GDS Holdings Limited Q1 FY2026 earnings call

- AI-driven Demand Resurgence * GDS management has observed a resurgence in data center demand driven by AI, which it expects to be the start of a multi-year growth trend supported by growing domestic chip availability in China * Customers are planning unprecedented large-scale future deployments with high conviction, and GDS as a market leader is positioned to capture this opportunity with existing customer trust, a multi-gigawatt development pipeline in strategic locations, and a strong balance sheet * Total bookings through the end of 1Q2026 reached 1.8 gigawatts, with 340 megawatts of new bookings year-to-date 2026, putting GDS well on track to meet or exceed its full-year 2026 sales target of at least 500 megawatts. Total new bookings plus reservations reached over 1 gigawatt year-to-date, which provides near certainty of follow-on orders over the next 1-2 years

- Platform and Pipeline Expansion * GDS has expanded its platform to new locations that can accommodate the largest AI deployments, which integrate well with its existing established market footprint to serve diverse customer needs * In anticipation of growing demand, GDS increased its secured land bank to nearly 4 gigawatts, with land purchased exclusively for data center development. Power quotas are secured as customer commitments are obtained, and construction timing is synchronized with new bookings and customer move-in schedules * Over the past 15 months, GDS initiated 400 megawatts of new construction, almost entirely pre-committed by customers. Its backlog has grown to almost 600 megawatts (over 200,000 square meters), most of which will become billable within the next 6-8 quarters, leading to accelerated growth once delivered

- Financial and Operating Economics * Average unit development cost for new business is approximately 20,000 RMB per kilowatt ($3 million per megawatt), varying by specification, cooling technology, and location. Pricing for new business remains stable * Adjusted gross profit yield for stabilized new assets is 10% to 11%, and the overall in-service portfolio has maintained a stable adjusted gross profit yield of ~11% for the past several years at a 75% portfolio utilization rate. Management expects portfolio yield to remain in the 10% to 11% range as new capacity is delivered * Assuming a 6-year investment cycle (development, ramp-up, stabilized operations, asset monetization), management expects incremental investment to generate ~20% return on equity * Net additional area utilized in 1Q2026 was ~16,000 square meters. The second quarter 2026 figure will be slightly lower, before rebounding to ~20,000 square meters per quarter in the second half of 2026, with a noticeable step-up in move-in rates in the second half of 2027 as higher 2026 bookings flow through * Capital recycling and new equity issues left GDS with over 19 billion RMB ($2.7 billion) in cash and time deposits as of the end of 1Q2026. Net debt to annualized adjusted EBITDA decreased to 4.7x at end-1Q2026, down from 6.8x at end-2024, and is expected to rise to an acceptable 5x to 6x as investment scales up

- Three-Year Growth Plan * GDS' three-year plan targets 500 to 800 megawatts of new bookings annually, with potential for higher volumes. The company plans to commit 30 billion to 50 billion RMB in new investment over this period to deliver required capacity, which management expects to create significant shareholder value given solid Chinese data center business economics

GDS Holdings did not break out financial performance by distinct product segments in this earning call. All financial results are reported on a consolidated company level. For 1Q2026, consolidated revenue grew 7.9% year-over-year, and adjusted EBITDA grew 8% after excluding normal course one-time items. On a pro forma basis that adds back deconsolidated revenue and adjusted EBITDA from assets monetized in March and July 2025, consolidated pro forma revenue and adjusted EBITDA grew 12% to 13% after excluding one-time items. Organic capital expenditure for the quarter was 770 million RMB.

- Full-year 2026 new bookings guidance of at least 500 megawatts is maintained, and management confirms it is well on track to meet or exceed this target, with potential for upside, though management remains disciplined in selecting high-quality orders - Full-year 2026 capital expenditure guidance is maintained; the modest 1Q2026 organic capex of 770 million RMB is attributed to seasonal timing around Chinese New Year, with no change to underlying full-year plans - Move-in guidance: 16,000 square meters of net additional utilized area in 1Q2026, a lower figure in 2Q2026, ~20,000 square meters per quarter in H2 2026, total full-year 2026 move-in of slightly over 70,000 square meters, and a substantial step-up (approximately double 2026 volumes) in 2027, with the largest increases coming in H2 2027 - The company's existing four-year full company guidance is maintained unchanged - Management expects the 10% to 11% portfolio adjusted gross profit yield to remain stable as new capacity is delivered

- Forward-looking statements regarding future growth, demand, and returns are subject to inherent risks and uncertainties that could cause actual results to differ materially, with further details included in the company's SEC filings - Aggressive pricing by some competitors in isolated regional markets exists, but management notes this is limited to one-off transactions and not representative of broader market conditions - Unexpected shifts in domestic chip supply could impact customer deployment timelines, though management's 2026 forecasts are based entirely on existing domestic chip supply chain expectations, with any supply improvements from imported chips potentially creating upside rather than downside risk

Q: Pricing varies across markets, and there are reports of aggressive bidding from some players like telcos in certain regions. Can you break down pricing trends across different markets? A: Overall pricing for new AI-driven large-scale demand remains broadly stable overall. Isolated aggressive bidding in some regional transactions is one-off and not representative of the overall market pricing environment, which matches the stable conditions experienced last quarter.

Q: Why has average per-kilowatt development cost fallen compared to a few years ago? Is this driven mostly by location shifts, or are there other factors? A: On a like-for-like basis across established and new markets, unit development cost per kilowatt has fallen ~15% over three years. MEP (mechanical electrical plant, which makes up 70% of total development cost) has driven most of this decrease, while land, concrete, steel and construction costs have been stable on a per-square-meter basis, but higher power density reduces per-kilowatt costs for these inputs. Additional factors include unprecedented project scale that gives cost savings for vendors, enabling lower pricing, and architectural changes for AI data centers compared to older cloud data centers that also reduce costs.

Q: 1Q2026 capex of 770 million RMB seems low given the strength of new orders, most of which are for new builds. What explains this gap? A: Full-year capex guidance remains unchanged. The lower first quarter capex is purely a seasonal factor tied to the annual Chinese New Year holiday, which historically leads to lower first quarter capex compared to the other three quarters of the year, with no more fundamental driver behind the quarterly number.

Q: For the 30 billion to 50 billion RMB in planned three-year investment, how much will GDS fund itself versus using JV partners or capital recycling? A: For a midpoint total of 40 billion RMB in three-year capex, GDS historically uses ~60% project debt for development, which would leave ~14 billion RMB in equity funding required. GDS can cover this via existing operating cash flow (~3 billion RMB annually), ongoing asset monetization, its existing $2.7 billion in cash on the balance sheet, and additional optional sources like development partnerships if needed. GDS is well-positioned to fund this planned investment.