Consensus Estimate of $1.78. Results reflected steady leasing momentum with better rental rates amid rising demand.

Over the trailing four quarters, Digital Realty’s core FFO per share surpassed the Zacks Consensus Estimate on all occasions, with the average beat being 4.43%. This is depicted in the chart below:

Digital Realty Trust, Inc. Price and EPS Surprise

Digital Realty Trust, Inc. price-eps-surprise | Digital Realty Trust, Inc. Quote

Factors at Play and Projections for DLR

Digital Realty is well-poised to gain from its unmatched global footprint of data centers with growing digital transformation, cloud computing and the proliferation of artificial intelligence. The growing demand for data centers is leading to accelerated leasing activity, aiding its revenue growth in the to-be-reported quarter.

Moreover, DLR is expected to ride on its growth curve, backed by strategic investments in land, infrastructure and acquisitions. The company’s expertise in providing indigenous designs to manage the unique challenges of AI workload deployment at scale goes a long way to secure strategic partnerships with newer clients and aid its leasing activity.

The data center REIT has a high-quality, diversified customer base comprising tenants from cloud, content, information technology, network, other enterprise and financial industries. This is anticipated to have aided stable revenue generation for DLR during the to-be-reported quarter, driving its top line.

For the fourth quarter, the Zacks Consensus Estimate for rental revenues is pegged at $1.06 billion, up 10.8% from $958.9 million reported in the year-ago quarter. The Zacks Consensus Estimate for interconnection & other revenues currently stands at $121.1 million, indicating a projected increase of 7.8% from the year-ago quarter.

The consensus estimate for quarterly total revenues is pegged at $1.58 billion, suggesting a year-over-year jump of 9.97%.

Digital Realty’s activities in the to-be-reported quarter were adequate to garner analysts’ confidence. The Zacks Consensus Estimate for the company’s quarterly FFO per share has been revised northward to $1.83 over the past month. Moreover, the figure indicates year-over-year growth of 5.78%.

What Our Quantitative Model Predicts for DLR

Our proven model does not conclusively predict a surprise in terms of FFO per share for Digital Realty this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.

Digital Realty currently has an Earnings ESP of -0.99% and carries a Zacks Rank of 3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks That Warrant a Look

Here are two stocks from the broader REIT sector — W.P. Carey WPC and Host Hotels & Resorts HST— you may want to consider, as our model shows that these have the right combination of elements to report a surprise this quarter.

W.P. Carey, scheduled to report quarterly numbers on Feb. 10, has an Earnings ESP of +1.06% and carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Host Hotels & Resorts, slated to release quarterly numbers on Feb. 18, has an Earnings ESP of +1.71% and carries a Zacks Rank of 3 at present.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.

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This article originally published on Zacks Investment Research (zacks.com).

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