GDS Earnings: Weaker Demand in China but Still Undervalued

No-moat GDS has retained its previously announced 2023 guidance following a third quarter where it reported 6.4% year-on-year revenue growth and 5.6% year-on-year adjusted EBITDA growth. It is tracking toward the bottom end of its 6.6% to 10.7% revenue growth guidance but toward the top end of its 4.2% to 8.2% adjusted EBITDA growth guidance. The company had previously disclosed that 2023 would be affected by one large internet customer moving out of its downtown data centers in Beijing, which has affected its net additional area utilized numbers. It has also been affected by slowing demand from the large internet customers in China and has not seen the same artificial intelligence lead data center demand in China that the United States is seeing, partly because of uncertainty around high-end chip supply.