GDS conference call highlights: Customer onboarding is expected to accelerate in the second half of the year, and management remains confident in AI inference demand in the coming years

GDS management stated that the previously signed 152MW ultra-large-scale order is expected to significantly accelerate customer onboarding speed in the second half of 2025. Despite uncertainties in chip supply, there is confidence in the future demand for AI inference.

On August 21, according to news from the Chasing Wind Trading Desk, Bank of America Merrill Lynch stated in its latest research report that GDS's Q2 2025 conference call conveyed positive signals, with management expecting a noticeable increase in customer onboarding pace in the second half of 2025, mainly benefiting from the delivery of the previously signed 152MW ultra-large-scale order, which will directly translate into revenue growth.

Bank of America Merrill Lynch noted that despite uncertainties in chip supply leading to relatively cautious new orders related to AI, management maintains an optimistic outlook on the demand for AI in the coming years, expecting inference demand to be a key driving force.

Additionally, Bank of America Merrill Lynch pointed out that management revealed during the conference call that the overseas business platform DayOne performed strongly in Q2, adding 246MW of committed orders, including new orders from Thailand and Finland. The company is conducting a Series C equity financing and plans to IPO within 18 months.

Bank of America Merrill Lynch maintained a buy rating, raising the target price from $47.6 to $50.6, mainly based on the company's strong market position as China's largest carrier-neutral data center operator, sufficient domestic backlog supporting growth, and the prospects of overseas expansion as a new growth driver.

According to a previous article from Jianwen, the latest financial report shows growth in the data center business, with GDS's revenue increasing by 9.1% in Q4 2024, and net profit turning profitable year-on-year. Looking ahead to 2025, GDS expects total revenue to grow by approximately 9.4% to 12.3% year-on-year. The company anticipates total capital expenditures of about RMB 4.3 billion for 2025.

Customer onboarding pace is expected to accelerate significantly in the second half of the year

The research report states that GDS management clearly indicated during the conference call that they expect the customer onboarding speed in Q3 and Q4 of 2025 to significantly improve compared to the previous two quarters. This expectation is mainly based on the delivery of the previously signed 152MW ultra-large-scale customer orders starting in the second half of the year.

According to Bank of America Merrill Lynch's analysis, GDS currently has 185,000 square meters of backlog projects (including projects in service and under construction), and management plans to deliver 35% of this in the second half of 2025, with another 35% in 2026. This delivery schedule indicates that the company has a stable revenue growth foundation.

In Q2 of this year, the company added a committed area of 22,700 square meters, mainly from traditional internet and cloud service businesses. Currently, GDS's utilization rate in the Chinese market has reached 77.5%, an increase compared to the same period last year, indicating a robust demand foundation.

AI Inference Demand Seen as Core Driver of Long-Term Growth

Bank of America Merrill Lynch stated that despite the uncertainty in chip supply affecting customers' new orders in AI-related fields, the management of GDS remains strongly confident in the AI demand over the next few years, especially optimistic about the development prospects of inference demand.

The research report pointed out that management mentioned in a conference call that compared to training demand, AI inference will become a key driving factor for data center demand. GDS is well-positioned in this trend, with multiple sites around Beijing and Shanghai that have completed preliminary preparations and can be ready for service in a short time.

In the long term, GDS holds 900MW of future development capacity in first-tier cities and surrounding areas, which can be delivered in the coming years. This reserve provides ample infrastructure support for the company to capture the growth of AI inference demand.

DayOne's Overseas Business Order Trend Strong

Bank of America Merrill Lynch stated that GDS's overseas business platform DayOne performed well in the second quarter, adding 246MW of committed orders, including new orders in Thailand and Finland. As of the end of the second quarter, DayOne's total IT power commitment reached 783MW, with IT power utilization at 213MW.

The research report noted that during the third quarter, DayOne secured its second site in Finland, further expanding its footprint in the European market. Management stated in the conference call that DayOne is expected to achieve its original goal of obtaining a total power commitment of 1GW within three years ahead of schedule, with an anticipated addition of 300-500MW of commitments each year in the coming years.

DayOne is currently undergoing a Series C equity financing, and management revealed plans to achieve an IPO within 18 months. This timeline reflects the company's confidence in the development prospects of its overseas business and provides funding support for future expansion