GDS Q2 Earnings Call Highlights

Key Points

• AI demand is accelerating GDS’s growth: The company recorded a record 470 megawatts of bookings in the first half of 2026 and raised its full-year target to 1 gigawatt from 500 megawatts. It also secured 600 megawatts of additional customer reservations, bringing total binding commitments above 2 gigawatts.
• GDS’s backlog grew to 757 megawatts by midyear, representing approximately RMB1.6 billion in booked-but-not-billed adjusted EBITDA. Management expects 2027 move-ins to more than double 2026 levels, with the recent booking surge driving significant EBITDA acceleration from the second half of 2027.
• The company raised 2026 capital-expenditure guidance to RMB10 billion, primarily for second-half investment, with projects expected to be funded through roughly 60% debt and 40% equity. GDS also completed RMB4.9 billion of debt financing and refinancing in the second quarter.

GDS NASDAQ: GDS said artificial intelligence demand is driving its strongest sales momentum to date, prompting the Chinese data-center operator to raise its full-year 2026 bookings target to 1 gigawatt from 500 megawatts previously.

Founder, Chairman and Chief Executive Officer William Huang said the company recorded 260 megawatts of new bookings in the second quarter, bringing first-half bookings to a record 470 megawatts. Huang said all sales agreements include binding take-or-pay commitments, allowing the company to invest against secured customer demand.

“AI is transforming our business,” Huang said. “Our sales momentum is the strongest we have ever seen.”

The company said its agreements generally specify a delivery date of up to four quarters after a booking is made, followed by a customer ramp-up period that is typically another four quarters. GDS said this structure provides visibility into the timing of future billings, although actual move-ins may occur faster or slower than its planning assumptions.

Reservations Add to Future Pipeline

Alongside binding bookings, GDS said customers are increasingly requesting that it reserve additional deployable capacity at the same sites for future use. The company secured 600 megawatts of new reservations in the first half and expects to finish 2026 with more than 1 gigawatt of new reservations.

Management clarified during the question-and-answer session that reservations are included within the same sales agreements as bookings, rather than representing standalone memoranda of understanding. Huang said customers have exercised their reservations “on a 100% basis” over the past 12 to 18 months, though the timing and percentage of phased move-ins remain subject to negotiation.

At midyear, GDS had more than 2 gigawatts of total binding commitments, plus 600 megawatts of reserved capacity. It also had roughly 3 gigawatts of developable capacity that was neither committed nor reserved, largely located in newer markets.

Huang said the first-half bookings included significant business from each of the company’s three largest hyperscale customers. GDS has also begun building relationships with emerging AI-focused customers, although management said it remains selective and that hyperscalers remain the principal source of new business.

About half of first-half bookings came from established markets, with the remainder coming from newer markets including Ulanqab and Horinger in Inner Mongolia and Shaoguan in Guangdong province. The company is also progressing with customers at its Zhongwei campus in Ningxia province.

Backlog, Move-Ins and Capital Spending

Chief Financial Officer Dan Newman said GDS began 2026 with a backlog of 450 megawatts and had increased that backlog to 757 megawatts by midyear. Based on contract pricing and operating-cost benchmarks, the company estimates the backlog can generate average adjusted EBITDA of RMB2.2 million per megawatt, equating to approximately RMB1.6 billion of booked-but-not-billed adjusted EBITDA.

Assuming GDS reaches its 1-gigawatt booking target, Newman said the company expects backlog to exceed 1 gigawatt by year-end.

GDS reported net move-ins of 145 megawatts in the first half and forecast another 90 megawatts in the second half, for a full-year total of 235 megawatts. Management expects 2027 move-ins to more than double the 2026 level, with activity heavily weighted toward the second half of 2027.

Newman said the current-year move-in pattern reflects bookings made during 2025 and earlier. The surge in bookings during the first two quarters of 2026 is expected to support a “significant acceleration” in EBITDA growth beginning in the second half of 2027, he said. Management did not provide formal 2027 financial guidance.

GDS raised its 2026 capital-expenditure guidance to RMB10 billion from RMB9 billion, with most spending expected in the second half. Unit capital expenditure for capacity currently under construction averages about RMB20 million per megawatt, Newman said.

• New investments are expected to be financed with about 60% debt and 40% equity at the project level.
• GDS targets a stabilized cash yield of 10% to 11% on new investments.
• The implied project-level leverage is approximately 5.5 to six times, according to management.

The company said it completed RMB4.9 billion of new debt financing and refinancing during the second quarter. It also had nearly RMB20 billion of cash on its balance sheet and net debt equal to 4.7 times last-quarter annualized adjusted EBITDA, Newman said.

Guidance and Pricing Commentary

Newman said GDS revised upward its full-year revenue and adjusted EBITDA guidance to reflect what he described as a more accurate financial outlook, including one-time items disclosed in the first quarter. The company did not state the updated revenue or adjusted EBITDA figures during the call.

On a pro forma basis that excludes certain one-time items, recurring income restructured into a one-time payment and contributions from monetized assets before deconsolidation, first-half adjusted EBITDA rose 12.7% year over year. Based on the midpoint of revised full-year guidance, pro forma adjusted EBITDA growth would be 6.5% for 2026, Newman said.

Management said its full-year guidance does not include the impact of any additional asset monetization. GDS said the first post-initial public offering asset injection into its C-REIT remains under regulatory review.

Addressing pricing, Newman said GDS expects MSR to decline about 3% in the fourth quarter of 2026 compared with the fourth quarter of 2025, potentially followed by a similar decline next year. He attributed the change partly to a greater mix of business in newer markets and partly to legacy contracts being reset to current market pricing. Management said pricing in both tier-one and newer markets is currently stable.

Huang said domestic GPU supply appears to be catching up after taking time to develop, while traditional cloud demand is also supporting orders. He said some new orders are driven by CPU-based workloads, which face no comparable supply issue. Management estimated the workload mix at roughly 50% CPU and 50% GPU currently, with GPU potentially representing a somewhat higher share next year.

About GDS (NASDAQ:GDS)

GDS Holdings 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.

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