Hello, ladies and gentlemen. Thank you for standing by for GDS Holdings Limited's second quarter 2026 earnings conference call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a question and answer session. Today's conference call is being recorded. And I'll turn the call over to your host, Ms. Laura Chen, head of investor relations for the company. Please go ahead, Laura.

Thank you. Hello, everyone. Welcome to the second quarter of 2026 Earnings Conference Call of GDS Holdings Limited. The company's results were issued via Newswire Services earlier today and are posted online. A summary presentation, which will refer to GDS Conference Call, can be viewed and downloaded from our IA website at InvestorsGDSServices.com. Meeting today's call is Mr. William Huang, GDS founder, chairman, and CFO. will provide an overview of our new strategy and performance. Mr. Dan Newman, GBS CFO, will then review the financial and operating results. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties As such, the company's results may be maturely different from the views expressed today. Further information regarding these and other risks and services is included in the company's perspective as filed with the U.S. SEC. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please also note that GDS earnings press release of this report. include discussions of unaudited gap financial information as well as unaudited non-gap financial measures. GDS practically contains a reconciliation of the unaudited non-gap measures to the unaudited most directly comparable gap measures. I'll now turn over the call to GDS founder, chairman, and CEO, Mr. Wei Huang. Please go ahead, Wei Huang.

Hello, everyone. This is Wei Huang. Thank you for joining us on today's call. AI is transforming our business. Our sales momentum is the strongest we have ever seen. In the second quarter, we achieved 260 megawatts of new bookings, bringing our total for the first half of 2026 to a record 470 megawatts. During the current quarter, we are well on the way to securing a further major business win

were leading customers.

We are confident today raising our four-year sales target to one gig. All of our sales agreements include a binding take-or-pay commitment. This is a metric which we disclose as bookings. The sales agreements specify the delivery date, which is up to four quarters of the bookings. This allowed us to invest based on secure commitments. Following the delivery date, there's an agreed ramp-up period, usually another four quarters, which gives us visibility to the timing of new buildings. Alongside new bookings, our customers also request us to reserve deployments

and the same size for their future needs.

Reservation has become an integral part of our sales agreement. So far this year, we have secured an additional 600 megawatts of reservations from our customers. We expect to end this year with over 1 gigawatts of new reservations. This provides us with high visibility for new orders in the next couple of years as customers convert reservations to binding commitments. China's tech giants and emerging AI leaders are driving the adoption of advanced Agitig Models. This has led to a structural upgrade in the demand for computing power and AI infrastructure. GDS is uniquely positioned to address this opportunity as a result of our strategic customer relationships. Presents across all key markets in China. track record of execution and financing capabilities. The strength of our platform is clearly evident in the composition of our first half bookings. We won significant new business from each of the three largest hyperscale customers. At the same time, we started to establish relationships with a group of emerging AI leaders, which have the potential to generate incremental demand in the future. Our new business wings are diversified across the markets. For the first half of the year, around half of our bookings came from established markets and half from new markets, including the Ulaanbaatar and Norlinga in Mongolia. and Xiaobai in Guangdong province. We are progressing well with customers for our Zhongwei campus in Ningxia province, which is another new market. This sales success validates our differentiation resource strategy. At the midpoint of this year, we have a total finding commitment for over two gigawatts, plus a further 600 megawatts of reservation. On the capacity side, we have around three gigawatts of developable capacity, which is not yet committed to end the reservation. It is mostly in new market. In view of our current sales momentum, we are actively adding to the have identified in the markets where demand is growing. While pursuing our ambitious target, we remain selective in terms of customers and the counter-terms. We invest against binding long-term commitments from customers, and we are committed to maintaining financial discipline. I will now pass on to Dan for the financial and operating review.

Thank you, William. I'll start from the backlog buildup on slide 10. We started the current year with a backlog of 450 megawatts. By the middle of the year, our backlog had increased substantially to 757 megawatts. Based on the pricing in the contracts, and our operating cost benchmarks, we estimate that we can generate 2.2 million RMB of adjusted EBITDA per megawatt on average from this backlog. Our booked but not billed adjusted EBITDA was therefore around 1.6 billion RMB. By year end, assuming we achieve our sales target, we expect the backlog to increase further to over one gigawatt. Turning to slide 11, during the first half of 2026, our net move-in was 145 megawatts. During the second half, we forecast move-in of another 90 megawatts, making 235 megawatts for the full year. The move-in pattern over the course of 2026 reflects the timing of bookings last year. For 2027, we forecast move-in will increase substantially to more than double the number for 2026. The move-in will be heavily weighted the second half of 2027. Assuming we sustain our sales momentum, 2028 should see another step up in move-in. Turning to CapEx on slide 12, Our unit CapEx for the new capacity which we are constructing averages around 20 million RMB per megawatt. As we just raised our sales target for the current year, we are also raising our guidance for CapEx pay from 9 billion RMB to 10 billion RMB, most of which is in the second half. Our plan is to continue financing new investments with around 60% debt and 40% equity at the project level. Assuming we can generate a stabilized cash yield on new investments of 10% to 11%, this implies leverage of around 5.5 to 6 times at the project level. Our primary source of debt is onshore RMB-denominated long-term bank borrowings.

The onshore bank market remains highly supportive.

During 2Q26 alone, we were able to complete 4.9 billion RMB of new debt financing and refinancing. For the project equity, we have various sources. We have cash of nearly 20 billion RMB on our balance sheet, and we have delevered down for 4.7 times net debt to last quarter annualized adjusted EBITDA. We have operating cash flow, which continues to strengthen. And we have our onshore asset monetization program, which we are building up in a very deliberate way. Following our successful CREIT IPO, the first post-IPO asset injection is currently under regulatory review. Turning to slide 16, we're revising upwards our full-year revenue and adjusted EBITDA guidance to reflect a more accurate financial outlook for this year, which includes the one-time items disclosed in 1Q26. Turning to slide 17, in order to put our first half 26 financial performance and revised full year 26 guidance into context, we have made some pro forma adjustments. Starting from reported revenue and reported adjusted EBITDA, we deduct the one-time items in 1Q26. For consistency, we also deduct recurring income in prior quarters, which was restructured into the one-time payment. and we deduct the revenue and adjusted EBITDA contributed by the monetized assets prior to their deconsolidation. These adjustments establish a clean basis for comparison. For the first half of 2026, our pro forma adjusted EBITDA increased by 12.7%, taking the midpoint of our revised guidance. for full year 26. The implied growth rate for pro forma adjusted EBITDA is 6.5%. We'd now like to open the call to questions. Operator?

Thank you.

We will now begin the question and answer session. To ask a question, please press star 11 on your telephone and write your name to be announced. To withdraw your question, Please press star 11 again. For the benefit of all participants on today's call, please limit yourself to one question. If you have more follow-up questions, please re-enter the queue. A moment for our first question. And our first question comes from the line of Yang Liu from Morgan Stanley. Please ask your question. Yang, your line is open.

Thanks for the opportunity to ask questions and congratulations on the upward revision of four-year guidance. I would like to ask about the future potential moving. I think that there's a lot of debate on your customers' CapEx and also the availability of GPU in the market and also the constraint of computing power. We also see that you expect your moving to improve dramatically next year. What could be the downside risk for that? And if there's any concern or delay when customer get the GPUs, will the take-or-pay contract protect GDS revenue? Thank you.

Okay, yes, thank you. I think the dynamic of the demands from the different dimensions, I think, of course, the key driver is still the GPU. But the GPU, I think, in terms of the domestic GPU, the supplies are catching up. Yeah. I think it took a while in the last couple of quarters, right, as we mentioned. But now it looks like you're on track to catching up.

This is number one.

But in the meanwhile, I think they also drive a lot of traditional growth. What we have seen is that the new order, quite a big number is driven by the CPU. So it will not impact in terms of the supply. There's no issue. So I think this is a positive. So that's why we take the more positive way. to look at the current or future chip supply. So that's our view. If you look at the other, a lot of these traditional cloud, they are still raising their profit, and the growth is very significant as well. So I think that, let's be clear there.

Thank you.

How about... The take-or-pay term protects the GDS revenue.

Two comments. The first is that in each contract, there is a specific delivery date when the capacity has to be available to move in by the customer. And that is a fixed date in each contract. It's up to four quarters.

from when the booking is disclosed.

So that part, I think, is unchangeable. After that, there's a move-in period, and it varies from contract to contract. We've been very focused on trying to select contracts which had a shorter move-in period and a fixed commitment. For the purposes of forecasting, we assumed that the move-in will be on average over four quarters on a straight line basis. So that is what our forecast reflects. In reality, it could be faster or it could be slower, but I don't think it will materially deviate from that.

Thank you.

Thank you. We will now proceed to take our next question. and our next question comes from Sarah Wong from UBS. Please ask your question, Sarah.

Thank you for the opportunity to ask a question and then congrats on the really solid new order signs. As Madison just mentioned that there's increasing demand from emerging AI leaders. So just wondering, is there any difference in their demand profile or contract terms compared to established cloud or internet have been skilled customers. We already served for quite some time.

I think we are just starting to build up our relationship. So far, we are a very selective business from this new AI leader. I think in terms of their demand profile, it looks like it's getting bigger and bigger right but we are still very selective our main customer the new new business mainly driven by the hyperscale yeah a couple of the larger hyperscale but we are we think that there are suddenly a new uh customer in future it's the right thing to do to diversify uh our customer base so we just start start to build some relationships with them right now so so that of course there their demands work on this obvious inference, which we believe, yeah.

I see. Thank you.

Thank you. We will now take our next question from the line of Frank Loven from Raymond James and Associates. Please ask your question, Frank. Your line is open.

Great, thank you. I wanted to get an update on your new guidance and what does that imply for the impact of potential action with the CREIT contribution? Does that include any of that? And what would you expect that to be? How would you expect that to impact revenue and EBITDA? And then secondly, if you could just address the slowdown in MRR, how should we think about that? And if we're looking forward, are you signing contracts that should be resulting in an improvement in MRR going forward? How should we think about that?

Thanks. First of all, on guidance, to make clear that our guidance does not take account of any further asset monetization. There's a transaction in progress under regulatory review. We can't be any more specific about the timing of that. But to be clear, it's not factored in. For the MSR, we've provided guidance about the yield in terms of EBITDA per megawatt for the backlog and the new business that we're winning. And I think that will help for forecasting. If we go back to MSR, I always make the comparison on a same quarter basis. So if we take 4Q26 compared with 4Q25, we forecast that it will be down 3% and then maybe buy a similar amount next year. Part of that is the change in the location mix because there's a substantial amount of new business in new markets and part of it is due to the legacy contracts where we have about another 18 months to go before we are through the transition of adjusting all of our contracts to the current market pricing. So our guidance this year and what we indicate in the future will fully reflect that.

I should point out there, I mean, the tier one market, I mean, also the new market, the current price level is quite stable.

This is all about the transition.

Okay, great. Thank you.

Thank you. And our next question comes from the line of Daily Lee from Bank of America Securities. Please ask your question, Daily. Your line is open.

Hi, thanks management for taking the question. Congrats on the opportunity for the new orders. I have one question regarding the moving. I remember in last earnings call, we are sending a soft moving rate in Q2, but it seems that the number is better than our market expectation. So what has been the key drivers for better moving Q2? And secondly, how do we see the demand and supply trend in the data center market in China, considering the power quota approval progress by the government? Thank you.

I would not read anything into the quarterly fluctuations. Most of the move-in in the current year is a capacity that was booked in 2025 or even before. And if you look at the bookings in 2025, they had a very strong first quarter 2025, and then the second, third, fourth quarter were at a lower consistent level. And then from the first quarter this year, their bookings increased by a very large amount. That sustained the second quarter, gave an indication for the full year that that sustained. So I think you can derive from that the outlook for move-in over 2020, made of 2026 and 2027. We see a significant increase in move-in in the second half of 2027. which is going to lead to a significant acceleration of EBITDA growth.

I think there's a couple of key points. Number one, now it's controlled by the central government.

So basically, if you apply the policy, the first step is to go to the municipal level to get the local government their commitment and their full support, right? This is the normal. Our government is quite selective right now. They try to give the market leader more allocation. That's why we built up our land bank in the last 18 months. so quickly and take some advantage of the GDS grant. So second, then we go to the provincial level NDRC approval, then go to the final approval from the central government, the NDRC central government.

That's the key process of how we get it out of location. Thank you, Matthew. Thank you.

Thank you. We will now take our next question from the line of Edison Li from Jefferies. Please ask your question, Edison. Your line is open.

Thank you for taking my questions. So congrats on the good results. My question, sorry, is really centering around just reconfirming the definition of the bookings and the reservations. So I assume that bookings mean contracts have been signed and reservations mean that is sort of an MOU with indicated interest by the customers and you look forward to converting that into signed contracts over the next few quarters. Is my understanding correct?

Not exactly. What I'd like to make clear is that there's a sales agreement which contains a booking which is a contractual take-or-pay commitment. But within the same document, we undertake to reserve capacity to enable the customer to have certainty of being able to make commitments typically at the same site in future over a period of time. So the bookings and the reservations go together, and that's how the customers look at it from a resource planning perspective.

Yeah, in the meanwhile, I think we should say, based on our last 12 or 18-month experience, which the reservation, our customers exercise their reservation in a 100% base. That's our current experience. But in terms of the case-by-face-by-face, we should still negotiate moving presented that, but in general reservation is quite a certain, provide a very, very high certainty for our future booking.

Okay, so can I follow up by asking your booking targets this year? Right now it's one gigawatt. I think in the last quarter, I think your target was still 500 megawatt. So this doubling of the bookings target, I believe is driven by your customers. or your assessment of the customer's demand and is it possible for you to split the customer's demand into training versus inference or you have no idea how to split that?

I think the campus like in the new market is

I think they will host different workloads. It's a training plus instance.

They're both their workloads.

Increase the guidance? I think increase guidance is, number one, the whole market demand we see is increased. If you look at our hyperscale, they continue to increase their contacts. That's in line with it. That is number one. Number two, I think the GDS still maintained a lot of advantage, which is our customers' preferred. So everybody knows we stepped in the new growth, and we started our new business plan. So I think in terms of the capital readiness, even better than other competitors.

So I think the customer will more rely on us.

and in terms of your power reserves, can you talk about the locations of your power reserves? The part we identify is development capacity. That is almost entirely new markets. We have capacity in established markets, but it's under reservation.

There's only a small amount in established markets have not committed or reserved. So is that very different from what you disclosed in the last quarter in terms of locations? No, we disclosed it on the new market rate. Thank you. We will now move up to our next question.

And our next question comes from the line of Timothy Chow from Goldman Sachs. Please ask your question, Timothy.

Your line is open.

Thank you, Michael, for taking that question. I think I just want to get more clarity on the MuYin and how do you want to look at the revenue on EBITDA beyond this year. Just wondering if you can give us a breakdown, for example, for this year, a lot of MuYins, what is the proportion between CPU base and GPU base? And into next year, it seems that you are looking for the MuYin to be more than double to close to 700 megawatts next year. And what will be that breakdown? and Yixin Qian. Thank you very much.

It's not, I think it's not, in general, we don't have the current detail number, specific number in terms of that breakdown there. But in general, I think I can give you the general, I mean, assumption, maybe around 50-60.

Yeah, about both in 2027, yeah. We provide annual guidance. Obviously, we won't be doing that until we get the full year results in around March next year. But what you can already see is that over the course of next year, there's going to be a very significant acceleration. The growth rate from 1Q, 2Q, 3Q, 4Q is going to be very different. I think what really matters is where we are at the end of the year and where we are in 2028. I believe it's already are all strong indication that in 2028, GDS is going to be a pretty high-growth company.

Thank you. And may I follow up on the breakdown 50-50? Just wondering if that refers to both this year and next year and onwards, or how that mix can change in the next year?

Yeah. Yeah, maybe GPO will... a little bit higher next year. Yeah, that's what I guess. Yeah, based on the current domestic supply, it's catching up.

I think, yeah.

Thank you. Due to the time limit of today's call, I'll now like to turn the call back to the company for any closing remarks. Thank you all once again for joining us today and see you next time.

Thank you.

This concludes this conference call you may now disconnect your lines. Thank you.