GDS Q2 2025 Earnings Report

GDS EPS Results

• Actual EPS: N/A
• Consensus EPS: -$0.11
• Beat/Miss: N/A
• One Year Ago EPS: -$1.30

GDS Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $2.83 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

GDS Announcement Details

• Quarter: Q2 2025
• Date: 8/20/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, August 20, 2025
• Conference Call Time: 8:00AM ET

GDS (NASDAQ:GDS) Limited, founded in 2001 and headquartered in Shanghai, is a leading network-neutral data center services provider in China. The company operates a portfolio of state-of-the-art data center facilities designed to support the mission-critical IT infrastructure of cloud service providers, internet enterprises, financial institutions, and government entities. GDS was among the first Chinese providers to offer high-density colocation solutions, catering to customers with demanding computing and storage requirements.

GDS specializes in delivering scalable colocation, cross-connect, and interconnection services within its facilities, enabling clients to establish high-speed, low-latency connections to major cloud platforms and internet exchange points. In addition to traditional colocation, the company offers managed services such as remote hands and hardware installation, as well as cloud on-ramp solutions that facilitate seamless access to leading global cloud providers. These offerings are supported by robust power and cooling infrastructure and redundant network architectures designed to ensure high availability.

The company’s data centers are strategically located in major Chinese markets, including Beijing, Shanghai, Shenzhen, Guangzhou, Nanjing, Tianjin, Wuhan, Chengdu, and Hangzhou. This geographic footprint allows GDS to serve a diverse customer base across China’s most dynamic economic regions, addressing the growing demand for digital infrastructure driven by cloud adoption, big data analytics, and content delivery. GDS continues to expand its capacity through new facility developments, extensions, and selective partnerships to meet evolving market needs.

GDS’s management team comprises professionals with extensive experience in data center operations, finance, and technology infrastructure. The company focuses on delivering reliable service, operational excellence, and tailored solutions that align with the long-term IT strategies of its customers. Through its commitment to innovation and customer-centric design, GDS has established itself as a trusted partner in China’s rapidly growing digital ecosystem.

GDS Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: GDS delivered a solid Q2 with revenue up 12.4% year-on-year and adjusted EBITDA up 11.2%, while data center utilization climbed to 77.5% and gross moved volume held steady at ~20,000 sqm.
• Positive Sentiment: The company pioneered China’s first data center ABS in March and a REIT IPO in July, raising ~$676 million and monetizing stabilized assets at EV/EBITDA multiples up to 16.9× (22.8× post-IPO trading).
• Positive Sentiment: GDS is positioning for an AI demand wave by holding ~900 MW of powered land in Tier-1 markets and completing preliminary site preparations to enable short-lead AI inferencing deployments once chip supply clarifies.
• Positive Sentiment: Equity affiliate Day one added 246 MW in Q2 to exceed 780 MW of customer commitments, including anchor projects in Thailand and a second campus in Finland, and is on track to surpass 1 GW well ahead of its three-year goal.
• Positive Sentiment: Strong balance sheet actions—issuing $535 million in convertible bonds (2.25% coupon) and $142 million in equity—cut net debt/LQA EBITDA from 6.6× to 6.1× (5.7× pro forma), lowered 2025 CapEx guidance to RMB 2.7 billion, and target cash flow breakeven before financing.

Presentation

[Operator]

Hello, ladies and gentlemen. Thank you for standing by for GDS Holdings Limited's Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in listen only mode. After management's prepared remarks, there will be a question and answer session. Today's conference call is being recorded.

[Operator]

I will now turn the call over to your host, Ms. Laura Chen, Head of Investor Relations for the company. Please go ahead, Laura.

[Laura Chen, Head Investor Relations at GDS]

Thank you. Hello, everyone. Welcome to the second quarter twenty twenty five earnings conference call of GDS Holdings Limited. As the company's results were issued via newswire services earlier today and are posted online. A summary presentation, which we'll refer to during this conference call, can be viewed and downloaded from our IR website at investors.gdsservices.com.

[Laura Chen, Head Investor Relations at GDS]

Leading today's call is Mr. Rui Kang, GDS's Founder, Chairman and CEO, who will provide an overview of our business strategy and performance Mr. Dan Newman, GDS's 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.

[Laura Chen, Head Investor Relations at GDS]

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 risk uncertainties is included in the company's prospectus as filed with the U. S.

[Laura Chen, Head Investor Relations at GDS]

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 its conference call includes discussions of unaudited GAAP financial information as well as unaudited non GAAP financial measures. GDS's 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's Founder, Chairman and CEO, William Huang. Please go ahead, William.

[William Huang, Founder, Chairman of the Board & CEO at GDS]

Okay. Thank you. Hello, everyone. This is William. Thank you for joining us on today's call.

[William Huang, Founder, Chairman of the Board & CEO at GDS]

We delivered a solid second quarter, growing revenue by 12.4% and adjusted EBITDA by 11.2% year on year. We raised the net proceeds of $676,000,000 through the issue of convertible bonds and equity in the international capital market, strengthening our vertical balance sheet. More recently, we achieved a significant milestone in our onshore asset monetization strategy. With the successful completion of our C REITs IPO, the units of our C REITs are now trading on the Shanghai Stock Exchange at an implied cap rate of below 5%. This is a major breakthrough giving us access to China equity capital market on highly advantageous terms. Our gross moving during 2Q twenty twenty five was around 20,000 square meters, which is consistent with the level over the past five quarters. Our utilization rate has continued to climb, reaching 77.5%.

[William Huang, Founder, Chairman of the Board & CEO at GDS]

Moving over the next few quarters will remain solid, driven by delivery of the 152 megawatts order, which we signed in 1Q twenty twenty five. We expect to deliver 35% of our total current backlog in the 2025. In 2Q twenty twenty five, gross new bookings were 23,000 square meters, mainly from traditional internet and the cloud business. With a good mix of customers and the locations. AI demand was relatively quiet due to the uncertainty of chip supply in China.

[William Huang, Founder, Chairman of the Board & CEO at GDS]

Customers have a number of options across both imported and domestic sourced chips. It's a complicated metrics of performance, technology, availability and other considerations. We think that it will take some time for customer to decide which way to go. We are very confident about AI driven demand over the medium and long term. However, we are still in a period of wait and see.

[William Huang, Founder, Chairman of the Board & CEO at GDS]

We should have a clear view after a few more months. During this period, we think that the most important thing is for us to be ready to respond, ready in terms of developable capacity and ready in terms of access to capital. On the capacity side, we have around 900 megawatts of power land held for future development in and around the Tier one markets. We believe the coming waves of AI demand is going to be mainly for inference. This kind of demand is latency sensitive and will require relatively large sites distributed across the Tier one markets.

[William Huang, Founder, Chairman of the Board & CEO at GDS]

For operational reasons, customers will seek to deploy capacity for inferencing within established cloud regions and availability zones. We have multiple sites suitable for AI inferencing around the Beijing Shanghai Center. We have undertaken preliminary site preparations so that we can develop with a short lead time. This is an important consideration for customers. We believe there is a good chance that we will develop all of this 900 megawatts and more over the next few years.

[William Huang, Founder, Chairman of the Board & CEO at GDS]

The issue is only the timing of takeoff. On the financing side, we completed the first ever data center ABS transaction in China in late March. We then followed this up with the first ever data center REITs IPO in China in August. By pioneering these transactions, we have proven our ability to recycle capital from stabilized data center assets. This comes at the perfect timing time as we can use the proceeds to fund the new investment opportunities.

[William Huang, Founder, Chairman of the Board & CEO at GDS]

Furthermore, the terms on which we have monetized asset established a benchmark for the value of our stabilized asset the data center in Tier one markets, creating potential to unlock more value for shareholders. Our Power of the Land and our monetization vehicles are unique in China and give us significant competitive advantage as we enter into the AI era. Lastly, I would like to share some operating updates for our equity investment in Day one. In 2Q twenty twenty five, Day one added a phenomenal two forty six megawatts of new commitments, which bring its total power committed by customers to over seven eighty megawatts. The new order in 2Q twenty twenty five included an anchor customer commitment for its Thailand project.

[William Huang, Founder, Chairman of the Board & CEO at GDS]

More recently, DayOne announced that it has secured a second campus site in Finland, building on its successful market entry. DRAM is well ahead of schedule to meet the target of one gigawatt of total power commitments within three years. I will now pass on to Dan for the financial and the operating review.

[Daniel Newman, CFO at GDS]

Thank you, William. Starting on Slide 13. In 2Q twenty twenty five, revenue increased by 12.4% year on year. This resulted from an increase in total area utilized of 14.1% and a decrease in MSR per square meter of 1.7% as compared with 2Q twenty twenty four. In 2Q twenty twenty five, adjusted EBITDA increased by 11.2% year on year.

[Daniel Newman, CFO at GDS]

Adjusted EBITDA margin for 2Q twenty twenty five was 47.3% compared with 47.8% in 2Q twenty twenty four. Following completion of the ABS transaction in late March, we deconsolidated the underlying projects for the whole of 2Q twenty twenty five. For incompletion of the sale of stabilized data centers to a C REIT in late July, we will deconsolidate these projects during 3Q twenty twenty five. As we report earnings over the next three to four quarters, the reported revenue and EBITDA growth will be impacted because the comparison will not be apples to apples. We estimate that the apparent year on year growth rate without making adjustments to normalize for the asset monetizations will be about six percentage points lower.

[Daniel Newman, CFO at GDS]

We will continue to call this out on future earnings calls so the underlying trend is clear. Starting with 2Q twenty twenty five, without the ABS transaction, the year on year adjusted EBITDA growth rate would have been 13.9% as compared with the reported 11.2%. As shown on Slide 17, the ABS transaction took place on an EV to EBITDA multiple of 13.3 times based on the maximum potential sale proceeds and the projected stabilized EBITDA. This was a good start considering where GDS is trading as a listed company on NASDAQ and the Hong Kong Stock Exchange. However, for the SeaREIT IPO, we achieved an even higher multiple of 16.9 times at the IPO price of RMB3 per unit.

[Daniel Newman, CFO at GDS]

The units started trading on the Shanghai Stock Exchange on the August 8. The closing price yesterday was RMB4.04 per unit, about 35% up from the IPO price. At this level, the CRE is trading on 22.8 times the projected 26 EBITDA disclosed in the offering memorandum. This is close to double the current year trading multiple for GDS China business after adjusting for the assumed value of our equity investment in day one on a sum of the past basis. Under the current CRE regulations, we must wait twelve months before undertaking the first post IPO asset injection.

[Daniel Newman, CFO at GDS]

We started preparing some candidate assets of various sizes to give us the flexibility to dimension the next monetization in accordance with our financial requirements. It's important that we continue to grow and diversify the CRE so that it remains a viable option for us to recycle capital when it is in our interest to do so. With the CRE platform in place, if we assume that we invest in new projects, ramp up, operate and monetize after five years at a cap rate in, say, the 5% to 6% range, the return on investment is at a very acceptable level. Turning to Slide 18. When we gave CapEx guidance earlier this year, we spoke of RMB 4,800,000,000.0 of organic CapEx.

[Daniel Newman, CFO at GDS]

There's RMB 500,000,000 net proceeds in the current year from the ABS transaction, resulting in CapEx guidance of RMB 4,300,000,000.0. We are now deducting a further RMB 1,600,000,000.0 net proceeds from the SeaREIT transaction, which was not previously factored in. This brings our CapEx guidance down from RMB 4,300,000,000.0 to RMB 2,700,000,000.0. On Slide 19, in 2024, we achieved positive cash flow before financing with the benefit of some capital recycling from day one back to GDS. In 2025, despite the fact that our organic CapEx is much higher than for the past few years, we expect our cash flow before financing to be close to breakeven with the contribution from our asset monetization transactions.

[Daniel Newman, CFO at GDS]

Turning to Slide 20. During the second quarter, we raised US535 million dollars through the issue of a seven year CB with 2.25% coupon and 35% conversion premium. We also raised US142 million dollars through a simultaneous follow on equity offering. One of the main purposes of this capital raise was to enable us to repay short term debt at HoldCo level and to either repurchase if possible or potentially redeem a CB issued in 2022, which is currently out of the money and put a bill in March 2027. Our net debt to LQA adjusted EBITDA decreased from 6.6 times at the end of 1Q twenty twenty five to 6.1 times at the end of 2Q twenty twenty five.

[Daniel Newman, CFO at GDS]

The reduction in consecutive quarters was partly due to the cash proceeds of the ABS, which were received during 2Q twenty twenty five and to the cash proceeds of the follow on equity offering. As shown on Slide 21, if we take account of the Sea REIT transaction on a pro form a basis, the net debt to LQA adjusted EBITDA ratio will come down to 5.9x. If we further adjust for the value of our reinvestment in the ABS and CRET listed securities, the ratio will come down to 5.7x. On Slide 22, we have already used part of the proceeds of the offshore capital raise to repay a working capital loan due in 2026. As you can see, we now have three CBs outstanding.

[Daniel Newman, CFO at GDS]

As I mentioned, the 2022 CB is out of the money. Hence, we show the maturity based on the potential put in 2027. The liability is covered by cash, which we are holding on reserve. The 2023 CB and the recently issued 2025 CB are both in the money. And hence, the maturity is shown based on the final maturity dates in 2030 and 2032 respectively.

[Daniel Newman, CFO at GDS]

Turning to Slide 23. When we gave guidance earlier this year, we already assumed that the ABS will be deconsolidated in 2Q twenty twenty five. However, the CRE transaction, which we completed during late July, was not factored into our 2025 guidance at all. Nonetheless, we are maintaining FY 2025 revenue and adjusted EBITDA guidance unchanged, notwithstanding the deconsolidation of the Sea REIT assets, while we are making mathematical adjustment to CapEx guidance to deduct the Sea REIT cash proceeds. Finishing on Slide 24.

[Daniel Newman, CFO at GDS]

Day one power utilized jumped from 143 megawatts at the end of the first quarter to two thirteen megawatts at the end of 2Q twenty twenty five. This contributed to revenue growth of 244% and adjusted EBITDA growth of 265% year over year during the second quarter. Considering its fast expansion, including the recently announced second campus in Finland, Day one is currently working on a Series C equity raise. We'd now like to open the call to questions. Operator?

[Operator]

Thank you. You. Thank you so much for understanding. And now we're going to take our first question. And it comes from the line of Yan Liu from Morgan Stanley. Your line is open. Please ask your question.

[Yang Liu, Executive Director at Morgan Stanley]

Thanks for the opportunity and congrats on the very solid results. I would like to ask about the future strategy in terms of the asset monetization in China after the successful series IPO. In terms of future injection, does management benchmark the previous set target of five times net debt to EBITDA as a long term operation target for GDS leverage? Or you are more keen to go a little bit more aggressive towards the SLIGHT model to achieve better investment return via the five year development cycle? How to think about your future strategy here? Thank you.

[Daniel Newman, CFO at GDS]

Thank you for the question. There are a number of different considerations in the asset monetization strategy. One of course is the value at which we can monetize assets and the benchmark which has been established in the ABS transaction and then at a higher level in the CRE transaction remains far above the level at which GDS shares are trading in the international capital markets. The implication of that is that every asset monetization is highly accretive for our shareholders and I think that alone would be a strong rationale to monetize assets. Secondly, as we described in the prepared remarks, we feel like we are on the threshold to the start of another growth phase, multi year growth phase in this industry which should present some very good investment opportunities.

[Daniel Newman, CFO at GDS]

The return on investment potentially is enhanced now that we know that we will be able to monetize assets at cap rates, which are certainly higher than what we used to assume in our internal underwriting case. The implication is that if we can monetize assets and reinvest then we can create more value for our shareholders. You mentioned the consolidated net debt to EBITDA ratio. I did check back, think in 2023 I mentioned that we would target it five times within three years which would be give me about another one year I think. I think we're approaching that level already But we're now, as I mentioned, at a stage where some attractive new investment opportunities could present themselves.

[Daniel Newman, CFO at GDS]

I don't think it's necessary for us to be too aggressive about deleveraging if those opportunities arise. If they don't arise, then we monetize on accretive terms, deleveraging will naturally add.

[Yang Liu, Executive Director at Morgan Stanley]

Thank you. I have another question, if I may, regarding the development of day one. Given the company's believe that the previous one gigawatt target will be achieved far ahead of schedule. What is the current new target for example, by the end of this year or next year in terms of the total area committed or megawatt committed? Thank you.

[William Huang, Founder, Chairman of the Board & CEO at GDS]

Yes. I think based on current our footprint, I think we build each growth engine in a different region right now. So Finland is a very good example in Europe and in Asia Pacific, we already build up very solid and sustainable growth resource land bank and a power, right? So our growth will be very solid in the next few years. So in general, we target every year, let's say, at least add, let's say 500 megawatt.

[William Huang, Founder, Chairman of the Board & CEO at GDS]

Yes, this is some internal KPI, but we are we commit to the market is at least 300, right? Internally, five. That's our order. But now we have a very, very solid base to talk about this kind of number because we are not just growing in one country, one region. We have the two regions and in the next couple of quarters, maybe we will enter some new region as well.

[William Huang, Founder, Chairman of the Board & CEO at GDS]

So that will allow us can talk about more big number, more high growth. Yes, thank you very much.

[Yang Liu, Executive Director at Morgan Stanley]

Thank you.

[Operator]

Thank you. Now we will take our next question. And the question comes from the line of Sarah Wang from UBS. Your line is open. Please ask your question.

[Xinyi Wang, Equity Research Analyst - Greater China Telecom & Data Center at UBS Group]

Hi, thank you for the opportunity to ask a question. And again, congratulations on the solid results. I have one question regarding the customer profile. So, the second quarter gross moving or new orders signed are still quite solid despite all the uncertainties around US GPU export. So may I ask who are the key customers, like, separately for the move ins and also for the new orders?

[Xinyi Wang, Equity Research Analyst - Greater China Telecom & Data Center at UBS Group]

And then what kind of workload do we set up for these new orders to carry? Is it mostly CPU or GPU? And then, like, if it's CPU, is it because the oversupply in the industry has been digested Or if it's GPU, does that mean the domestic substitution has achieved quite meaningful progress so that the supply chain uncertainty going forward should be mitigated? Thank you.

[William Huang, Founder, Chairman of the Board & CEO at GDS]

Customer profile.

[Daniel Newman, CFO at GDS]

Customer profile and the workloads.

[William Huang, Founder, Chairman of the Board & CEO at GDS]

Yeah, think the first question about customer profile, as I just mentioned that there's a traditional Internet company plus a cloud service provider. And also so this is some new order, which we get this year, right? And in terms of workload, there's both, I think, GPU type and traditional CPU cloud growth as well. So I think this is quite a hybrid, right?

[Xinyi Wang, Equity Research Analyst - Greater China Telecom & Data Center at UBS Group]

I see. Maybe a quick follow-up on the demand side. Do we see any signs of price increase or MSR increase in the industry? The reason I'm asking is because I saw in second quarter the MSR decline continue to narrow year on year and even like increase quarter on quarter. But if we assume the contract length is maybe five years on average, so meaning the contracts renewed this year were mostly signed five years ago, that was when the industry MSR or industry rental price was peaked in 2020 or 2021.

[Xinyi Wang, Equity Research Analyst - Greater China Telecom & Data Center at UBS Group]

But as we renew the contract this year, we still maintain a stable MSR. So, what's the key reason behind? Thank you.

[Daniel Newman, CFO at GDS]

First of all, let's talk about the market price. It's been stable since, say, the middle of last year, which is quite satisfactory. As I mentioned in my prepared remarks, if we evaluate new investment using a five year cycle from inception to exit and even if we use exit cap rates, which are aiming quite a bit off from where our ABS and CRE transactions were done, we can generate a very acceptable return. I think that's important because there's many industries in China which are suffering in a deflationary environment. But the economics of our business remains very solid.

[Daniel Newman, CFO at GDS]

MSRs, know, Sarah, because you asked quite a few times in previous earnings calls, The MSR reduction is partly a reflection of the reduction in the market price that we're talking about on a like for like basis, but it's also due to the change in mix. If you go back five years, at that point, most of our new business was coming from edge of town sites, Langfang, Beijing, Changshu, Taichang around Shanghai. And those were relatively early years for that kind of large edge of town campus. And there was a significant price differential as there was a significant development cost differential as compared with our sort of downtown colocation data centers. So the MSI is not purely an indication of the reduction in market prices.

[Daniel Newman, CFO at GDS]

It also reflect the change in the location mix. Over the next couple of years, we'll continue to see our MSR decline. Most of it is due to the price reset of contracts like you say, you gave an example five years ago. Five years ago, 2020, 2021, the market price had already come down. I think in 2021, 'twenty two, it came down further.

[Daniel Newman, CFO at GDS]

So we can calculate bottom up on our own contract portfolio. We know a pretty good idea of what the dilution is going to be from price reset over the next couple of years. And then that will get reflected in our MSR. So the MSR will continue to decline by a few percent if we take a quarter compared with the same quarter of prior year, it will continue to decline by low single digits percent for the next couple of years. Beyond that, I think we'll start to see much reduced drag and our growth rate will then reflect quite purely the volume growth in our business.

[Xinyi Wang, Equity Research Analyst - Greater China Telecom & Data Center at UBS Group]

Got it. Thank you.

[Operator]

Thank you. Now we're going to take our next question. Just give us a moment. And the question comes from the line of Frank Louthan from Raymond James and Associates. Your line is open. Please ask your question.

[Frank Louthan, Managing Director at Raymond James Financial]

Great. Thank you. With the Series C round that you're looking at, are you still considering a broader public offering for day one in 2026, which think you've talked about in the past? And then can you break out some of the growth in day one between Southeast Asia and then Finland or any other EU sites that considering? Thanks.

[Daniel Newman, CFO at GDS]

Yeah. Frank, think the it's the shareholder plan to have an IPO of day one from GDS perspective in particular is because we would like to be able to have the opportunity to distribute the shares to our shareholders. That remains the case that we target have an IPO within eighteen months. Series C, we didn't anticipate that there would be another equity round pre IPO, but the performance of day one has far exceeded our expectations. It's been phenomenal.

[Daniel Newman, CFO at GDS]

And that's what's driving the Series C. I I can't rule out there'll be other capital raises before the IPO. They won't a plan to use mezzanine debt as well and that's still the case. So these pre IPO rounds are a function of the success the business is having. So your second question, I can answer that.

[Daniel Newman, CFO at GDS]

Yes. You asked us to break out Europe. Far our European presence is in Finland, in the Helsinki area. And we have a first campus for which we obtain an anchor customer commitment. And it's I don't want to be too precise, but it's well over 100 megawatt commitment.

[Daniel Newman, CFO at GDS]

And I expect that we will build on that quite quickly in terms of getting follow on commitments. The strategy at Day one is to be a pioneer in creating new markets. It's not easy to do that. Day one has done it multiple times now, working with different customers in close collaboration to derisk our market entry. And then that gives us the opportunity to build on that base.

[Daniel Newman, CFO at GDS]

We think that Finland is a very attractive location for data center operations because of the access to renewable energy, the competitive power tariff, we support an operating environment. So what you see is just the foundations now, derisked market entry, secured resource expansion and the opportunity to add significantly to that.

[Frank Louthan, Managing Director at Raymond James Financial]

Okay, great. Thank you.

[Operator]

Thank you. Now we're going to take our next question. And the question comes from the line of Edison Lee from Jefferies. Your line is open. Please ask your question.

[Edison Lee, Head - HK/China Tech, Telecom & Software Research at Jefferies]

Thank you for taking my question. My first question is on day one. You have roughly seven eighty megawatt committed power. Would you be able to give us some color as to the split between Chinese customers and U. S.

[Edison Lee, Head - HK/China Tech, Telecom & Software Research at Jefferies]

Customers on that seven eighty three megawatt? I think your longer term objective previously mentioned was fifty-fifty, right? So I just want to know the progress on that.

[William Huang, Founder, Chairman of the Board & CEO at GDS]

Think frankly speaking the current, I think it's percentage wise not significant improve, but it's because it's a very early stage, right? Last couple of quarters, we experienced this situation because every time we will write some key customer, their demand and to try to build our business and sooner or later we say that this is our customer always our direction, right? And so I think this will change maybe in the next two or three years, right? We changed the whole profile. I think currently like a percentage wise, I think I don't remember what the exact number, maybe it's a thirty, seventy, right.

[William Huang, Founder, Chairman of the Board & CEO at GDS]

So 30 from the international customer, 17 from, let's say, Chinese customer, but they are overseas business.

[Edison Lee, Head - HK/China Tech, Telecom & Software Research at Jefferies]

I see. Okay. Thank you. Quick follow-up here on your guidance. You haven't changed your revenue and EBITDA guidance this year.

[Edison Lee, Head - HK/China Tech, Telecom & Software Research at Jefferies]

And the first half is very strong, right? So I'm just wondering what we should how we should think about the second half growth based on guidance not being changed?

[Daniel Newman, CFO at GDS]

For the second half, we have the impact of deconsolidation of the C REIT. That wasn't factored into our guidance, our regional guidance at all. And we will be deconsolidating the revenue and EBITDA from late July. So that will have a material impact in terms of the EBITDA for those five months post deconsolidation. I'm aware that the implied growth rate for the second half is lower than the actual growth rate for the first half.

[Daniel Newman, CFO at GDS]

But we didn't feel it was we didn't feel that we should adjust our revenue and adjusted EBITDA guidance at this point in time.

[Edison Lee, Head - HK/China Tech, Telecom & Software Research at Jefferies]

Does it mean that it's going to be impacted more by move in, in the second half and also maybe higher depreciation as you deliver more projects into the second half?

[Daniel Newman, CFO at GDS]

Well, I think let's see what the growth rates actually are. And so there's a lot of moving parts, right?

[Edison Lee, Head - HK/China Tech, Telecom & Software Research at Jefferies]

Right. Okay. No problem.

[Daniel Newman, CFO at GDS]

Yes.

[Edison Lee, Head - HK/China Tech, Telecom & Software Research at Jefferies]

Made a lot of comments about yes, okay.

[Operator]

Thank you. Now we're going to take our last question for today, and it comes from the line of Gokul Hariharan from JPMorgan. Your line is open. Please ask your question.

[Gokul Hariharan, Managing Director at JP Morgan Chase & Co]

Yes. Hi, William, Dan and Laura. Thanks for taking my question. First of all, it looks like you have a fairly back end loaded delivery schedule this year. Dan, could you outline how that will influence growth probably into next year, given most of this is likely not captured in this year or even early next year?

[Gokul Hariharan, Managing Director at JP Morgan Chase & Co]

So should we expect that there should be a reacceleration in revenue and EBITDA growth sometime maybe Q2, Q3 next year, given you're delivering a lot of capacity in second half of this year? That's my first question.

[Daniel Newman, CFO at GDS]

We are delivering a lot of capacity in the third and fourth quarter of this year. Incremental revenue per square meter for that capacity is below our MSR. It's edge of town capacity. These are a couple of large sites which are being developed specifically for AI inferencing with a very high power density. Maybe the impact of that is not as great as it would be if this was more traditional cloud business.

[Daniel Newman, CFO at GDS]

I think we stick by how high level direction that we're targeting high single digit EBITDA growth year on year. We have a backlog that will drive some of that, but we also need to have new bookings to drive that. And for now, I think new bookings are at a healthy level. It's higher than it was in the last few years, but it's not reflecting mega orders like we saw in the first quarter of this year. So until that happens, I think our growth rate won't really accelerate.

[Gokul Hariharan, Managing Director at JP Morgan Chase & Co]

Understood. And how are the conversations going with customers regarding some of these AI orders? Given the supply situation, I think, definitely seems a little bit more optimistic in q three compared to what it was in q two. Are you seeing a lot more interest from customers and the sticking point is still like your certainty of availability of chips? Or is there any other factors like the inferencing that demand is going to come a little bit later within this AI cycle compared to a lot of the remote site training demand that has already happened in the last couple of years?

[Daniel Newman, CFO at GDS]

We saw in the first quarter, if there's no chip supply issue, we would see much stronger bookings. And that gives us a lot of confidence about the future. So it really is an issue around chip supply. And that's not an issue that gets resolved very quickly. There have been policy changes and I think right now, I think customers are waiting for the new technology in terms of the next generation of NVIDIA chip.

[Daniel Newman, CFO at GDS]

So it may not just be all about H20, H20, H20. It could be about the next big thing. And I think we'll have a clearer view on that in the next couple of months. Then we can talk more precisely about the timing of when we'll start to see those large orders. In the meantime, all we can do is get prepared.

[Daniel Newman, CFO at GDS]

And I think we're very well prepared. We've had the powered land. We've incurred some CapEx to prepare that too, which shortens the lead time. We know from our previous experience in China and also from observing experience at day one that when customers are deploying AI, usually are. So I think we're very well prepared in terms of developable land.

[Daniel Newman, CFO at GDS]

And we're well prepared in terms of our access to capital, both the capital we've raised and our ability and confidence in being able to recycle more. I don't think there's any other data center companies in China, which are as well prepared in both those respects.

[Operator]

You, Gokul. Yes, participants, thank you very much for your time. Due to time limit of today's call, we will not be addressing any further questions. And at this moment, we'd like to turn the call back over to the company for any closing remarks.

[Laura Chen, Head Investor Relations at GDS]

Thank you very much once again for joining us today, and see you next time. Bye.

[Operator]

This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.

Participants

Executives

• Laura Chen, Head Investor Relations
• William Huang, Founder, Chairman of the Board & CEO
• Daniel Newman, CFO

Analysts

• Yang Liu, Executive Director at Morgan Stanley
• Xinyi Wang, Equity Research Analyst - Greater China Telecom & Data Center at UBS Group
• Frank Louthan, Managing Director at Raymond James Financial
• Edison Lee, Head - HK/China Tech, Telecom & Software Research at Jefferies
• Gokul Hariharan, Managing Director at JP Morgan Chase & Co