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VNET
Earnings call · Jun 2026 (Q2 FY26)

VNET Group Q2 FY26 earnings call VNET

Aug 18, 2026 Source

Executive summary

VNET Group Q2 FY26 — Strong Wholesale IDC Growth and Strategic AI Partnerships

VNET Group delivered robust Q2 FY26 results, driven by surging AI-driven demand and strong wholesale IDC performance, which saw capacity in service exceed 1 gigawatt. The company secured significant new orders and reservations, enhancing future revenue visibility, while also forging a strategic partnership with CATL to develop an integrated compute energy ecosystem. Management reiterated its full-year guidance, anticipating accelerated customer move-in pace and continued operational efficiency gains in the second half of the year.

Highlights

5

  • Secured 347 megawatts in new orders in Q2 2026, primarily from wholesale IDC, bringing year-to-date wholesale orders to 862 megawatts.

  • Wholesale capacity in service surpassed 1 gigawatt (1,007 megawatts), growing by 49.4% year-over-year.

  • Total net revenues increased by 14.2% year-over-year to RMB 2.78 billion.

  • Adjusted EBITDA grew by 25.4% year-over-year to RMB 918.3 million, with adjusted EBITDA margin rising to 33.0%.

  • Adjusted net income reached RMB 7.4 million, marking a turnaround from a loss in the prior year period.

Concerns

2

  • Adjusted cash gross margin decreased slightly to 41.8% from 43.6% year-over-year, primarily due to higher utility costs for customers.

  • Wholesale IDC revenue was "a little bit weaker than expected" in Q2 due to customer move-in pace, though expected to accelerate in H2 2026.

Guidance & targets

CategoryTargetConfidence
Full-year 2026 Total Net Revenues
RMB 11.5 billion to RMB 11.8 billion
high materiality
High
Full-year 2026 Total Net Revenues Growth
15.6% to 18.6%
high materiality
High
Full-year 2026 Adjusted EBITDA
RMB 3.55 billion to RMB 3.75 billion
high materiality
High
Full-year 2026 Adjusted EBITDA Growth
19.2% to 25.9%
high materiality
High
Full-year 2026 CapEx
RMB 10 billion to RMB 12 billion
medium materiality
High
Capacity Delivery
333 megawatts
medium materiality
High
Capacity Delivery
252 megawatts
medium materiality
High
Overseas Resource Development
Prudent approach, follow orders
medium materiality
Medium
Future Operating Strategy and Outlook
Lay out in Q4
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Wholesale IDC
Key growth driver, surpassing 1 gigawatt in capacity in service for the first time. Growth mainly attributable to N-HB Campus and N-OR Campus 028. High mature capacity utilization indicates strong demand.
Capacity in service: 1,007 megawattsCapacity in service growth YoY: 49.4%Utilized capacity: 744 megawattsUtilized capacity growth YoY: 45.5%Utilization rate: 73.9%Mature capacity utilization rate: 92.5%Revenue as % of total: 39.8%Recurring revenue: >90%Weighted average remaining lease term: 7 years
RMB 1.10 billion29.3%——
Retail IDC
Progressed smoothly, supported by growing AI-driven demand. MRR per cabinet increased, indicating healthy pricing.
Capacity in service: 50,081 cabinetsUtilization rate: 64.5%MRR per cabinet: RMB 9,799
RMB 1.05 billion9.1%——
Non-IDC Business
Modest growth in other business lines.
RMB 628.4 million1.1%——

Orderbook & backlog

New Order Wins (Wholesale IDC) 345 megawatts Q2 FY26

From a leading cloud service provider for a data center in the Greater Beijing area.

New Order Wins (Retail IDC) 2 megawatts Q2 FY26

Across multiple retail data centers from customers in IT services, local services, and financial services sectors.

New Order Wins (Wholesale IDC) Year-to-Date 862 megawatts June 30, 2026

Includes 345 MW in Q2 and 517 MW announced in Q1.

Total Orders and Reservations >1.2 gigawatts June 30, 2026

Includes 355 megawatts of reservations. Provides greater visibility into future growth and phase delivery schedule.

Reservations 355 megawatts June 30, 2026

Customers securing capacity in advance under reservation agreements for medium- to long-term expansion plans. Historically, all reservations convert to firm orders.

Delivery Schedule for Orders 287 megawatts June 30, 2026

Expected to be delivered in 2026.

Delivery Schedule for Orders 345 megawatts June 30, 2026

Expected to be delivered in 2027.

Delivery Schedule for Orders 230 megawatts June 30, 2026

Expected to be delivered in 2028 and beyond.

Deals & partnerships

CATL Strategic cooperation agreement to jointly develop a 3-layer integrated compute energy ecosystem.

The ecosystem will comprise gigawatt scale compute energy facilities, distributed compute energy networks, and a zero-carbon token ecosystem. Aims to combine VNET's large-scale computing infrastructure with CATL's zero-carbon new energy technologies to shape next-generation digital energy infrastructure globally.

Risks & headwinds

Structural imbalance in effective compute capacity supply Expected to persist until around 2028

Tight equivalent brand, constrained by power availability, chip supply chains, and other real-world bottlenecks.

Mitigation:VNET's position as a top-tier player with end-to-end capability and differentiated resource portfolio creates a sustained tailwind.

Higher utility costs for customers Q2 FY26

Primarily attributable to higher utility costs for customers, leading to a slight decrease in adjusted cash gross margin to 41.8% from 43.6% YoY.

Mitigation:Utility usage is a pass-through mechanism, so it impacts margin rate but not necessarily dollar profit. Ongoing efficiency enhancement initiatives are in place.

Higher construction costs in overseas markets Ongoing

Construction cost is relatively high in overseas countries.

Mitigation:Maintaining a prudent approach to overseas outlay, initially using own funds only for land acquisition and only proceeding with mechanical and electrical fit-out upon securing firm orders.

What to watch in Q3 FY26

Wholesale customer move-in pace

H2 FY26
Current Steady in Q2
Target Faster move-in pace in H2 2026

Why it matters

An accelerated move-in pace is crucial for converting secured orders into revenue and improving wholesale IDC revenue growth.

[Interpreted] Overall, we are expecting to see a faster move in pace in the second half of this year, marginally compared to the first half.

Q&A highlights

Can management provide an update on supply and demand in key regions and the outlook for pricing dynamics?

Management noted steadily increasing compute demand driven by AI, with gigawatt-level tenders expected. Supply is constrained by structural mismatches in high-power smart computing resources, with bottlenecks in power and chip supply expected to persist until 2028. Pricing for new projects will consider peer rates, construction costs, resource scarcity, competition, and target returns.

“[Interpreted] In terms of supply, the national data center capacity continues to expand. However, the industry is showing clear structural mismatches the aggregate capacity does not always translate into effective supply of high-power smart computing resources. And the sector is currently in a tight equivalent brand. The release of effective compute capacity is constrained by power availability, chip supply chains and other real-world bottlenecks. Multiple industry analysts expect this structural imbalance to persist until around 2028.”

asked by Yue Tang · answered by Wen Teng

2 min read 6 chapters

Detailed narrative

AI-Driven Demand and Market Dynamics

VNET Group is capitalizing on surging AI-driven demand, particularly in its wholesale IDC business. The company notes that AI training and inferencing are steadily increasing compute demand, with several major players expected to issue gigawatt-level tenders in 2026. Despite overall national data center capacity expansion, structural mismatches exist, leading to a tight supply of high-power smart computing resources due to constraints like power availability and chip supply chains. This imbalance is expected to persist until around 2028, creating a sustained tailwind for top-tier players like VNET.

Wholesale IDC Growth and Capacity Expansion

The wholesale IDC business was a key growth driver, with revenues increasing by 29.3% year-over-year to RMB 1.10 billion. Wholesale capacity in service grew by 49.4% year-over-year to 1,007 megawatts, surpassing 1 gigawatt for the first time. Utilized capacity reached 744 megawatts, with a utilization rate of 73.9%, and mature capacity utilization hit 92.5%. The company's wholesale resource capacity totaled over 4 gigawatts as of June 30, 2026, an increase of approximately 1.5 gigawatts from the previous quarter, primarily from newly secured land banks.

Retail IDC Performance and MRR Growth

The retail IDC business progressed smoothly, supported by growing AI-driven demand. Retail revenues increased by 9.1% year-over-year to RMB 1.05 billion. Retail capacity in service stood at 50,081 cabinets, maintaining a stable utilization rate of 64.5%. Monthly Recurring Revenue (MRR) per retail cabinet increased to RMB 9,799 in Q2, indicating healthy pricing and customer value.

Strategic Partnership with CATL

VNET signed a strategic cooperation agreement with CATL, a global leader in new energy technology, to jointly develop a 3-layer integrated compute energy ecosystem. This ecosystem will comprise gigawatt-scale compute energy facilities, distributed compute energy networks, and a zero-carbon token ecosystem. The partnership aims to combine VNET's infrastructure development with CATL's zero-carbon energy expertise, positioning the company as a leader in digital energy infrastructure for the AI era. Further details on operating strategy and outlook will be disclosed in Q4.

Overseas Expansion Strategy and Resource Reserves

VNET secured approximately 500 megawatts of overseas resources, in addition to its over 3.5 gigawatts in mainland China. The company plans a prudent approach to overseas development, prioritizing firm orders before mechanical and electrical fit-out due to higher construction costs. The first overseas project is slated for Southeast Asia, with evaluations underway for opportunities in the Middle East and Europe, aiming to broaden its global footprint and respond to customer needs for international expansion.

Capital Expenditure and Liquidity Management

CapEx for the first half of 2026 was RMB 3.55 billion, reflecting strategic investments in capacity expansion. The full-year 2026 CapEx guidance remains RMB 10 billion to RMB 12 billion. The company maintains a robust cash position of RMB 7.21 billion and healthy debt ratios, with net debt to adjusted last quarter annualized EBITDA at 4.6%. Net operating cash inflow for H1 2026 was RMB 391.8 million, or RMB 781.5 million excluding one-off items.

AI-generated summary of the company's earnings call. Not investment advice.