GDS Holdings Q1 FY26 earnings call GDS

GDS Holdings is experiencing a resurgence in data center demand, primarily driven by AI, which management believes is the beginning of a multi-year growth story. The company reported total bookings of 1.8 gigawatts after Q1 FY26. Year-to-date, new bookings have already exceeded 340 megawatts, putting the company well on track to meet or exceed its full-year target of at least 500 megawatts. This strong performance includes significant new orders from all largest customers across its platform, including new markets.

To support the unprecedented^🌐 scale of hyperscale AI deployments, GDS has expanded its platform to new locations capable of accommodating large AI infrastructure. These new sites are integrated with existing platforms to serve diverse customer requirements. The company has increased its secured land bank to nearly 4 gigawatts, typically purchasing land exclusively for data center development and obtaining power quotas upon customer commitments. Construction timing is synchronized with new bookings and move-in schedules.

GDS plans to commit RMB 30 billion to RMB 50 billion in new investment over the next three years to deliver required capacity. This investment is expected to generate a return on equity of approximately 20% from incremental capital. The financing strategy involves approximately 60% project debt, with the remaining RMB 14 billion to be funded through operating cash flow (nearly RMB 3 billion last year), ongoing asset monetization, and a substantial cash balance of over RMB 19 billion (USD 2.7 billion).

Despite aggressive bidding in some markets, pricing for new data center business remains stable, enabling an adjusted gross profit yield of 10% to 11% for stabilized assets. The unit development cost has decreased by about 15% over the past three years, now averaging around RMB 20,000 per kilowatt or USD 3 million per megawatt. This reduction is attributed to the unprecedented^🌐 scale of new projects, stable MEP costs, and architectural changes in AI data centers.

The in-service portfolio currently maintains a utilization rate of approximately 75%, with an adjusted gross profit yield of around 11%. Net additional area utilized was 16,000 square meters in Q1 FY26, expected to be slightly lower in Q2, then rebound to around 20,000 square meters per quarter in H2 FY26. A significant step-up in move-in rates, driven by the flow-through of higher new bookings, is anticipated in the second half of 2027.

GDS has significantly strengthened its balance sheet, with net debt to last quarter annualized adjusted EBITDA decreasing from 6.8x at the end of 2024 to 4.7x at the end of Q1 FY26. The company holds over RMB 19 billion (USD 2.7 billion) in cash and time deposits, positioning it well for the new growth phase. Management expects the leverage ratio to increase to between 5x to 6x as investments ramp up, which is considered an acceptable level.