Digital Realty Trust DLR reported fourth-quarter 2024 constant currency core funds from operations (FFO) per share of $1.73, beating the Zacks Consensus Estimate of $1.69. The FFO also increased 6.1% year over year.

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Results reflect steady leasing momentum with better rental rates amid rising demand. However, higher operating expenses undermined the performance to an extent. The company issued its 2025 outlook.

The company registered operating revenues of $1.44 billion in the fourth quarter, missing the Zacks Consensus Estimate of $1.46 billion. However, on a year-over-year basis, operating revenues increased 4.8%. DLR also reported "same-capital" cash net operating income (NOI) growth of 1.4%.

According to Digital Realty’s president & chief executive officer, Andy Power, "2024 was a remarkable year for Digital Realty, with record leasing driving impressive growth in our revenue backlog, and providing compelling visibility into our accelerating earnings growth."

For full-year 2024, the constant currency core FFO per share came in at $6.72, up 2% from the prior-year tally and beating the Zacks Consensus Estimate of $6.71. Total operating revenues grew 1.4% to $5.55 billion but missed the consensus mark of $5.58 billion.

Digital Realty Trust, Inc. Price, Consensus and EPS Surprise

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

DLR’s Fourth Quarter in Detail

In the reported quarter, signed total bookings were estimated to generate $100 million of annualized GAAP rental revenues, including a $62 million contribution from the 0-1-megawatt category and a $15 million contribution from interconnection. The weighted average lag between the new leases signed in the fourth quarter and the contractual commencement date was six months.

Digital Realty signed renewal leases, marking $250 million of annualized cash rental revenues during the October-December quarter. Rental rates on renewal leases signed during the quarter rose 4.7% on a cash basis and 9.1% on a GAAP basis.

Total operating expenses increased 4.5% year over year to $1.29 billion. The rise was attributable to the increase in expenses related to rental property operating, property taxes, insurance, general and administration costs, provision for impairment and other expenses.

Adjusted EBITDA of $751.3 million in the quarter marked a 7.4% increase year over year.

DLR’s Portfolio Activity

During the October-December period, Digital Realty acquired a 6.7-acre land parcel in Richardson, TX, for around $15 million, a 156-acre land parcel in Charlotte, NC, for $160 million, and a three-acre land parcel in Madrid, Spain, for $26 million.

During the fourth quarter, Digital Realty disposed of three facilities: one in San Jose, CA, for $10 million, a second in Trumbull, CT, for $10 million and a third in Redhill, UK, for $80 million.

Digital Realty disposed of an additional 15.1% interest in a data center in Frankfurt, Germany, for $74 million to Digital Core REIT during the fourth quarter. Also, the company, together with Blackstone Inc., completed the second phase of its joint venture development of a $7 billion hyperscale data center.

DLR’s Balance Sheet Position

Digital Realty exited 2024 with cash and cash equivalents of $3.87 billion, up from $2.18 billion recorded as of Sept. 30, 2024.

As of Dec. 31, 2024, this data center REIT had $16.7 billion of total debt outstanding, of which $16 billion was unsecured debt and $0.7 billion was secured debt and other. As of the same date, its net debt-to-adjusted EBITDA was 4.8X, while the fixed charge coverage was 4.2X.

Its debt maturity schedule is well-laddered with modest near-term maturities, with a weighted average maturity of 4.2 years and a 2.7% weighted average coupon as of Dec. 31, 2024.

During the quarter, DLR realized net proceeds of $923 million from the sale of 5 million shares of its common stock at a weighted average price of $185.63 per share under its ATM program.

2025 Guidance by DLR

Digital Realty expects 2025 constant currency core FFO per share in the range of $7.05-$7.15. The Zacks Consensus Estimate of $7.07 lies within the guided range.

DLR projects total revenues in the band of $5.80-$5.90 billion, which is below the consensus mark of $6.01 billion. Adjusted EBITDA is expected in the range of $500-$510 million.

This data center REIT projects rental rates on renewal leases to be within 4-6% on a cash basis and 6-8% on a GAAP basis. The year-end portfolio occupancy is expected to increase by 100-200 bps. The same-capital cash NOI is estimated to grow 3.5-4.5%.

DLR's Zacks Rank

Currently, DLR carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

Iron Mountain Incorporated IRM reported a fourth-quarter 2024 adjusted FFO per share of $1.24, beating the Zacks Consensus Estimate of $1.20. This figure jumped 11.7% year over year.

Results reflected solid performances in the storage and service segments and the data center business. However, higher interest expenses in the quarter undermined the performance to an extent. IRM issued its outlook for 2025.

Equinix Inc. EQIX reported a fourth-quarter 2024 adjusted FFO per share of $7.92, missing the Zacks Consensus Estimate of $8.11. However, the figure improved 8.5% from the prior-year quarter.

Results reflected higher non-recurring charges undermining the performance. However, steady growth in colocation and interconnection revenues, led by strong demand for digital infrastructure, supported the results to an extent. EQIX issued its 2025 outlook.

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

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