GDS Q1 2026 Earnings Call Transcript

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May 20, 2026

Key Takeaways

  • Positive Sentiment: GDS said AI-driven demand is accelerating and that year-to-date new bookings already exceeded 340 MW, putting the company on track to meet or beat its 2026 target of at least 500 MW.
  • Positive Sentiment: Management highlighted a large pipeline, with 1.8 GW of total bookings at the end of 1Q26 and more than 1 GW of bookings plus reservations year to date, which they said gives near-term visibility into follow-on orders.
  • Positive Sentiment: The company reported a stronger balance sheet after capital recycling and financing activity, ending with over RMB 19 billion in cash and time deposits while lowering net debt to annualized adjusted EBITDA to 4.7x.
  • Neutral Sentiment: Management said development economics remain stable, with unit development cost around RMB 20,000 per kW and stabilized portfolio yields at roughly 10% to 11%, supporting an estimated 20% ROE on incremental investment over a six-year cycle.
  • Positive Sentiment: GDS expects utilization and move-ins to accelerate, guiding to about 70,000 sq m of move-ins in 2026 and a much larger step-up in 2027 as backlog converts into billable capacity.
AI Generated. May Contain Errors.
Earnings Conference Call
GDS Q1 2026
00:00 / 00:00

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Operator

Hello, ladies and gentlemen. Thank you for standing by for GDS Holdings Ltd's first quarter 2026 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. 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
Laura Chen
Head of Investor Relations at GDS Holdings Ltd

Hello, everyone. Welcome to the first quarter of 2026 earnings conference call of GDS Holdings Ltd. The company's results were issued via wire 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.

Laura Chen
Laura Chen
Head of Investor Relations at GDS Holdings Ltd

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 can 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
William Huang
Founder, Chairman, and CEO at GDS Holdings Ltd

Hello, everyone. This is William. Thank you for joining us on today's call. Over the past few quarters, we have seen a resurgence in data center demand driven by AI. We believe this is the beginning of a multi-year growth story, supported by increasing availability of the domestic chips. Customers are planning their future deployments at unprecedented scale with a high degree of conviction. As market leaders, GDS is well-prepared to address these opportunities to the fullest extent. We have the trust of all the key customers, a multi-gigawatt development pipeline in strategic locations, and a very strong balance sheet. Up to the end of 1Q 2026, our total bookings stood at 1.8 GW. In our three-year business plan, we target adding 500 MW to 800 MW of new bookings every year, with the potential to do more.

William Huang
William Huang
Founder, Chairman, and CEO at GDS Holdings Ltd

To deliver this capacity, we are prepared to commit RMB 30 billion-RMB 50 billion of new investment over the next three years. The economics of the data center business in China is solid, and this new investment will create significant value for our shareholders. On the last earning call, we announced a sales target for 2026 of at least 500 MW. In the year today, we have already done over 340 MW of new bookings, and we are still being selective. We are well on track to reach or exceed our full-year target. We have won significant new orders from all of our largest customers for deployments across the whole of our platform, including the new markets. For the hyperscale business, customers are planning gigawatt scale deployments in single clusters.

William Huang
William Huang
Founder, Chairman, and CEO at GDS Holdings Ltd

When they sign new sales agreements with us, they commit to a certain amount of capacity, which we disclose as bookings, and ask us to reserve the rest of the site for their subsequent phases. In the year to date, total new bookings plus reservations comes to over 1 GW. The reservation give us near certainty of winning follow-on orders within the next one or two years. In order to fulfill our customer requirements, we expanded our platform to new locations, which can accommodate the largest AI deployments. These new locations integrated well with our platform in established market, enabling us to serve diversified customer requirements. Anticipating the demand trends, we increased our secured land bank to nearly 4 GW. Typically, we are purchasing land from the government exclusively for our data center development.

William Huang
William Huang
Founder, Chairman, and CEO at GDS Holdings Ltd

As we obtain customer commitment, we will be granted a power quota for these sites. We synchronize the timing of construction with new bookings and fixed move-in schedules. Over the past 15 months, we initiated over 100,000 sq m or 400 MW of new construction, which is almost entirely pre-committed. Our backlog has increased to over 200,000 sq m or almost 600 MW, most of which we will become billable within the next six to eight quarters. As this occurs, our growth will start to accelerate. AI in China is a transformational opportunity. We are super motivated to support this development, and we'll commit all the resource requirement to the expansion of our AI infrastructure platform. I will now pass on to Dan for the financial and operating review.

Dan Newman
Dan Newman
CFO at GDS

Thank you, William. For our new business, the unit development cost averages around RMB 20,000 per kilowatt or $3 million per megawatt, depending on specification, cooling technology, and location. Pricing for new business is stable, and at current levels, we're able to generate an adjusted gross profit yield of 10%-11% for stabilized assets. As shown on slide 13, across the whole of our in-service portfolio, the adjusted gross profit yield is currently around 11%. We calculate this ratio based on adjusted gross profit, which includes the cash cost of operating assets divided by gross PP&E, which includes replacement CapEx already incurred, and for conservatism, we added back historic impairment charges. The portfolio yield has been stable at around 11% for the past few years based on a portfolio with utilization rate of around 75%.

Dan Newman
Dan Newman
CFO at GDS

As our new bookings are delivered, we expect the portfolio yield to remain in the 10%-11% range, which in our view is a reasonable return. Assuming a six-year investment cycle of development, ramp up, stabilized operations, and then asset monetization, we expect to generate a return on equity of around 20% from the incremental investment. This underpins our confidence in growing the business. As shown on slide 13, during the first quarter, net additional area utilized was around 16,000 sq m. During the current quarter, this metric will be slightly lower, and then in the second half of the year, it will rebound to around 20,000 sq m per quarter. During the second half of next year, as we start to see the flow-through from this year's higher levels of new bookings, the move-in rate will step up noticeably.

Dan Newman
Dan Newman
CFO at GDS

MSR on slide 16 is a useful metric for financial forecasting purposes that must be seen together with unit development cost. This is why we think it's more relevant to look at the gross profit yield or cash-on-cash yield as a measure of the economics of our business. Turning to slide 18, during the first quarter, we recorded 7.9% growth in revenue and 8% growth in adjusted EBITDA after excluding one-time items which arose in the normal course of business. We find it useful to look at our growth rates on a pro forma basis, adding back the deconsolidated revenue and adjusted EBITDA of the assets which we monetized in March and July of 2025. This shows pro forma revenue and adjusted EBITDA growing at 12%-13% after excluding one-time items. Turning to slides 19 and 20.

Dan Newman
Dan Newman
CFO at GDS

In 1Q 2026, our organic CapEx was RMB 770 million. In addition, we received cash proceeds of RMB 2.7 billion, or $385 million, from the sale of a small part of our equity interest in DayOne, which is recorded in investing cash flow. We also received cash proceeds of RMB 2.1 billion, or $300 million, from the issue of convertible preferred shares, which is recorded in financing cash flow. As a result of the capital recycling and new issue, we are now sitting on over RMB 19 billion or $2.7 billion of cash and time deposits. This is an ideal situation to be in as we prepare for a new growth phase. Turning to slide 23.

Dan Newman
Dan Newman
CFO at GDS

Our net debt to last quarter annualized adjusted EBITDA has decreased from 6.8x at the end of 2024 to 4.7x at the end of the first quarter of 2026. As we step up our investment, this ratio will increase to between 5-6x, which we consider an acceptable level. Finishing on slide 25, we maintain our full year guidance unchanged. Now we'd like to open the call to questions. Operator?

Operator

Thank you so much. Dear participants, as a reminder, if you wish to ask a question, please press star one one on your telephone keypad and wait for a name to be announced. To withdraw a question, please press star one and one again. For the benefit of all participants on today's call, please limit yourself just to one question. If you have more questions, please re-enter the queue. Thank you so much. Now we're going to take our first question. It comes line of Yang Liu from Morgan Stanley. Your line is open. Please ask your question.

Yang Liu
Yang Liu
Analyst at Morgan Stanley

Hey, thanks for the opportunity to ask a question. I would like to hear your comment on the pricing for the data center business. I think Dan previously mentioned that overall pricing environment is stable. Could you please break it down to different market or locations? Because from time to time we hear that in certain market, it's a little bit under supply, and also in certain markets there are some relative aggressive bidding from telcos, et cetera. Could you please comment on the pricing in different markets, please? Thank you.

William Huang
William Huang
Founder, Chairman, and CEO at GDS Holdings Ltd

Yeah, I'd say, Liu, I think this will, I think the in the last earnings call we already say the new incremental demand which is driven by the AI, right. The larger scale data center demand. In general, I mean, the price pretty stable, number one. Number two, I think there, of course, in a whole, the market, you know, you cannot stop some bidder, right. Use some price tools to try to win that. It's not normal, right. It's not normal. It's, it maybe it's, in my view, it's a in some region, some deal, it's a one time. It's a, it's not a represented a whole market situation. Our fee is a remain the what we experienced last quarter. Is a quite a stable. Yeah.

Operator

Thank you.

Yang Liu
Yang Liu
Analyst at Morgan Stanley

Got it. Thank you.

Operator

Now we're going to take our next question. The question comes line of Gokul Hariharan from JPMorgan. Your line is open. Please ask your question.

Gokul Hariharan
Gokul Hariharan
Analyst at JPMorgan

Hi. My question is basically on the development cost. Dan, I think you mentioned roughly 20 million RMB, or $3 million per kilowatt, if I remember right. That number sounds a lot lower than what it used to be a few years back when you updated those numbers, I think. Could you talk a little bit about what are the variables that have changed? Is it mostly the location that has really changed, or are there any other factors that have really changed to kind of reduce that development cost over the last maybe, I think two to three years?

Dan Newman
Dan Newman
CFO at GDS

I would say that the unit development cost on a like for like basis, whether we're talking in established markets or new markets, has decreased by about 15% over the past three years. That would be the case with the MEP, the Mechanical Electrical Plant, which accounts for about 70% of the total development cost. I'd also say that the land, concrete, steel and construction cost has been quite stable. If we measure it on a per sq m basis, the unit cost is relatively flat, the power density has increased. If we were to measure that part on a per kW basis, it might appear to have come down as well. That's why I think overall, on a per kilowatt basis, the decrease is about 15% over three years.

William Huang
William Huang
Founder, Chairman, and CEO at GDS Holdings Ltd

Yeah. I try to add a couple thing. I mean, number one, the scale is unprecedented, right? Scale also make the cost a bit lower, right? That's fair nature. I mean, this is number one. Even for the vendor perspective, that's larger scale give the, a lot of the manufacturing product company a lot of benefit, right? They're willing to reduce the cost or reduce price. This is number one. Number two, I think there's another lot of the AI data center. This is compared with the previous cloud. The architecture-wise also change a lot. This is another reason to drive down the costs, right? That's two more reasons.

Gokul Hariharan
Gokul Hariharan
Analyst at JPMorgan

Okay. Thank you.

Operator

Thank you. Now we're going to take our next question. The question comes line of Sara Wang from UBS. Your line is open. Please ask your question.

Sara Wang
Sara Wang
Analyst at UBS

Thank you for the opportunity to ask a question. I have one question regarding first quarter CapEx. Since the first quarter CapEx is RMB 770 million, it seems a little bit modest given the strong orders we saw in year to date. Especially given the majority of the new orders should be new builds. May I ask what's the reason behind this gap? Thank you.

Dan Newman
Dan Newman
CFO at GDS

Sara, I would point you to our full year CapEx guidance, which remains unchanged. I mean, the timing of incurring CapEx, you know, per quarter, is not that significant, right? The first quarter is Chinese New Year, it tends to be historically slightly below the level of the other three quarters. No other more fundamental explanation than that.

Sara Wang
Sara Wang
Analyst at UBS

Gotcha. Thank you.

Operator

Thank you. Now we're going to take our next question. The question comes line of Frank Louthan from Raymond James & Associates. Your line is open. Please ask your question.

Frank Louthan
Analyst at Raymond James & Associates

Great. Thank you. Of the roughly RMB 3 billion that you discussed in capital you're spending, how much of that will you be funding yourself versus maybe with some JV investors or with capital recycling from some of your other assets? Thanks.

Dan Newman
Dan Newman
CFO at GDS

Yeah, Frank, it's Dan. Let me just go over these numbers again and make sure everyone is clear. William was talking about having a sales plan of 500 MW to 800 MW over the next three years. That's our current view. If you apply the logic of what I said, 20,000 RMB per kilowatt or $3 million per megawatt, that's how you end up with total CapEx over three years of between 30 billion-50 billion RMB. If we take the midpoint of that and say 40 billion RMB, you know, historically we have financed our investment quite conservatively with around 60% project debt to total development cost.

Dan Newman
Dan Newman
CFO at GDS

We would be able to obtain and draw down on about 60% of 40 billion, which is RMB 24 billion of new debt. That would leave RMB 14 billion, which is less than $2 billion that we have to finance. We have several different sources for that. We have our operating cash flow, which is last year was nearly RMB 3 billion. We have our ongoing asset monetization program, which, you know, we're trying to build up step by step. We also have RMB 2.7 billion of cash on our balance sheet. I think we are in a strong position to finance that level of investment and new other options may arise, as you point out, development partnerships and so on.

Frank Louthan
Analyst at Raymond James & Associates

Great. Thank you very much.

Operator

Thank you. Now we're going to take our next question. The next question comes from line of Ellie Jiang from Macquarie. Your line is open. Please ask your question.

Ellie Jiang
Ellie Jiang
Analyst at Macquarie

Great. Thank you, madam, for taking my question. I just wanted to get a sense on the new bookings trajectory. The year-to-date 340 MW new bookings seems to be very encouraging. Considering the current token consumption and how, you know, AI agents are significantly boosting that compute demand, how would you kind of evaluate that upside surprises on the current scale? Thank you.

Dan Newman
Dan Newman
CFO at GDS

Potential to upsize.

William Huang
William Huang
Founder, Chairman, and CEO at GDS Holdings Ltd

Yeah. We, number one, I think we are 500 MW, we are very confident for this number with a new booking. Definitely. That's a base case. We are looking at it a more high number booking, it's too early to say what kind of level we can reach. We try to because we are still very, we remain very disciplined to select order in terms of the moving price, and the customer types. This is in general, I think it's, we are very confident we can do more. Even though we still want to do a high quality order.

Ellie Jiang
Ellie Jiang
Analyst at Macquarie

Got it. If I may, just a quick follow-up. Would it be possible for you guys to consider, kind of doing some of the neocloud business models as well? 'Cause it does seem like some of the peers are trying to accumulate more resources on the compute side. That was being perceived as approach to boost the MSR or revenue in general. Is that something that we're considering as well?

William Huang
William Huang
Founder, Chairman, and CEO at GDS Holdings Ltd

Yeah, I think, yeah, neocloud actually is not something new in China already. Historically, they are a lot of big platform, GPU service provider customer already, right? We are already serve them indirectly, right? This is number one. Number two, I think We, for a long-term perspective, we also start to build some relationship with them. Far we haven't do any business with them, and we will see, because in terms of maybe we can. As I said, we'll maintain our very discipline in terms of the financial return and the risk, everything, right? If some neocloud, high quality neocloud, we're willing to do something with them, start to build some relationship. Yeah.

Ellie Jiang
Ellie Jiang
Analyst at Macquarie

Got it. Thank you very much.

Operator

Thank you. Now we're going to take our next question. The question comes line of Timothy Zhao from Goldman Sachs. Your line is open. Please ask your question.

Timothy Zhao
Timothy Zhao
Analyst at Goldman Sachs

Great. Thank you, gentlemen, for taking my question. My question is regarding the movement pace over the world traditional area utilized. Just wondering, after the first quarter, can you share your immediate outlook for the rest of this year in terms of moving pace and what are the key moving factors that may affect the user rate ramp up? Thank you.

Dan Newman
Dan Newman
CFO at GDS

Timothy, I couldn't hear you clearly, but what I'm told you're asking about the moving pace, right? I did address that in the prepared remarks. As you know, it was 16,000 sq m in the first quarter. It will be a lower number in the second quarter, and then it will rebound, I'd say to around 20,000 sq m in the third quarter of this year and the fourth quarter of this year. Next year we will see a significant step up, but it will be in the second half of 2027, in the third and fourth quarter of 2027.

Dan Newman
Dan Newman
CFO at GDS

If we look at 2026 and 2027 as a whole, I think the move-in this year will be somewhat over 70,000 sq m. Next year's number is gonna be very substantially larger than that. Maybe double something of that order of magnitude.

Timothy Zhao
Timothy Zhao
Analyst at Goldman Sachs

Sure. Understood. Can I ask a follow-up if I may? Just wondering, I think behind it, your assumptions, I think we'd like to see new factors. I.e., how much of that is contributed by the domestic chips versus the imported chips. I'm just wondering if you can share more color.

William Huang
William Huang
Founder, Chairman, and CEO at GDS Holdings Ltd

Sure..

Laura Chen
Laura Chen
Head of Investor Relations at GDS Holdings Ltd

Imported chips and foreign chips will affect the moving.

Dan Newman
Dan Newman
CFO at GDS

Oh, okay. Okay.

William Huang
William Huang
Founder, Chairman, and CEO at GDS Holdings Ltd

Oh, yeah. I think, I'm not sure it's your question. I mean, import chips will affect our moving, right? Is that your question?

Timothy Zhao
Timothy Zhao
Analyst at Goldman Sachs

Yeah. Yes. Hello?Yes. Yeah. Okay. [crosstalk]

William Huang
William Huang
Founder, Chairman, and CEO at GDS Holdings Ltd

Okay. Frankly said, this year's forecast are not based on any import chips. All based on the domestic chips supply chain. It will not impact our current estimation. If the import coming, maybe some upside, who knows, right?

Timothy Zhao
Timothy Zhao
Analyst at Goldman Sachs

Okay. Got it. Thank you.

Operator

Thank you. Now we're going to take our next question. The question comes line of Daley Li from Bank of America Securities. Your line is open. Please ask your question.

Daley Li
Analyst at Bank of America Securities

Hi, [inaudible]. Thanks for taking my question. My question is about our land and power resources. We have secured quite strong resources in 1Q. Are we planning to expand our resources in the following quarters? If we have the plan in future, what types of area we would focus on? Thank you.

Dan Newman
Dan Newman
CFO at GDS

Continue to add to our resources.

William Huang
William Huang
Founder, Chairman, and CEO at GDS Holdings Ltd

I think that last quarter we already answered the question. We will continue to develop the new market and establish a market as well. In China what happened is the training and the inference demands all happening in the same time. I think we try because everybody know GDS is a platform player, not just a project player, right? We try to build, try to fulfill all the kind of the AI demand, whatever is training or in the future or, let's say inference. We try to catch up. We're well-positioned to catch up the different pace of the AI demand.

Daley Li
Analyst at Bank of America Securities

Thank you. Yeah.

Operator

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

Laura Chen
Laura Chen
Head of Investor Relations at GDS Holdings Ltd

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

William Huang
William Huang
Founder, Chairman, and CEO at GDS Holdings Ltd

Thank you.

Operator

This concludes today's conference call. You may now disconnect your line. Thank you.

Executives
    • Dan Newman
      Dan Newman
      CFO
    • Laura Chen
      Laura Chen
      Head of Investor Relations
    • William Huang
      William Huang
      Founder, Chairman, and CEO
Analysts
    • Daley Li
      Analyst at Bank of America Securities
    • Ellie Jiang
      Analyst at Macquarie
    • Frank Louthan
      Analyst at Raymond James & Associates
    • Gokul Hariharan
      Analyst at JPMorgan
    • Sara Wang
      Analyst at UBS
    • Timothy Zhao
      Analyst at Goldman Sachs
    • Yang Liu
      Analyst at Morgan Stanley
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