On Wednesday, GDS Holdings (NASDAQ:GDS) discussed first-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

GDS Holdings reported a resurgence in data center demand driven by AI, with bookings reaching 1.8 gigawatts and a target of adding 500 to 800 megawatts annually over the next three years.

The company plans to invest RMB 30 billion to RMB 50 billion in new data center development, supported by a strong balance sheet and customer commitments.

Financial performance showed a 7.9% growth in revenue and 8% growth in adjusted EBITDA for Q1 2026, with stable pricing and improved unit development costs.

GDS Holdings maintains a full-year sales target of at least 500 megawatts and has already achieved over 340 megawatts in new bookings year-to-date.

Management expressed confidence in meeting growth targets due to a solid pipeline, strategic land acquisitions, and a disciplined approach to new orders.

Full Transcript

Laura Chen (Moderator)

Laura hello everyone. Welcome to the first quarter 2026 earnings conference call of GDS Holdings Ltd. The company's results were issued via PR Newswire 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.gdsservices.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. Further information regarding these and other risks 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 its 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.

William Huang (Founder, Chairman, and CEO)

Please go ahead William 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 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 1Q26 our total bookings stood at 1.8 gigawatts. In our three years business plan we target adding 500 megawatts to 800 megawatts of new bookings every year with the potential to do more to deliver this capacity. We are prepared to commit RMB 30 billion to 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 earnings call, we announced a sales target for 2026 of at least 500 megawatts in the year today we have already done over 340 megawatts 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. 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 a year or so. Today, total new bookings plus reservations comes to over 1 gigawatt. 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 requirement. Anticipating this demand trend, we increased our secured land bank to nearly 4 gigawatts. Typically, we are purchasing land from the government exclusively for our data center development. As we obtain customer commitment, we will be granted a power quota for this site. We synchronized the timing of construction with new bookings and fixed moving schedules. Over the past 15 months we initiated over 100,000 square meters or 400 megawatts of new construction which is almost entirely pre committed. Our backlog has increased to over 200,000 square meters or almost 600 megawatts, most of which 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 will commit all the resource requirements to the expansion of our AI infrastructure platform. I will now pass on to Dan for the financial and operating review.

Dan Newman (Chief Financial Officer)

Thank you William. Around new business, the unit development cost averages around 20,000 RMB per kilowatt or US$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 to 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 and 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%. As our new bookings are delivered, we expect the portfolio yield to remain in the 10% to 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 square meters. 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 square meters per quarter. During the second half of next year, as we start to see the flow through from this year's higher level of new bookings, the move in rate will step up noticeably. As mentioned 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 figures 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 to 13% after excluding one time items. Turning to slides 19 and 20 in 1Q26 our organic capex was 770 million RMB. In addition we received cash proceeds of 2.7 billion RMB or 385 million US dollars from the sale of a small part of our equity interest in day one which is recorded in investing cash flow. We also received cash proceeds of 2.1 billion RMB or US$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 19 billion RMB or US$2.7 billion of cash and time deposits. This is an ideal situation to be in as we prepare for for a new growth phase. Turning to slide 23. Our net debt to the last quarter's annualized adjusted EBITDA has decreased from 6.8 times at the end of 2024 to 4.7 times at the end of the first quarter of 2026. As we step up our investment, this ratio will increase to between five to six times 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 11 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. And now we're going to take our first question and it comes line of Yang Liu from Morgan Stanley. Your line is open. Please ask your question.

Yang Liu (Equity Analyst)

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. But 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 regions. Yeah, different markets, please. Thank you.

William Huang (Founder, Chairman, and CEO)

Yeah, I think Liang, I think this. William, I think in the last earnings call we already say the new incremental demand which is driven by AI, right. A larger scale data center demand in general. I mean the price pretty stable, number one. Number two, I think they're of course in the whole market you cannot stop some bidder, right? Use some price tools, try to win. But it's not normal. It's not normal, right? And maybe in my view in some region, some deal, it's a one time, it's not representing the whole market situation. Our view remain what we experienced last quarter. It's quite stable. Yeah. Thank you. Got it. Thank you.

OPERATOR

Now we're going to take our next question and the question comes line of Gokul Hariharan from JP Morgan. Your line is open. Please ask a question.

Gokul Hariharan (Equity Analyst)

Hi, my question is basically on the development cost. Dan, I think you mentioned roughly 20. 20%. Sorry, 20,000 RMB per kilowatt or $3 million per megawatt. 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 (Chief Financial Officer)

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 and 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 square meter basis the unit cost is relatively flat but the power density has increased. So if we were to measure that part on a per kilowatt basis it might appear to have come down as well. So that's why I think overall on a per kilowatt basis the decrease is about 15% over three years.

William Huang (Founder, Chairman, and CEO)

Yeah, I try to add a couple. I mean number one this scale is unprecedented. Right. So scale also make the cost a bit lower. Right? That's the nature of the business. I mean this is number one even for the vendor perspective that's larger scale give a lot of the manufacturing product company a a lot of benefit. Right. So they're willing to reduce the cost, reduce price. This is number one and number two I think a lot of the AI data center this is compared with the previous cloud the architecture wise also change a lot. So this is another reason to drive the cost. Right. So that's a to more reasons.

Gokul Hariharan (Equity Analyst)

Okay, thank you.

OPERATOR

Thank you. Now we're going to take our next question and the question comes line of Sarah Wang from ubs. Your line is open. Please ask your question.

Sarah Wang (Equity Analyst)

Thank you for the opportunity to ask a question. So I have one question regarding first quarter CapEx. So since the first quarter CapEx is 770 million RMB. So. So it seems a little bit modest given the strong orders we signed year-to-date and especially given the majority of the new orders should be new builds. So may I ask what's the reason behind this gap? Thank you.

Dan Newman (Chief Financial Officer)

Sarah. I would point you to our full year CAPEX guidance which remains unchanged. I mean the, the timing of incurring CapEx per quarter is not that significant. Right. The first quarter is Chinese New Year and it tends to be historically slightly below the level of the other three quarters. So I can't really no other more fundamental explanation than that. Gotcha. Thank you.

OPERATOR

Thank you. Now we're going to take our next question and the question comes line of Frank Lawson from Raymond James and Associates. Your line is open. Please ask a question.

Frank Lawson (Equity Analyst)

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

Frank Stone

Frank Stone. Let me just go over these numbers again and make sure everyone is clear. So William was talking about having a sales plan of 500 megawatts to 800 megawatts over the next three years. That's our current currently in and if you apply the logic of What I said, 20,000 RMB per kilowatt or US$3 million per megawatt, that's how you end up with total capex over three years of between 30 to 50 billion RMB. So if we take the midpoint of that say 40 billion RMB. Historically we have financed our investment quite conservatively with around 60% project debt to total development cost. So we would be able to obtain and draw down on about 60%, 40 billion, which is 24 billion RMB of new debt. So that would leave 14 billion RMB which is less than US$2 billion that we have to finance. But we have several different sources for that. We have our operating cash flow which is last year was nearly 3 billion RMB. We have our ongoing asset monetization program which you know, we tried to build up step by step. And we also have $2.7 billion of cash on our balance sheet. So I think we are in a strong position to finance that level of investment and other options may arise as you point out, development partnerships and so on.

Frank Lawson (Equity Analyst)

Great, thank you very much.

OPERATOR

Thank you. Now we're going to take our next question and the next question comes from the line of Ailey Zhang from Macquarie. Your line is open. Please ask question.

Ailey Zhang (Equity Analyst)

Great. Thank you for taking my question. I just wanted to get a sense on the new bookings trajectory. The year to date 340 megawatts new bookings seems to be very encouraging considering the current token consumption trends 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. What is the potential for upside?

William Huang (Founder, Chairman, and CEO)

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

Ailey Zhang (Equity Analyst)

Got it. And if I may just a quick follow up. Would it be possible for you to guys to consider kind of doing some of a neo-cloud business models as well? Because it does seem like some of the peers are trying to accumulate more resources on the compute side. So 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 (Founder, Chairman, and CEO)

Yeah, I think Neo cloud actually is not something new in China already. Historically there are a lot of big platforms, GPU service providers and customers already. Right. We are already serve them indirectly. Right. So this is number one. But number two I think we are for a long term perspective we also build, start to build some relationship with them. So far we did, we haven't done 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. So if some new cloud, high quality new cloud, we're willing to do something with them, start to build some relationship.

Ailey Zhang (Equity Analyst)

Thank you very much.

OPERATOR

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

Timothy Zhao (Equity Analyst)

Great, thank you for taking my question. My question is regarding the additional area utilized. Just wondering after the first quarter can you share your latest outlook for the rest of this year in terms of the move-in pace and what are the key moving factors that may affect the utilization rate ramp up. Thank you.

Dan Newman (Chief Financial Officer)

Timothy, I couldn't hear you clearly but yeah, I thought. Yes, I'm told you're asking about the move in pace. Right. I did address that in the prepared remarks. As you know it was 16,000 square meters 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 square meters in the third quarter of this year and fourth quarter this year and 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. But if we look at 2026 and 2027 as a whole, I think the move-in this year will be somewhat over 70,000 square meters. And then next year's number is going to be very substantially larger than that. Maybe double something of that order of magnitude.

Timothy Zhao (Equity Analyst)

Sure, understood. Can I also follow up, if I may. Just wondering. I think behind these movie assumptions I think we like to see many factors. So that is like how much of that is contributed by the domestic chips versus the imported chips. I'm just wondering if you can share more color. Important chips and weather chips will affect your moving. Okay. Okay.

Dan Newman (Chief Financial Officer)

Oh yeah, I think. I'm not sure it's your question. I mean imported chips will affect our move-in, right? Is there a question? Yes. Okay. Okay. Frankly, this year's forecast is not based on any imported chips. So all based on the domestic chips supply chain. So it will not impact our current estimates. So as the import coming, maybe, maybe some upside, who knows. Okay, got it. Thank you.

OPERATOR

Thank you. Now we're going to take our next question. And the question comes line of Daily Li from Bank of America securities. Your line is open. Please ask your question.

Matuan

Hi Matuan, thanks for taking my question. My question is about our land and power resources. We have secured quite strong resources in 1Q and are we planning to expand our resources in the following quarters and if we have the plan in future and what kinds of area we would focus on. Thank you. Continue to add to our resources.

William Huang (Founder, Chairman, and CEO)

I think last quarter we already answered the question. We will continue to develop the new market and establish a market as well. Because in China what happened is the training and the inference demands all happening in the same time. So I think we are. Because everybody know GDS is a platform player, not just a project player, right? So 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. So we try to catch up well position to catch up a different pace of the eitme.

Matuan

Thank you, William.

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.

William Huang (Founder, Chairman, and CEO)

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

OPERATOR

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

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