GDS Holdings Limited Q2 FY2026 earnings call

• AI-driven demand growth and sales momentum

  • AI is driving a structural upgrade in demand for high-capacity computing and AI infrastructure in China, with unprecedented sales momentum for GDS.
  • The company raised its four-year total sales target to 1 gigawatt, supported by strong H1 2026 performance and current quarter pipeline.
  • All bookings are binding take-or-pay contracts with scheduled delivery dates (up to 4 quarters post-booking) and a typical 4-quarter ramp-up, giving the company clear visibility for capacity planning and investment.
  • Reservations, which allow customers to reserve capacity for future conversion to binding bookings, have become a standard part of sales agreements. 600 megawatts of reservations have been secured year-to-date, with a target of over 1 gigawatt of new reservations by end-2026, providing high visibility for future orders.
  • GDS holds a total of over 2 gigawatts of binding customer commitments plus 600 megawatts of reservations, with ~3 gigawatts of uncommitted developable capacity, mostly located in new high-growth markets.

• Customer and geographic diversification

  • H1 2026 bookings include significant wins from all three of China's largest hyperscale customers, while the company has also begun building relationships with emerging AI leaders for future incremental demand.
  • Half of H1 2026 bookings came from established core markets, and half came from new markets including sites in Mongolia and Guangdong and Ningxia provinces in China, validating GDS' differentiated expansion strategy.

• Financial and investment discipline

  • GDS maintains a disciplined approach to customer selection and contract terms, only investing against binding long-term customer commitments.
  • The company plans to finance new capital investment with a consistent 60% debt / 40% equity structure at the project level, targeting a stabilized 10% to 11% cash yield on new investments.
  • The onshore RMB long-term bank lending market remains highly supportive of GDS' financing needs. The company is progressing with its onshore asset monetization program; the first post-IPO asset injection for its CREIT is currently under regulatory review.

The earnings call transcript does not break out reported financial performance for distinct product segments. It only provides aggregated company-level operational and financial metrics for the first half and second quarter of 2026, including: 260 megawatts of new bookings in Q2 2026, bringing H1 2026 total new bookings to a record 470 megawatts; 600 megawatts of secured year-to-date customer reservations; 145 megawatts of net move-in in H1 2026; pro forma adjusted EBITDA growth of 12.7% for H1 2026; 4.9 billion RMB in new debt financing and refinancing completed in Q2 2026; ~20 billion RMB in cash on the balance sheet, with a net debt to annualized adjusted EBITDA ratio of 4.7x; an estimated average of 2.2 million RMB of adjusted EBITDA per megawatt from the current backlog, bringing total booked-but-not-billed adjusted EBITDA to ~1.6 billion RMB.

• Full-year 2026 net move-in is guided to 235 megawatts (145 megawatts in H1 2026, 90 megawatts in H2 2026). 2027 net move-in is expected to more than double the 2026 full-year figure, with most move-in weighted to the second half of 2027. Another step-up in move-in volume is projected for 2028 if sales momentum continues.
• Annual CapEx guidance for 2026 is revised upward from 9 billion RMB to 10 billion RMB, with most CapEx to be spent in the second half of the year. Unit CapEx for new construction averages 20 million RMB per megawatt.
• Full-year 2026 revenue and adjusted EBITDA guidance have been revised upward to reflect a more accurate full-year outlook including previously disclosed one-time 1Q26 items. The implied pro forma adjusted EBITDA growth rate for full-year 2026 is 6.5% at the midpoint of the revised guidance range.
• By end-2026, total backlog is expected to increase to over 1 gigawatt, up from 757 megawatts at mid-year 2026.

• Forward-looking statements carry inherent uncertainty, and actual results may differ materially from guidance due to risks and factors disclosed in GDS' SEC filings.
• Delays in customer GPU availability could potentially shift move-in timelines, though binding take-or-pay contract terms protect GDS' revenue commitments.
• Chinese government power quota approvals for new data center capacity are a centralized, multi-stage process, and market entry is dependent on regulatory approval and government support.
• MRR (monthly recurring revenue) is expected to decline ~3% year-over-year in 4Q2026, with a similar decline projected for 2027, driven by legacy contract pricing transitions and a shift in location mix to new lower-cost markets.

Q: What downside risks could delay 2027 projected move-in growth from GPU supply constraints, and do take-or-pay contracts protect GDS revenue? / A: Domestic GPU supply is currently on track to catch up to demand, and a large portion of new orders is driven by CPU capacity, so chip supply is not seen as a major material issue. All contracts have fixed delivery dates for capacity, and GDS selects contracts with shorter move-in periods and fixed commitments. Forecasts assume an average four-quarter straight-line ramp-up, and management does not expect material deviation from this projection.

Q: How does the demand profile and contract structure of emerging AI leader customers differ from established hyperscale customers? / A: GDS is in the early stages of building relationships with emerging AI leaders and remains selective in pursuing business from this segment. Most current new business still comes from large hyperscale customers, but diversifying the customer base with emerging AI players is a deliberate long-term strategy to capture future demand growth.

Q: What is the difference between bookings and reservations, and are reservations non-binding MOUs? / A: Bookings are binding contractual take-or-pay commitments within signed sales agreements. Reservations are also included in the same signed sales agreements, where GDS commits to reserve capacity at the same site for the customer's future expansion. GDS' experience over the past 18 months shows customers exercise 100% of their reservations, giving very high certainty for future booking growth.

Q: What is the current breakdown of 2026 and 2027 move-in between CPU-based and GPU-based capacity, and how will the mix change? / A: Management does not report exact granular breakdowns, but estimates the current mix is roughly 50% CPU and 50% GPU for both 2026 and 2027. The GPU share is expected to increase slightly in 2027, as domestic GPU supply continues to catch up to growing AI demand.