VNET Group, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Wholesale IDC: Maintained significant growth momentum, with capacity in service growing 17.5% q-o-q to 674 MW, utilization rate 75.9%, and revenues up 112.5% y-o-y.
• Retail IDC: Progressed smoothly supported by AI demand, with capacity in service at 52,131 cabinets and MRR per cabinet at RMB 8,915.
• New Order Wins: Secured 4 MW retail orders in IT services, Internet, AIoT, and financial services sectors, and a 20-MW wholesale order from a leading cloud services provider.
• Hyperscale 2.0 Framework: Unveiled to capture AI opportunities, aiming to manage 10 gigawatts of data center assets by 2036.
• Technologies: Utilizes building standardization and modular data center technologies to accelerate construction and enhance efficiency.
• Financials: Total net revenues up 22.1% y-o-y to RMB 2.43B, adjusted EBITDA up 27.7% y-o-y to RMB 732M, adjusted EBITDA margin 30.1%.

Segment Performance

• Wholesale IDC: Total net revenues increased by 22.1% year-over-year to RMB 2.43 billion for the second quarter. Wholesale revenues reached RMB 854 million, up 112.5% year-over-year. As of June 30, 2025, wholesale capacity in service grew by 17.5% quarter-over-quarter to 674 megawatts, with utilization rate stable at 75.9%.
• Retail IDC: Retail capacity in service was 52,131 cabinets, utilization rate increased slightly to 63.9% as of June 30, 2025, and MRR per retail cabinet increased to RMB 8,915.
• Non-IDC: Revenues were RMB 621 million for the second quarter.

Guidance

• Full Year 2025 Revenue: Expected to be in the range of RMB 9.15 billion to RMB 9.35 billion, a year-over-year increase of 11% to 13%.
• Adjusted EBITDA: Expected to be in the range of RMB 2.76 billion to RMB 2.82 billion, a year-over-year increase of 14% to 16% (excluding disposal gain of E-JS 02 data center).
• CapEx: Expected to be in the range of RMB 10 billion to RMB 12 billion for 2025.
• Buyback Program: Board authorized a buyback program to repurchase up to USD 50 million on the open market over the next 12 months.

Risks

• Forward-looking statements subject to risks and uncertainties as per U.S. Private Securities Litigation Reform Act of 1995.
• Potential impact of AI chip supply constraints on customer demand.
• Execution risks related to the implementation of the Hyperscale 2.0 framework.

Question and Answer

Q: Tom Tang from Morgan Stanley asked about future demand and orders, specifically regarding NVIDIA's chip shipment to China and customer order tendering pattern.

A: Market is active in regions with strong digital economy, AI demand strong in Greater Beijing area and Yangtze River Delta; attention on demand released around September.

Q: Edison Lee from Jefferies asked about wind power build-out in Ulanqab and MSR on wholesale.

A: Wind power project in Ulanqab underway, impact on P&L not expected soon; MSR on wholesale mainly due to seasonal factors and one-off income.

Q: Huiqun Li from BofA Securities asked about gross margin fluctuation and REITs progress.

A: GP margin fluctuation due to timing of PPE and depreciation; actively promoting REIT projects, aiming for RMB 2B recovery through REITs.

Q: Timothy Zhao from Goldman Sachs asked about second half outlook and retail IDC revenue decline.

A: Second half guidance conservative, waiting to see if wholesale utilization speed sustains; retail IDC revenue decline within reasonable range, expected to stabilize.

Q: Andy Yu from DBS asked about sustainability of client movement momentum and AI chip supply impact.

A: Optimistic about second half, client move-in pace fast once orders confirmed; wholesale business orders not affected by chip supply constraints.

Q: Xinyi Wang from UBS asked about potential new tenders and customer workload.

A: Clients unleash demand gradually, AI demand remains unchanged going forward.