Digital Realty to Post Q2 Earnings: What to Expect From the Stock?

Digital Realty Trust DLR is slated to report second-quarter 2025 results on July 24, 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 $1.77 in the prior quarter, surpassing the Zacks Consensus Estimate of $1.73. Results reflected steady leasing momentum with better rental rates amid rising demand. However, higher operating expenses undermined the performance to an extent.

Over the trailing four quarters, Digital Realty’s core FFO per share surpassed the Zacks Consensus Estimate on three occasions and met once, with the average beat being 1.33%. 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

DLR 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 rising demand for data centers is likely to have accelerated its leasing activity, aiding its revenue growth in the second quarter.

Moreover, this data center REIThas a global presence, with 308 data centers in more than 50 metros with decent occupancy. The company is poised for growth with more than 5,000 global customers and growing. Its tenant roster includes names like IBM, Oracle, LinkedIn, Meta Platforms, Comcast and other additions.This is anticipated to have aided stable revenue generation for the company during the to-be-reported quarter, driving its top line.

For the second quarter, the Zacks Consensus Estimate for rental revenues is pegged at $987.5 million, up 8.2% from $913.0 million reported in the year-ago quarter. The Zacks Consensus Estimate for interconnection & other revenues currently stands at $115.3 million, indicating a projected increase of 5.3% from the year-ago quarter.

The consensus estimate for quarterly total revenues is pegged at $1.44 billion, suggesting a year-over-year increase of 6.4%.

Digital Realty’s activities in the to-be-reported quarter were inadequate to garner analysts’ confidence. The Zacks Consensus Estimate for the company’s quarterly FFO per share has remained unchanged at $1.74 over the past three months. However, the figure indicates year-over-year growth of 5.5%. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

What Our Quantitative Model Predicts for DLR

Our proven model predicts 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 the case here.

Digital Realty currently has an Earnings ESP of +0.38% and carries a Zacks Rank of 2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks That Warrant a Look

Here are two stocks from the broader REIT sector — American Tower AMT and Highwoods Properties HIW— you may want to consider, as our model shows that these have the right combination of elements to report a surprise this quarter.

American Tower, scheduled to report quarterly numbers on July 29, has an Earnings ESP of +1.08% and carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Highwoods Properties, slated to release quarterly numbers on July 29, has an Earnings ESP of +1.18% 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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