21Vianet Group, Inc. Sponsored ADR Class A Aktie

Hello, ladies and gentlemen. Thank you for standing by for the First Quarter 2026 Earnings Conference Call for VNET Group, Inc.

[Operator Instructions]

Participants from our management include Ms. Sharon Liu, rotating President; Mr. Peter Zhang, SVP of Operational Finance; Ms. Xinyuan Liu, Head of Investor Relations of the company. Please note that today's conference call is being recorded. I will now turn the call over to the first speaker today, Ms. Xinyuan Li. Please go ahead.

Thank you, operator. Hello, everyone, and welcome to our first quarter 2026 earnings conference call. Our earnings release was distributed earlier today. and you can find a copy on our aside as well as on use wire services. Please note that today's call will contain forward-looking statements with under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations.

For detailed discussions of these risks and uncertainties, please refer to our latest annual report and other documents filed with the SEC. VNET does not undertake any obligations to update any forward-looking statements, except as required under applicable laws. Please also note that VNET's earnings press release and this conference call include the disclosure of audited GAAP and non-GAAP financial matters. VNET's earnings press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures. A summary presentation, which we will refer to during this conference call can be viewed and downloaded from our IR website at ir.vnet.com.

Next, I'd like to alert you that we will be utilizing text-to-speech technology powered by newlink.ai to deliver this quarter's prepared remarks by Ms. Sharon Liu, our rotating President; and Mr. Peter Zhang, our SVP of Operational Finance. The management team will join the Q&A session in person. Additionally, this conference is being recorded. A webcast of this conference call will also be available on our aside at ir.vnet.com. Now let's get started with today's presentation. Ms. Liu, please go ahead.

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 first quarter of 2026. We began this year with strong results, thanks to strong execution of our effective dual core strategy and hyperscale 2.0 framework. On the operational side, our wholesale IDC business delivered robust growth driven by strong customer demand and fast customer movements as of March 31, 2026. Our wholesale capacity in service rose by 18 megawatts to 907 megawatts, in line with our plan to concentrate our capacity expansion deliveries in the second half of the year.

Meanwhile, driven by customers' fast movements, wholesale capacity utilized by customers grew by 64 megawatts to 687 megawatts, bringing the utilization rate to 75.7%, up 5.6 percentage points quarter-over-quarter. Our retail IDC business continued to progress smoothly supported by growing AI-driven demand. Retail MRR per cabinet increased slightly to RMB 9,448 sequentially and retail utilization rate remained stable at 64.1% during the first quarter. On the financial side, our total net revenues increased by 19.8% year-over-year to RMB 2.69 billion for the first quarter. Wholesale revenues remain the key growth driver, reaching RMB 1.06 billion, a significant year-over-year increase of 58.1%. Our adjusted EBITDA for the first quarter also increased by 30.6% year-over-year to RMB 891.5 million, driven by the strong growth of our wholesale IDC business. In addition, our premium reliable services continue to earn customer trust and gain market share, evidenced by multiple high-quality order wins, totaling 519 megawatts year-to-date 2026. I will go through the details on the next slide.

Moving on to our new order wins on Slide 5, year-to-date 2026. Order momentum remained strong with 3 wholesale orders. secured totaling 57 megawatts fueled by continued growth in AI-driven demand for high-quality data center resources. We secured 2 orders, 110 megawatts and 400 megawatts from an Internet customer at separate data centers in the Greater Beijing area. Meanwhile, another data center in the Greater Beijing area won a 7-megawatt order from a local services customer. Furthermore, bolstered by AI-driven demand, we also secured new retail orders totaling approximately 2 megawatts across multiple retail data centers from customers in the local services, Internet and IT services sectors. This robust order momentum underscores our strengthened competitive positioning and growing ability to capture market share. At the same time, continued policy support for AI Plus initiatives is reinforcing industry tailwinds. Authorities are promoting the development of large-scale, clustered green computing infrastructure, which is accelerating the broader adoption of computing power across industries and further expanding the addressable market.

Meanwhile, driven by the AI industry's rapid progress. Demand for AI-related computing power and data center resources is surging, driving the industry into a new growth phase. However, the effective supply of high-quality data centers remains relatively limited, constrained by utility and power quotas limitations in core regions. Against this backdrop, IDC players with long-term industry accumulation, sufficient resource reserves and project deployments in core regions are best positioned to fully capture the structural opportunities arising from the expansion of AI demand. As a pioneer in AIDC, VNET is poised to benefit from these structural shifts. Our high performance large-scale data center clusters, coupled with a robust resource pipeline in core regions represent a significant advantage. Furthermore, our proven track record in rapid delivery and operation and maintenance excellence are competitive strengths that are becoming increasingly difficult to replicate at scale, supported by favorable policies and an ongoing structural transformation within the industry. We are confident in our ability to consistently capture emerging market opportunities and cement our leadership position.

Now let's delve into our business updates, starting with our wholesale business on Slide 7. our wholesale business continued to grow with capacity in service increasing by 18 megawatts quarter-over-quarter to 907 megawatts. Utilized capacity grew by 64 megawatts and sequentially to 687 megawatts, driving the utilization rate up to 75.7% from 70.1% last quarter, mainly attributable to customers' fast movements at NOR campus [ 02A ] and NHB campus 03. Our mature capacity utilization rate also reached 93.8% and a relatively high level. We have a clear growth path for our wholesale data center capacity. Let's move on to Slide 8. Our total wholesale resource capacity continued its upward trajectory reaching 2.48 gigawatts as of March 31, 2026. Specifically, our capacity under construction rose to [ 516 ] megawatts and with a precommitment rate of 85.8% year-to-date 2026. Capacity held for short-term and long-term future development grew to 697 megawatts 359 megawatts, respectively. It's worth noting that the majority of the capacity reserved for future development is driven by resources we have secured at our Ulanqab IDC campus demonstrating our ability to secure critical resources and rapidly scale capacity in strategic regions.

Our secured resources provide us with a meaningful competitive edge particularly given the tightening effect of supply in the IDC industry and reinforce our confidence in the long-term growth potential, driven by AI-related demand. Moving to our retail IDC business on Slide 9. We our retail business progressed smoothly in the first quarter. Retail capacity in service increased to 5,170 cabinets from 49,863 cabinets last quarter, the utilization rates remained stable at 64.1% as of the end of March, MRR per retail cabinet slightly increased to RMB 9,448 this quarter. Turning to our delivery plan on Slide 10. We delivered 18 megawatts in the first quarter of 2026, and in line with our delivery plan, which concentrates the majority of the year's deliveries in the second half. We currently have 8 data centers under construction with 7 in the Greater Beijing area and 1 in the Yangtze River Delta. We plan to deliver 56 megawatts of capacity over the next 12 months, around 250 megawatts during the second and third quarters of 2026 and around 266 megawatts during the fourth quarter of 2026, and the first quarter of 2027, with the majority allocated to our data centers, at the Ulanqab IDC campus to meet the strong demand from wholesale customers. In conclusion, our first quarter performance demonstrated both strategic effectiveness and execution strength.

Looking forward, we will remain focused on advancing our dual core strategy and hyperscale 2.0 framework, further developing our scalable green data center clusters and enhancing our comprehensive AIDC solutions to meet growing AI-driven demand. In parallel with our long-term strategy, we have also strengthened our shareholder base by welcoming new strategic investors affiliates of CATL have entered into a share purchase agreement to acquire up to approximately 38.1% and of our shares from subsidiaries of Shandong Hi-Speed Holdings Group, with closing expected in the fourth quarter of this year. We would also like to express our sincere appreciation to Shandong Hi-Speed Holdings Group for their trust in our vision and years of partnership and support in our growth journey with CATL entry. We believe that this new relationship will generate meaningful strategic synergies and bring opportunities for fruitful collaboration across technological innovation, supply chain and next-generation AI data center development enhancing our long-term competitiveness and growth momentum.

Overall, we remain confident in capturing the growth opportunities ahead and delivering sustainable long-term value for all shareholders. Now I will turn the call over to our SVP of Operational Finance, Peter, for a further discussion of our operating and financial performance. Thank you, everyone.

Good morning and good evening, everyone. Before we start the detailed discussion of our financial performance, please note that unless otherwise stated, all the financials we present today are for the first quarter of 2026 and are in renminbi terms. Furthermore, unless otherwise specified, all the growth rates I am revealing are on a year-over-year basis.

Let's turn to Slide 12. In the first quarter, we continued to focus on high-quality development. Our total net revenues increased by 19.8% to RMB 2.69 billion, mainly driven by the rapid growth of our wholesale business. Our adjusted cash gross profit rose by 25.1% to RMB 1.21 billion, while our adjusted EBITDA also grew year-over-year by 30.6% to RMB 891.5 million. Let's look more closely at our top line. As you can see on Slide 13, we have a new milestone this quarter as wholesale revenues have surpassed retail revenues for the first time. Wholesale revenues, our key revenue growth driver increased significantly by 58.1% to RMB 1.06 billion for the first quarter mainly attributable to activity at the NOR campus 01 and NOR campus 028, Retail revenues increased by 5.4% to RMB 1.02 billion for the first quarter. Our non-IDC business revenues increased by 0.3% to RMB 606.6 million for the first quarter. During the first quarter, we maintained solid margins thanks to ongoing efficiency enhancement initiatives. As shown on Slide 14, our adjusted cash gross margin improved to 45% and from 43.1% in the same period last year. Our adjusted EBITDA margin rose to 33.1% compared with 30.4% in the same period last year.

Moving on to liquidity on Slide 15. We maintained robust and healthy liquidity. Our net operating cash inflow reached RMB 173.7 million during the first quarter excluding the impact of RMB 119.1 million in income tax related to capital transactions and other one-off items. The net operating cash inflow for this quarter would be RMB 292.8 million. Our cash position remains solid with total cash and cash equivalents, restricted cash and short-term investments, reaching RMB 8.8 billion as of March 31, 2026. Next, let's take a look at our debt structure on Slide 16. we maintained our prudent approach to debt management. As of March 31, 2026, our net debt to the adjusted last quarter annualized EBITDA ratio was 3.8% and total debt to the adjusted last quarter annualized EBITDA ratio was 6.1%, both remaining at healthy levels. Our adjusted trailing 12 months EBITDA to interest coverage ratio was 5.8%. We prioritize long-term debt maturity planning in our debt and strategic management to ensure the security of debt repayment. Currently, the company's short and medium-term debt maturing in 2026 to 2028 comprises 45.8% of our total debt.

Turning now to CapEx spending on Slide 17. Our CapEx was RMB 1.91 billion in the first quarter, with the majority allocated to the expansion of our wholesale IDC business. We continue to expect our CapEx for the full year 2026 to be in the range of RMB 10 billion to RMB 12 billion, mainly to support our planned delivery of 450 to 500 megawatts in 2026. We continue to advance our asset monetization strategy and made meaningful progress during the first quarter. As we mentioned on our last call, in March 2026, two of our private rate projects were successfully listed on the Shanghai Stock Exchange with a combined offering size of approximately RMB 6.36 billion and an EV to EBITDA multiple of around 13x to 14x by establishing a scalable, efficient capital recycling model. These rate listings give us an advantage in this inherently capital-intensive industry allowing us to reinvest in new project development. We expect to realize no less than RMB 2 billion in total cash proceeds from our REIT-related initiatives this fiscal year. substantially strengthening our liquidity position and setting a new benchmark for sustainable growth in digital infrastructure.

Now moving to our full year guidance for 2026 on Slide 18. As we expect strong demand from our wholesale IDC customers and ongoing operational efficiency gains throughout 2026. We expect total net revenues to be in the range of RMB 11.5 billion, to RMB 11.8 billion, a year-over-year increase of 15.6% to 18.6% and adjusted EBITDA to be in the range of RMB 3.55 billion to RMB 3.75 billion, representing a year-over-year increase of 19.2% to 25.9%. The above outlook remains unchanged from the previously provided estimates. Before I conclude, I'd like to briefly update you on our ESG efforts. Sustainability remains important to our business strategy, supporting our operational excellence and long-term growth. In April, we published our sixth ESG report, highlighting our ESG progress and achievements in 2025. Our average annual power usage efficiency improved to 1.24 in 2025 compared with 1.27 in 2024. Total renewable energy consumption accounted for 36% of total resources utilized by VNET in 2025 compared with 18% in 2024. These accomplishments also won continued recognition from leading ESG rating agencies. We were included in the global addition of the S&P Global Sustainability Yearbook for 2 consecutive years, 2025 and 2026. And were also selected for the China Addition for 4 consecutive years, where we were once again recognized among the top 1% in IT services industry. Going forward, we will deepen our commitment to sustainability, strengthening our investments in intelligent infrastructure and green data center operations to create long-term sustainable value.

To sum up, we delivered robust first quarter results, reflecting continued strong execution and strategic direction. Looking ahead, we will stay focused on strengthening our core capabilities. to capture the opportunities arising from accelerating AI adoption and digital transformation, delivering sustainable, high-quality growth and creating long-term value for all stakeholders. This concludes our prepared remarks for today. We are now ready to take questions.

[Operator Instructions]

Your first question comes from Tom Tang from Morgan Stanley.

So again, congratulations on a very strong result and winning the over 500-megawatt of order. So my question is on the delivery pattern of the new order. So how should we think about the time or the pattern we're going to deliver this 500-megawatt order? And also on a quarterly basis, what is impacted or when we will see a significant impact to our revenue and EBITDA from this new order. And also, are we going to see upside to our current full year CapEx guidance given we're winning a very large amount of orders.

[Foreign Language]

[Interpreted] Thank you, Tom, for your question. This is Sharon. With regard to the 500 megawatts new orders, we are planning to deliver these new orders in the next 2 to 3 years, effectively from 2026 throughout 2028. And we are going to deliver the very first batch in the first second half of 2026. Based on the pace of our clients, our customers moving in pace. So that will translate into some positive impact on our next 3 years EBITDA and also, we are not going to adjust our CapEx guidance for the full year of 2026 because the CapEx guidance we give is actually based on our annual delivery target of 550 to 500 megawatts. Therefore, we're going to keep our annual CapEx guidance untouched.

Your next question comes from Edison Lee with Jefferies.

I've got 2 questions. Number one is that now that CATL has become a strategic investor in VNET, so can you maybe share with us how investors should think about the synergies going forward? And also previously, I think that Shandong Hi-Speed has been building some green power plants in new line top supply to your data center campus. So I wonder if that is ongoing and whether there will be any change to that. So that's number one. Number 2 is, can you comment on the pricing situation now that you have one pipe projects and in fact, what are you seeing in terms of pricing trend in the market? And where do you think pricing in 2027 will actually be stable or even going up?

[Foreign Language]

[Interpreted] Thank you for your question. As we have disclosed in our quarterly report that CATL affiliate, is going to come. Our strategic shareholder, shell the deal with Shandong Hi-Speed Holdings Groups closed successfully. Actually, we see synergies across several areas, and we see that in our AIDC energy storage. We see the synergy in the supply chain, specifically the synergy that we saw in technology and resources. To elaborate, we are going to leverage a CATL's extensive supply chain resources, energy storage and dispatch capabilities augmented by their priority high-voltage DC technology through their own invested investments. And we are going to significantly enhance our data centers power stability and dynamic frequency regulation.

I think this integration is vital to supporting the robust operational demands of hyperscale AIDC clusters directly sharpening our long-term competitive edge. And also the synergy we saw in commercial and operational sites. You know, VNET, if we deliver the rest of the REIT wholesale, say, wholesale AIDC targets this year. This is going to bring our total wholesale capacity in service to 1.5 gigawatts. So this provides a CATL with concrete use cases which can feed back into their businesses. And also with our collaboration, we are going to accumulate a lot of critical operational data. This will also drive the mutual ecosystem value. And with regards to our prior collaboration with the Shandong Hi-Speed Holdings Group in terms of the green energy integration, we have maintained a fairly good communication and collaboration with Shandong Hi-Speed Holdings Group in terms of green energy development, and we extend our gratitude to their support in this regard. And going forward, VNET will continue to pursue the development of green and low-carbon data centers. We will actively evaluate or explore corporation opportunities and expand our corporation on that side.

And on top of that, the green energy and the digital infrastructure development takes the coordination of multiple parties. And we, VNET, will continue to remain committed to the principles of prudent and the market-oriented approach and we want to assess collaboration opportunities based on its economics. At the end of the day, we want to match resources that can best serve our customers' needs. So our goal is to increase our energy efficiency and promote our competitiveness in the green energy space. So that is the question on the new strategic investor as well as our collaboration with the Shandong Hi-Speed Holdings in terms of the green development. And now coming back to the question on pricing. As we have disclosed in our earnings report that we have secured large orders that is going to be delivered within the next 2 to 3 years. And according to our observations, we have seen fairly strong demand from our customers in terms of premium and quality AIDC resources. And we're seeing that through Q1, also straight into Q2.

I think -- so for now, all of these customers are signing long-term contracts with us so as to secure these quality resources from us and we expect the price to stable at the moment. And shall the supply and demand dynamics improve in the future, we might see the possibilities of prices trending upward as well.

Your next question comes from Timothy Zhao with Goldman Sachs.

Congrats on the solid results. My question is regarding the wholesale capacity reserves that you have. I noticed that in the first quarter, the company added another 300 megawatts capacity for the wholesale data centers. Just wondering if you have any targets for your capacity reserve for this year and probably in the midterm? And out of that 1.3 gigawatts capacity that you have in terms of expansion pipeline and the capacity under construction, just wondering if you can share what proportion of that already received the power quarter approval from the government.

[Interpreted] Thank you, Tim, for your question. The company's strategy in the medium to long term is that we are going to increase our efforts in acquiring more resources. As we have mentioned that, we are -- and according to the company's plan, we are going to acquire gigawatt worth of resources, primarily in Mongolia down to River Delta, as well as the key notes along the West -- East Data, West compute route. And we are going to disclose the resources acquired in the subsequent quarterly results. And speaking of the resources that compromise consists of both land as well as the power quotas.

As you may know, there is a window guidance imposed by the government. And right now, we have seen that whole flow being tested already. Because at VNET, we got 4 of our projects approved by the government and with others being reviewed at the moment. So the company is quite confident in acquiring more resources [indiscernible] in terms of land as well as our power quotes. And also the company is, like I said, actively exploring and acquiring potential more resources along the few regions that I've mentioned.

Your next question comes from Ming Ramey with CICC.

A really appreciated and the congrats on the strong results. I have questions about our overseas business. Regarding the [indiscernible] strategic investment. Could you share any thoughts on how this partnership might shape your overseas expansion strategy?

[Foreign Language]

[Interpreted] Thank you, Nina, for your question. With regard to our overseas deployment, we maintain a fairly close relationship with our leading or key clients or customers. And they have been sending inquiries on our resource acquisition or planning in the -- in overseas. The company is actively preparing and looking for potential resources in overseas specifically, we're talking about resources in Southeast Asia as well as other areas. Shall there be any further updates, we will communicate them with you in a timely manner going forward.

And also with regard to the new strategic investor of CATL because they have a global presence, and they have matured capability in supply chain as well as green energy. I believe these will be a fairly good complementary -- this will complement to our advantages. Also in terms of the business, we are going to conduct in over these countries

Your next question comes from Daley Lee with BofA Securities.

I have one question regarding our financing channels. With our full year guidance for the CapEx, how do we see the operating cash flow and also the financing channel lies to finance our CapEx. And could management share our future risk project, which would be our plan?

[Foreign Language] .

[Interpreted] Thanks for your question. Our full year CapEx guidance for 2026 is based on the annual delivery target of 450 to 500-megawatt. We have a very diversified financing channels both from the project level as well as the traditional financing channels. All of them serves the same purpose of supporting our full year delivery target. Actually, in terms of the ABS or asset-backed securities, we have successfully issued 2 of them in the first quarter, and we are continuing our efforts in this regard.

Your next question comes from Ethan Zhang with Nomura.

So I've got 2 questions. The first one is a follow-up on the land reserve strategy. So could management give us more color on our current reserve in the Mongolia region as well as what's our thoughts on the demand in other user data with the computing compute hub cities? And my second question is could management give us some color on the potential listing your Hong Kong market?

[Foreign Language]

[Interpreted] Thank you, Ethan, for your question. With regard to your question on our land reserve strategy, like I said, in the medium to long term, VNET is planning to acquire 1 gigawatt -- gigawatt worth of campuses in Mongolia, Yangtze River Delta as well as the Easter Data West compute hubs. To give you a specific number, the 1 gigawatt worth of campus would roughly translates to 1,000 acres of land, given the prices with the land is quite cheap.

In actual percentage wise, the CapEx for acquiring land will account for only low single digits of our total full year CapEx. So the company would proactively acquire lands to prepare for our reserve capacity. And to add on to the question in terms of financing channels, as a listed company, we have diversified financing channels, both from the listed company perspective as well as the asset level. The company is proactively raising funds to support our CapEx as well as our debt repayment. Now moving on to the potential listing in the Hong Kong Stock Exchange. We have been actively exploring the feasibility of potential Hong Kong listing as part of our efforts to optimize our capital structure and better support the company's long-term strategic development, while broadening our international investor base, we will communicate with the public market in a timely manner once there is more defined plan or any definitive progress.

Your next question comes from Sara Wang with UBS.

Thank you for the opportunity to ask a question. And again, congratulations on the solid results. I have actually one question. So I noticed that the commitment and precommitment rate of our resources are already quite high. And then on top of that, we have another 1 gigawatt resources held for future development. When I ask for this 1 gigawatt, what is the expected average lead time from order to delivery? And then at the same time, how shall we think about the unit CapEx, say, CapEx per megawatt? And how shall we think of the trend going forward?

[Foreign Language]

[Interpreted] Thank you, Sara, for the question. a clarification on the company's strategy, we are planning to acquire gigawatt level worth of resources in the 3 key regions, like I mentioned, and we are going to just close the updates going forward. And moving back to the unit CapEx for 1 unit for 1 megawatt of unit, where we delivered, the unit CapEx is around RMB 20,000 and that per kilowatt. So that is achieved thanks to our supply chain capabilities as well as our large-scale batch procurement.

And we are fairly confident in -- and also -- so that is for the unit CapEx per kilowatt. And now moving on to the precommitment rate. we are quite confident in maintaining a fairly high precommitment rate. And we have now disclosed our data as of Q1 2027. And in terms of the 500-megawatt order we secured, we are going to deliver them in batches. So we are going to keep updates to the market on the orders we have locked in as well as the pace of their delivery. And all in all, we want to say we are fairly confident in maintaining or securing a high precommitment rate for our capacities to be delivered.

There are no further questions at this time. Ladies and gentlemen, that concludes our conference for today. Thank you for participating. You may now disconnect your lines.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Hello, ladies and gentlemen. Thank you for standing by for the Fourth Quarter and Full Year 2025 Earnings Conference Call for VNET Group, Inc. [Operator Instructions] Participants from our management include Ms. Sharon Liu, Rotating President; Mr. Peter Zhang, SVP of Operational Finance; and Ms. Xinyuan Liu, Head of Investor Relations for the company. Please note that today's conference call is being recorded.

I would now like to turn the call over to the first speaker today, Ms. Xinyuan Liu. Please go ahead.

Thank you, operator. Hello, everyone, and welcome to our fourth quarter and full year 2025 earnings conference call. Our earnings release was distributed earlier today and you can find a copy on our IR website as well as on Newswire services.

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. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. For detailed discussions of these risks and uncertainties, please refer to our latest annual report and other documents filed with the SEC.

VNET does not undertake any obligations to update any forward-looking statements except as required under applicable laws. Please also note that VNET's earnings press release and this conference call include the disclosure of audited GAAP and nonfinancial matters. VNET's earnings press release contains a reconciliation of the unaudited non-GAAP matters to the unaudited GAAP matters. A summary presentation, which we will refer to during this conference call, can be viewed and downloaded from our IR site at ir.vnet.com.

Next, I'd like to alert you that we will be utilizing text-to-speech technology powered by newlink.ai to deliver this quarter's prepared remarks by Ms. Sharon Liu, our rotating President; and Mr. Peter Zhang, our SVP of Operational Finance. The management team will join the Q&A session in-person. Additionally, this conference is being recorded. A webcast of this conference call will also be available on our IR site ir.vnet.com. Now let's get started with today's presentation. Ms. Liu, please go ahead.

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 fourth quarter and full year of 2025. Before we dive into the key figures, I want to underscore that 2025 was an exceptional year for VNET. Our effective dual core strategy and hyperscale 2.0 framework empowered us to capture surging AI demand and deliver impressive results.

Let's turn to Slide 4. On the operational side, our wholesale IDC business continued to grow significantly, driven by robust customer demand and our rapid delivery capabilities. As of December 31, 2025, our wholesale capacity in service grew to 889 megawatts, an increase of around 107 megawatts quarter-over-quarter, bringing our total deliveries for the full year of 2025 to a record high 404 megawatts, in line with our full year delivery plan, wholesale capacity utilized by customers rose to 623 megawatts, an increase of around 41 megawatts quarter-over-quarter, driven by continued strong customer demand and our solid execution.

Customers moved into 270 megawatts over the full year, bringing the utilization rate to 70.1%. Our retail IDC business continued to progress smoothly, benefiting from growing AI-driven demand. In the fourth quarter, our retail MRR per cabinet was RMB 9,420. Retail utilization rate was stable at 64.0%. On the financial side, our total net revenues increased by 19.6% year-over-year to RMB 2.69 billion for the fourth quarter.

Wholesale revenues remain the key growth driver, reaching RMB 978.1 million, a significant year-over-year increase of 47.1%. Our adjusted EBITDA for the fourth quarter also increased by 11.6% year-over-year to RMB 805.1 million, driven by the rapid growth of our wholesale IDC business, excluding the one-off impact of asset disposals in the fourth quarter of 2024. Adjusted EBITDA increased by 39.3% year-over-year.

For the full year of 2025, our total revenues grew significantly by 20.5%, to RMB 9.95 billion, and adjusted EBITDA grew 22.6% to RMB 2.98 billion, both significantly outperforming our 2025 guidance. We continue to advance our capital recycling strategy in 2025 and achieved meaningful results. In November 2025, we successfully issued an RMB 860 million holding type real estate green asset backed security. Also in March 2026, two of our private REIT projects were listed on the Shanghai Stock Exchange with a total offer size of approximately RMB 6.36 billion.

Moving into 2026. Customer demand for our wholesale IDC business remains strong. Meanwhile, our ongoing operational efficiency gains are providing increasingly robust support for this business' high-quality growth. We expect our full year 2026 revenue to be in the range of RMB 11.5 billion to RMB 11.8 billion, representing a year-over-year increase of 15.6% to 18.6%, and adjusted EBITDA to be in the range of RMB 3.55 billion, to RMB 3.75 billion, representing a year-over-year increase of 19.2% to 25.9%.

Moving on to our new order wins on Slide 5. We Order momentum remained strong in the fourth quarter, largely fueled by brisk demand from customers. During the quarter, we secured 5 wholesale orders totaling 135 megawatts. Specifically, in addition to the 32-megawatt order mentioned on our last call, we won a 12-megawatt order from Internet customer for a data center in the Yangtze River Delta. Meanwhile, we also won a 56-megawatt order from a cloud service provider and a 25-megawatt order from an Intelligent Driving customer and an 11-megawatt order from another Internet customer for our data centers in the Greater Beijing area this quarter.

Furthermore, bolstered by AI-driven demand, we secured a combined capacity of approximately 2 megawatts in new retail orders across multiple retail data centers from customers in the Intelligent Driving, Local Services, AIoT and Financial Services sectors. China's IDC industry continues to thrive, driven by strong market demand as well as supportive policies. At the national level, authorities have rolled out a series of systematic and actionable policies, sustaining their support for the digital economy and computing infrastructure.

At the industry level, accelerating AI adoption and enterprise digital transformation, along with increasingly clear and sustained investment commitments from large and midsized customers, particularly leading Internet companies and cloud service providers are fueling strong visible demand for high-quality IDC services. Market demand is further shifting towards large-scale, clustered and highly reliable data center infrastructure, while rising requirements for delivery certainty, long-term scalability and green operations are tightening effective supply.

Our industry-leading delivery performance, premium IDC services and scalable data center clusters, continue to strengthen VNET's competitiveness in this market environment. Guided by our dual core strategy and hyperscale 2.0 framework, we are well positioned to capture growth opportunities and expand market share in an increasingly AI-driven infrastructure landscape.

Now let's delve into our business updates, starting with our wholesale business on Slide 7. Our wholesale business maintained strong growth momentum, with capacity in service, increasing by around 107 megawatts quarter over quarter to 889 megawatts and utilization rate at 70.1%, mainly attributable to rapid deliveries at our N-OR Campus 02A and N-HB Campus 03 and fast move-ins at our N-OR Campus 02A. Our mature capacity utilization rate also reached 93.1%, a relatively high level. We have a clear growth path for our wholesale data center capacity.

Let's move on to Slide 8. As of the end of the fourth quarter, our total wholesale resource capacity was around 2.2 gigawatts. Specifically, our capacity under construction was around 452 megawatts. Capacity held for short-term future development was around 513 megawatts. And capacity held for long-term future development was around 327 megawatts, these secured resources represent a significant advantage in light of the IDC Industries limited effective supply and are in line with our optimistic view of AI-driven demand's long-term growth potential.

Moving to our retail IDC business on Slide 9. Our Retail business progressed smoothly in the fourth quarter. Retail capacity in service decreased to 49,863 cabinets from 52,288 cabinets last quarter, mainly because the target retail data center under our private REITs project was excluded from the group's consolidated capacity. The utilization rate was stable at 64.0%. As of the end of December, our MRR per retail cabinet increased slightly to RMB 9,420 this quarter from RMB 8,948 last quarter, driven by the increasing adoption of value-added services amid vast AI-driven demand.

Turning to our delivery plan on Slide 10. As I mentioned before, leveraging our efficient delivery capabilities, we successfully delivered a total of around 107 megawatts in the fourth quarter of 2025, bringing our total deliveries to around 404 megawatts as of the end of December this year. We currently have 7 data centers under construction with 6 in the Greater Beijing area, and 1 in the Yangtze River Delta. We plan to deliver 450 to 500 megawatts of capacity over the next 12 months to meet the strong demand from our wholesale customers.

In conclusion, our robust fourth quarter and full year 2025 results validate our operational excellence, growth strategy and our ability to identify and capture market demand in the AI era. As we move into 2026, we will continue to advance our dual core strategy and hyperscale 2.0 framework, developing our scalable, high-performance and energy-efficient data centers to seize growth opportunities while empowering China's digital economy for sustainable growth.

Now I will turn the call over to our SVP of Operational Finance. Peter, for further discussion of our operating and financial performance. Thank you, everyone.

Good morning and good evening, everyone. Before we start the detailed discussion of our financial performance, please note that unless otherwise stated, all the financials we present today are for the fourth quarter and the full year of 2025 and are in renminbi terms. Furthermore, unless otherwise specified, all the growth rates I am reviewing are on a year-over-year basis.

Let's turn to Slide 12. In the fourth quarter, we continue to pursue high-quality business. Our total net revenues increased by 19.6% to RMB 2.69 billion, mainly driven by the rapid growth of our wholesale business. Our adjusted cash gross profit rose by 23.1% to RMB 1.14 billion. While our adjusted EBITDA also grew year-over-year by 11.6% to RMB 805.1 million. Meanwhile, excluding the one-off impact of asset disposals in the fourth quarter of 2024, our adjusted cash gross profit and adjusted EBITDA increased significantly by 31.1% and 39.3%, respectively, year-over-year.

For the full year, our total net revenues were RMB 9.95 billion, increasing by 20.5% and adjusted EBITDA reached RMB 2.98 billion, reflecting an impressive 22.6% increase from the prior year, both exceeding the raised guidance we issued in the third quarter.

Let's look more closely at our top line. As you can see on Slide 13. In the fourth quarter, wholesale revenues our key revenue growth driver increased significantly by 47.1% to RMB 978.1 million, mainly attributable to activity at the N-OR Campus 02A. For the full year, our wholesale revenues increased significantly by 77.4% to RMB 3.46 billion, driven by rapid customer moving pace this year. Retail revenues increased by 7.6% to RMB 1.04 billion for the fourth quarter and increased by 3.5% to RMB 3.96 billion.

For 2025, our non-IDC business revenues increased by 8.8% to RMB 670.8 million for the fourth quarter and increased by 1.8% to RMB 2.52 billion for 2025. During the fourth quarter, we maintained solid margins, thanks to our ongoing efficiency improvements.

As shown on Slide 14, our adjusted cash gross margins improved modestly to 42.3% from 41.1% in the same period last year. Our adjusted EBITDA margin was largely stable at 30.0%.

Moving on to liquidity on Slide 15. We maintained robust and healthy liquidity bolstered by a net operating cash inflow of RMB 546.4 million during the fourth quarter, bringing our net operating cash inflow for this year to RMB 1.92 billion, if the RMB 231.0 million of income tax from one-off asset and equity disposal were excluded. The net operating cash inflow for this year was RMB 2.15 billion. Our cash position remains solid with total cash and cash equivalents, restricted cash and short-term investments reaching RMB 6.58 billion as of December 31, 2025.

Next, let's take a look at our debt structure on Slide 16. We maintained our prudent approach to debt management. As of December 31, 2025, our net debt to the adjusted last quarter annualized EBITDA ratio was 4.3% and total debt to the adjusted last quarter annualized EBITDA ratio was 6.2% both remaining at healthy levels. Our adjusted trailing 12-month EBITDA to interest coverage ratio was 6.7%. We prioritize long-term debt maturity planning in our debt and strategic management to ensure the security of debt repayment. Currently, the company's short- and medium-term debt maturing in 2026 to 2028 comprises 46.6% of our total debt.

Turning now to CapEx spending. As you can see on Slide 17, for full year 2025, our CapEx was RMB 8.24 billion with the majority allocated to the expansion of our wholesale IDC business, actual CapEx came in below our prior full year guidance, primarily due to cost efficiencies from economies of scale, and enhanced supply chain management, we expect our CapEx for the full year 2026 to be in the range of RMB 10 billion and RMB 12 billion, mainly to support our planned delivery of 450 to 500 megawatts in 2026.

We made meaningful progress in advancing our asset monetization strategy this year. In November 2025, we successfully issued a holding type green real estate asset-backed security under one of our private rate programs, the first of its kind in China's IDC industry. The offering totaled RMB 860 million with equity consideration of around RMB 800 million, implying a valuation of approximately 13x EV to EBITDA. Notably, this project has received a G1 rating from an authoritative third-party evaluation institution, the highest possible rating in the relevant evaluation system. VNET sees consolidating the project for financial reporting purposes. However, as the issuer and originator for the private REIT project, VNET will remain responsible for the IDC projects operation to ensure its healthy long-term development.

More recently, in March 2026, two of our private REIT projects were successfully listed on the Shanghai Stock Exchange with a combined offering size of approximately RMB 6.36 billion and the EV to EBITDA multiple of around 13x to 14x. Looking ahead, we will continue to execute capital recycling initiatives to further unlock the value of our existing IDC assets. Proceeds from these initiatives will be reinvested into new project development and incremental business expansion, supporting our long-term growth strategy. Additionally, they will effectively reduce leverage and optimize the company's capital structure, ultimately creating long-term value for shareholders.

Now moving to our full year guidance for 2026 on Slide 19. As we expect strong demand from our wholesale IDC customers, and ongoing operational efficiency gains throughout 2026, we expect total net revenues to be in the range of RMB 11.5 billion to RMB 11.8 billion, a year-over-year increase of 15.6% to 18.6%, and adjusted EBITDA to be in the range of RMB 3.55 billion to RMB 3.75 billion, representing a year-over-year increase of 19.2% to 25.9%.

Before I conclude, I'd like to briefly update you on our ESG efforts, building on our constant dedication to sustainability. VNET continues to receive recognition from leading global rating institutions. We have been included in the global edition of the S&P Global Sustainability Yearbook 2026 for a second consecutive year, reflecting the consistency of our ESG practice. In addition, VNET earned a B rating in CDP's 2025 Climate Change Questionnaire, underscoring strong performance across key environmental metrics.

Looking ahead, we will continue to strengthen our ESG framework, embedding sustainability more deeply into our operations and business strategy to support our sustainable growth and value creation. To sum up, our strong fourth quarter performance capped 2025 and laid a solid foundation for 2026. We will continue to reinforce our core strengths, optimize resource allocation and proactively capture opportunities arising from AI adoption and enterprise digital transformation. We remain dedicated to delivering high-quality growth that creates long-term value for all stakeholders.

This concludes our prepared remarks for today. We are now ready to take questions.

[Operator Instructions] First question today comes from Tom Tang at Morgan Stanley.

Congratulate on a very strong result and a very solid forward guidance for the year of 2026. So I have 2 questions. So first of all, we heard that there has been some big customers starting tender on their 2026 and 2027 data centers in the beginning of the year. So just wondering, have we been participating in those tenders, and what has been our current progress?

And secondly, we know that our fourth quarter total resource on hand had almost 400 megawatts increase quarter-on-quarter. So just wondering what are the regions for our new resources? And do we have any outlook for our new resources for the year?

[Foreign Language].

[Foreign Language] Thank you, Tom, for your question. Let me take your 2 questions. We did notice that at the beginning of the year, some of our key clients have already hosted meetings or tenders. And as the Tier 1 IDC provider in China, we have also participated in these billings. However, we are going to update on the market in terms of the progress and also the ones in our future earnings release. So please do follow our latest update on this related matter.

And with regard to the second question, indeed, we have notably increased our resource reserve in Q4. And a majority of these resources are located in the Greater Beijing area, specifically in Wulanchabu and also the areas surrounding Beijing. Going forward, we will strategically value our resources reserve in the Greater Beijing area, particularly in Mongolia and its surrounding regions.

On top of that, we are also on top of the existing resources we have in the Yangtze River Delta region, we are actively acquiring resources, expanding our reserves in that region. Just a quick point. We are actively looking for areas or regions where there are favorable utility conditions. So we would also actively deploy in these areas so as to provide a service which features low latency to meet our customers' demand.

Your next question comes from Edison Lee at Jefferies.

Congrats on the results as well. I have 3 questions. Number one is out of the 450 megawatts to 500 megawatt capacity addition guidance this year, what percentage has been locked in already? And what do you think is the progress over the next few quarters? And number 2 is on CapEx, RMB 10 billion to RMB 12 billion guidance this year. What percentage of that guidance is actually for 2027 growth? And then thirdly, can you explain how you're going to finance this RMB 10 billion to RMB 12 billion CapEx?

[Foreign Language].

[Foreign Language] Let me answer your first question. Thank you, Edison. In our presentation wise, we have actually disclosed we have locked in 150-megawatt out of the 450-megawatt plant. And we are going to disclose these capacity that's already secured in our future earnings call. As we participate in the biddings, signed MOUs as well as the contracts that's been signed. So please do follow up -- follow these announcements from our future earnings calls quarter-by-quarter. And overall, the company is very highly confident in the capacity to be locked in for 2026.

And now I'll pass it over to Peter for the second question.

[Foreign Language] We have run some numbers internally and the majority of the CapEx for 2026 is to deliver the capacity in 2026. And few of that CapEx or very little of that CapEx is going to be used for the capacity expansion and delivery in 2027. So hopefully, that answers your question.

[Foreign Language] I'll take your question on the financing channels. Predominantly, we are tapping into the project loans to finance our projects. Given our current condition, the company is able to secure favorable and long-term loans with very low interest rates. On top of that, we are also exploring diversified means of financing channels. On top of that, we can finance these CapEx with our cash flow. Each year, we're generating around RMB 2 billion cash so that can support our CapEx. And in addition to all of these, we have successfully conducted or implemented the private rate.

So that is also another financing channel. And additionally, we are also going to tap into private equity as well as other means as a public listed company to finance our CapEx. All in all, we are going to maintain a fine balance between our debt and equity financing amount. So we would maintain our leverage ratio within a reasonable range with a prudent approach being implemented along the way.

Your next question comes from Daley Lee at BofA Securities.

Firstly, congrats on the strong results and the solid guidance. I have 2 questions here. Number one is about our utilization rate in the Q4 last year. It seems quarter-on-quarter dropped a bit. Could you update us what's the underlying reason? And how do you see the future clients moving progress in the following quarters? And do we have a target for the full year utilization rate?

My second question is about the CapEx. It seems that last year, the CapEx number is behind our target, which seems a good thing for in the view of investors. And for this year, could you introduce us the reasons for the CapEx? And for this year, do we see upside for the more delivery given we have more CapEx for this year?

[Foreign Language].

[Foreign Language] Let me take your question on the utilization rate. Thanks for your question. Indeed, as we have disclosed in our presentation, the Q4 utilization rate did fluctuate. However, to clarify, majority of the deliveries happen in the end of the year. Hence, the fluctuation out there. Actually, our utilization rate can be specifically break down into 2 parts. One is the utilization rate for the mature capacities we have in place. Right now, that's in 90% to 95% range. However, for the ramp-up capacity, that's another portion of the utilization rate.

We see these fluctuations as perfectly normal. Overall, the company is confident in the utilization rate in 2026. We're confident to maintain that within 70% to 75%. However, mainly, there is going to be fluctuations quarter-by-quarter. Hopefully, that answers your question.

Now I'll pass it over to Peter for the second question.

[Foreign Language] On the CapEx question. In 2025, our CapEx expenditure was RMB 8.2 billion. Actually, that compared to 2024 was a significant increase. However, we didn't notice but nevertheless, we saw some economies of scale because of the significant increase in the CapEx. Meanwhile, we are also enhancing our capacity along the supply chain management that also gives us some tailwinds. Looking ahead to 2026, our CapEx guidance is around RMB 10 billion to RMB 12 billion, majority of it is going to be used to deliver the capacity as well as to fuel our continuous expansion.

Your next question comes from Timothy Zhao at Goldman Sachs.

[Foreign Language] Congrats on the solid results and outlook. I have 2 questions here. One is on the breakdown of your 2026 outlook. Just wondering if can provide more detailed guidance in terms of the revenue growth outlook between the wholesale IDC, retail IDC and IDC business? And any color on the EBITDA growth between different segments will be quite helpful.

Secondly is on the pricing trend. I note that for your wholesale business in the fourth quarter, there was some pricing fluctuation. However, for the retail business, the pricing trend seems to be more robust. Just wondering if you can share any color on the pricing fluctuation between wholesale and the retail business in the fourth quarter.

[Foreign Language] With regard to the guidance for 2026, I would like to break it down according to -- based by the 3 segments. For retail IDC, it's going to continue to growth compared to year-over-year. And that is also true for our wholesale IDC services. We're going to witness significant growth. Whereas for our non-IDC business, it's going to be stabilized, it's going to be stable.

Moving on to the pricing trend. Indeed, for our retail IDC service, we have seen the MRR continue to trend up. That comes from several drivers. Number one, customers have -- our customers have a stronger demand for our value-added services. Number two, our unit price per cabinet is also increasing. Also, the high power density cabinets we have also yield higher MRR overall, that is going to contribute to a stronger MRR going forward in 2026.

Your next question comes from Ethan Zhang at Nomura.

So 2 questions from me. So first, could you follow up on the CapEx guidance. So could you give some color on the gearing ratio for this year. For example, the net debt-to-EBITDA for guidance for this year. And if we are seeing continued or further higher demand than are expected any chances that we could further increase our gearing ratio. And my second question is regarding the Wulanchabu project. So we noticed some tailwinds -- policy tailwinds in terms of the coordination of computing and power. So just wonder, could management give us some color on the building the in-house green energy in Wulanchabu project? Any progress in terms of building your own solar wind power and self-sufficiency rates, et cetera.

[Foreign Language].

[Foreign Language] Let me take your first question on the gearing ratio. As we have disclosed in 2025, the net debt-to-EBITDA ratio was 4.3, which is within a robust level. And as we see more demand from the market, we will seize these opportunities. But again, we will try to balance the cadence, our financing as well as the demand from the market. Like I said, we are going to tap into various means of financing channels, so the key is to maintain our leverage ratio within a stable range.

[Foreign Language] With regard to the green power for AI energy integrated projects, that is actually one of the key strategies for the company to provide integrated power and AI services for our clients, and we do value the provision of green power to our customers. And we have the Wulanchabu project advancing steadily, and that is going to be put into service by the end of the year. And we are going to disclose the further progress in our future earnings calls. Thank you.

Your next question comes from Shuyun Che from CICC.

Congratulations on the strong earnings. I have 2 questions. First, with the rapid development of the AI agent, the inference demand is expected to scale up. And in the long term, will we adjust the plans for energy and land cultures, particularly in terms of regional structure. My second question is, in last quarter, we won large orders including customers from Internet, cloud and smart driving. Looking at customer structure, what changes to management expect in 2026.

[Foreign Language].

[Foreign Language] Thank you for your question. So indeed, the industry as a whole has witnessed an increase of demand for inferencing. And currently, clients that we -- the customers that we serve has demand for generic computing, smart computing or intelligent commuting as well as inferencing. And our current data centers are actually accommodating these demands. And in terms of the geographic resource deployment, the top priority for us is the Greater Beijing area as well as the greater Yangtze River delta region.

As you know that VNET has retail data centers, which is intended to provide inferencing and computing services for clients that is usually in the case of edge computing. So these type of value-added services are in high demand among our clients.

And going forward, actually, like I said, we have a variety of customers in terms of the mix of our customers. They are -- some of them are leading Internet giants, hyperscalers as well as AI Cloud providers. But like I said, we are going to provide a comprehensive solution that is going to meet the demand of all kinds of customers, like I mentioned, the edge computing service that's needed by some autonomous driving companies as well as financial companies. We are using our retail city data center to accommodate this type of need. We believe we're going to provide a full scale one like a food stop solution to our customers.

Your next question comes from Sara Wang at UBS.

And again, congratulations on the solid results. I have 2 questions. So first of all, I think last year, the central NBRC imposed a window guidance on new power code release. May I have an update on the latest data, whether what's the process of acquiring new power quota? Do we still -- are we still under window guidance from the central government?

And then second question is on competition. So given the strong demand, how shall we think about the rental fee trend? Do we expect the rental fee to increase? Or in other words, usually in previous up cycle, when the demand is quite strong, there could be some new entrants. So just wondering what's the latest observation from the management's perspective.

[Foreign Language].

[Foreign Language] Thank you, Sarah, for your question. we actually view the window guidance from NDRC as a favorable policy for us. Because that is going to affect the supply and the demand dynamics in the market. However, as the Tier 1 -- as the Tier 1 data center provider, I think the window guidance is favoring us. As we -- we did notice that the approval rate from NDRC was quite low. But on the good side, we have successfully got the approval for our data center application in our Greater Beijing area by the end of Q4. And we are going to continue to apply for new power quotas according to our own rhythm.

And looking at the rental costs, I think as the Tier 1 player, we are well positioned because we have developed a very strong relationship with our existing customers, and we can anticipate and learn about their needs and match their needs with our resources so that we are well positioned in that regard. I would say the overall rental cost is stable. But as we see the supply and demand dynamics continue to tighten up, we might see the prices begin to stabilize first and then eventually to rise. But overall, that is my optimistic view on the overall trend. But again, overall, we are bullish on the future development.

Ladies and gentlemen, that concludes our conference for today. Thank you for participating. You may now disconnect your lines.

Hello, ladies and gentlemen, thank you for standing by for the Third Quarter 2025 Earnings Conference Call for VNET Group Inc. [Operator Instructions] Participants from our management include Mr. Ju Ma, Rotating President; Mr. Ki Yuhang, Chief Financial Officer; Ms. Xinyuan Liu, Head of Investor Relations of the company. Please note that today's conference call is being recorded.

I will now turn the call over to the first speaker today, Ms. Xinyuan Liu. Please go ahead.

Thank you, operator. Hello, everyone, and welcome to our third quarter 2025 earnings conference call. Our earnings release was distributed earlier today, and you can find a copy on our website as well as on newswire services. Please note that today's call will contain forward-looking statements with underlisted harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. For detailed discussions of these risks and uncertainties, please refer to our latest annual report and other documents filed with the SEC.

VNET does not undertake any obligations to update any forward-looking statements, except as required under applicable laws. Please also note that VNET earnings press release and this conference call include the disclosure of unaudited GAAP and non-GAAP financial matters. VNET's earnings press release contains a reconciliation of the unaudited non-GAAP matters to the unaudited measures. A summary presentation, which we will refer to during this conference call, can be viewed and downloaded from our IR website at ir.vnet.com.

Next, I'd like to alert you that we will be utilizing text-to-speech technology powered by NewLink.ai to deliver this quarter's prepared remarks by Mr. Ju Ma, our rotating President; and Mr. Qiyu Wang, our CFO. The management team will join the Q&A session in person. Additionally, this conference is being recorded. A webcast of this conference call will also be available on our website at ir.vnet.com.

Now let's get started with today's presentation. Mr. Ma, please go ahead.

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. Let's turn to Slide 4. 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' fast-moving pace.

As of September 30, 2025, our wholesale capacity in service grew by 16.1% quarter-over-quarter to 783 megawatts, an increase of around 109 megawatts. Wholesale capacity utilized by customers rose by 13.8% quarter-over-quarter to 582 megawatts, an increase of around 70 megawatts, while the utilization rate was 74.3%, reflecting customers' continuous demand for our high-quality, high-performance AIDC services.

Our Retail IDC business continued to progress smoothly benefiting from growing AI-driven demand. This quarter, our retail MRR per cabinet increased for 6 consecutive quarters, reaching RMB 8,948.

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%, 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. 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, we continue to capitalize on strong customer momentum and secure new orders in the third quarter. I'll share more on the next slide.

Moving on to our new order wins on Slide 5. In the third quarter, we secured 3 wholesale orders totaling 63 megawatts. 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 as announced in September and a 3-megawatt order from an intelligent driving company all for data centers in the Greater Beijing area. 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.

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. 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. 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 AIDC solutions.

Meanwhile, customer demand and critical resources, such as power are increasingly concentrated among leading IDC players. As an industry pioneer in AIDC development, we're leveraging our acute insights, strong resources and premium reliable services to seize the structural growth opportunities by quickly meeting customers' needs.

Now let's delve into our business updates. Starting with our wholesale business on Slide 7. Our wholesale business maintained strong growth momentum, with capacity in service increasing by around 109 megawatts quarter-over-quarter to 783 megawatts and utilization rate remaining stable at 74.3%, mainly attributable to our delivery capacities at our N-OR Campus 02 and N-HB Campus 01 A and faster-than-expected move-ins at our N-OR Campus 01. 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.

Let's move on to Slide 8. As of the end of the third quarter, our total wholesale resource capacity was around 1.8 gigawatts. Specifically, our capacity under construction was around 306 megawatts capacity held for short-term future development was around 414 megawatts and capacity held for long-term future development was around 291 megawatts. These secured resources represent a significant advantage in light of the IDC Industries Limited effective supply and are in line with our optimistic view of AI-driven demand's long-term growth potential.

Moving to our retail IDC business on Slide 9. Our Retail business continued to progress smoothly in the third quarter. 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 6 consecutive quarters, reaching RMB 8,948.

Turning to our delivery plan on Slide 10. With our strong and efficient delivery capabilities, we successfully delivered a total of around 109 megawatts in the third quarter of 2025, bringing our total deliveries around 297 megawatts as of the end of September this year. We currently have 7 data centers under construction with 6 in the Greater Beijing area and one in the Yangtze River Delta. We plan to deliver around 306 megawatts of capacity over the next 12 months or around 132 megawatts during the fourth quarter of 2025 and the first quarter of 2026 and around 174 megawatts 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 ability over the next couple of quarters.

In conclusion, our strong third quarter results showcase our ability to identify opportunities and our readiness to specially meet evolving market demand. 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 as AI-related demand grows, we will continue to advance our effective dual core strategy and hyperscale 2.0 framework, seize opportunities to further unleash our growth potential in the AI era.

Now I will turn the call over to our CFO, Qiyu Wang, for further discussion of our operating and financial performance. Thank you, everyone.

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 RMB terms. Furthermore, unless otherwise specified, all the growth rates I am reviewing are on a year-over-year basis.

Let's turn to Slide 12. In the third quarter, we continue 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. 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.

Let's look more closely at our top line. As you can see on Slide 13, in the third quarter, Wholesale revenues, our key revenue growth driver increased significantly by 82.7% to RMB 955.5 million, and the rapid growth was mainly attributable to the N-OR Campus 01. 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.

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.

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 9 months of the year to RMB 1.37 billion. Our cash position remains solid with total cash and cash equivalents, restricted cash and short-term investments reaching RMB 5.33 billion as of September 30, 2025.

Next, let's take a look at our debt structure on Slide 16. We maintained our prudent approach to debt management. As of September 30, 2025, our net debt to the trailing 12 months adjusted EBITDA ratio was 5.5x and total debt to the trailing 12 months adjusted EBITDA ratio was 6.7x, both remaining at healthy levels. Our trailing 12 months adjusted EBITDA to interest coverage ratio was 6.5x. We prioritize long-term debt maturity planning in our debt and strategic management to ensure the security of debt repayment.

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 9 months, our CapEx was RMB 6.24 billion, with the majority allocated to the expansion of our Wholesale IDC business. 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 megawatts in 2025.

Now moving to our full year guidance for 2025 on Slide 18. As we expect faster-than-anticipated move-ins among Wholesale IDC customers and ongoing operational efficiency gains through the end of the year, 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%. And adjusted EBITDA 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%. If the RMB 87.7 million of disposal gains on the E-JS 02 data center were excluded from the adjusted EBITDA calculation for 2024, the year-over-year growth rate would be 24% to 26%.

Please note our updated guidance factors and the impact of the private REIT transactions we issued early this November and excludes the Target IDC projects financials from our consolidated financial statements. 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, VNet score increased to 73 from 70 last year, ranking among the top 8% of the IT service industry globally. We stand out in areas, including risk management, information security, environmental management and customer relations, underscoring our comprehensive capabilities and sustainability development. This quarter's strong growth and enhanced profitability are yet another testament to our high-quality growth strategy. Looking ahead, we will continue to consolidate our core strengths and capture growth opportunities delivering sustainable long-term value for all stakeholders. This concludes our prepared remarks for today.

We are now ready to take questions.

[Operator Instructions]

Your first question comes from Tom Tang from Morgan Stanley.

So I have 2 questions. So first question is more on the 2026 outlook. So we're hearing that there has been some expansion in the domestic chipset capacities. So just wondering what is our current outlook for the overall order tendering in 2026? And second question is about private REIT. So we noticed that we have filed another private REIT with a size of almost RMB 10 billion. So just wondering what will be the time line of this private REIT execution? How much cash are we going to recycle and what will be our impact to the financial statements?

[Foreign Language]

[Interpreted]

This is Ma. I'll take your question. Thank you very much. As we are approaching the end of the year, we are engaging our customers and trying to learn about their development path. This would put us in a well position to plan our resources accordingly. So according to our communications with the client 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. Therefore, we have to plan carefully in order to accommodate the users' needs because they are having -- they are requiring us to deliver the capacities at a faster pace with a higher requirement. 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 to be stable with a moderate increase.

And with regard to your second question on the domestic chip, so we, VNET, is tracking and monitoring the development of the domestic chips very closely. We know that the sector is evolving very quickly with a lot of more options available. And we believe that in 2026, 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. So we're going to see significant growth development in this sector. So that will give us -- give the customers a lot more choices with more certainty. Again, that would have pushed the development or in return, drive the development of our business.

[Interpreted]

This is Qiyu Wang. I will take your second question with regard to the REITs projects. So these 2 REIT projects followed on the heel of our first private REIT projects. So the underlying project for our first REITs project was retail IDC, whereas the underlying project -- underlying assets for these 2 rate projects are wholesale IDCs. So this would be the first time that we have a scaled private REITs issuance for the -- with the underlying assets of Wholesale IDCs. So if these issues were too successful, this would officially mark that we have completed the full closed-loop financial capital cycle of development, holding, partial exit as well as a long-term operation.

These 2 REITs projects are currently being reviewed by the exchanges and the expected valuation multiples would be better than the first REIT project. Once the 2 REITs projects were successfully issued, we will -- unlike the first REIT project, we will consolidate the financial statements of these 2 projects into the group level financial statements. 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 risk projects with underlying assets of Wholesale IDCs. And our goal is to complete the issuance by Q1 next year.

Your next question comes from Timothy Zhao from Goldman Sachs.

Two questions here. One regarding [indiscernible]

Yes, we can hear you now.

Okay. Yes. So I was -- appears to be we need more orders in your wholesale campuses in Hubei and Changzhou from the geographical location perspective, how do you think about the customer preferences and what kind of demand does each campus serve differently? That's my first question.

My second question is regarding price interest for the Wholesale business. I noticed that for this quarter, there is some fluctuation in the wholesale [indiscernible] Just wondering how do you think about the pricing trend into the fourth quarter and next year, the wholesale?

[Foreign Language]

[Interpreted]

I'll take your first question. actually, the client takes specific considerations with regard to their orders for their business across different regions, they do not have very particular preferences I think the major considerations on their end is first, the type of business and product offerings. Second, the distance of proximity to their headquarter and the third is how convenient it is to scale up the existing capacity that they have with us.

And we take VNET, for example, so we have observed that the clients have different types of pace with regard to their requests across different regions. And it would vary quarter-by-quarter. We have a lot of the demand coming from the Greater Beijing area as well as the Yangtze Delta area. However, we do have upcoming new demand from customers for campuses in Hubei province as well as the [indiscernible] Campus.

Like I said, there are -- the major considerations on the client side is there type of current product offerings and proximity to their headquarters as well as the -- how convenient it is -- convening it is to scale their existing capacity with us. So that's the major considerations on their end. And based on that, they are varying their requests quarter-by-quarter.

And with regard to the pricing of our wholesale IDCs, according to what we have observed in the price seen for Q3 was fairly stable. And I would like to elaborate on that. First, customers are moving in faster than we expected. Therefore, the IRR of these projects are better than we expected. And number two, frankly speaking, in areas where the dynamics of the supply and demand is in tight balance, VNET do not engage in the biddings with low prices. Therefore, we are able to secure a fairly stable order or contract price.

Your next question comes from Daley Li from Bank of America.

I have 2 questions here. First one is in our last earnings call, we mentioned we have a few projects and we are participating for the tendering? And could you update us the progress and how we complete 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 more tendering in future?

My second question is about the new land and power resources. In this quarter, we see our total resources on hand is slightly stable. And in future, where would -- which area will be our focus to find more resources land and power?

[Foreign Language]

[Interpreted]

Thank you for questions. As we have observed for the first 3 quarters that different customers coming up with different requests at the different paces. And for us, we follow their paces closely. And I have did a very brief summary for what we have achieved in terms of the new orders that we have secured for the past 12 months, that was 331 megawatts.

Looking ahead to 2026, based on the services we are offering to our clients as well as the understanding of our clients, we are confident that we are able to sustain this growth momentum. So with regard to the wholesale IDCs, we have been following closely the client's AI development trend. We have noticed that customers are actually balancing their inferencing and training demand. And we have captured that change. The customers are 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. So this would put us in a good position to accommodate our users' needs.

And 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.

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 put a lot of thoughts in based on the service that we offer to our clients as well as the understanding that we have on them, we are planning our resources for the next year. On top of that, we have extended our planning over to 5-year horizon rather than on a yearly basis. So this would allow us to plan more strategically to accommodate users' needs.

And to break it down, we carefully weigh 3 factors. One is the split, the demand split between generic computing power versus a smart computing power. And the second is the geo locations. And the third is the AI GPU-related chip development.

And more specifically, with regard to next year, we are going to focus, number one, the Greater Beijing area, particularly Ulanqab, Hubei and the Beijing surrounding areas. Second -- number two, the Yangtze River Delta areas. We are starting to acquire resources for the next 5 years to accommodate our users' demand. And additionally, we are exploring the resources outside these 2 major areas that I mentioned. Thank you.

Your next question comes from Sara Wang from UBS.

I actually only have one question. So I recall earlier this year, management has shared that one of the top priority from hyperscale customer is the time to market. 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 like customers' consideration in terms of new order release? And if we talk about more workloads by insurance, does that means maybe user latency will be a relatively more important consideration factor going forward?

[Foreign Language]

[Interpreted]

I will take -- answer the second half of your question. Yes, we have observed that inferencing will become a major growth driver for next year.

So that means the customers have higher requirements in terms of litany. So the lower latency, the 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 Ulanqab Campus. And with regard to the first half of your question, yes, it is quite a trade-off that we have to face. So 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.

And there are 3 approaches that we are taking to meet customers' demand. Number one, we are planning early in terms of super engineering and external power supply. Number two, we are consolidating our capacity in terms of supply chain management. Number three, we are adopting electro mechanical modularization as well as other standardized construction solutions to meet customers' needs.

As you know, the general time line that the customer expects is which means they want to move in within 6 months after signing the contract. Yes, we are able to accommodate users needs in terms of horizon. In one particular case, we're even able to accommodate or deliver within 3 months after signing the contract, just so you know.

Your next question comes from Shuyun Che from CICC.

My first question is about the Wholesale IDC and the delivery piece for the Wholesale IDC business is very fast and as the company said the utilization rate target for the next 2 years? My second question is about the Retail IDC business. We have seen the Retail business, IDC business, MRR has been growing for several quarters and what are the main drivers behind this trend? And how do you view this sustainability in the future?

[Foreign Language]

[Interpreted]

With regard to the utilization rate, of course, the customers are demanding to move at a faster pace. For our mature IDCs, the utilization rate is inching closer to 95%.

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 2 years. We will disclose more information in the Q4 financials. And we are -- in the long run, we are confident that the utilization rate will steadily increase.

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. We are very pleasant to see the MRR of our Retail business to continue to grow quarter-over-quarter for several consecutive quarters. As you know, the competition landscape in this sector is fairly intent. 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 storage plus generic computing and we are proactively repurposing our cabinets in order to meet their demands in order to capitalize on this growth momentum and need.

And factor #2 on our side, on top of the hosting service we offer to the clients, we are providing incremental value-added services on the software level, let's say, networking as well as storage networking services. And another factor is the initiative of repurposing the retail cabinets into higher density cabinets. And clearly, we are benefiting from these efforts and initiatives.

Last but not least, should the demand from customers in terms of storage, generic computing plus value-added services sustained. We are confident to sustain the growth momentum of our Retail business. Thank you.

Your next question comes from Andy Yu from DBS.

So I have 2 questions. So your key peer has announced plans to expand into regions with lower electricity cost to capture AI training demand. So how do you see the supply demand dynamics will evolve in these regions, where I think that currently have a first mover advantage? And secondly, the government spend on data center which has become more positive with a shorter time line for new asset ingestion post-IPO, do we expect our series application to accelerate? And apart from REITs projects, what will our funding strategy be going forward?

[Foreign Language]

[Interpreted]

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. So they are actually deploying resources based on all of these factors. However, I would like to elaborate on how we go about it.

Susana -- those woman Paduano hanging or do what do you Jinan -- they had a further longing Fonte Foteini. Like iterated many times. Over the next 3 to 5 years, AI is going to be increasingly more important growth driver.

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 -- so. That's the first reading that we have on the market.

And number two, we believe that inferencing and private deployment will continue to sustain its growth momentum as it can be evidenced or confirmed from [indiscernible] remarks. And number three, we believe over the course of the next 5 years, as the GPU grows -- domestic GPU chips grow, there is going to be more demand from the inferencing, private deployment as well as many emerging group intelligent agents. So these are the growth areas or customer demands that we are paying closer attention to.

So in a nutshell, we, VNET, will adhere to the principle of a coordinated balance to development. So using our resources to meet users' varying demand. Thank you.

[Interpreted]

So ROCE rate is still underway. However, I am not in a position to disclose any information at the moment, and we wish to update to you later as we see more progress. So other than the C rates or public rates, we are proactively advancing the holding type ABS, also known as private REITs. And we have successfully issued one, and we are hopeful that this would allow us to recycle a major sizable asset fund capital from such types of issuance.

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 AAA rating from a domestic rating institution, which is rare among private-owned companies, nonpublic or non-OEMs -- nonstate-owned companies. So with this rating, a favorable rating, 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. So should it be pulled through, we are going to benefit from a lower interest rate with a widening channel of financing.

Your next question comes from Ethan Zhang from Nomura.

So only one quick question. So how do see the trends for our unit CapEx spending? Because I noted that for the first 9 months, the total CapEx was around RMB 6 billion versus our year guidance of [indiscernible] So it looks a bit behind schedule versus our capacity delivery schedule. And so just wonder if management can provide some colors on this? And also for next year's CapEx, what's our outlook and potential sources for funding our next year's CapEx?

[Foreign Language]

[Interpreted]

So majority of our CapEx is on the Wholesale IDC and the CapEx per unit megawatt for our Wholesale IDC campuses are gradually trending down. And we are still in process of putting together our CapEx for next year, and we are preparing the similar size of funding and the sources of these funding would mainly come from asset securitization as well as issuance of a corporate -- domestic corporate bond. So a quick number that I want to share with you. So through the pre-REITs, private REITs and development fund that issued in 2025, we have successfully recycled RMB 2 billion during the equity assets. And our goal is that we are going to feed this number in 2026.

There are a lot of tools in our tool boxes -- financing tool boxes, obviously. And we are confident that we are able to fund our CapEx, while keeping the leverage ratio within a secure range or a safe range.

Your next question comes from Anthony Ling from JPMorgan.

I have 2 questions regarding the full year [indiscernible] Guidance. So the full year guidance implies about the 4Q revenue appears to be down a little bit, contentious based on the midpoint. And what could be the potential reasoning given the strong SaaS customer moving rate? Is there a potential upside to the full year guidance order? Second question is regarding the 3Q reported [indiscernible] The margin. This sequential decline versus 2Q despite a very strong customer moving rate. What's been the potential drivers to cost is the quite -- and what would be the next few quarters, EBITDA margin trend?

[Foreign Language]

[Interpreted]

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. Looking to the quarter-over-quarter growth, I think there's 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.

And with regard to the EBITDA margin, I would say it's within a reasonable range because majority of our offerings is revenues from the Wholesale IDC business. And because of the rising temperatures in Q3, therefore, we are seeing more tariffs for Q3. Given that the -- these are actually reflected in our P&L in terms of the tariffs that we pay. However, with regard to our operational costs, they are consistent. We do not see huge fluctuations. And with -- so I would see this is a reasonable seasonal fluctuations. Thank you.

Thank you. Ladies and gentlemen, that concludes our conference for today. Thank you for participating. You may now disconnect your lines.

Hello, ladies and gentlemen. Thank you for standing by for the Second Quarter 2025 Earnings Conference Call for VNET Group, Inc. [Operator Instructions] Participants from our management include Mr. Ju Ma, Rotating President; Mr. Qiyu Wang, Chief Financial Officer; Ms. Xinyuan Liu, Head of Investor Relations of the company. Please note that today's conference call is being recorded. I will now turn the call over to the first speaker today, Ms. Xinyuan Liu. Please go ahead.

Thank you, operator. Hello, everyone, and welcome to our second quarter 2025 earnings conference call. Our earnings release was distributed earlier today, and you can find a copy on our IR site as well as on Newswire services. 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. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. For detailed discussions of these risks and uncertainties, please refer to our latest annual report and other documents filed with the SEC.

VNET does not undertake any obligations to update any forward-looking statements, except as required under applicable laws. Please also note that VNET's earnings press release and this conference call include the disclosure of unaudited GAAP and non-GAAP financial measures. VNET's earnings press release contains a reconciliation of the unaudited non-GAAP matters to the unaudited GAAP matters. A summary presentation, which we will refer to during this conference call, can be viewed and downloaded from our IR website at ir.vnet.com. Next, I'd like to alert you that we will be utilizing text-to-speech technology powered by Newlink.ai to deliver this quarter's prepared remarks by Mr. Ju Ma, our rotating President; and Mr. Qiyu Wang, our CFO. The management team will join the Q&A session in person. Additionally, this conference is being recorded. A webcast of this conference call will also be available on our IR website at ir.vnet.com. Now let's get started with today's presentation. Mr. Ma, please go ahead.

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 second quarter of 2025. We delivered strong quarterly results, thanks to continued effective strategic execution. On the operational side, our wholesale IDC business maintained its significant growth momentum, supported by our customers' fast move in pace. As of June 30, 2025, our wholesale capacity in service grew by 17.5% quarter-over-quarter to 674 megawatts, an increase of around 101 megawatts. Wholesale capacity utilized by customers rose by 17% quarter-over-quarter to 511 megawatts, an increase of around 74 megawatts, while the utilization rate was stable at 75.9%, reflecting a fast-moving pace in our wholesale data centers. Our retail IDC business continued to progress smoothly, supported by growing AI-driven demand from customers. Both our high-quality wholesale and retail IDC services continue to attract customers from various industries in the second quarter.

I'll dig into those details on the next slide. On the financial side, both our revenues and adjusted EBITDA maintained solid growth. Specifically, our total net revenues increased by 22.1% year-over-year to RMB 2.43 billion for the second quarter. Notably, wholesale revenues reached RMB 854 million for the quarter, representing impressive year-over-year growth of 112.5%, fueled by the rapid growth of our wholesale IDC business. Our adjusted EBITDA for the second quarter also increased by 27.7% year-over-year to RMB 732 million with an adjusted EBITDA margin of 30.1%, up 1.3 percentage points year-over-year. Moving on to our new order wins on Slide 5. In the second quarter, driven by growing demand from customers for intelligent deployment, we secured a combined capacity of around 4 megawatts in retail orders from customers in the IT services, Internet, AIoT and financial services sectors. These orders span multiple retail data centers in the Greater Beijing area, the Yangtze River Delta, the Greater Bay Area and other regions.

Furthermore, we recently won a 20-megawatt wholesale order from a leading cloud services provider for the project we operate in Hebei province with our joint venture partner. As AI permeates every aspect of the world, new growth opportunities for data centers, the bedrock of AI infrastructure, continue to emerge. AI-driven demand remains especially robust in China, including training and inference demand from customers across multiple industries, conducting intelligent deployments. To capture these opportunities and strengthen our competitiveness, we unveiled our Hyperscale 2.0 framework for the future of our AIDC development at our Investor Day in Wulanchabu in late June. We also outlined our blueprint for growing the capacity of our data center assets under management to 10 gigawatts by 2036. Driven by the proliferation of AI, the data center industry's development has reached an inflection point where traditional IDCs are shifting to AIDCs to meet dynamic market demand.

In parallel, data center business model is evolving from simply providing project-based capacity delivery to serving as a platform offering comprehensive AIDC solutions. As a pioneer in AIDC development with strong fundamentals and deep industry know-how, VNET is poised to shape this trend through our Hyperscale 2.0 framework. Our innovative technologies enable us to construct high-quality, flexible AI DCs faster, ensuring rapid deliveries to meet customer needs. For example, our building standardization technology utilizes standardized modules as data centers' core building units, allowing us to rapidly construct data centers tailored to diverse customer needs. This method cuts construction cycles by 1/3 compared to traditional construction methods. Additionally, our modular data center technology integrates various functions, including power supply systems, cooling systems, et cetera, into separate functional modules. These modules are manufactured and pretested in factories and shipped to data center sites for installation, which significantly enhances our installation efficiency.

They can also be swapped out, allowing us to selectively upgrade only specific modules instead of entire systems, reducing improvement costs and extending data centers life cycles. By leveraging these technologies, we can build quickly and combine modules with different functions flexibly to meet customer-specific requirements, ensuring fast capacity delivery to our customers. We believe these innovations position us as a frontrunner in the IDC industry going forward. Execution of our Hyperscale 2.0 framework is already underway, starting in Inner Mongolia, Hebei Province and Beijing, where we plan to establish data center hubs encompassing megawatt scale cabinets, 100-megawatt scale buildings and gigawatt scale campuses. Ultimately, as I mentioned earlier, we aim to manage a 10-gigawatt integrated data center asset cluster by 2036 that seamlessly combines computing power and energy management across multiple campuses, empowering us to shape the future development of AI DC solutions.

Now let's delve into our business updates, starting with our wholesale business on Slide 8. Our wholesale business continued to grow rapidly, with capacity in service increasing by around 101 megawatts quarter-over-quarter to 674 megawatts and utilization rate remaining stable at 75.9% mainly attributable to our strong delivery capabilities at our N-OR Campus 01 and faster-than-expected move-ins at our N-OR Campus 01 and E-JS Campus 03. Our mature capacity utilization rate also reached 94.6%, a relatively high level. We have a clear growth path for our wholesale data center capacity. Let's move on to Slide 9. Our overall wholesale data center capacity maintained its growth trajectory in the second quarter. Our capacity under construction was around 326 megawatts, with a precommitment rate for capacity under construction of 55.2% as of the end of June.

Capacity held for short-term future development was around 374 megawatts and capacity held for long-term future development was around 418 megawatts as we remain confident in the long-term growth potential of AI-driven demand. Moving to our retail IDC business on Slide 10. Our retail business continued to progress smoothly in the second quarter. Retail capacity in service was 52,131 cabinets, with the utilization rate increasing slightly to 63.9% as of the end of June, MRR per retail cabinet increased to RMB 8,915 this quarter. Turning to our delivery plan on Slide 11. With our robust and efficient delivery capabilities, we successfully delivered a total of around 188 megawatts in the first half of 2025.

We currently have 8 data centers under construction with 6 in the Greater Beijing area and 2 in the Yangtze River Delta. We plan to deliver around 326 megawatts of capacity over the next 12 months or around 227 megawatts during the second half of 2025 and around 99 megawatts during the first half of 2026. This ambitious delivery plan reflects strong demand from our customers and our outstanding delivery prowess. Now turning to our non-IDC business, a key component of our business. [indiscernible] further expanded its customer base by winning new customers in the consulting and intelligent driving industries for its premium dedicated Internet services, VPN services, IDC services, and cloud services.

In conclusion, our robust second quarter results further validate our core strengths and effective strategic execution. Looking ahead, we will continue to sharpen our competitive advantages with faster deliveries and consistently reliable IDC services as we embark on our ambitious hyperscale 2.0 framework to build greener, more intelligent data centers for the AI era. And as always, we will remain committed to driving innovation and fostering industry development as we grow, delivering value to all of our stakeholders. Now I will turn the call over to our CFO, Qiyu, for further discussion of our operating and financial performance. Thank you, everyone.

Good morning, and good evening, everyone. Before we start the detailed discussion of our second quarter performance, please note that unless otherwise stated, all the financials we present today are for the second quarter of 2025 and are in renminbi terms. Furthermore, unless otherwise specified, all the growth rates I'm reviewing are on a year-over-year basis. Let's turn to Slide 13. In the second quarter, we continued to pursue high-quality, high-margin business. Our total net revenues increased by 22.1% to RMB 2.43 billion, mainly driven by the rapid growth of our wholesale business. Our adjusted cash gross profit rose by 34.9% to RMB 1.06 billion, while our adjusted EBITDA also grew year-over-year by 27.7% to RMB 732.5 million. Let's look more closely at our top line. As you can see on Slide 14, in the second quarter, wholesale revenues, our key revenue growth driver, increased significantly by 112.5% to RMB 854.1 million, mainly attributable to sales at the N-OR Campus 01 and E-JS Campus 03.

Retail revenues continue to account for the largest part of our total net revenues, reaching RMB 959 million for the second quarter. Our non-IDC business revenues were RMB 621 million for the second quarter. During the second quarter, we maintained solid margins, thanks to our continuous efforts to enhance overall efficiency. As shown on Slide 15, our adjusted cash gross margins improved to 43.6% from 39.5% in the same period last year. Our adjusted EBITDA margin rose to 30.1% compared with 28.8% in the same period last year. Moving on to liquidity. On Slide 16, we maintained robust and healthy liquidity, bolstered by a net operating cash inflow of RMB 366.6 million during the second quarter, bringing the net operating cash flow for the first half of the year to RMB 562.3 million. Our cash positions remained solid with total cash and cash equivalents, restricted cash and short-term investments reaching RMB 4.66 billion as of June 30, 2025.

Next, let's take a look at our debt structure on Slide 17. We maintained our prudent approach to debt management. As of June 30, 2025, our net debt to the trailing 12 months adjusted EBITDA ratio was 5.3 and total debt to the trailing 12 months adjusted EBITDA ratio was 6.4, both remaining at healthy levels. Also, our trailing 12 months adjusted EBITDA to interest coverage ratio was 6.9. We prioritize long-term debt maturity planning in our debt and strategic management to ensure the security of debt repayment. Additionally, the company's short- and medium-term debt maturing in 2025 to 2027 comprises 44.1% of our total debt. Turning now to CapEx spending. As you can see on Slide 18, for the first half of 2025, our CapEx was RMB 3.89 billion, with the majority allocated to the expansion of our wholesale IDC business. 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 megawatts in 2025 or approximately 3x 2024's total deliveries and surpassing our total deliveries in the past 3 years combined. Furthermore, in late June, our Board authorized a buyback program under which we may repurchase up to USD 50 million from time to time on the open market over the ensuing 12 months. The buyback program underscores our deep commitment to delivering value to shareholders and our confidence in VNET's future development and growth prospects. Now moving to our full year guidance for 2025 on Slide 19. As we announced in a press release in late June, we have increased our full year revenue and adjusted EBITDA guidance, fueled by faster-than-anticipated move-ins among wholesale IDC customers and ongoing operational efficiency gains.

We now expect total net revenues to be in the range of RMB 9.15 billion to RMB 9.35 billion, a year-over-year increase of 11% to 13% and adjusted EBITDA to be in the range of RMB 2.76 billion to RMB 2.82 billion, representing a year-over-year increase of 14% to 16% if the RMB 87.7 million on disposal gain of E-JS 02 data center were excluded from the adjusted EBITDA calculation for 2024.

The year-over-year growth would be 18% to 20%. Before I conclude, I'd like to briefly update you on our ESG efforts. We were pleased to receive an A grade, the highest rating in the 2024 Supplier Engagement Assessment by the Carbon Disclosure Project. We were also recognized as a supplier engagement leader for our collaboration with supply chain partners on low-carbon technology, R&D, enhancing our IDC operational energy efficiency and empowering our partners to save energy and reduce emissions. Looking ahead, we will remain steadfast in our pursuit of ESG excellence, embracing and promoting a green future.

In summary, we maintained our business' vibrant momentum with strong financial results during the second quarter, supported by our effective dual core strategy and new Hyperscale 2.0 framework. We're well positioned to lead the AIDC transformation, capturing surging AI-driven opportunities and delivering sustainable long-term value for all stakeholders. This concludes our prepared remarks for today. We are now ready to take questions.

[Operator Instructions] Your first question comes from Tom Tang with Morgan Stanley.

And first of all, congratulations on very strong quarterly results, especially on the wholesale business. So my question is mainly about the future demand and orders. So we noticed that NVIDIA has regained its permission to ship their new chipsets to China again last month. So just wondering, based on our communication with our big customers, what is our current expectation of their future demand and the pattern of their order tendering?

[Foreign Language]

[Foreign Language]

Thank you for your question. And now the market is relatively active. And according to the report of the third party institutions, we find that in the regions where the digital economy is relatively active, for example, in the Greater Beijing area and in the Yangtze River Delta, I think the AI demand is relatively strong and also the relation between supply and demand has improved a lot.

[Foreign Language]

And your question is also mentioned about the bidding and also the demand for the big client. Since you also have noticed that this year, our delivery plan is over 400 megawatts, it is relatively large. And also the new orders should be delivered in 6 months. So we will pay more attention to the demand released around September.

[Foreign Language]

So in addition to the 20-megawatt wholesale business, I think we are also paying a lot of attention to the potential demand, and we are also communicating for this potential demand. I think most of them are highly relevant to the AI.

Your next question comes from Edison Lee with Jefferies.

I have 2, right? Number one, can you update us on the build-out of wind power in Ulanqab and when that will actually come into effect and how that's going to impact the revenue and also the margin of the company? Number two, can you comment on your MSR on wholesale because it seems that your MSR or your MRR on the wholesale in the second quarter is actually up on a year-on-year basis. So maybe if you can explain a little bit what is driving that unit price, that will be great.

[Foreign Language]

[Foreign Language]

I think now the wind power project in Ulanqab is well underway. I think by the end of this year and also in the beginning of next year, it will go to deliver power. But I think this is relatively a new trial for us, so we cannot expect impact on our P&L. However, I think it will mainly deliver positive impact on our IR. So I think the details on the statistics and the figures will be offered when it began to deliver power.

[Foreign Language]

And so for the second question, I think it has 2 factors. The first one is I think the wholesale price is relatively very stable. And you also mentioned that the improvement in MSR, I think it's mainly due to the seasonal effect factors because of the increase in the revenue from the electricity bills and also in this quarter, we have the one-off income.

Your next question comes from Daley Li with BofA Securities.

I have 2 questions here. The first one is regarding our gross margin. Our adjusted gross margin was quite a healthy growth and improvement. And for our GAAP level, gross margin, if we look at quarter-on-quarter, it seems dropped a little bit and what's the reason behind this? And how do you think the future normalized gross profit margin?

Second question about the new financing channel, the REITs. Could you please update us on the progress of the private REITs and the C-REITs going forward?

[Foreign Language]

[Foreign Language]

Thank you for your question. For the changes in the GP margin, I think it's affected by the timing of turning the [indiscernible] into [PPE] and also the depreciation. So there can be some seasonal factors that leads to the fluctuation. But if we exclude the -- if we only consider the cash GP margin, I think it's still varied on a healthy and a steady increase.

[Foreign Language]

And also for the REIT project, we have been actively promoting the REIT projects. We have the public and also the private REITs. And I think we have and also, as mentioned, this year through the REITs project, we have to have a recovery of RMB 2 billion.

Your next question comes from Timothy Zhao with Goldman Sachs.

Great. Congrats on the very strong results. Two questions here as well. First is regarding your guidance, pretty glad to see that you raised guidance actually 2 months ago. But after the very strong first half results, just wondering how management thinks about the second half outlook? So if my calculation is correct, I think towards the high end of your guidance, I think the second half growth implied only around single-digit growth. Just wondering how should we think about the second half outlook?

Secondly is regarding the retail IDC business. As I see there is some revenue decline on this retail IDC revenue in the second quarter of this year versus a stronger first quarter. Just wondering what is the reason behind?

[Foreign Language]

[Foreign Language]

Thank you for your question. As mentioned, in spite of the upgrading in the guidance, I think the guidance for the second half of this year is still relatively conservative. So our consideration is that we needed to watch -- we need to watch and see that if the utilization speed and the pace of our customers or clients will not be affected by the chips. And if our wholesale utilization business can maintain its speed, I think we can upgrade the guidance for the second half of the year.

[Foreign Language]

And your second question is relatively to the IDC revenue from -- for the retail business. Yes, there can be some slight decline, but I think it's still within the reasonable range. And I think the revenue for the retail IDC will maintain a relatively stable and even some increase.

Your next question comes from Andy Yu with DBS.

Congratulations on solid results. So I have a question regarding the second half outlook. Could management share some color on whether the rapid momentum of our client movement can be sustained? Also, do we expect that the impact of AI chip supply constraints could affect senior orders or customer movements in the second half of '25?

Let me translate the question. [Foreign Language]

[Foreign Language]

So as for the outlook for the second half of this year. I think if we compare the second half with the first half of this year, I think, I am relatively optimistic about the second half because if we take into account the delivery of the -- delivery in the first half of this year, and we will also closely follow the rules of the new orders unleashed by our clients. And I think we will be very optimistic generally about the second half of this year. And also as for the move-in pace of our clients, I think according to the practice once the order has been confirmed, we usually have very fast move in pace.

[Foreign Language]

And also as for the supply of the chips of AI, we will closely follow the companies like [NVIDIA chips] and also the domestic chips. And I think the expectation will be very clear, very soon. As also according to our experiences of serving our clients or customers, I think once the order is confirmed, the move-in pace will be very fast. And also as for the wholesale business, we have also confirmed with the core clients that the orders at hand for rest of our clients will not be affected.

Your next question comes from Sara Wang with UBS.

Thank you for the opportunity to ask a question. And again, congratulations on the very solid results. I only have one question -- is that management just mentioned that there could be potential new tenders from the customers. Do we expect similar customers and similar workload going forward? Or there could be some change?

[Foreign Language]

[Foreign Language]

So thank you for your question. I think our clients unleash their demand gradually. And from the demand side, I think in terms of the business, the demand for AI remain unchanged.

Your next question comes from [indiscernible] with CICC.

We will just pause for a moment to see if we'll have [indiscernible] back in the queue.

That does conclude our call and conference for today. Thank you for participating. You may now disconnect.