Edison Lee

Edison Lee inquired about the utilization plan for the $111 million raised from the sale of ACM Shanghai shares and sought further comment on the pricing pressure affecting some products in Q4.

Answer

CEO David Wang explained that proceeds from ACM Shanghai's private offering are focused on R&D and manufacturing expansion, including a second building for $3 billion annual output and the Ningdong mini-line. The $111 million from the 1.3% Shanghai share sale will primarily fund global customer engagement, marketing, sales, and establishing a US assembly base to mitigate tariff impacts. CFO Mark McKechnie reiterated that a few semi-critical products faced low margins in Q3 and Q4 due to competitive pressure, and a larger inventory provision in the latter half of 2025 contributed to the margin impact, with expectations for a smaller and more balanced provision in 2026.

Edison Lee asked about the factors contributing to the lower Q4 margin, slower revenue growth, and shipment decline, and when these metrics are expected to improve in 2026. He also questioned the utilization of the $111 million proceeds from the sale of ACM Shanghai shares.

Answer

CEO David Wang reiterated that new product ramps (SPM, N2 bubbling, supercritical CO2, copper plating, PECVD, track, furnace) and the Ningdong mini line will drive improvement. CFO Mark McKechnie clarified that Q4 2025 was impacted by new products not yet scaling and a customer push-out, confirming pricing pressure on semi-critical products and higher inventory provisions. David Wang stated the $111 million proceeds would fund R&D, manufacturing expansion (second building for $3 billion annual output), the mini line, global marketing, sales channels, and US assembly operations, emphasizing flexibility in funding sources.

Edison Lee of Jefferies asked about the reasons for Q2's slower revenue growth relative to the full-year outlook and requested a breakdown of growth drivers for Q3 and within the China market (memory vs. logic).

Answer

CEO David Wang explained that quarterly revenue can be lumpy and reiterated the full-year 15% growth target at the midpoint. He identified cleaning and copper plating as the main drivers for the strong Q3 outlook. While not providing a precise split, he noted that both memory and logic segments in China are showing solid, long-term demand.

Edison Lee questioned whether the slowdown in China's advanced packaging market could be a leading indicator for front-end spending and asked about strategic shifts among Chinese packaging firms, such as moves into HBM or CoWoS.

Answer

CEO David Wang clarified that the advanced packaging segment, while slow earlier in the year, saw a gradual pickup in Q3 and Q4, and he remains positive on its outlook. He explained that reported revenue reflects past activity. Wang confirmed that Chinese packaging companies are actively developing new technologies, including moving into high-density and panel-level packaging to address advanced applications.

Edison Lee asked about the AI exposure (percentage, inferencing vs. training) of new orders for the China market (near 300 megawatts) and the impact of China government's Q2 window guidance to tighten data center supplier regulations.

Answer

Dan Newman (CFO) clarified that new bookings for 2025 are expected to be nearly 300 megawatts, with about 65% being AI-related, mainly inferencing or a combination with training in Tier 1 cloud regions. William Huang (Founder, Chairman and CEO) addressed the government guidance, stating it's common in Tier 1 markets, but GDS is prepared with 900 megawatts of powered land, and in remote areas, power is abundant with local government encouragement.

Edison Lee from Jefferies asked for a breakdown of Dayone's 780 megawatts of committed power between Chinese and U.S. customers. He also questioned why GDS maintained its full-year guidance despite strong first-half results and the recent C-REIT deconsolidation.

Answer

CEO William Huang estimated Dayone's customer mix is currently about 30% international and 70% Chinese customers for their overseas business, a profile he expects to evolve over the next few years. CFO Daniel Newman explained that full-year guidance was maintained because the material impact of the C-REIT asset deconsolidation, which will reduce reported revenue and EBITDA in the second half, was not factored into the original guidance.

Edison Lee of Jefferies asked for an update on the wind power project in Wulan Chabu, its potential financial impact, and the reasons for the year-over-year increase in wholesale MRR.

Answer

VNet Management stated the wind power project is on track to deliver power by late 2025 or early 2026, expecting a positive impact on IRR but deferring P&L specifics until it's operational. They attributed the higher wholesale MRR to seasonal factors, including increased electricity bill revenue and one-off income, confirming that underlying wholesale pricing remains stable.

Edison Lee from Jefferies asked if the new 4MW of retail contracts are AI-driven and priced by power, and also questioned the drivers behind the significant increase in Monthly Recurring Revenue (MRR).

Answer

A company Moderator confirmed that most of the new retail demand is indeed AI-driven, spanning sectors like FinTech, local services, and intelligent driving. An executive identified as Zhu Yu added that the MRR increase is a direct result of these AI-related orders, which require high-voltage cabinets that command higher prices, and noted the company is actively repurposing capacity to meet this demand.

Edison Lee asked about the differences in CapEx and technology requirements between AI training and inferencing demand. He also began to ask about the significant increase in power held for short-term development before his connection became unstable.

Answer

Rotating President Chenggang Shen explained that while AI training demand remains strong, demand for inference services is growing, particularly from quant trading and autonomous driving firms, which VNET is addressing at its Huailai and retail campuses. CFO Qiyu Wang noted that non-wholesale CapEx was split between retail data center maintenance and purchasing GPU hardware to meet specific user demand.