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DATE

Thursday, Aug. 13, 2026, at 8 a.m. ET

CALL PARTICIPANTS

  • Head of Investor Relations-Laura Chen
  • Founder, Chairman and Chief Executive Officer-William Huang
  • Chief Financial Officer-Dan Newman

TAKEAWAYS

  • Net Revenue -- RMB 3,088.0 million, representing a 6.5% year-over-year increase driven by the continued ramp-up of data center facilities.
  • Net Income -- RMB 837.6 million, compared to a net loss of RMB 70.6 million last year, primarily reflecting a dilution gain on the investment in DayOne Data Centers Limited.
  • Adjusted EBITDA -- RMB 1,406.0 million, a 2.5% increase year over year as revenue growth was partially offset by elevated utility costs.
  • Adjusted EBITDA Margin -- 45.5%, representing a decline from 47.3% in the same period last year due to higher utility expenses as a percentage of net revenue.
  • New Bookings -- 260 megawatts in the second quarter, bringing the total for the first half of 2026 to a record 470 megawatts.
  • Sales and Reservation Targets -- 1 gigawatt for new bookings and over 1 gigawatt for reservations by year-end, reflecting an upward revision from previous targets due to strong demand for computing power.
  • Backlog -- 757 megawatts at the midpoint of the year, increasing from 450 megawatts at the beginning of 2026.
  • Booked But Not Billed Adjusted EBITDA -- RMB 1.6 billion, estimated based on an average of RMB 2.2 million in adjusted EBITDA per megawatt from the current backlog.
  • Move-in Volume -- 145 megawatts in the first half of 2026, with an additional 90 megawatts forecasted for the second half of the year.
  • 2027 Move-in Forecast -- More than double the 2026 volume, with move-ins expected to be heavily weighted toward the second half of 2027.
  • Full Year 2026 Guidance -- RMB 12.7 billion to RMB 13.0 billion for revenue and RMB 5.9 billion to RMB 6.1 billion for adjusted EBITDA, including one-time items from the first quarter.
  • Capital Expenditures Guidance -- RMB 10 billion for the full year, raised from RMB 9 billion to support accelerated development activity.
  • Unit CapEx -- RMB 20 million per megawatt on average for new capacity under construction, reflecting current project efficiency.
  • Cash and Cash Equivalents -- RMB 14.9 billion as of June 30, 2026, providing liquidity for ongoing project equity requirements.
  • Leverage Ratio -- 4.7x net debt to last quarter annualized adjusted EBITDA, representing a deleveraging of the consolidated balance sheet.
  • Total Area Committed -- 784,802 square meters, an 18.2% increase compared to June 30, 2025.
  • Utilization Rate -- 79.2% for area in service, up from 77.5% in the same period last year.
  • Area Under Construction -- 170,355 square meters as of June 30, 2026, representing a 28.8% increase year over year.
  • Debt and Project Financing -- RMB 4.9 billion in new debt financing and refinancing completed in the second quarter, with new investments utilizing a 60% debt and 40% equity structure.
  • Pro Forma Adjusted EBITDA Growth -- 12.7% for the first half of 2026 after adjusting for one-time payments and asset monetization activities.

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RISKS

  • CFO Newman stated, "part of it is due to the legacy contracts where we have about another 18 months to go before we are through the transition of adjusting all of our contracts to the current market pricing," regarding downward pressure on monthly service revenue.
  • The company reported that gross profit margin declined to 21.5% from 23.8%, mainly due to a higher level of utility costs as a percentage of net revenue.

SUMMARY

Management reported a transition in demand driven by the adoption of advanced agentic models and AI infrastructure requirements. GDS Holdings Limited (GDS +0.09%) raised its annual sales target and capital expenditure guidance to accommodate record bookings from hyperscale customers. Strategic initiatives focused on geographic expansion into new markets and the continued monetization of assets through the C-REIT platform. Financial discipline remains a priority as the company utilizes a project-level financing model to support capacity growth across its land bank.

  • CEO Huang stated, "Our sales momentum is the strongest we have ever seen," noting that the first-half total of 470 megawatts represented a record for the company.
  • CFO Newman noted that for 2027, "move-in will increase substantially to more than double the number for 2026," with activity heavily weighted toward the second half of the year.
  • Huang attributed the demand shift to "a structural upgrade in the demand for computing power and AI infrastructure" driven by China's technology companies.
  • The company's expansion into new markets such as Ulanqab, Horinger, and Shaoguan accounted for approximately half of the bookings in the first half of the year.
  • Newman reported that the first post-IPO asset injection into the C-REIT is currently under regulatory review.
  • Management noted that domestic graphics processing unit supply is catching up following constraints observed in previous quarters.
  • Huang confirmed that the company has established relationships with emerging AI leaders, which have the potential to generate incremental future demand.

INDUSTRY GLOSSARY

  • Adjusted EBITDA: A non-GAAP financial measure representing earnings before interest, taxes, depreciation, and amortization, with adjustments for items like share-based compensation and results of equity method investees.
  • C-REIT: China Real Estate Investment Trust, a financial vehicle used to monetize infrastructure assets.
  • Hyperscale: Large-scale data center facilities typically used by major cloud providers and high-growth internet companies.
  • Take-or-Pay: A contractual provision where a customer agrees to either utilize the capacity or pay a specified fee.
  • Bookings: Contractual commitments with fixed delivery dates and binding financial terms.
  • Reservations: Agreements to reserve capacity for future needs, providing visibility for upcoming binding commitments.
  • GPU: Graphics Processing Unit, specialized hardware used for artificial intelligence and high-performance computing.
  • MW: Megawatt, a unit of power equal to one million watts, used to measure data center capacity.
  • Gigawatt: A unit of power equal to 1,000 megawatts.
  • MSR: Monthly Service Revenue, a metric for recurring revenue generated per unit of data center capacity.
  • NDRC: National Development and Reform Commission, a central planning agency in China responsible for infrastructure and energy approvals.

Full Conference Call Transcript

Operator: Hello, ladies and gentlemen. Thank you for standing by for GDS Holdings Limited's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded. I'll now turn the call over to your host, Ms. Laura Chen, Head of Investor Relations for the company. Please go ahead, Laura.

Laura Chen: Thank you. Hello, everyone. Welcome to the Second Quarter 2026 Earnings Conference Call of GDS Holdings Limited. The company's results were issued via Newswire Services earlier today and are posted online. A summary presentation, which we will refer to during this conference call, can be viewed and downloaded from our IR website at investors.gds-services.com. Leading today's call is Mr. William Huang, GDS Founder, Chairman and CEO, who will provide an overview of our business strategy and performance. Mr. Dan Newman, GDS CFO, will then review the financial and operating results. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.

Forward looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in the company's prospectus as filed with the U.S. SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Please also note that GDS earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. GDS press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures. I'll now turn the call over to GDS Founder, Chairman and CEO, Mr.

William Huang. Please go ahead, William.

William Huang: Hello, everyone. This is William. Thank you for joining us on today's call. AI is transforming our business. Our sales momentum is the strongest we have ever seen. In the second quarter, we achieved 260 megawatts of new bookings, bringing our total for the first half of 2026 to a record 470 megawatts. During the current quarter, we are well on the way to securing further major business wins with leading customers. We are confidently raising our full year sales target to 1 gigawatt. All of our sales agreements, including -- include a binding take-or-pay commitment. This is a metric which we disclose as bookings. The sales agreement specified delivery date, which is up to 4 quarters after bookings.

This allowed us to invest based on secured commitments. Following the delivery date, there is an agreed ramp-up period, usually another 4 quarters, which gives us visibility to the timing of new billings. Alongside the new bookings, our customers also request us to reserve deployable capacity at the same site for their future needs. Reservation has become an integral part of our sales agreements. So far this year, we have secured an additional 600 megawatts of reservations for our -- from our customers. We expect to end this year with over 1 gigawatt of new reservations. This provides us with high visibility for new orders in the next couple of years as customers convert reservations to binding commitments.

China's tech giants and emerging AI leaders are driving the adoption of advanced agentic models. This has led to a structural upgrade in the demand for computing power and AI infrastructure. GDS is uniquely positioned to address this opportunity as a result of our strategic customer relationships presence across all key markets in China, track record of execution and financing capabilities. The strength of our platform is clearly evidenced in the composition of our first half bookings. We won significant new business from each of the 3 largest hyperscale customers. At the same time, we started to establish relationships with a group of emerging AI leaders, which have the potential to generate incremental demand in the future.

Our new business wins are diversified across the markets. For the first half of the year, around half of our bookings came from the established markets and half from new markets, including the Ulanqab and Horinger in inner Mongolia and Shaoguan in Guangdong province. We are progressing well with customers for our Changshu campus in Jiangsu Province, which is another new market. This new sales success validates our differentiated resource strategy. At the midpoint of this year, we have total binding commitments for over 2 gigawatts plus a further 600 megawatts of reservations. On the capacity side, we have around 3 gigawatts of developable capacity, which is not yet committed or to -- under reservation.

It is mostly in new markets. In view of our current sales momentum, we are actively adding to the deployment pipeline in the markets where demand is growing. While pursuing our ambitious target, we remain selective in terms of customers and the contract terms. We invested against binding long-term commitments for -- from the customers, and we are committed to maintaining financial discipline. I will now pass on to Dan for the financial and operating review.

Daniel Newman: Thank you, William. I'll start from the backlog buildup on Slide 10. We started the current year with a backlog of 450 megawatts. By the middle of the year, our backlog had increased substantially to 757 megawatts. Based on the pricing in the contracts and our operating cost benchmarks, we estimate that we can generate RMB 2.2 million of adjusted EBITDA per megawatt on average from this backlog. Our booked but not billed adjusted EBITDA was therefore around RMB 1.6 billion. By year-end, assuming we achieve our sales target, we expect the backlog to increase further to over 1 gigawatt. Turning to Slide 11. During the first half of 2026, our net move-in was 145 megawatts.

During the second half, we forecast move-in of another 90 megawatts, making 235 megawatts for the full year. The move-in pattern over the course of 2026 reflects the timing of bookings last year. For 2027, we forecast move-in will increase substantially to more than double the number for 2026. The move-in will be heavily weighted to the second half of 2027. Assuming we sustain our sales momentum, 2028 should see another step-up in move-in. Turning to CapEx on Slide 12. Our unit CapEx for the new capacity, which we are constructing averages around RMB 20 million per megawatt.

As we just raised our sales target for the current year, we are also raising our guidance for CapEx paid from RMB 9 billion to RMB 10 billion, most of which is in the second half. Our plan is to continue financing new investments with around 60% debt and 40% equity at the project level. Assuming we can generate a stabilized cash yield on new investments of 10% to 11%, this implies leverage of around 5.5 to 6x at the project level. Our primary source of debt is onshore RMB-denominated long-term bank borrowings. The onshore bank market remains highly supportive. During 2Q '26 alone, we were able to complete RMB 4.9 billion of new debt financing and refinancing.

For the project equity, we have various sources. We have cash of nearly RMB 20 billion on our balance sheet, and we have delevered down to 4.7x net debt to last quarter annualized adjusted EBITDA. We have operating cash flow, which continues to strengthen. And we have our onshore asset monetization program, which we are building up in a very deliberate way. Following our successful C-REIT IPO, the first post-IPO asset injection is currently under regulatory review. Turning to Slide 16. We are revising upwards our full year revenue and adjusted EBITDA guidance to reflect a more accurate financial outlook for this year, which includes the onetime items disclosed in 1Q '26. Turning to Slide 17.

In order to put our first half '26 financial performance and revised full year '26 guidance into context, we have made some pro forma adjustments. Starting from reported revenue and reported adjusted EBITDA, we deduct the onetime items in 1Q '26. For consistency, we also deduct recurring income in prior quarters, which was restructured into the onetime payment. and we deduct the revenue and adjusted EBITDA contributed by the monetized assets prior to their deconsolidation. These adjustments establish a clean basis for comparison. For the first half of 2026, our pro forma adjusted EBITDA increased by 12.7%. Taking the midpoint of our revised guidance for full year '26, the implied growth rate of pro forma adjusted EBITDA is 6.5%.

We'd now like to open the call to questions. Operator?

Operator: [Operator Instructions] And our first question comes from the line of Yang Liu from Morgan Stanley.

Yang Liu: Congratulations on the upward revision of full year guidance. I would like to ask about the future potential move-in. I think that there's a lot of debate on your customers' CapEx and also the availability of GPU in the market and also the constraint of computing power. We also see that you expect your move-in to improve dramatically next year. What could be the downside risk for that? And if there's any concern or a delay in one customer getting the GPUs, will the take-or-pay contract protect GDS revenue?

William Huang: Yes. Thank you. I think dynamics of the demand from the different dimension. I think, of course, the key driver is still the GPU. But the GPU, I think in terms of the domestic GPU, the supply is catching up. I think it took a while in the last couple of quarters, right, as we mentioned. But now it looks like on track to catch up. This is number one. But in the meanwhile, I think they also drive a lot of traditional cloud growth. What we have seen is the new order quite a big number is driven by the CPU. So it will not impact in terms of the supply, it's no issue.

So I think this is all positive. So that we take a more positive way to look at the current or future chip supply. So that's our view. If you look at the other -- a lot of the traditional cloud business, they are still raising their target and the growth is very significant as well. So I think let's be clear there.

Yang Liu: How about the take-or-pay term protecting the GDS revenue?

Daniel Newman: Yes. Yes, 2 comments. The first is that in each contract, there is a specific delivery date when the capacity has to be available to move in by the customer and that is a fixed date in each contract. It's up to 4 quarters from when the booking is disclosed. So that part, I think, is unchangeable. After that, there's a move-in period, and it varies from contract to contract. We've been very focused on trying to select contracts which have a shorter move-in period and a fixed commitment. For the purposes of forecasting, we assumed that the move-in will be on average over 4 quarters on a straight-line basis. So that is what our forecast reflects.

In reality, it could be faster or it could be slower. But I don't think it will materially deviate from that.

Operator: And our next question comes from Sara Wang from UBS.

Xinyi Wang: Congrats on the really solid new order signs. As management just mentioned that there is increasing demand from emerging AI leaders. So just wondering, is there any difference in their demand profile or contract terms compared to established cloud or Internet hyperscale customers we already served for quite some time.

William Huang: I think we are just starting to build up our team. So far, we are very selective business from some new AI leader. I think in terms of their demand profile, it looks like it's getting bigger and bigger, but we are still very selective. Our main customers and the new business mainly driven by the hyperscale, a couple of large hyperscale. But we think there are some new customer in future, it's the right thing to do to diversify our customer base. So we just start to build some relationship with them right now. So of course, the demand is obviously [indiscernible] in which we believe.

Operator: We will now take our next question from the line of Frank Louthan from Raymond James & Associates.

Frank Louthan: I wanted to get an update on what your new guidance is and what does that imply for the impact of potential action with the C-REIT contribution? Does that include any of that? And what would you expect that to be -- how would you expect that to impact revenue and EBITDA? And then secondly, if you could just address the slowdown in MRR, how should we think about that? And what -- and if we're looking forward, are you signing contracts that should be resulting in an improvement in MRR going forward? How should we think about that?

Daniel Newman: Frank, first of all, on guidance, to make clear that our guidance does not take account of any further asset monetization. There's a transaction in progress under regulatory review. We can't be any more specific about the timing of that. But to be clear, it's not factored in. For the [ MSR, ] we've provided guidance about the yield in terms of EBITDA per megawatt for the backlog and the new business that we're winning. And I think that will help for forecasting. If we go back to [ MSR, ] I always make the comparison on a same quarter basis.

So if we take 4Q '26 compared with 4Q '25, we forecast that it will be down 3% and then maybe by a similar amount next year. Part of that is the change in the location mix because there's a substantial amount of new business in new markets. And part of it is due to the legacy contracts where we have about another 18 months to go before we are through the transition of adjusting all of our contracts to the current market pricing. So our guidance this year and what we indicate in the future will fully reflect that.

William Huang: I should point out that, I mean, the Tier 1 market, I mean, also the new market, the current price level is stable. It is all about the transition...

Operator: And our next question comes from the line of Daley Li from Bank of America Securities.

Huiqun Li: Congrats on the upward trend for the new orders. I have one question regarding the move-in. I remember in last earnings call, we are seeing a soft move-in rate in Q2, but it seems the number is better than our -- the market expectation. So what will be the -- what has been the key drivers for better move-in Q2? And secondly, how do we see the demand, supply trend in the data center market in China, considering the power quota approval progress by the government?

Daniel Newman: I would not read anything into the quarterly fluctuations. Most of the move-in the current year is the capacity that was booked in 2025 or even before. And if you look at the bookings in 2025, we had a very strong first quarter 2025 and then the second, third, fourth quarter were at a lower -- consistent level. And then from the first quarter of this year, our bookings increased by a very large amount. That's sustained in the second quarter. We gave an indication for the full year that's sustained.

So I think you can derive from that the outlook for move-in over 2020 -- remainder of 2026 and 2027, we see a significant increase in move-in the second half of 2027, which is going to lead to a significant acceleration of EBITDA growth.

William Huang: I think the current power, there's a couple of key points. Number one is now it's controlled by the central government and the municipal government as well. So basically, if you apply the polish, first step is to go to the municipal level because the local government commitment and their full support, right? This is -- now government is quite selective right now. They try to give some [indiscernible] market leader more allocation. That's why we have built up our land bank in the last 18 months so quickly, right, and take some advantage of the GDS brand, right?

So second then we go to the provincial level [ NDRC ] approval, then go to the final approval from the central government, the [ NDRC ] central government. That's the key process of how we get [indiscernible] location.

Operator: We will now take our next question from the line of Edison Lee from Jefferies.

Yu Lee: So congrats on the good results. My question -- sorry, it's really centering around just reconfirming the definition of the bookings and the reservations. So I assume that bookings, contracts have been signed and reservations mean that is being -- is sort of an MOU with indicating interest by the customers, and you look forward to converting that into signed contracts over the next few quarters. Is my understanding correct?

Daniel Newman: Not exactly. What I'd like to make clear is that there's a sales agreement, which contains a booking, which is a contractual take-or-pay commitment. But within the same document, we undertake to reserve capacity to enable the customer to have certainty of being able to make commitments typically at the same site in future over a period of time. So the bookings and the reservations go together, and that's how the customers look at it from a resource planning perspective.

William Huang: Yes. In the meanwhile, I think we should say based on our last 12 or 18 months experience, which the reservation -- our customers exercise their reservation in a 100% basis. That's our current experience. But in terms of the case by case, which negotiate, moving in general, reservation is quite certain -- provide a very, very high certainty for our future booking.

Yu Lee: Okay. So can I follow up by asking your booking targets this year right now is 1 gigawatt. I think in the last quarter, I think your target was still 500 megawatts. So this doubling of the bookings target, I believe, is driven by your customers or your assessment of the customers' demand. And is it possible for you to split the customers' demand into training versus inference? Or you have no idea how to split that?

William Huang: I think the campus like in the new markets, I think they will host a different workload. It's a training plus inference, both their workload increased the guidance. I think the increased guidance is number one is that the whole market demand we see is increased. If you look at our hyperscalers, they continue to increase their CapEx, and that's in line with that. That is number one. Number two, I think GDS still maintain a lot of advantage, which is our customers prefer. So everybody knows we step in the new growth and we started our new business plan. So I think in terms of the capital revenues, even better than the other competitors.

So I think the customer will more rely on us.

Yu Lee: And in terms of your power reserves, can you talk about the locations of your power reserves?

Daniel Newman: The part that we identify is developable capacity that is almost entirely new markets. We have capacity in established markets that it's under reservation. So there's only a small amount in established markets that is not committed or reserved.

Yu Lee: So is it very different from what you disclosed in the last quarter in terms of locations?

Daniel Newman: [indiscernible].

Operator: We will now move to our next question -- and our next question comes from the line of Timothy Zhao from Goldman Sachs.

Timothy Zhao: I think I just want to get more clarity on the move-in and how do you want to look at the revenue and EBITDA, I think beyond this year. Just wondering if you can give us a breakdown, like, for example, for this year, a lot of move-ins, what is the proportion between CPU based and GPU based? And into next year, it seems like you are looking for the move-in to be more than double to close to 700 megawatts next year. And what will be the breakdown between GPU and CPU next year? And with that 700 megawatts move in, of course, I think the majority will be more geared toward the second half of the next year.

So if that is the case, then how do you think about the revenue and EBITDA growth, I think, beyond this year into '27 and '28.

William Huang: It's -- I think it's not -- in general, we don't have the current detailed specific number in terms of the breakdown there. But in general, I think I can give you the general -- I mean, assumption, maybe it's around 50-50.

Daniel Newman: Yes, about growth in 2027, we provide annual guidance. Obviously, we won't be doing that until we give the full year results in around March next year. But what you can already see is that over the course of next year, there's going to be a very significant acceleration. The growth rate from 1Q, 2Q, 3Q, 4Q is going to be very different. I think what really matters is where we are at the end of the year and where we are in 2028. I believe it's already a strong indication that in 2028, GDS is going to be a pretty high-growth company.

Timothy Zhao: And my follow-up on the breakdown 50-50. Just wondering if that refers to both this year and next year and onwards or how that mix can change into next year?

William Huang: Yes. Maybe GPU will a little bit higher next year, that's what I guess based on the current domestic supply is catching up. I think -- yes.

Operator: Thank you. Due to the time limit of today's call, I would now like to turn the call back to the company for any closing remarks.

Laura Chen: Thank you all once again for joining us today, and see you next time.

Operator: This concludes this conference call. You may now disconnect your lines. Thank you.