Wen Teng, the CEO of a leading data center company, recently shared some major accomplishments during the second quarter of 2026. The company experienced robust growth, capitalizing on the increasing demand for AI-driven services.
One of the key highlights was securing a total of 347 megawatts in new order wins, with a significant portion coming from the wholesale IDC business. This growth was driven by the accelerating demand for data center services, especially in the wholesale sector. The company has seen a total of 862 megawatts in new orders year-to-date in 2026, showcasing the strong demand for its services.
In terms of capacity, the company’s wholesale capacity in service rose by 49.4% year-over-year to 1,007 megawatts, surpassing 1 gigawatt for the first time. The utilization rate also increased to 73.9%, reflecting the growing demand for the company’s services.
On the financial side, total net revenues increased by 14.2% year-over-year to RMB 2.78 billion for the second quarter. Wholesale revenues were the key driver of this growth, reaching RMB 1.10 billion, a year-over-year increase of 29.3%. Adjusted EBITDA also saw a significant increase, rising by 25.4% year-over-year to RMB 918.3 million, primarily driven by the wholesale IDC business.
The company also made progress on strategic initiatives during the quarter, including a collaboration with CATL to develop a 3-layer integrated compute energy ecosystem. Additionally, the company strengthened its strategic resource reserves in key regions, with a total capacity exceeding 3.5 gigawatts in the Chinese Mainland and approximately 500 megawatts of overseas resources secured.
Overall, the company’s performance in the second quarter demonstrates its strong position in the market and its ability to meet the growing demand for data center services. With a focus on innovation and strategic partnerships, the company is well-positioned for long-term growth in the rapidly evolving AI-driven industry. As AI models become increasingly sophisticated and AI applications continue to scale across industries, leading internet companies, large cloud service providers, and AI native companies are accelerating their investments in high-performance computing infrastructure. The demand for such infrastructure is increasing due to the rising power requirements, longer project development cycles, and greater construction complexity associated with AI data centers (AIDC). This has led to a structural shift in the industry, concentrating demand among IDC operators with secured power resources, proven large-scale delivery capabilities, and technical expertise in executing complex AIDC projects.
With a differentiated resource portfolio, established AI infrastructure capabilities, and deep relationships with leading customers, companies are well-positioned to serve as trusted infrastructure partners and capture long-term growth opportunities in the expanding AI market. The wholesale business segment has seen significant growth, with capacity in service increasing by 49.4% year-over-year to 1,007 megawatts, surpassing the 1 gigawatt milestone for the first time. The mature capacity utilization rate has also reached a relatively high level of 92.5%.
Looking ahead, the wholesale capacity growth pipeline is robust, with over 4 gigawatts of wholesale resource capacity as of June 30, 2026. This increase is mainly driven by securing a land bank, with strong customer demand across the capacity portfolio. The retail IDC business segment has also progressed smoothly, with retail capacity in service at 50,081 cabinets and a stable utilization rate of 64.5%.
In terms of future plans, there are six data centers currently under construction, with a plan to deliver 585 megawatts of capacity over the next 12 months. Strategic partnerships, such as the one with CATL, aim to deepen computing energy integration by combining expertise in large-scale computing infrastructure development and zero-carbon new energy technologies. This partnership will contribute to shaping next-generation digital energy infrastructure globally and advancing innovation in integrated compute energy systems.
Overall, the future looks promising for companies investing in high-performance computing infrastructure for AI applications. The industry is poised for continued growth, with strong demand for AI-driven data centers and opportunities for strategic partnerships to drive innovation and sustainability in the intelligent era. The second quarter performance of our company has shown significant progress across all aspects of our business. Looking forward, our focus will be on enhancing our execution capabilities, expanding our high-performance, large-scale data centers, and strategically investing in resource reserves to improve our competitive position and seize growth opportunities. We are confident in our growth trajectory and remain committed to creating sustainable long-term value for our shareholders.
During the second quarter of 2026, our total net revenues increased by 14.2% to RMB 2.78 billion, driven primarily by the rapid growth of our wholesale business. Our adjusted cash gross profit also saw a 9.4% increase to RMB 1.16 billion, while our adjusted EBITDA grew by 25.4% to RMB 918.3 million. Adjusted net income reached RMB 7.4 million, marking a significant turnaround from the adjusted net loss in the same period last year.
Wholesale revenues, a key revenue driver, increased by 29.3% to RMB 1.10 billion in the second quarter, mainly due to activity at our N-HB Campus 03 and N-OR Campus 02A. Retail revenues also saw a 9.1% increase to RMB 1.05 billion, while non-IDC business revenues grew by 1.1% to RMB 628.4 million.
Despite slight decreases in adjusted cash gross margin, our margins remained solid thanks to ongoing efficiency enhancement initiatives. Our adjusted EBITDA margin improved to 33% compared to 30.1% in the same period last year. In terms of liquidity, we maintained a robust position with a net operating cash inflow of RMB 391.8 million in the first half of 2026.
Our cash position remains strong with total cash and cash equivalents, restricted cash, and short-term investments reaching RMB 7.21 billion as of June 30, 2026. We continue to prioritize long-term debt maturity planning and maintain healthy debt ratios.
Moving forward, our CapEx for the full year of 2026 is expected to be in the range of RMB 10 billion to RMB 12 billion to support our planned delivery of 450 to 500 megawatts. Our full-year guidance for 2026 remains unchanged, with total net revenues expected to be in the range of RMB 11.5 billion to RMB 11.8 billion and adjusted EBITDA in the range of RMB 3.55 billion to RMB 3.75 billion.
In conclusion, our second quarter results demonstrate our continued execution strength and progress in strategic initiatives. As we look ahead, we will focus on strengthening our core capabilities, deepening strategic collaborations, and expanding our infrastructure resources to capitalize on long-term opportunities in the AI era. We are committed to delivering sustainable, high-quality growth and creating long-term value for our shareholders. We are now ready to take questions from our esteemed investors and analysts. The question-and-answer session has officially begun, and we are excited to address any inquiries you may have.
The first question comes from Tom Tang, a representative from Morgan Stanley. Tom congratulated us on the significant order win this quarter and posed a question regarding the supply and demand dynamics in our key regions. He inquired about the updated outlook for pricing dynamics in these regions as well.
In response to Tom’s question, Wen Teng provided insights into the current market scenario. He mentioned that the overall compute demand is steadily increasing, driven by the demand for AI training and inferencing. The smart computing segment focused on AI is growing rapidly, with leading Internet companies procuring high-capacity resources in key regions. In 2026, major players are expected to issue tenders at the gigawatt level, primarily in national hubs under the East Data West Compute initiative. While the national data center capacity is expanding, there are structural mismatches in the industry that are creating a tight equilibrium. This imbalance is expected to persist until around 2028, providing a sustained tailwind for top-tier players like us.
Regarding pricing, existing projects will follow agreed contract rates, while new projects will consider peer rates, construction costs, resource scarcity, competitive landscape, and target returns.
The next question is from Timothy Zhao of Goldman Sachs, who had two inquiries. Firstly, he asked about the move-in pace in the second quarter and quarter-to-date, and whether it impacted the wholesale IDC revenue. Secondly, he inquired about our CapEx outlook, given the strong order wins and delivery plans for the next few years, including overseas projects.
Wen Teng addressed the first question, stating that the move-in pace was steady in Q2 and is expected to maintain momentum in the second half of the year. With the rapid ramp-up of domestically produced chips in the second half of 2026, the move-in pace is projected to increase.
Peter Zhang addressed the second question, mentioning that CapEx is aligned with demand and actual deliveries. The company will disclose the full year CapEx for 2026 once a quantitative delivery target is established. In terms of overseas development, a 500-megawatt reserved resource is being prudently developed.
Overall, we are committed to transparent communication and are dedicated to addressing any questions or concerns our stakeholders may have. Thank you for your participation in this Q&A session. Xiao Liu and Wen Teng from VNET recently shared insights on the company’s CapEx plan and overseas expansion strategy during a conference call. According to Xiao Liu, the CapEx for domestic products is closely tied to delivery schedules and unit economics for domestic IDCs. The company has a strong order pipeline and customer retention ratio, providing high visibility into CapEx. With close to 500 megawatts of overseas reserve resources, VNET plans to deliver these resources in batches while maintaining overseas outlay due to high construction costs.
Initially, the company will use its own funds to acquire land, only starting mechanical and electrical fit-out once firm orders are secured. Wen Teng added that VNET recently added 500 megawatts of new overseas reserved resources and plans to stay responsive to customer needs by implementing projects overseas. The first project will be delivered in Southeast Asia, with evaluations ongoing for opportunities in the Middle East and Europe to expand the company’s global footprint.
Regarding collaboration with CATL, VNET has established a strategic partnership focused on capturing demand from AI and integrating computing and energy for digital growth and decarbonization. The collaboration will include gigawatt-scale computing and energy facilities, distributed networks, and a zero-carbon token ecosystem. The goal is to become a defining player in digital energy infrastructure for the AI era, with synergies expected to drive progress and market disclosure in due time.
During the Q&A session, questions were raised about the company’s strong new bookings in the second quarter, particularly with a leading Internet company. Wen Teng noted that VNET signed a cumulative 862 megawatt in new orders in the first half, with a sizable 510-megawatt order from the Internet company. The company remains optimistic about potential order wins from emerging AI leaders and a diverse customer mix going forward. In the second quarter, a 345-megawatt new order was signed with another leading computing enterprise. This marks a significant step forward in the company’s collaboration with top Internet companies and hyperscalers. Additionally, the company is actively expanding its customer base by venturing into the AI industry and partnering with high-growth companies in various verticals.
Moving forward, the company aims to fine-tune its customer mix to achieve a more diversified customer base. This strategic approach will enable the company to tap into new markets and explore opportunities with emerging players in the industry.
During the earnings call, questions were raised about the company’s operating expenses (OpEx) and cost efficiency. Peter Zhang, a representative of the company, highlighted the ongoing efforts to reduce operational costs and maximize efficiency through measures like headcount control and the use of AI tools. These initiatives are expected to drive cost reduction and enhance overall operational performance in the long run.
On the financial front, concerns were raised about the decline in cash gross margin in the second quarter. Wen Teng, another company representative, explained that the decline was primarily due to higher utility usage and a one-off gain in the previous quarter. Despite these factors, the company remains focused on maintaining a strong financial position and delivering sustainable growth.
In terms of capacity expansion, the company added 1.5 gigawatts of new resources during the second quarter, with a significant portion located in Inner Mongolia and East China regions. The company plans to continue acquiring new resources in Inner Mongolia, particularly in the Wulanchabu area, over the next three years.
Regarding customer demand and reserve capacity, management shared that approximately 355 megawatts of reserve capacity are currently available. This capacity is expected to convert into firm orders as customers progress with their projects. The company has a strong track record of converting reserved capacity into orders, underscoring the high-quality backlog and strong conversion certainty.
In conclusion, the company remains optimistic about its growth prospects and is committed to driving value for its customers and stakeholders. By focusing on cost efficiency, customer diversification, and capacity expansion, the company is well-positioned to capitalize on opportunities in the evolving energy landscape. After participating in the conference call with Vnet Group, you may now disconnect your lines. Before making any decisions about buying stock in Vnet Group, it is important to consider some key factors.
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As a reminder, this article is a transcript of a conference call produced for The Motley Fool. While efforts are made to provide accurate information, there may be errors or omissions. The Motley Fool does not take responsibility for the use of this content and encourages readers to conduct their own research by listening to the call and reviewing the company’s SEC filings.
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