Iron Mountain: A High-Yield REIT Poised for Value Reclamation Amid AI-Driven Demand and Resilient Legacy Business

Iron Mountain REIT (IRM) has long been a fixture in the real estate investment trust (REIT) landscape, but its recent transformation into a digital infrastructure powerhouse has redefined its investment narrative. As artificial intelligence (AI) and hyperscale data center demand reshape the global technology ecosystem, Iron Mountain finds itself at a pivotal inflection point. With a stock price that has underperformed despite robust operational metrics and a valuation that appears disconnected from intrinsic value estimates, the REIT presents a compelling case for value reclamation. This analysis explores how Iron Mountain's dual strengths-its resilient legacy business and its AI-driven digital infrastructure expansion-position it as a high-yield opportunity in a transforming market.

A Valuation Disconnect: Why the Market Is Undervaluing Growth

Iron Mountain's current valuation metrics tell a story of divergence between fundamentals and market perception. As of late 2025, the REIT trades at a P/FFO (Price-to-Funds-From-Operations) multiple of 32x, significantly above its historical average and industry peers. Meanwhile, its P/E ratio of 148.48x is nearly double the 10-year average of 60.33–84.47x according to data. These elevated multiples might suggest overvaluation, but a deeper look reveals a disconnect.

A discounted cash flow (DCF) analysis estimates Iron Mountain's intrinsic value at approximately $216 per share, implying the stock is trading at a 61.8% discount. This discrepancy arises from the market's underappreciation of the REIT's digital infrastructure segment, which is growing at a near-30% annualized rate according to research. For context, the company's price-to-sales (P/S) ratio of 3.67x is below both industry and peer benchmarks according to analysis, signaling that the market is not fully pricing in the scalability of its high-margin data center operations. Analysts, including those at Jefferies and Wells Fargo, have echoed this view, with an average price target of $118.73-44% above the current price according to reports.

AI-Driven Data Center Growth: A Catalyst for Long-Term Value

Iron Mountain's pivot to digital infrastructure has been nothing short of transformative. In Q3 2025, data center revenue surged 33% year-over-year to $204.1 million, with adjusted EBITDA margins expanding to 37.6%. This growth is fueled by a robust backlog and surging demand from hyperscale providers and AI infrastructure clients. Management projects data center revenue growth above 30% in Q4 2025 and over 25% in 2026 according to forecasts, positioning the segment as a key driver of future cash flows.

The AI boom has created a tailwind for colocation and edge computing services, areas where Iron Mountain has strategically expanded its footprint. For instance, the REIT's global data center portfolio now includes 13 hyperscale facilities, with 10 under construction or in development. These projects are expected to generate incremental revenue streams while leveraging the REIT's existing infrastructure.

Resilience in the Legacy Business: A Stabilizing Force

While the digital infrastructure segment is the star of Iron Mountain's growth story, its legacy businesses-physical storage and asset lifecycle management-remain a critical source of stability. Despite concerns about declining volume trends in North American physical storage, the REIT has mitigated risks through geographic diversification and cross-selling opportunities. For example, its digital services segment, which includes cloud migration and data lifecycle management, has grown 15% year-to-date according to data, demonstrating how legacy operations are being repurposed to serve modern demand.

This duality-high-growth digital infrastructure and resilient legacy operations-creates a balanced risk profile. Even as the physical storage segment faces headwinds, the REIT's ability to monetize data through digital services ensures a steady cash flow base. This hybrid model is rare in the REIT sector and provides a buffer against sector-specific downturns.

Dividend Strength and Balance Sheet Discipline

Iron Mountain's commitment to shareholder returns is underscored by its recent 10% dividend increase in Q3 2025 according to reports, a move that reflects confidence in free cash flow generation. The REIT's debt-to-market assets ratio remains conservative at 33.5%, aligning with industry averages, while its weighted average interest rate of 4.2% according to data suggests manageable leverage costs. These metrics, combined with a 3.7% dividend yield, make Iron Mountain an attractive option for income-focused investors.

Risks and Bearish Concerns

Critics, including Gotham City Research, have raised concerns about the sustainability of Iron Mountain's valuation and potential overbuild in the data center sector according to analysis. While competition is intensifying, the REIT's first-mover advantage in digital infrastructure and its ability to leverage existing assets provide a competitive edge. Additionally, its focus on high-margin hyperscale clients reduces exposure to price wars.

Conclusion: A Compelling Case for Value Reclamation

Iron Mountain REIT occupies a unique intersection of legacy resilience and AI-driven growth. Its current valuation, trading at a significant discount to intrinsic value estimates, offers an entry point for investors willing to bet on its digital transformation. With a robust balance sheet, a growing dividend, and a strategic alignment with the AI revolution, the REIT is well-positioned to reclaim its value in the coming years. For long-term income investors, Iron Mountain represents a rare combination of yield and growth potential in an evolving real estate and data infrastructure landscape.