Key Highlights

  • Second-quarter Revenue of $455 million beat the $454.2 million estimate by 0.16 percent, while adjusted EPS of negative $0.56 missed the $1.35 estimate by 58.52 percent.
  • First-half 2026 bookings reached a record 470 megawatts, with the company raising its full-year sales target to 1 gigawatt, up from a prior target of 500 megawatts.
  • Backlog grew from 450 megawatts at the start of the year to 757 megawatts by mid-year, with an estimated 2.2 million yuan of adjusted EBITDA per megawatt embedded in that backlog.
  • The company raised its Capital Expenditure guidance to 9 billion to 10 billion yuan for the year to support the expanded bookings target.

Bookings Momentum Prompts a Doubling of the Annual Sales Target

GDS Holdings Limited (NASDAQ:GDS), a developer and operator of data centers across China, reported record first-half bookings of 470 megawatts, including 260 megawatts in the second quarter alone, prompting management to raise its full-year sales target to 1 gigawatt from a prior target that had already been raised earlier in the year. Executives attributed the acceleration to broadening Demand from China's largest hyperscale customers alongside emerging AI companies, with new Business won from each of the company's three largest hyperscale customers during the first half.

Alongside new bookings, customers have also reserved an additional 600 megawatts of future deployable capacity at existing sites, with management expecting reservations to exceed 1 gigawatt by year-end. Total binding commitments plus reservations stood at more than 2.6 gigawatts at the midpoint of the year, providing what executives described as high visibility into order flow over the next several years as reservations convert into binding contracts.

Backlog Growth Signals Accelerating Revenue Conversion Ahead

Backlog increased from 450 megawatts at the start of 2026 to 757 megawatts at mid-year, with management estimating the Backlog carries roughly 2.2 million yuan of adjusted EBITDA per megawatt based on current contract pricing and operating cost benchmarks, implying booked-but-not-billed adjusted EBITDA of approximately 1.6 billion yuan. Net move-in, the pace at which contracted capacity actually begins generating revenue, totaled 145 megawatts in the first half, with a further 90 megawatts forecast for the second half.

Move-in is expected to more than double in 2027 compared with 2026, heavily weighted toward the second half of that year, reflecting the typical lag between when capacity is booked and when it becomes billable following delivery and ramp-up periods that can each span up to four quarters. Management cautioned that quarterly move-in figures can fluctuate and should not be read as a signal of changing demand, since the bulk of capacity converting to revenue in any given period reflects bookings made a year or more earlier.

Financing Capacity Expands to Support Elevated Capital Spending

The company raised its capital expenditure guidance to 9 billion to 10 billion yuan for the year, up from a prior 9 billion yuan target, with unit construction costs averaging roughly 20 million yuan per megawatt. Management reiterated its financing approach of roughly 60 percent Debt and 40 percent Equity at the project level, supported by continued strength in the onshore renminbi bank lending market, where the company completed 4.9 billion yuan of new financing and refinancing during the second quarter alone.

GDS also continues building out its asset monetization program following its C-REIT initial public offering, with the first post-IPO asset injection currently under regulatory review, though management confirmed that transaction is not factored into current guidance given the uncertain timing of regulatory approval. The company ended the period with net debt of 4.7 times annualized adjusted EBITDA, continuing a multi-year deleveraging trend even as capital spending accelerates to meet the raised bookings target.

Guidance Reflects Confidence Tempered by Legacy Contract Repricing

Management revised full-year revenue and adjusted EBITDA guidance upward to reflect the stronger bookings trajectory, though the company flagged that same-market monthly Recurring Revenue is expected to decline roughly 3 percent in the fourth quarter compared with the prior year, driven partly by a mix shift toward new, typically lower-priced markets and partly by roughly 18 months of remaining transition as legacy contracts are repriced to current market levels. Executives characterized current pricing in both established and new markets as stable, suggesting the anticipated revenue pressure reflects a temporary transition dynamic rather than a broader pricing deterioration. The company expects a significant acceleration in EBITDA growth beginning in the second half of 2027 as the substantially larger Volume of capacity booked in 2025 and 2026 completes its move-in and ramp-up period, though that timeline depends on continued domestic GPU Supply normalization and sustained hyperscaler capital expenditure plans.