VNET Group, Inc. Q4 FY2024 earnings call

• Key Achievements: Wholesale business delivered remarkable growth, retail business remained stable, net revenue and adjusted EBITDA surpassed previous guidance, and 252.5 megawatts in orders were secured across industries.
• Fourth Quarter Performance: Wholesale IDC business showed strong performance with capacity in service increasing by 127 megawatts to 486 megawatts, and utilized capacity up by 73 megawatts to 353 megawatts. Retail business continued smoothly with 52,107 cabinets in service.
• Financial Results: Fourth quarter net revenue was RMB2.25 billion, up 18.3% year-over-year. Adjusted EBITDA was RMB721.3 million, up 63.8% year-over-year. Full year net revenue was RMB8.26 billion, up 11.4% year-over-year, and adjusted EBITDA was RMB2.43 billion, up 19.1% year-over-year. Full year net profit was RMB248 million, a turnaround from net loss in 2023.
• New Orders: Secured various orders including 32 megawatts from an Internet customer, 1.5 megawatts from an intelligent driving customer, and framework agreements for large capacities in regions like Ulanqab and Hebei.
• ESG: Recognized with spots in S&P Global Sustainability Yearbook 2025, A rating from MSCI for the third consecutive year, and B-grade in CDP’s climate change questionnaire with 8 A-grade categories.

Wholesale Business: In the fourth quarter, wholesale revenue reached RMB665 million, a year-over-year growth of 125.4%, which was the fastest growth rate for any quarter in 2024. As of December 31, 2024, wholesale capacity in service was 486 megawatts, with utilized capacity at 353 megawatts. For the full year, net revenue from wholesale contributed to the overall growth. Retail Business: In the fourth quarter, retail capacity in service was 52,107 cabinets, with a utilization rate of 63.5%. MRR per retail cabinet was RMB8,794.

• 2025 net revenue is expected to be between RMB9.1 billion to RMB9.3 billion, representing year-over-year growth of 10% to 13%.
• Adjusted EBITDA is expected to be in the range of RMB2.7 billion to RMB2.76 billion, representing year-over-year growth of 15% to 18%.
• CapEx for 2025 is expected to be in the range of RMB10 billion to RMB12 billion, a year-over-year growth of 101% to 141%.
• Expect to deliver 400 to 450 megawatts in the next 12 months, an increase from 2024’s total deliveries.

• ESG and regulatory risks, as highlighted by the need to refer to latest annual report and SEC filings for detailed risks.
• Potential supply chain issues and competition in the data center market, especially with evolving demand from AI-related businesses.

Q: Could management provide details on the arrangement of CapEx over 2025 and how much of this spending will be covered through funds from risk projects, and insight into the potential impact of AI-related orders on the retail segment?

A: In 2025, over 90% of CapEx will go to wholesale IDC business. Over 400 megawatts will be delivered in wholesale IDC, with 83% of orders determined. Remnant CapEx will go to retail for high-power density retrofit and value-added business. AI-related orders have driven up demand for retail IDC, with small and medium enterprises showing strong demand for retail IDC rental services coupled with DeepSeek.

Q: Can you share observations on customers' preferences between in-house data centers and third-party data center operators, and how your wholesale campuses cater to inferences versus training demand?

A: Both in-house and third-party choices co-exist. Most clients prefer rental from third-party operators. Wholesale campuses cater to both inferences and training demand, with clients having different requirements in terms of power cost and latency, and the majority deploying inference models in retail IDCs