Financial Data and Key Metrics Changes - Total net revenues increased by 21.7% year over year to RMB 2.58 billion for the third quarter [5][13] - Adjusted EBITDA rose by 27.5% year over year to RMB 758 million [5][14] - Adjusted cash gross profit increased by 22.1% to RMB 1.05 billion [13][14] - Adjusted cash gross margins improved to 40.7% from 40.6% in the same period last year [15] - Adjusted EBITDA margin rose to 29.4%, compared to 28% in the same period last year [15] Business Line Data and Key Metrics Changes - Wholesale revenues, the key growth driver, increased significantly by 82.7% to RMB 956 million [5][15] - Retail revenues increased by 2.4% to RMB 999.1 million [15] - Retail MRR per cabinet reached RMB 8,948, marking six consecutive quarters of growth [5][10] Market Data and Key Metrics Changes - Wholesale capacity in service grew by 16.1% quarter over quarter to 783 megawatts [4][9] - Utilization rate for wholesale capacity was 74.3%, reflecting strong customer demand [4][9] - Retail capacity in service was 52,288 cabinets, with a utilization rate of 64.8% [10] Company Strategy and Development Direction - The company is focusing on capturing growth opportunities driven by AI demand, transitioning from product-based resource delivery to platform-based services [8][12] - The Hyperscale 2.0 framework is being advanced to lead in the AI-driven market [11][12] - The company plans to deliver around 306 megawatts of capacity over the next 12 months, with a focus on the Greater Beijing area and the Yangtze River Delta [11][47] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the stability and moderate growth in the order pipeline for 2026 [24] - The company is closely monitoring the rapid development of domestic chips and anticipates increased competition in the sector [24] - Management highlighted the importance of meeting customer demands for lower latency as inferencing becomes a major growth driver [50][51] Other Important Information - The company maintained a strong liquidity position with total cash and cash equivalents reaching RMB 5.33 billion as of September 30, 2025 [16] - CapEx for the first nine months was RMB 6.24 billion, primarily for wholesale IDC expansion, with full-year guidance set between RMB 10 billion and RMB 12 billion [17][18] - The company received recognition for its sustainability performance, ranking among the top 8% of the IT service industry globally [19] Q&A Session Summary Question: Outlook for 2026 order tendering and private REIT execution timeline - Management expects a stable market with moderate increases in order tendering for 2026 and plans to complete the private REIT issuance by Q1 next year [22][26] Question: Customer preferences and demand across different campuses - Customers consider business type, proximity to headquarters, and capacity scaling convenience when placing orders, with varying demand across regions [31][32] Question: Pricing trends for wholesale business - Pricing for Q3 was stable, with no engagement in low-price bidding due to balanced supply and demand dynamics [34][36] Question: Progress on ongoing projects and future tendering seasonality - The company has secured 331 megawatts in new orders over the past 12 months and anticipates sustaining growth momentum [41][42] Question: Focus areas for acquiring new resources - Future resource acquisition will focus on the Greater Beijing area and the Yangtze River Delta, with a five-year planning horizon [44][47] Question: Trends in unit CapEx spending and funding sources - CapEx per unit megawatt is trending down, with funding sources expected to include asset securitization and domestic corporate bonds [88][90] Question: Full-year guidance and EBITDA margin trends - Management remains cautious with full-year guidance, expecting Q4 revenue to remain stable, while Q3 EBITDA margin fluctuations are attributed to seasonal factors [94][95]

Financial Performance - Total Net Revenues reached RMB 2,434 million, a 22.1% year-over-year increase and an 8.4% quarter-over-quarter increase[8] - Wholesale IDC Revenue was RMB 854 million, showing a significant increase of 112.5% year-over-year and 26.9% quarter-over-quarter[8] - Adjusted EBITDA reached RMB 732 million, representing a 27.7% year-over-year increase and a 7.3% quarter-over-quarter increase[8] - The company's FY2025 revised guidance projects revenues between RMB 9,150 million and RMB 9,350 million, implying an 11%-13% year-over-year growth[66] - The company's FY2025 revised guidance projects Adjusted EBITDA between RMB 2,760 million and RMB 2,820 million, implying an 18%-20% year-over-year growth[66] IDC Business Growth - Wholesale IDC Business capacity in service increased to 674MW, with a quarter-over-quarter increase of 101MW, representing a 17.5% growth[8] - Wholesale IDC Business capacity utilized increased to 511MW, with a quarter-over-quarter increase of 74MW, representing a 17.0% growth[8] - The utilization rate of the company's wholesale IDC business was 75.9% in 2Q25[8] - The company secured a 20MW order from a leading cloud services provider via its JV project[8] - The company plans to grow data center assets under management to 10GW by 2036[12] Capacity and Infrastructure - Wholesale capacity in service is distributed with 55.0% in the Greater Beijing Area and 45.0% in the Yangtze River Delta[18] - Wholesale capacity under construction is distributed with 77.4% in the Greater Beijing Area and 22.6% in the Yangtze River Delta[19] - Wholesale capacity held for future development is heavily concentrated in the Greater Beijing Area, accounting for 98.1%[20]

Core Insights - VNET Group, Inc. reported strong financial results for Q2 2025, with total net revenues increasing by 22.1% year-over-year to RMB2.43 billion (US$339.8 million) driven by significant growth in the wholesale IDC business [2][11][24] - The company aims to expand its data center capacity to 10GW by 2036 under its new Hyperscale 2.0 framework, focusing on building greener and more intelligent data centers for the AI era [2][24] Financial Performance - Total net revenues rose to RMB2.43 billion (US$339.8 million), up from RMB1.99 billion in Q2 2024, primarily due to a 112.5% increase in wholesale revenues to RMB854.1 million (US$119.2 million) [3][11][27] - Retail revenues remained stable at RMB958.7 million (US$133.8 million), slightly down from RMB964.8 million in the same period last year [3][27] - Adjusted EBITDA increased by 27.7% year-over-year to RMB732.5 million (US$102.2 million), with an adjusted EBITDA margin of 30.1% [18][24] Operational Highlights - The wholesale capacity in service increased by 101MW quarter-over-quarter to 674MW, with utilized wholesale capacity growing by 74MW to 511MW [2][8] - The company secured approximately 4MW in retail orders and a 20MW wholesale order through a joint venture project in Hebei Province [2][8] Business Outlook - VNET expects total net revenues for 2025 to be between RMB9,150 million to RMB9,350 million, representing year-over-year growth of 11% to 13% [24] - Adjusted EBITDA is projected to be in the range of RMB2,760 million to RMB2,820 million, indicating year-over-year growth of 14% to 16% [24]

Investment Ratings - The report maintains a "Buy" rating for GDS and VNET, with target prices set at US$37/HK$36 for GDS (20% upside) and US$12 for VNET (69% upside) [1][21] Core Insights - The China data center sector is expected to benefit from deleveraging and improved order visibility, which will support share price performance in the second half of 2025 [1] - GDS is positioned to capture demand from Generative AI-driven cloud growth, while VNET aims for significant capacity expansion under its Hyperscale 2.0 strategy [18][23] Summary by Sections GDS Holdings - GDS's C-REIT offering implies a 16.9x 2026 EV/EBITDA, scheduled for listing on July 14, which supports deleveraging with approximately Rmb1.6 billion proceeds [4][8] - Revenue forecasts for GDS remain largely unchanged, with EBITDA revised down by 7% for 2025E [9] - GDS's financials show a projected revenue of Rmb11,545 million for 2025E, with an EBITDA of Rmb5,335 million [16] VNET Group - VNET has raised its guidance for 2025 revenue and EBITDA, aiming for a total data center capacity of 10GW by 2036 [21][25] - The company has added 555MW in data center capacity from 2019 to 2024 and plans to reach 1GW by 2025 [23][27] - VNET's revenue for 2025E is projected at Rmb9,316 million, with an adjusted EBITDA of Rmb2,810 million [41] Market Dynamics - Improved visibility of chip availability is expected to lead to stronger order volume and faster revenue growth for both GDS and VNET in 2026E [4] - The report anticipates that Alibaba and Tencent's capital expenditures will recover sequentially in the second half of 2025 [5] Financial Metrics - GDS's net debt/adj EBITDA ratio is projected to decline to 5.1x by 2028E due to improving EBITDA and reduced capex [13] - VNET's EBITDA margin is expected to improve to 34.0% by 2027E, reflecting operational efficiencies [41] Strategic Outlook - GDS is focusing on backlog delivery to enhance revenue growth visibility, while VNET's Hyperscale 2.0 strategy emphasizes a platform-based approach to data center operations [18][23]