Q3 2025 VNET Group Inc Earnings Call
Speaker #2: Please note the Chinese line is in . Listen only mode . If you wish to questions , ask please dial in through the English line .
Speaker #2: Participants from our management include Mr. Ju Ma , rotating president , Mr. Qiyu Wang , Chief Financial Officer . Miss Xinyuan Liu , Head of Investor Relations of the company .
Speaker #2: Please note that today's conference call is being recorded. I will now turn the call over to the first speaker today, Miss Xinyuan Liu. Please go ahead.
Speaker #3: Thank you . Operator . Hello , everyone , and welcome to our third quarter 2020 earnings conference call . Our earnings release was distributed earlier today , and you can find a copy on our well as website , as on newswire services .
Speaker #3: Please note that today's call will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.
Speaker #3: Forward looking statements are subject to risks and uncertainties cause actual that may results to differ materially from our current expectations . For detailed discussions of these risks and uncertainties , please refer to our latest annual report and documents filed other with the SEC .
Speaker #3: We now do not undertake any obligation to forward-update any looking statements except as required under applicable laws. Please also note that winner's earnings press release and this conference call include the disclosure of unaudited GAAP and non-GAAP financial measures.
Speaker #3: earnings press Winner's release contains a reconciliation of the non-GAAP measures the to audited GAAP measures . A summary presentation , which we will refer to during this conference call , can be viewed and downloaded from our IRF at IR Netcom .
Speaker #3: Next, I'd like to alert you that we will be utilizing text-to-speech technology powered by Neuralink AI to deliver this quarter's prepared remarks by Mr. Ju Ma.
Speaker #3: Our rotating president and Mr. Qiyu Wang, our CFO, will join the management team in the Q&A session in person. Additionally, this conference is being recorded.
Speaker #3: A webcast of this conference call will also be available on our website at IR.com. Now let's get started with today's presentation.
Speaker #3: Mr. Ma, please go ahead.
Speaker #4: Good morning and good evening, everyone. Thank you for joining our call today. I'll start with an overview of our major accomplishments during the third quarter of 2025.
Speaker #4: Let's turn to slide four. We delivered another strong quarter, demonstrating our strategy's effectiveness in capturing opportunities on the operational side. Our wholesale IDC business sustained its robust growth trajectory, driven by our rapid delivery capabilities and customers.
Speaker #4: Fast-moving pace. As of September 30, 2025, our wholesale capacity in service grew by 16.1% quarter over quarter to 783 MW, an increase of around 109 MW.
Speaker #4: Wholesale capacity utilized by customers rose by 13.8% quarter over quarter to 582MW , an increase of around 70MW . While the utilization rate was 74.3% , reflecting customers continuous demand for our high quality , high performance IDC services , our retail IDC business continued to progress smoothly , benefiting from growing AI driven demand this quarter .
Speaker #4: retail Our MRR per cabinet increased for six consecutive quarters , reaching RMB 8948 on the financial side , our total net revenues increased by 21.7% year over year to RMB 2.58 billion for the third quarter , wholesale revenues remained our key growth driver , reaching RMB 956 million , a significant year over year increase of 82.7% .
Speaker #4: Fueled by the rapid growth of our wholesale IDC business, our adjusted EBITDA for the third quarter also increased by 27.5% year over year to RMB 758 million.
Speaker #4: In addition , building on the increase , we announced to our full year guidance before Q2 earnings this year . We are further increasing our full year revenue and adjusted EBITDA guidance this quarter thanks to faster than anticipated Movings among wholesale IDC customers and ongoing operational efficiency gains supported by our premium wholesale and retail IDC services .
Speaker #4: We continue to capitalize on strong customer momentum and secure new orders in the third quarter. I'll share more on the next slide.
Speaker #4: Moving on to our new order wins on slide five . In the third quarter , we secured three wholesale orders totaling 63MW . Specifically , in addition to the 20 megawatt order from our JV project , we mentioned on our last call , we won a 40 megawatt order from an internet company .
Speaker #4: As announced in September, and a three-megawatt order from an intelligent driving company, all four data centers in the Greater Beijing area.
Speaker #4: Entering the fourth quarter , we are seeing continued order momentum , including a 32 megawatt wholesale order . We just secured from an internet company for a data center in the Yangtze River Delta .
Speaker #4: Furthermore, driven by growing demand from customers for intelligent deployment, we secured a combined capacity of approximately 2 megawatts in new retail orders across multiple retail data centers from customers in the cloud services, local services, and financial services sectors.
Speaker #4: During the quarter . Rapid AI development and broader adoption of AI applications continued to fuel growth in China's IDC industry . We saw sustained momentum in AI related investments , especially from hyperscalers that are executing strong CapEx expansion plans .
Speaker #4: This has further accelerated demand for high performance data centers driven by AI training and inference needs . AI has become the core growth driver of the IDC industry , propelling the industry's business model evolution from product based resource delivery to platform based services that provide integrated IDC solutions .
Speaker #4: Meanwhile , customer demand and critical resources such as power are increasingly concentrated among leading IDC players . As an industry pioneer in IDC development , we're leveraging our acute insights , strong resources and premium , reliable services to seize these structural growth opportunities by quickly meeting customers needs .
Speaker #4: Now, let's delve into our business updates, starting with our wholesale business on slide seven. Our wholesale business maintained strong growth momentum, with capacity in service increasing by around 109 MW quarter over quarter to 783 MW.
Speaker #4: And utilization rate remaining stable at 74.3%, mainly attributable to our delivery capacities at our Noor campus, Zero Two, and NB campus Zero One, and faster than expected move-ins at our Noor campus Zero One.
Speaker #4: Our mature capacity utilization rate also reached 94.7%, a relatively high level. We have a clear growth path for our wholesale data center capacity.
Speaker #4: Let's move on to slide eight. As of the end of the third quarter, our total wholesale resource capacity was around 1.8 GW.
Speaker #4: Specifically, our capacity under construction was around 306 MW. Capacity held for short-term future development was around 414 MW, and capacity held for long-term future development was around 291 MW.
Speaker #4: This secured resource represents a significant advantage in light of the IDC Industries Limited effective supply and is in line with our optimistic view of AI-driven demands.
Speaker #4: Long-term growth potential. Moving to our retail IDC business on slide nine, our retail business continued to progress smoothly in the third quarter.
Speaker #4: Retail capacity in service was 52,288 cabinets , with the utilization rate increasing slightly to 64.8% as of the end of September . As I just mentioned , our retail MRR per cabinet has increased for six consecutive quarters , reaching RMB 8948 .
Speaker #4: Turning to our delivery plan on slide ten. With our strong, efficient delivery capabilities, we successfully delivered a total of around 109 MW in the third quarter of 2025, bringing our total deliveries to around 297 MW as of the end of September this year.
Speaker #4: We currently have seven data centers under construction, with six in the Greater Beijing area and one in the Yangtze River Delta. We plan to deliver around 306 MW of capacity over the next 12 months, or around 132 MW during the fourth quarter of 2025.
Speaker #4: And the first quarter of 2026, and around 174 MW during the second and third quarters of 2026. This delivery plan reflects our view as of the end of September, but we may update these estimates as we gain greater visibility over the next couple of quarters.
Speaker #4: In conclusion, our strong third quarter results showcase our ability to identify opportunities and our readiness to seamlessly meet evolving market demand.
Speaker #4: Our visionary hyperscale 2.0 framework has positioned us to lead under the new global AI driven paradigm , supported by advantages across high density deployment , delivery speed and quality , and cutting edge , sustainable technology .
Speaker #4: AI As related demand grows . We will continue to advance our effective dual core strategy and hyperscale 2.0 framework , seizing opportunities to further unleash our growth potential in the AI era .
Speaker #4: Now , I will turn the call over to our CFO , Qiu , for further discussion of our operating and financial performance . Thank you everyone .
Speaker #5: Good morning and good evening , everyone . Before we start the detailed discussion of our third quarter performance , please note that unless otherwise stated , all the financials we present today are for the third quarter of 2025 and are in MB terms .
Speaker #5: Furthermore , unless otherwise specified , all the growth rates I am reviewing are on a year over year basis . Let's turn to slide 12 .
Speaker #5: In the third quarter , we continued to pursue high quality business . Our total net revenues increased by 21.7% to RMB 2.58 billion , mainly driven by the rapid growth of our wholesale business .
Speaker #5: Our adjusted cash gross profit rose by 22.1% to RMB 1.05 billion, while our adjusted EBITDA also grew year over year by 27.5% to RMB 758.3 million.
Speaker #5: Let's look more closely at our top line. As you can see on Slide 13, in the third quarter, wholesale revenues.
Speaker #5: Our key revenue growth driver increased significantly by 82.7% to RMB 955.5 million. The rapid growth was mainly attributable to the Noor Campus zero.
Speaker #5: One . Retail revenues increased by 2.4% to RMB 999.1 million . Our non IDC business revenues increased by 0.8% to RMB 627.1 million during the third quarter , we maintained solid margins thanks to our continuous efforts to enhance overall efficiency .
Speaker #5: As shown on slide 14, our adjusted cash gross margins improved to 40.7% from 40.6% in the same period last year. Our adjusted EBITDA margin rose to 29.4%, compared with 28% in the same period last year.
Speaker #5: Moving on to liquidity on slide 15, we maintained robust and healthy liquidity, bolstered by a net operating cash inflow of RMB 809.8 million during the third quarter, bringing our net operating cash flow for the first nine months of the year to RMB 1.37 billion.
Speaker #5: Our cash position remained solid , with total cash and cash equivalents , restricted cash and short term investments reaching RMB 5.33 billion as of September 30th , 2025 .
Speaker #5: Next , let's take a look at our debt structure on slide 16 . We maintained our prudent approach to debt management . As of September 30th , 2025 , our net debt to the trailing 12 months adjusted EBITDA ratio was 5.5 and total debt to the trailing 12 months adjusted EBITDA ratio was 6.7 .
Speaker #5: Both remaining at healthy levels . Our trailing 12 months adjusted EBITDA to interest coverage ratio was 6.5 . We prioritized long term debt maturity planning , and our debt and strategic management to ensure the security of debt repayment .
Speaker #5: Currently , the company's short and medium term debt maturing in 2025 to 2027 , comprises 41.4% of our total debt . Turning now to CapEx spending , as you can see on slide 17 , for the first nine months , our CapEx was RMB 6.24 billion , with the majority allocated to the expansion of our wholesale IDC business .
Speaker #5: We still expect our CapEx for the full year 2025 to be in the range of RMB 10 billion and RMB 12 billion. The increase is mainly to support our planned delivery of 400 to 450 MW in 2025.
Speaker #5: Now moving to our full year guidance for 2025 on slide 18 . As we expect faster than anticipated movements among wholesale IDC customers and ongoing operational efficiency gains through the end of the year .
Speaker #5: We have further increased our full year revenue and adjusted EBITDA guidance . We now expect total net revenues to be in the range of RMB 9.55 billion to RMB 9.867 billion a year over year increase of 16% to 19% .
Speaker #5: Adjusted EBITDA is expected to be in the range of RMB 2.91 billion to RMB 2.945 billion, representing a year-over-year increase of 20% to 21%.
Speaker #5: If the RMB 87.7 million of disposal gains on the EJ S02 data center were excluded from the adjusted EBITDA calculation for 2020 for year over the year , growth rate would be 24% to 26% .
Speaker #5: Please note, our updated guidance factors in the impact of the private REIT transactions we issued earlier this November and excludes the target IDC projects' financials from our consolidated financial statements.
Speaker #5: Before I conclude, I'd like to briefly update you on our ESG efforts. Our outstanding sustainability performance has once again earned recognition from a leading global rating institution in the 2025 S&P Global Corporate Sustainability Assessment. Our net score increased to 73 from 70 last year, ranking among the top 8% of the IT service industry globally.
Speaker #5: We stand out in areas including risk management, information security, environmental management, and customer relations, underscoring our comprehensive capabilities in sustainable development.
Speaker #5: This quarter's strong growth and enhanced profitability are yet another testament to our high quality growth strategy . Looking ahead , continue to we will consolidate our core strengths and capture growth opportunities , delivering sustainable , long term value for all stakeholders .
Speaker #5: This concludes our prepared remarks for today. We are now ready to take questions.
Speaker #2: Thank you . We will now begin the question and answer session if you wish to ask a question , please press star one on your telephone and wait for your name to be announced .
Speaker #2: If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset and ask your question for the benefit of all participants.
Speaker #2: On today's call, please ask your question to management in English and then repeat it in Chinese. Your first question comes from Tang from Morgan Stanley.
Speaker #2: Please go ahead .
Speaker #6: Thanks , management , for this opportunity to ask questions . And congrats again on a very strong result . quarterly So I have two questions .
Speaker #6: So, the first question is more on the 2026 outlook. We’re hearing that there has been expansion in some of the domestic chipset capacities.
Speaker #6: So just wondering what is our current outlook for the overall order in 2026 . And second question is about private rates . So we noticed that we have filed another private rates with a size of almost So 10 billion RMB .
Speaker #6: Just wondering, what will be the timeline of this private rates execution? How much cash are we going to recycle, and what will be the impact to our financial statements?
Speaker #6: For the 2021, I would like to discuss Qiyu Wang's ratings. So, regarding risk, we can look at the income statement.
Speaker #7: To . You . The pipeline can . The . Be . Your . I . Way to the . Way you . A .
Speaker #7: This .
Speaker #8: Is margin . I will take your question . Thank you very know , much . You as we are approaching the end of the year , we are engaging our customers and trying to learn about their development path .
Speaker #8: This would in a well put us position to plan our resources accordingly . So according to our communications with the clients and also the current status quo of the pipeline , we believe that the market will be fairly stable with moderate increase for the year 2023 , according to our conversations with clients , we feel that they are having very detailed expansion plan or growth nationwide .
Speaker #8: Therefore , we have to plan carefully in order to accommodate the users needs because they are having , you know , they are requiring us to deliver the capacities at a faster pace with a higher requirement .
Speaker #8: So that's why we are planning accordingly as well . And so the overall rating for the next year is that the market is going be to stable with the moderate increase and with regard to your second question on the domestic chip , so we VNet is the tracking and monitoring the development of the domestic chips .
Speaker #8: Very closely . We know that the sectors are evolving very quickly with a lot more options available . And we believe that in 2026 , you know , we're going to see intensive competition among domestic chip players other than the 2 to 3 major players , there are more upcoming players coming into the market .
Speaker #8: So we're going to see significant growth . You know , development in this sector . So that will give us give the customers a lot more choices with more certainty .
Speaker #8: Again , that would push the development or in return drive the development of our business . Thank you . The .
Speaker #9: Women are . A similar race . To the now . The IDC . The woman . Similar to the . Fashion . The a woman .
Speaker #9: In the .
Speaker #8: This is Qiyu Wang. I will take your second question with regard to the Ritz projects. So, these two Ritz projects followed on the heels of our first private Ritz project.
Speaker #8: So the underlying project for our first project was retail IDC. Whereas the underlying projects, underlying assets for these two Ritz projects are wholesale IDCs.
Speaker #8: So this would be the first time that we have scaled private Ritz issuance for the with the underlying assets of wholesale idcs . So if these issues were to successful , this would officially marks that we have completed the full closed loop financial or capital cycle of development holding partial exit as well as a long term operation .
Speaker #9: Now when . The woman . The the . The woman . The . The woman is .
Speaker #8: Leads to raise. Projects are currently being reviewed by the exchanges, and the expected valuation multiples would be better than the first Ritz project.
Speaker #8: Once two Ritz the projects were successfully issued , we will , unlike the first Ritz project , we will consolidate the financial statements of these two projects into the group level financial statements .
Speaker #8: So therefore , it wouldn't impact the group level financial statements , specifically , the revenue or EBITDA data we are planning to adopt a similar approach with future private Ritz projects with underlying assets of wholesale idcs and our goal is to complete the issuance by Q1 next year .
Speaker #8: Next question please .
Speaker #2: Thank you. Your next question comes from Timothy Zhao from Goldman Sachs. Please go ahead.
Speaker #10: Thank you Great . for taking my question and congrats on the very solid results . Two questions here . One , I this earlier , you mentioned that .
Speaker #10: Receive more orders for. No.
Speaker #11: Yeah. We can hear you now.
Speaker #10: Okay. Yeah. So I was saying the winner appears to be winning more orders in your wholesale campuses in Hubei and Jiangsu.
Speaker #10: From the geographical location perspective, how do you think about the customer preferences, and what kind of demand does each campus serve differently?
Speaker #10: That's my first question. My second question is regarding the pricing for the wholesale business. I noticed that for this quarter, there is some fluctuation in the wholesale MSR.
Speaker #10: Just wondering , how do you think about the pricing trend into the fourth quarter and next year ? The wholesale business ? Yeah , the .
Speaker #10: The . 20 . Who do . How the . The . The 2020 . The . Now . I .
Speaker #7: I mean, the leasing for Taiwan.
Speaker #8: I'll take your first question. Actually, the client takes specific considerations with regard to their orders for their business across different regions.
Speaker #8: They do not have very particular preferences. I think the major considerations on their end are, first, the type of business and product offerings.
Speaker #8: Second, the distance or proximity to their headquarters. And the third is how convenient it is to scale up the existing capacity that they have with us.
Speaker #7: Now . And . The . The I . The . The .
Speaker #8: And take us for example. We have observed that the client has different types of pace with regard to their requests across different regions, and it would vary quarter by quarter.
Speaker #8: We have a lot of the demand coming from the Beijing area, as well as the Yangtze Delta area. However, we do have upcoming new demands from customers for campuses in Hubei Province, as well as the Apple campus.
Speaker #8: Like I said , they are the major considerations on the client side is their type of current product offerings and the proximity to their headquarter , as well as the how convenient it is convenient it is to scale their existing capacity with us .
Speaker #8: So that's the major considerations on their end . And based on that , they are varying their requests a quarter by quarter .
Speaker #7: You know, I within the.
Speaker #8: And with regard to the pricing of our wholesale IDCs, according to what we have observed in the pricing for Q3, it has remained fairly stable.
Speaker #7: In the . The the UK . So are .
Speaker #8: And I would like to elaborate on that. First, the customers are moving in faster than we expected. Therefore, the IRR of these projects is better than we expected.
Speaker #7: They are. They should.
Speaker #8: And number two. Frankly speaking, in areas where the dynamics of supply and demand are in tight balance, VNet does not engage in the beating with the low prices.
Speaker #8: Therefore, we are able to secure a fairly stable order or contract price. Thank you.
Speaker #11: Next question .
Speaker #2: Thank you. Your next question comes from Daily Li from Bank of America. Please go ahead.
Speaker #12: Hi . Thanks for taking my question . Congrats on the strong results . I have two questions here First one is . in our last earnings call , we mentioned we have a few other projects and we are participating for the tendering .
Speaker #12: And could you update us on the progress and how we complete , you know , all the projects ongoing or are we how many projects we are in with our clients and in future , how do you see the seasonality of tendering in future ?
Speaker #12: My second question is about the new land and power resources in this quarter . We see our total resources on hand is largely stable , and in future , where would we to which area would be our focus to find more resources and land and power ?
Speaker #12: How would . You we you . I . Will I woman and . Will I the two you see the . One . I can , I .
Speaker #12: And . For .
Speaker #7: We are here for the second one. I am who.
Speaker #8: Thank you for your questions. You know, as we have observed for the first three quarters, that different customers are coming up with different requests at varying paces.
Speaker #8: And for us, we follow their pace closely, and I have made a very brief summary of what we have achieved in terms of the new orders that we have secured over the past 12 months.
Speaker #8: That was 331 megawatt .
Speaker #7: In the woman Q2, the full should the woman I.
Speaker #8: Looking ahead to 2026, based on the services we are offering to our clients, as well as our understanding of our clients, we are confident that we are able to sustain this growth momentum.
Speaker #7: Going through Q2 , the AI , AI , the future . AI , the the . 20 . 2020 . One I . Qiyu Wang .
Speaker #7: The GPU 20 20 the.
Speaker #8: And so , with regard to the wholesale idcs , we have been following closely the clients AI development trend , we have noticed that customers are actually balancing their inferencing and training demands , and we have , you know , captured that change .
Speaker #8: customers are The pivoting more towards the inferencing . And we are deploying resources accordingly to meet that customer's needs . So therefore we are repurposing some of our cabinets and acquiring GPUs in advance .
Speaker #8: So this would put us in a good position to accommodate our users needs . And you know , particularly with these orders from the key clients , we are confident that with the efforts on our end , we are able to accommodate users needs as the AI growth momentum continues to unleash .
Speaker #7: You . A woman who who the who ? The women who before are . I to watch . . Q1 .
Speaker #8: And with regard to your second question on resources that we are planning to acquire in the future, that's something that the company values a lot and puts a lot of thought into based on the service that we offer to our clients, as well as the understanding that we have of them.
Speaker #8: We are planning our resources for the next year. On top of that, we have extended our planning over to a five-year horizon rather than on a yearly basis.
Speaker #8: So, this would allow us to plan more strategically to accommodate users' needs.
Speaker #7: The. The the Billie, the our. To to to AI GPU.
Speaker #8: And to break it down . We are carefully weigh three factors . One is the split the demand split between generic computing power versus the smart computing power .
Speaker #8: And the second is the geo locations . And the third is the AI . GPU related chips . Development .
Speaker #7: Beijing . The you . Who ? Wang Jing or the Qiyu Wang . The . The .
Speaker #8: And, more specifically with regard to next year, we are going to focus number one, the Greater Beijing area, particularly Hebei and the Beijing surrounding areas.
Speaker #8: Second , number two . The Yangtze River Delta areas , we are starting to acquire resources for the next five years to accommodate our users demand and additionally , we are exploring the resources outside these two major areas that I've mentioned .
Speaker #8: Thank you .
Speaker #2: You. Your. Thank you. Next question comes from Sarah Wong from UBS. Please go ahead.
Speaker #13: Thank you for the opportunity to ask a question. I actually only have one question. So, I recall earlier this year, management had shared that one of the top priorities from hyperscale customers is the time to market.
Speaker #13: So has that changed? And also, as inference demand is going to be the growth driver into next year, is there any change in the likelihood of customers' consideration in terms of new order releases?
Speaker #13: And if we talk about more workload, by inference, that means maybe user latency will be a relatively more important consideration factor going forward.
Speaker #13: Now, the AI to the . That . The . On 20 . 20 . Two.
Speaker #7: The 20. I would take.
Speaker #8: I'll answer the second half of your question. Yes, we have observed that inferencing will become a major growth driver for next year.
Speaker #7: You . And we . Xiao Xiao . You . Poco a poco .
Speaker #8: So that means the customers have higher requirement in terms of latency . So the lower latency , the better . Therefore , we are in a very good position to meet customers needs with our campuses in the Greater Beijing area , particularly Hubei province , as well as the campus .
Speaker #7: Do the . .
Speaker #8: And with regard to the first half of your question, yes, it is quite a trade-off that we have to face.
Speaker #8: We are facing significant challenges in terms of how fast the customer wants to move in with the capacity that they have secured with us.
Speaker #7: Some of the . The only .
Speaker #8: And there are three approaches that we are taking to meet customer demand. Number one, we are planning early in terms of civil engineering and external power supply.
Speaker #8: Number two , we are consolidating our capacity in terms of supply chain management . Number three , we are adopting electromechanical , modularization as well as other standardized construction solutions to meet customers needs .
Speaker #7: And .
Speaker #8: As you know, the general timeline that the customer expects is six months, which means they want to move in within six months after signing the contract.
Speaker #8: Yes, we are able to accommodate users' needs in terms of the horizon. In one particular case, we are even able to accommodate or deliver within three months after signing the contract.
Speaker #8: Just so you know. Thank you.
Speaker #11: Next question please .
Speaker #2: Thank you. Your next question comes from Xu Yunji from CIC. Please go ahead.
Speaker #3: Hi, my congratulations on the company's strong earnings and thank you for taking my question. My first question is about the wholesale, and the IDC delivery pace for the wholesale business is very fast. Has the company stated the utilization rate target for the next two years?
Speaker #3: My second question is about the retail IDC business. We have seen the retail business, IDC business, and MRI has been growing for several quarters.
Speaker #3: And what are the main drivers behind this trend, and how do you view this sustainability in the future? How? Adhesive. You are.
Speaker #3: MRI .
Speaker #7: You, the woman. The woman who... Women.
Speaker #8: With regard to the utilization rate, of course, the customers are demanding to live at a faster pace for our mature IDCs.
Speaker #8: The utilization rate is inching closer to 95%.
Speaker #7: Now . The . Woman . She . You .
Speaker #8: And with regard to the specific target on the utilization rate, I think it's partly that depends on the capacity that's going to be delivered in the next two years.
Speaker #8: We will disclose more information in the Q4 financials , and we are , you know , in the long run , we are confident that the utilization rate will steadily increase .
Speaker #7: Year the year. When in. The.
Speaker #8: And thanks for your attention on our retail IDC business. As you know, the wholesale IDC business has been growing fairly quickly, in contrast to the retail IDC.
Speaker #8: We are very pleased to see the MRI of our retail business continue to grow quarter over quarter for several consecutive quarters. As you know, the competitive landscape in this sector is fairly intense.
Speaker #7: The . Can you show the . Two to . To the to two to . One . The . The . Should .
Speaker #8: I think the growth partly boiled down to a couple of factors . Number one , in terms of the needs of customers , they are adding smart computing on top of a storage plus generic computing .
Speaker #8: And we are proactively repurposing our cabinets in order to meet their demands in order to capitalize on this growth momentum and needs.
Speaker #7: On the the . For Xinyuan Liu .
Speaker #8: And the factor number two on our side, on top of the hosting service we offer to the clients, is that we are providing incremental value-added services on the software level.
Speaker #8: Let's say networking, as well as storage, networking services.
Speaker #7: Again . The .
Speaker #8: And another factor is the are initiative of repurposing the retail cabinets into higher density cabinets . And clearly we are benefiting you know , from these efforts and initiatives .
Speaker #7: Through .
Speaker #8: Not last but least, should the demand from customers in terms of storage, generic computing, plus value-added services sustain, we are confident to sustain the growth momentum of our retail business.
Speaker #8: Thank you .
Speaker #11: question , Next please .
Speaker #2: Your next thank you question comes from Andy Yu from DBS. Please go ahead.
Speaker #14: Hi . Thank you , management , for taking my questions and congratulations on the solid results . So I have two questions . So your keep here has announced plans to expand into regions with lower electricity costs to capture AI training demand .
Speaker #14: So, how do you see the supply-demand dynamics evolving in these regions where the nets currently have a first mover advantage? And secondly, what is the government's stance on data centers, which has become more positive with a shorter timeline for new asset ingestion?
Speaker #14: Post IPO . Do we expect our seaweed application to accelerate ? And apart from which projects , what will our funding strategy be going forward ?
Speaker #14: Finally ? AI . Will now . Easy IP , hold . IPO Since . The series .
Speaker #7: Are you . Do you do you ? Do you licensing . Licensing the . Washington women .
Speaker #8: Thank you. I'll take your first question. I think different companies are adopting different strategic growth approaches with regard to their own reading on the market dynamics, as well as their development legacy.
Speaker #8: So they are actually deploying resources based on all of these factors. However, I would like to elaborate on how we go about it.
Speaker #7: So, do you? The... The...
Speaker #8: Like I iterated many times over the next 3 to 5 years, AI is going to be increasingly more important as a growth driver.
Speaker #7: We . On .
Speaker #8: On the corporate level , our reading is that the training of foundational models that type of demand will be increasingly concentrated to one or few top capable , deep pocketed players .
Speaker #8: So that's the first reading that we have on the market.
Speaker #7: When you truly .
Speaker #8: And number two, we believe that inferencing and private deployment will continue to sustain their growth momentum, as you know, it can be or confirmed.
Speaker #8: And number two, we believe that inferencing and private deployment will continue to sustain their growth momentum. As you know, it can be confirmed or advertised from Jensen Huang's remarks.
Speaker #7: The potential for the 20.
Speaker #8: And number three , we believe over the course of the next five years , as the GPU grows , domestic GPU chips grow , there is going to be more demand from the inferencing .
Speaker #8: Private deployment as well as many emerging group intelligent agents . So these are the , you know , growth areas or customer demands that we are paying closer attention to .
Speaker #7: For the . Like a the . future .
Speaker #8: in So a nutshell , we are we will adhere to the principle of a coordinated balanced development . So using our resources to meet users , varying demands .
Speaker #8: Thank you .
Speaker #9: But gene abs, similar to the fashion, or the.
Speaker #8: So, our C-rate is still underway. However, I am not in a position to disclose any information at the moment, and we wish to update you later as we see more progress.
Speaker #8: So other than the see rates for public are proactively rates , we advancing holding the type ABS , also known as private rates .
Speaker #8: And we have successfully issued one, and we are hopeful that this would allow us to recycle a major, sizable, as you know, fund or capital from such types of issuance.
Speaker #9: You know . And . The same . The . Been .
Speaker #8: And additionally , I am happy to share that we so the one of the operating entity domestic operating entity Beijing vnet has just got a received a triple A rating from a domestic reading institution , which is rare among private owned companies .
Speaker #8: A , you know , non-public . So none OEMs , non state owned companies . So with this rating , a favorable rating .
Speaker #8: So we are actively advancing the issuance of domestic corporate bond , particularly the science and tech innovation bond , which comes with very favorable interest rate .
Speaker #8: So, should it be pulled through? We are going to benefit from a lower interest rate with the widening channel of financing.
Speaker #11: Next question please .
Speaker #2: Thank you . Your next question comes from Ethan Zhang from Nomura . Please go ahead .
Speaker #15: Okay . Thanks , management , for taking the questions . So only one quick question . So how do you see the trend for our unit CapEx ?
Speaker #15: Because I noticed that for the first nine months, the total expenditure was around $6 billion versus our full year guidance of $10 to $12 billion.
Speaker #15: So it looks a bit behind schedule versus our capacity delivery schedule. And so, just wondering if management can provide some color on this.
Speaker #15: And also for next year's CapEx . What's our outlook . And potential sources for funding our next year's CapEx ? By 20 . CapEx .
Speaker #15: Route capacity just on unit CapEx. The trend is CapEx to fund the CapEx.
Speaker #9: CapEx . The CapEx .
Speaker #8: So, the majority of our CapEx is on the wholesale IDC, and CapEx per unit megawatt on our wholesale IDCs is gradually trending down.
Speaker #9: And the CapEx has increased. Women are more engaged, and the phasing is pretty smooth. She is doing a great job.
Speaker #8: And we are still in the process of putting together our CapEx for next year . And we are preparing the similar size of funding and the proceeds or the sources of these funding would mainly come from asset securitization as well as issuance of a corporate , domestic , corporate bond .
Speaker #8: So a quick number that I want to share with you . So through the pre prior private rates and development fund that issued in 2025 , we have successfully recycled 2 billion RMB through the equity assets .
Speaker #8: And our goal is that we are going to beat this number in 2026 .
Speaker #9: I take the CapEx.
Speaker #8: There are lot of a tools in our toolboxes financing toolboxes . I would say , and we are confident that we're able to fund our CapEx while keeping the leverage ratio within a secure range or safe range .
Speaker #11: question Next please .
Speaker #2: Thank you. Your next question comes from Anthony Lang, J.P. from Morgan. Please go ahead.
Speaker #10: Hello . Your . questions . So I have two Two questions regarding the the four year uplift guidance . So the four year guidance implies for Q revenue appears to be down a little bit .
Speaker #10: Second digit based on the midpoint. And then what could be the potential reasoning given the strong, fast customer moving rate? Is there a potential upside to the full-year guidance?
Speaker #10: Further , the second question is regarding the three Q reported the margin . There's be . There was some sequential decline versus Tokyo , despite a very strong customer moving rate .
Speaker #10: What could be the potential driver to cause this decline ? And what could be the next few quarters EBITDA margin trend ? So our dimension is Kenyan thing .
Speaker #10: They in so the . The something content to the . One . EBITDA margin . The the . The . The margin trend is .
Speaker #9: Is . The . The . Consumer .
Speaker #8: Let me take your question . As always . We have been consistently prudent in terms of offering our full year revenue guidance . I think we are going to watch closely the pace of our customers moving in , as well as the electricity used by them , because they are closely related to the revenue .
Speaker #8: Looking to the quarter over quarter growth , I there's think very little likelihood the Q4 revenue will decline sequentially . I would advise you to refer to the upper end of our full year revenue guidance range .
Speaker #9: The EBITDA margin is 20%. Sure, you mentioned Q2. You should refer to the margin. San. The margin is related to Chenggang Shen's EBITDA margin.
Speaker #9: The . The .
Speaker #8: And with regards the EBITDA margin , I would say it's within a reasonable range because majority of our offerings is , you revenue is from the wholesale IDC , idc business and because of the rising temperatures in Q3 , therefore , we are seeing we are seeing more tariffs for Q3 , given that the these are actually reflected in our PNL in terms of the tariff that we pay .
Speaker #8: However , with regard to our operational costs , they are consistent . We do not see huge fluctuations . And with , you know , so I would see this as reasonable seasonal fluctuations .
Speaker #8: Thank you .
Speaker #8: Thank you .
Speaker #2: you , ladies and Thank gentlemen . That concludes our conference for today . Thank you for participating . You may now disconnect your lines .