VNET Group, Inc. (VNET) Earnings

Management highlights

### Strategic Performance and Market Position - The company delivered strong Q1 results driven by effective execution of its dual core strategy and Hyperscale 2.0 framework, benefiting from surging AI-driven demand for high-quality data center resources. - Policy support for AI-plus initiatives and clustered green computing infrastructure is expanding the industry's addressable market, while limited effective supply of high-quality data centers in core regions creates advantages for established players with resource reserves. - VNet secured strong year-to-date 2026 order wins totaling 519 MW: 517 MW of wholesale orders (including a 400 MW and 110 MW order from one internet customer in Greater Beijing, plus a 7 MW order from a local services customer) and 2 MW of incremental retail orders across multiple customer sectors, confirming strengthened competitive positioning. ### Capacity and Delivery Updates - First quarter 2026 capacity delivery totaled 18 MW, in line with the plan to concentrate full-year deliveries in the second half of 2026. 8 data centers are currently under construction (7 in Greater Beijing, 1 in the Yangtze River Delta). - The company plans to deliver 516 MW of capacity over the next 12 months: ~250 MW in Q2-Q3 2026, and ~266 MW in Q4 2026-Q1 2027, with most capacity allocated to the Wulan Chabu IDC campus to meet strong wholesale customer demand. ### Strategic Shareholder Update - Affiliates of CATL have entered a share purchase agreement to acquire up to ~38.1% of VNet's shares from Shandong High Speed Holdings Group subsidiaries, with closing expected in Q4 2026. - Management expects meaningful strategic synergies across technological innovation, supply chain collaboration, and next-generation AI data center development that will enhance long-term competitiveness. ### Financial and ESG Highlights - Liquidity remains healthy: total cash, cash equivalents, restricted cash, and short-term investments totaled RMB 8.8 billion as of March 31, 2026. Net debt to adjusted annualized EBITDA stood at 3.8, with total debt to adjusted EBITDA at 6.1, both at healthy levels. - Two private REIT projects were successfully listed on the Shanghai Stock Exchange in Q1 2026, with a combined offering size of ~RMB 6.36 billion, advancing the company's asset monetization and capital recycling strategy. - ESG progress: 2025 average annual power usage efficiency improved to 1.24 from 1.24 in 2024, renewable energy consumption increased to 36% from 18% in 2024, and the company retained top ESG industry recognition.

Guidance

- Full-year 2026 capital expenditure (CapEx) guidance is maintained at RMB 10 billion to RMB 12 billion, to support the planned delivery of 450 to 500 MW of capacity in 2026. No upward adjustment was made following the large new 517 MW wholesale order win. - Full-year 2026 total net revenue guidance is maintained at RMB 11.5 billion to RMB 11.8 billion, representing a 15.6% to 18.6% year-over-year increase. - Full-year 2026 adjusted EBITDA guidance is maintained at RMB 3.55 billion to RMB 3.75 billion, representing a 19.2% to 25.9% year-over-year increase. - The company expects to realize no less than RMB 2 billion in total cash proceeds from REIT-related initiatives in fiscal 2026.

Segment performance

For the first quarter of 2026, VNet Group reported total net revenues of RMB 2.69 billion, representing a 19.8% year-over-year increase. 1. Wholesale IDC: Revenue reached RMB 1.06 billion, growing 58.1% year-over-year. This marks the first time wholesale revenue surpassed retail revenue, accounting for 39.4% of total net revenue. As of quarter-end, wholesale capacity in service totaled 907 MW, with utilized capacity at 687 MW, for a utilization rate of 75.7% (up 5.6 percentage points quarter-over-quarter). Total wholesale resource capacity reached 2.48 GW, with 516 MW under construction (85.8% pre-commitment rate). 2. Retail IDC: Revenue hit RMB 1.02 billion, growing 5.4% year-over-year, and accounted for 37.9% of total net revenue. Retail capacity in service reached 50,170 cabinets, with a stable utilization rate of 64.1%. Monthly recurring revenue (MRR) per cabinet increased sequentially to RMB 9,448. 3. Non-IDC business: Revenue came in at RMB 606.6 million, growing 0.3% year-over-year, and accounted for 22.5% of total net revenue. Adjusted EBITDA for the total company increased 30.6% year-over-year to RMB 891.5 million, with an adjusted EBITDA margin of 33.1% (up from 30.4% year-over-year). Adjusted cash gross margin improved to 45% from 43.1% year-over-year.

Risks & headwinds

- Forward-looking statements are subject to general risks and uncertainties that could cause actual results to differ materially from current expectations, as detailed in filings with the SEC. - The supply of high-quality data center capacity is constrained by government power quota limitations in core regions, which could impact the company's ability to deliver new capacity on schedule. - The CATL strategic share acquisition transaction is subject to closing expected in Q4 2026, and synergies from the transaction are potential and not yet fully finalized, with collaboration outcomes dependent on future execution.

Analyst Q&A

• Q: The company secured over 500 MW of new wholesale orders. What is the delivery timeline, when will revenue and EBITDA impact begin, and will full-year CapEx guidance be raised? /

  A: The 500+ MW of new orders will be delivered incrementally across 2026, 2027, and 2028, with the first batch delivered and starting to contribute in the second half of 2026. Positive revenue and EBITDA contributions will be realized over the next three years, and 2026 contributions are already included in the existing full-year guidance. Full-year 2026 CapEx guidance will remain unchanged, as the existing guidance already aligns with the 450-500 MW annual delivery target.

• Q: What synergies do you expect from CATL becoming a strategic investor, will existing green power collaboration with Shandong High Speed continue, and what is the current AIDC pricing outlook? /

  A: CATL's expertise in energy storage, high voltage DC technology, and supply chain will enhance VNet's AIDC power stability and operational performance for hyperscale clusters, while VNet's growing wholesale capacity provides CATL with real-world deployment use cases to refine their products. Existing green energy collaboration with Shandong High Speed will continue, and VNet will pursue new green partnerships based on market principles and customer needs. Management currently expects AIDC pricing for premium quality capacity to remain stable, with potential for upside if supply-demand dynamics tighten further in the future.

• Q: What is the company's medium-term capacity reserve target, and what share of the expansion pipeline has secured government power quota approval? /

  A: VNet's medium-long term strategy is to acquire one gigawatt of additional capacity resources, primarily focused on the Yangtze River Delta, Inner Mongolia, and key nodes along the East Data West Compute route. Acquired resources will be disclosed in subsequent quarterly updates. While government window guidance for power quotas is in place, four VNet projects have already received approval, and others are under review, with management confident in securing required land and power approvals for planned expansion.

• Q: Will CATL's strategic investment impact VNet's overseas expansion strategy? /

  A: VNet has already received repeated inquiries from key domestic clients about potential overseas data center resources, and is actively evaluating and preparing for potential projects in Southeast Asia and other international regions. CATL's existing global footprint, supply chain capabilities, and green energy expertise complement VNet's overseas expansion plans well. Any further updates will be disclosed to the market in a timely manner.