HSBC Upgrades Digital Realty to Buy on 10% Growth Outlook

Edgen Stock·Jan 21 2026, 17:07

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Key Takeaways

Analysts are issuing positive but mixed updates on Digital Realty (DLR), a data center REIT benefiting from AI and cloud demand. HSBC upgraded the stock to Buy with a higher price target, while Mizuho trimmed its target but maintained a Buy rating, reflecting broad confidence in the company's growth trajectory.

HSBC upgraded DLR to Buy on December 15, raising its price target to $193 and forecasting 9% to 10% AFFO growth over the next three years.
Mizuho Securities reiterated its Buy rating on January 12 but lowered its price target to $180 from $191, citing macroeconomic concerns about the broader REIT sector.
The bullish outlook is driven by DLR's core business of providing data center infrastructure, which is experiencing strong demand from the expansion of AI and cloud computing services.

HSBC Upgrades DLR to Buy, Projects 10% AFFO Growth

On December 15, HSBC analyst Phani Kanumuri upgraded Digital Realty Trust (NYSE: DLR) from Hold to Buy, increasing the price target from $187 to $193. The upgrade reflects an anticipated 9% to 10% growth in the company's adjusted funds from operations (AFFO) over the next three years. Kanumuri cited strong pricing power and high booking volumes in key metropolitan markets as primary drivers, noting that the data center REIT's recent share price performance offered an attractive entry point for investors.

Mizuho Cuts DLR Target to $180 But Maintains Buy Rating

While HSBC turned more bullish, Mizuho Securities expressed a more measured view on January 12. Analyst Vikram Malhotra reiterated a Buy rating on Digital Realty but lowered his price target from $191 to $180, which still suggests a potential 10% upside. This adjustment was part of Mizuho's broader 2026 outlook for real estate investment trusts, in which the firm maintained an Equal Weight stance on the sector due to macroeconomic uncertainties. The maintained Buy rating signals underlying confidence in DLR's specific business model despite wider sector headwinds.

AI and Cloud Demand Underpins Bullish Thesis

Both analyst assessments hinge on Digital Realty's strategic position as a critical infrastructure provider for the technology sector. The company owns and operates a global portfolio of data centers that supply the physical foundation for AI applications, cloud hosting, and enterprise digital transformation. Sustained demand for colocation, interconnection, and fiber services from these high-growth industries is expected to support DLR's operational and financial performance.