Digital Realty Earnings: Results Don’t Match Strong Demand; Clouded by Asset Sales, JV Investments

Digital Realty’s fourth-quarter 2023 result was mediocre considering the very strong demand environment we believe premier data center providers like Digital Realty are in. Renewal pricing remained strong, but bookings were modest and sales stagnant. Management’s 2024 sales outlook was also disappointing, but it’s possible that is misleading as numerous puts and takes, which aren’t indicative of momentum in the firm’s core rental and interconnection revenue, are at play. More broadly, the trajectory of Digital Realty’s financial performance continues to disappoint us, considering the strong position we believe it is in and the firm’s constant financial maneuvers make it difficult for investors to get a true sense of what’s under the hood. We’re maintaining our $135 fair value estimate and think the stock is fairly valued.