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Digital Realty Trust Inc DLR

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Interxion Acquisition Seems to be Boosting Digital Realty, but Margins Weak in Otherwise Good Q4

Matthew Dolgin, CFA Equity Analyst

Analyst Note

| Matthew Dolgin, CFA |

Digital Realty beat FactSet consensus revenue and EBITDA estimates and delivered another period of strong bookings in the fourth quarter. It appears the Interxion acquisition, which closed in March 2020, is already transforming the business, as Europe, the Middle East, and Africa accounted for over half of total bookings and the firm is rapidly growing cross connects and smaller colocation bookings. Our only disappointment is that the firm’s EBITDA margin has remained stubbornly low following the acquisition, and the firm didn’t forecast any improvement in 2021. We are maintaining our $125 fair value estimate.

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Company Profile

Business Description

Digital Realty owns and operates over 275 data centers worldwide. It has more than 30 million rentable square feet across five continents. Digital's offerings range from retail co-location, where an enterprise may rent a single cabinet and rely on Digital to provide all the accommodations, to "cold shells," where hyper-scale cloud service providers can simply rent much, or all, of a barren, power-connected building. In recent years, Digital Realty has de-emphasized cold shells and now primarily provides higher-level service to tenants, which outsource their related IT needs to Digital. Digital Realty has also moved more into the co-location business, increasingly serving enterprises and facilitating network connections. Digital Realty operates as a real estate investment trust.

Four Embarcadero Center, Suite 3200
San Francisco, CA, 94111
T +1 415 738-6500
Sector Real Estate
Industry REIT - Office
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 31, 2021
Stock Type Hard Assets
Employees 2,878