Release Date: March 19, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- GDS Holdings Ltd (GDS, Financial) is well-positioned to capitalize on the growing demand for AI inferencing in Tier 1 markets, leveraging its strong land and power resources.
- The company executed its first asset monetization transaction, providing financial flexibility to address immediate opportunities without deviating from its strategic path.
- GDS Holdings Ltd (GDS) achieved a record growth of 79,000 square meters in 2024, all organic and concentrated in Tier 1 markets.
- The company secured a massive new order for 40,000 square meters or 152 megawatts, marking the largest single order in its history in China.
- GDS Holdings Ltd (GDS) maintains a strong financial position with a positive cash flow before financing of RMB379 million for 2024, aligning with its financial targets.
Negative Points
- The availability of chips poses a potential risk for future deployments, leading GDS Holdings Ltd (GDS) to adopt a cautious 'wait and see' approach.
- The company's utilization rate was 74% at the end of 2024, with expectations to only reach the high 70% by the end of 2025, indicating underutilization of capacity.
- GDS Holdings Ltd (GDS) anticipates a decline in MSR per square meter over the next year, which could impact revenue growth.
- The company's CapEx for 2025 is projected to be RMB4.3 billion, which includes additional costs for the new 152 megawatt order, potentially straining financial resources.
- Cash flow before financing is expected to be negative in 2025 due to additional CapEx, although mitigated by asset monetization proceeds.
Q & A Highlights
Q: Could management update us on the plan and schedule for spinning off DayOne and letting it go public?
A: Wei Huang, CEO, stated that the IPO plan for DayOne is more visible now, and they plan to list the company within 18 months. They are confident that it will be a successful IPO, bringing high value to current shareholders.
Q: Is the current CapEx based on existing orders, including the 150 megawatt order win in the first quarter? How should we think about new order wins throughout 2025?
A: Wei Huang, CEO, confirmed that the CapEx includes the recent order win. They are cautious about the chip supply situation, which is a key driver for AI deployment in China. They are monitoring the situation closely and are ready to act when the conditions are favorable.
Q: Can you characterize the types of customers and workloads you're getting? What percentage is AI versus traditional cloud enterprise business?
A: Wei Huang, CEO, explained that the current demand in Tier 1 markets is mainly driven by AI inference, not training. The demand is strong and expected to maintain for the next few years. The lead time from order to full utilization has improved to 12 months.
Q: What is the supply and demand dynamic in Tier 1 markets, and how do you view the pricing environment?
A: Wei Huang, CEO, noted that the demand in Tier 1 markets is starting to benefit them, with a shift from training to inference. They expect the supply-demand balance to improve in 6 to 12 months, potentially leading to better pricing.
Q: What is the use of the ABS proceeds, and can you provide details on the customer profile and margin profile of those assets?
A: Daniel Newman, CFO, stated that the ABS proceeds can be used to pay down debt or reinvest. The assets chosen for the ABS have financial institution customers, which are highly recognized by investors. The ABS transaction allows them to increase CapEx while maintaining or lowering debt levels.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
