Company Reports

We expect VNET Group to continue to purchase and build data centers in and around its focus Tier 1 Chinese cities of Shanghai, Beijing, Shenzhen, and Guangzhou. As its network of interconnected data centers grows, it can more easily cater to the demand from its key cloud service provider customers, allowing them to expand in a flexible way in their key markets. This also enables key enterprise customers to deploy their hybrid clouds in close proximity to the networked nodes of leading public clouds. We also expect VNET to complement its basic data center offerings with value-added services such as managed hosting, cloud, and VPN services. In the foreseeable future, demand for GDS' services is being driven by strong demand across the board from companies and government investment in artificial intelligence. We remain confident in the longer-term demand for data centers in China as the country continues to revolutionize its operations digitally across government and private sectors.

We expect VNET Group to continue to purchase and build data centers in and around its focus Tier 1 Chinese cities of Shanghai, Beijing, Shenzhen, and Guangzhou. As its network of interconnected data centers grows, it can more easily cater to the demand from its key cloud service provider customers, allowing them to expand in a flexible way in their key markets. This also enables key enterprise customers to deploy their hybrid clouds in close proximity to the networked nodes of leading public clouds. We also expect VNET to complement its basic data center offerings with value-added services such as managed hosting, cloud, and VPN services. In the foreseeable future, demand for GDS' services is being driven by strong demand across the board from companies and government investment in artificial intelligence. We remain confident in the longer-term demand for data centers in China as the country continues to revolutionize its operations digitally across government and private sectors.

VNET reported a strong first-quarter 2026 result with net revenue growth of 19.8% and adjusted EBITDA growth of 30.6%. The first quarter was ahead of management's unchanged 2026 guidance of net revenue growth of 15.6%-18.6% and adjusted EBITDA growth of 19.2%-25.9%.

VNET reported a strong fourth-quarter 2025 result with 19.6% net revenue growth and adjusted EBITDA growth of 11.6% on a reported basis, or 39.3% excluding one-offs in fourth-quarter 2024. Management's 2026 guidance was for net revenue growth of 15.6%-18.6% and adjusted EBITDA growth of 19.2%-25.9%.

We expect VNET Group to continue to purchase and build data centers in and around its focus Tier 1 Chinese cities of Shanghai, Beijing, Shenzhen, and Guangzhou. As its network of interconnected data centers grows, it can more easily cater to the demand from its key cloud service provider customers, allowing them to expand in a flexible way in their key markets. This also enables key enterprise customers to deploy their hybrid clouds in close proximity to the networked nodes of leading public clouds. We also expect VNET to complement its basic data center offerings with value-added services such as managed hosting, cloud, and VPN services. In the foreseeable future, demand for GDS' services is being driven by strong demand across the board from companies and government investment in artificial intelligence. We remain confident in the longer-term demand for data centers in China as the country continues to revolutionize its operations digitally across government and private sectors.

We expect VNET Group to continue to purchase and build data centers in and around its focus Tier 1 Chinese cities of Shanghai, Beijing, Shenzhen, and Guangzhou. As its network of interconnected data centers grows, it can more easily cater to the demand from its key cloud service provider customers, allowing them to expand in a flexible way in their key markets. This also enables key enterprise customers to deploy their hybrid clouds in close proximity to the networked nodes of leading public clouds. We also expect VNET to complement its basic data center offerings with value-added services such as managed hosting, cloud, and VPN services. In the foreseeable future, demand for GDS' services is being driven by strong demand across the board from companies and government investment in artificial intelligence. We remain confident in the longer-term demand for data centers in China as the country continues to revolutionize its operations digitally across government and private sectors.

VNET reported a strong third-quarter result with revenue growth of 22% and adjusted EBITDA growth of 28%. Management again lifted its full-year guidance by 0.5% on revenue and 2.5% on EBITDA to revenue growth of 11%-13% and adjusted EBITDA growth of 18%-20%.

We expect VNET Group to continue to purchase and build data centers in and around its focus Tier 1 Chinese cities of Shanghai, Beijing, Shenzhen, and Guangzhou. As its network of interconnected data centers grows, it can more easily cater to the demand from its key cloud service provider customers, allowing them to expand in a flexible way in their key markets. This also enables key enterprise customers to deploy their hybrid clouds in close proximity to the networked nodes of leading public clouds. We also expect VNET to complement its basic data center offerings with value-added services such as managed hosting, cloud, and VPN services. In the foreseeable future, demand for GDS' services is being driven by strong demand across the board from companies and government investment in artificial intelligence. We remain confident in the longer-term demand for data centers in China as the country continues to revolutionize its operations digitally across government and private sectors.

VNET reported a strong second-quarter result with revenue growth of 22% and adjusted EBITDA growth of 28%. In June, management lifted its full-year guidance by 0.5% on revenue; 2.5% to revenue growth of 10%-13%, and adjusted EBITDA growth of 15%-18%.

We expect VNET Group to continue to purchase and build data centers in and around its focus Tier 1 Chinese cities of Shanghai, Beijing, Shenzhen, and Guangzhou. As its network of interconnected data centers grows it can more easily cater to the demand from its key cloud service provider customers allowing them to expand in a flexible way in their key markets. This also enables key enterprise customers to deploy their hybrid clouds in close proximity to the networked nodes of leading public clouds. We also expect VNET to compliment its basic data center offerings with value added services such as managed hosting, cloud, and VPN services. In the foreseeable future, demand for GDS' services is being driven by strong demand across the board from companies and government investment in artificial intelligence. We remain confident on the longer-term demand for data centers in China as the country continues to revolutionize its operations in a digital fashion across government and private sectors.

VNET reported a strong first-quarter result with revenue growth of 18% and adjusted EBITDA growth of 26%, outpacing its unchanged full-year guidance for revenue growth of 10%-13% and adjusted EBITDA growth of 15%-18%.

VNET reported a strong third-quarter result driven by wholesale demand for its internet data centers for artificial intelligence applications. Revenue grew by 12% with adjusted EBITDA up 20%. Management also increased its 2024 revenue guidance by 2% and adjusted EBITDA by 1%.

We expect VNET Group to continue to purchase and build data centers in and around its focus Tier 1 Chinese cities of Shanghai, Beijing, Shenzhen, and Guangzhou. As its network of interconnected data centers grows it can more easily cater to the demand from its key cloud service provider customers allowing them to expand in a flexible way in their key markets. This also enables key enterprise customers to deploy their hybrid clouds in close proximity to the networked nodes of leading public clouds. We also expect VNET to compliment its basic data center offerings with value added services such as managed hosting, cloud, and VPN services. In the near term, demand for its services may be somewhat affected by increased cost focus from large internet company customers, macro conditions, chip shortages, and covid-19 shutdowns. However, we remain confident on the longer-term demand for data centers in China as the country continues to revolutionize its operations in a digital fashion across government and private sectors.

VNET’s second-quarter results were slightly ahead of our expectations with revenue increasing 9.4% and very strong orders booked for the wholesale internet data center, or IDC, business. As also seen in the result from competitor GDS, the Chinese IDC industry seems to be recovering from low demand over the previous few years with most of the demand recovery attributed to artificial intelligence. VNET’s IDC revenue increased by 12.1% in the second quarter following a 5.2% increase in the first quarter. Non-IDC revenue, mainly generated by cloud and VPN services, increased by 4%. IDC growth was again driven by the newer wholesale business with wholesale revenue increasing by 81% to CNY 402 million, while retail IDC revenue decreased by 3.2% to CNY 965 million. Second-quarter adjusted EBITDA increased by 7.3% following only 2.5% growth in the first quarter with that first-quarter growth rate negatively impacted by agency service fees related to debt repayment and also stock expenses for employees. Guidance for 2024 is midpoint revenue growth of 6.6% and adjusted EBITDA growth of 10.4%, which remain unchanged. However, due to very strong orders and new projects under construction, the 2024 capital expenditure guidance has increased from a midpoint of CNY 3.95 billion to a midpoint of CNY 5.25 billion. We retain our fair value estimate for VNET at USD 3.50.

We expect VNET Group to continue to purchase and build data centers in and around its focus Tier 1 Chinese cities of Shanghai, Beijing, Shenzhen, and Guangzhou. As its network of interconnected data centers grows it can more easily cater to the demand from its key cloud service provider customers allowing them to expand in a flexible way in their key markets. This also enables key enterprise customers to deploy their hybrid clouds in close proximity to the networked nodes of leading public clouds. We also expect VNET to compliment its basic data center offerings with value added services such as managed hosting, cloud, and VPN services. In the near term, demand for its services may be somewhat affected by increased cost focus from large internet company customers, macro conditions, chip shortages, and covid-19 shutdowns. However, we remain confident on the longer-term demand for data centers in China as the country continues to revolutionize its operations in a digital fashion across government and private sectors.

VNET’s first-quarter results were in line with our expectations and management’s unchanged full-year guidance. First-quarter revenue increased 5.1% year on year, with adjusted EBITDA up 2.5%. Guidance for 2024 is midpoint revenue growth of 6.6% and adjusted EBITDA growth of 10.4%. First-quarter EBITDA was negatively affected by agency service fees related to debt repayment and also stock expenses for employees. We retain our forecasts, which are in line with management guidance for 2024 and our fair value estimate for VNET at $3.50. Management provided a breakdown of the three main revenue streams for the first time, with the retail internet data center business contributing 49% of the total revenue; the non-IDC business, including cloud services and virtual private networks, contributing 32%; and the wholesale IDC business contributing 19% of revenue. While it is the smallest, the wholesale business dominates the growth, with its revenue increasing 59% year on year to CNY 361 million, non-IDC revenue rising by 5% to CNY 995 million, and retail IDC revenue declining 7% year on year to CNY 924 million. With the company expecting to expand its wholesale capacity by 30%-40% in 2024, we would expect wholesale IDC to remain the main growth driver in the near term.

We expect VNET Group to continue to purchase and build data centers in and around its focus Tier 1 Chinese cities of Shanghai, Beijing, Shenzhen, and Guangzhou. As its network of interconnected data centers grows it can more easily cater to the demand from its key cloud service provider customers allowing them to expand in a flexible way in their key markets. This also enables key enterprise customers to deploy their hybrid clouds in close proximity to the networked nodes of leading public clouds. We also expect VNET to compliment its basic data center offerings with value added services such as managed hosting, cloud, and VPN services. In the near term, demand for its services may be somewhat affected by increased cost focus from large internet company customers, macro conditions, chip shortages, and covid-19 shutdowns. However, we remain confident on the longer-term demand for data centers in China as the country continues to revolutionize its operations in a digital fashion across government and private sectors.

VNET’s fourth-quarter results were again below our expectations, with revenue increasing only 0.9% and adjusted EBITDA up only 3.8% from the previous year. Guidance for 2024 is more positive, with the company expecting midpoint revenue growth of 6.6% and adjusted EBITDA growth of 10.4%. The company highlighted a 15 MW new wholesale contract signed in first-quarter 2024 with a cloud service provider in the Yangtze River Delta and indicated that it is seeing increasing demand from customers using data center capacity for artificial intelligence. We reduced our fair value estimate for VNET to $3.50 from $4.00 due mainly to the $299 million capital raised from Shandong Hi-Speed Holdings Group at a price of $2.75 at the end of 2023. Despite reducing our fair value estimate, we note that this capital raise allowed the company to repurchase the $600 million of convertible senior notes in February this year. This left it with less than CNY 1 billion per year in loans that mature over 2024, 2025, and 2026. There is also the possibility of synergies between Shandong Hi-Speed Holdings and VNET in developing renewable energy projects in northern China and in accessing domestic funding for VNET’s future expansion. VNET is guiding 2024 capital expenditures of between CNY 3.7 billion and CNY 4.2 billion, which is an increase in the CNY 3.6 billion spent in 2023, as it plans to deliver between 100 MW and 120 MW of capacity, with around 70% of that being wholesale.

We expect VNET Group to continue to purchase and build data centers in and around its focus Tier 1 Chinese cities of Shanghai, Beijing, Shenzhen, and Guangzhou. As its network of interconnected data centers grows it can more easily cater to the demand from its key cloud service provider customers allowing them to expand in a flexible way in their key markets. This also enables key enterprise customers to deploy their hybrid clouds in close proximity to the networked nodes of leading public clouds. We also expect VNET to compliment its basic data center offerings with value added services such as managed hosting, cloud, and VPN services. In the near term, demand for its services may be somewhat affected by increased cost focus from large internet company customers, macro conditions, chip shortages, and covid-19 shutdowns. However, we remain confident on the longer-term demand for data centers in China as the country continues to revolutionize its operations in a digital fashion across government and private sectors.

We expect VNET Group to continue to purchase and build data centers in and around its focus Tier 1 Chinese cities of Shanghai, Beijing, Shenzhen, and Guangzhou. As its network of interconnected data centers grows it can more easily cater to the demand from its key cloud service provider customers allowing them to expand in a flexible way in their key markets. This also enables key enterprise customers to deploy their hybrid clouds in close proximity to the networked nodes of leading public clouds. We also expect VNET to compliment its basic data center offerings with value added services such as managed hosting, cloud, and VPN services. In the near term, demand for its services may be somewhat affected by increased cost focus from large internet company customers, macro conditions, chip shortages, and COVID-19 shutdowns. However, we remain confident on the longer-term demand for data centers in China as the country continues to revolutionize its operations in a digital fashion across government and private sectors.