VNET Group Q2 2026 Earnings Call - Wholesale Revenue Surpasses Retail as AI Demand Drives Gigawatt Milestone

Operator: Hello, ladies and gentlemen. Thank you for standing by for the second quarter 2026 earnings conference call for VNET Group, Inc. After management’s prepared remarks, there will be a question and answer session. Please note the Chinese line is in listen-only mode. If you wish to ask questions, please dial in through the English line. Participants from our management include Mr. Wen Teng, Rotating President, Mr. Peter Zhang, SVP of Operational Finance, Ms. Sharon Liu, Executive Vice President, Ms. Julia Jiang, Senior Manager of Investor Relations of the company, Mr. Ju Ma, Executive Vice President. Please note that today’s conference call is being recorded. I will now turn the call over to the first speaker today, Ms. Julia Jiang. Please go ahead.

Julia Jiang, Senior Manager of Investor Relations, VNET Group, Inc.: Thank you, Operator. Hello, everyone, and welcome to our second quarter 2026 earnings conference call. Our earnings release was distributed earlier today, and you can find a copy on our website as well as on news wire services. Please note that today’s call will contain forward-looking statements made under the Safe Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause the actual results to differ materially from our current expectations. For detailed discussion of these risks and uncertainties, please refer to our latest annual report and other documents filed with the SEC. VNET does not undertake any obligation to update any forward-looking statements, except as required under applicable laws. Please also note that VNET’s earnings press release and this conference include the disclosures of unaudited GAAP and non-GAAP financial measures.

VNET earnings press release contain a consolidation of unaudited non-GAAP measures to the unaudited GAAP measures. A summary presentation of which we refer 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 Neolink for AI to deliver this quarter’s prepared remarks by Mr. Wen Teng, 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 website at ir.vnet.com. Now, let’s get started with today’s presentation. Mr. Teng, please go ahead.

Wen Teng, Rotating President, VNET Group, Inc.: 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 2026. We delivered another robust quarter as we continue to capitalize on surging AI-driven demand, leveraging our industry-leading capabilities, strategically located resource reserves, and strong execution. In the second quarter, we secured a total of 347 megawatts in new order wins, primarily driven by accelerating growth in our wholesale IDC business, which contributed 345 megawatts. Together with the 517 megawatts of orders disclosed in our last quarter earnings results, our wholesale IDC business has secured a total of 862 megawatts of new orders year to date in 2026. As of June 30, 2026, our wholesale capacity in service rose by 49.4% year-over-year to 1,007 megawatts, surpassing one gigawatt for the first time.

Meanwhile, wholesale capacity utilized by customers grew by 45.5% year-over-year to 744 megawatts, bringing the utilization rate to 73.9%. Our retail IDC business continued to progress smoothly, supported by growing AI-driven demand. Retail MRR per cabinet increased to RMB 9,799 in the second quarter, while the retail utilization rate remained stable at 64.5%. On the financial side, our total net revenues increased by 14.2% year-over-year to RMB 2.78 billion for the second quarter. Wholesale revenues remained the key growth driver, reaching RMB 1.10 billion, a year-over-year increase of 29.3%. Our adjusted EBITDA for the second quarter increased by 25.4% year-over-year to RMB 918.3 million, also primarily attributable to the wholesale IDC business. Beyond our operational and financial performance, we made meaningful progress on the following two strategic initiatives during the quarter.

First, we continued to advance our strategic collaboration with CATL, a global leader in zero carbon new energy technology. We signed a strategic cooperation agreement to jointly develop a three-layer integrated compute energy ecosystem. I will share more details shortly. Second, we continued to strengthen our strategic resource reserves across key regions. By the end of the second quarter, our total capacity exceeded 3.5 gigawatts in the Chinese mainland. On top of that, we secured approximately 500 megawatts of overseas resources. Our proactive investments in critical resources provide the flexibility for future capacity expansion, enabling us to capture rising demand. Together, these strategic initiatives further strengthen our competitive position and support our long-term growth. Let me now walk you through our business performance in more detail. Moving on to our new order wins on Slide 5. Our premium reliable services continue to earn customer trust and gain market share.

Following our last earnings call, we won a new 345-megawatt wholesale order in the second quarter from a leading cloud service provider for our data center in the greater Beijing area. This order win reflects growing customer confidence in our high-performance data center capabilities and our ability to support their evolving AI infrastructure requirements. Furthermore, driven by AI-related demand, we secured new retail orders totaling approximately 2 megawatts across multiple retail data centers during the quarter from customers in the IT services, local services, and financial services sectors. In aggregate, we secured four wholesale orders totaling 862 megawatts year to date in 2026, including the 345 megawatts I just mentioned and 517 megawatts we announced last call. We continue to see robust momentum in customer demand with increasing depth and durability.

Customers are not only accelerating their near-term capacity deployments, but are also beginning to secure capacity in advance under reservation agreements to support their medium to long-term expansion plans. As of the end of the second quarter, our reservations stood at 355 megawatts, bringing total orders and reservations to over 1.2 gigawatts. This demonstrates the strength and sustainability of expansion-related demand and provides greater visibility into our future growth and phase delivery schedule. Meanwhile, we have established a well-structured delivery schedule for these orders, with approximately 287 megawatts expected to be delivered in 2026, 345 megawatts in 2027, and 230 megawatts in 2028 and beyond. Securing these large-scale orders is a testament to the trust customers place in our execution capabilities and speed to market.

These new orders and our disciplined delivery roadmap enhance the visibility and predictability of our future revenue growth, underpinned by a high-quality base of long-term contracted revenue. Please see Slide 7. As of the end of the quarter, more than 90% of our wholesale IDC revenue was recurring. Our total capacity committed benefits from a favorable maturity profile with minimal near-term expirations and a weighted average remaining lease term of seven years. These long-term customer commitments provide a predictable and resilient foundation for our sustained revenue growth. The rapid development of AI continues to drive significant growth across the IDC industry. As AI models become increasingly sophisticated and AI applications continue to scale across industries, leading internet companies, large cloud service providers, and AI native companies are accelerating their investments in high-performance computing infrastructure. On the supply side, the industry is also undergoing a structural shift.

Increasing power requirements, longer project development cycles, and greater construction complexity are concentrating demand among IDC operators with secured power resources, proven large-scale delivery capabilities, and the technical expertise to execute complex IDC projects. With our differentiated resource portfolio, established AI infrastructure capabilities, and deep relationships with leading customers, we are well-positioned to serve as a trusted infrastructure partner and capture the long-term growth opportunities created by the continued expansion of AI. Now, let’s delve into our IDC business updates, starting with our wholesale business on Slide 8. Our wholesale business continued to grow, with capacity and service increasing by 49.4% year over year to 1,007 megawatts, surpassing the one gigawatt milestone for the first time. Utilized capacity grew by 45.5% year over year to 744 megawatts, with a utilization rate of 73.9%, mainly attributable to customers’ fast move-ins at N-HB Campus 03 and N-OR Campus 01.

Our mature capacity utilization rate also reached 92.5%, a relatively high level. Let’s turn to Slide 9 for an update on our wholesale capacity growth pipeline. As of June 30, 2026, our wholesale resource capacity totaled over four gigawatts, representing an increase of approximately 1.5 gigawatts from the previous quarter. Mainly driven by the land bank we secured this quarter, customer demand remained strong across our capacity portfolio. Capacity in service grew to 1,007 megawatts, with 96.3% already committed by customers. Meanwhile, capacity under construction increased to 585 megawatts, with a pre-commitment rate of 94.2%, providing strong visibility into future deliveries. Approximately 1.1 gigawatts of this capacity is held for future development, primarily in the Greater Beijing area. The scale and strategic concentration of these resources allow us to expand efficiently and respond flexibly to customer demand.

Our newly secured land bank supports approximately 1.4 gigawatts of this capacity, with 908 megawatts across key strategic locations in the Chinese mainland and 478 megawatts in overseas markets, giving us substantial flexibility to support both domestic and international expansion. This diverse resource portfolio not only provides a clear multi-year growth runway, but also reinforces our ability to deliver capacity at scale as AI-driven demand continues to accelerate. Moving to our retail IDC business on Slide 10. Our retail business progressed smoothly in the second quarter. Retail capacity in service was 50,081 cabinets, with utilization rate remaining stable at 64.5% as of the end of June. MRR per retail cabinet increased to CNY 9,799 this quarter. Turning to our delivery plan for the following 12 months on Slide 11.

We delivered 117 megawatts in the first half of 2026, in line with our delivery plan, which concentrates the majority of the year’s deliveries in the second half. We currently have six data centers under construction, with five in the Greater Beijing area and one in the Yangtze River Delta. We plan to deliver 585 megawatts of capacity over the next 12 months, around 333 megawatts during the second half of 2026, and around 252 megawatts during the first half of 2027. The majority of these upcoming deliveries will come from our Ulanqab IDC campus, where we are scaling capacity to support strong and sustained demand from our wholesale customers. This delivery plan provides clear visibility into continued capacity and revenue growth over the coming quarters. Now, I’d like to share more on the strategic cooperation agreement with CATL that I mentioned earlier. Please turn to Slide 12.

Under the agreement, VNET and CATL will establish a partnership to deepen computing energy integration by synergistically combining VNET’s leadership in large-scale computing infrastructure development and operations with CATL’s expertise in zero-carbon new energy technologies. With the goal of shaping next-generation digital energy infrastructure globally and leveraging green direct-current and direct green power connection technologies, the parties plan to jointly develop a three-layer integrated compute energy ecosystem comprising gigawatt-scale compute energy facilities, distributed compute-energy networks, and a zero-carbon token ecosystem. By combining our complementary strengths and deepening cooperation across technology, infrastructure, and supply chains, we will jointly advance innovation in integrated compute energy systems. Together, we aim to contribute to the next generation of digital energy infrastructure in the intelligent era. Before I conclude, a few words on what lies ahead.

This partnership with CATL will further strengthen our core competitiveness and inject new momentum into our future growth. More importantly, it reflects our long-term commitment to becoming a standard-setter and industry leader of digital energy infrastructure in the AI era. Building on this strategic cooperation, we plan to lay out our future operating strategy and outlook to the market in the fourth quarter. In conclusion, our second quarter performance reflects continued progress across our business. Looking ahead, we will continue to strengthen our execution capabilities, expand our high-performance, large-scale data centers, and strategically invest in resource reserves to enhance our competitive position and capture rising growth opportunities. We remain confident in our growth trajectory and committed to creating sustainable long-term value for our shareholders. 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.

Peter Zhang, SVP of Operational Finance, VNET Group, Inc.: 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 second quarter of 2026 and are in CNY terms. Furthermore, unless otherwise specified, all the growth rates I am reviewing are on a year-over-year basis. In the second quarter, we continued to focus on high-quality development. Our total net revenues increased by 14.2% to CNY 2.78 billion, mainly driven by the rapid growth of our wholesale business. Our adjusted cash gross profit rose by 9.4% to CNY 1.16 billion, while our adjusted EBITDA also grew year over year by 25.4% to CNY 918.3 million. Adjusted net income reached CNY 7.4 million, marking a turnaround from an adjusted net loss in the same period last year. Let’s look more closely at our top-line wholesale revenues.

Our key revenue growth driver increased by 29.3% to RMB 1.10 billion for the second quarter, mainly attributable to activity at the N-HB Campus 03 and NOR Campus 02A. Wholesale revenue again surpassed retail revenue this quarter, accounting for 39.8% of our total revenue and further underscoring the growing demand for our wholesale service. Retail revenues increased by 9.1% to RMB 1.05 billion for the second quarter. Our non-IDC business revenues increased by 1.1% to RMB 628.4 million for the second quarter. During the second quarter, we maintained solid margins, thanks to ongoing efficiency enhancement initiatives. Our adjusted cash gross margin decreased slightly to 41.8% from 43.6% in the same period last year, primarily attributable to higher utility costs for customers. Our adjusted EBITDA margin rose to 33.0%, compared with 30.1% in the same period last year. Moving on to liquidity, we maintained a robust and healthy liquidity.

Our net operating cash inflow reached RMB 391.8 million during the first half of 2026. Excluding the impact of RMB 389.7 million in income tax related to capital transactions and other one-off items, net operating cash inflow for the first half would be RMB 781.5 million. Our cash position remains solid, with total cash and cash equivalents, restricted cash and short-term investments reaching RMB 7.21 billion as of June 30, 2026. Let’s take a look at our debt structure. We maintained our prudent approach to debt management. As of June 30, 2026, our net debt to the adjusted last quarter annualized EBITDA ratio was 4.6 and total debt to the adjusted last quarter annualized EBITDA ratio was 6.4, both remaining at healthy levels. Our adjusted last quarter annualized EBITDA to interest coverage ratio was 5.6.

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 40.8% of our total debt. Turning to CapEx spending, our CapEx was RMB 3.55 billion in the first half of 2026, primarily reflecting continued strategic investment in capacity expansion and the construction of our wholesale data center projects. We continue to expect our CapEx for 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. Now moving to our full year guidance for 2026. As we continue to expect strong demand from our wholesale IDC customers and ongoing operational efficiency gains throughout 2026, our outlook remains unchanged from the previously provided estimates.

We reiterate our guidance of total net revenues expected 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 in the range of RMB 3.55 billion to RMB 3.75 billion, a year-over-year increase of 19.2% to 25.9%. To sum up, we delivered solid second quarter results reflecting continued execution strength and meaningful progress across our strategic initiatives. Looking ahead, we will remain focused on strengthening our core capabilities, deepening strategic collaborations, and expanding our infrastructure resources to capture the long-term opportunities in the AI era. We are committed to delivering sustainable, high-quality growth and creating long-term value for our shareholders. This concludes our prepared remarks for today. We are now ready to take questions.

Operator: Thank you. We will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. For the benefit of all participants on today’s call, please ask your question to management in English and then repeat in Chinese. Your first question today comes from Tom Tang with Morgan Stanley. Please go ahead.

Tom Tang, Analyst, Morgan Stanley: Thank you, management, for the opportunity to ask the questions, and congratulations on the very large order win this quarter. I only have one question. Could you please give us an update on the overall supply and demand situations in our key regions? If there is any updated outlook for the pricing dynamics there?

那我先简单翻译一下，就是感谢管理层给我提问的机会，也恭喜公司斩获了这么大的一个订单。我只有一个问题，就是希望管理层可以给我们更新一下几个大区的一个供应和需求的情况，以及对价格是否有什么新的展望。谢谢。

Wen Teng, Rotating President, VNET Group, Inc.: 好，谢谢您的问题。首先从您刚才提到的需求供给，特别是需求这块，我们很清晰地看到，我们这个行业算力需求保持稳健的向上增长。这个是由于来自AI训练与推理场景共同的驱动。从多家的机构测算显示出，行业的算力规模具备可观的增长空间。另外一个很明显的现象是智算的一个细分赛道增速更为突出了。增量主要来源一些头部的互联网客户，在一些核心的区域，高电价机的采购需求也是很强烈。并且在今年，多家大厂已经释放了gigawatt级的招标体量，主要集中在东数西算的八大枢纽和10个集群内。

Wen Teng, Rotating President, VNET Group, Inc.: Thank you for your question. With regard to the demand, we are seeing that the overall compute demand steadily trending up. That is primarily contributed to the demand from both AI training and inferencing. According to multiple organizations, the market still offers room for growth, with the AI focused smart computing segment growing particularly fast. Incremental demand is largely driven by leading internet companies procuring high capacity, high density cabinet resources in key regions. In 2026, several major players are expected to issue tenders at the gigawatt level, primarily concentrated within the national hubs under the Eastern Data, Western Computing Initiative.

Wen Teng, Rotating President, VNET Group, Inc.: 从供给侧来看，全国的数据中心整体供给规模持续地扩张，但行业呈现出明显的结构性的特点。总量的资源与高功率智算的有效供给并不是完全的匹配。

Wen Teng, Rotating President, VNET Group, Inc.: In terms of supply, the national data center capacity continues to expand. However, the industry is showing clear structural mismatches. The aggregate capacity does not always translate into effective supply of high power smart computing resources.

Wen Teng, Rotating President, VNET Group, Inc.: 行业处于一个紧平衡的格局。有效算力供给的释放会同步受到一些像电力配套、芯片供应链等现实的条件的约束。多家机构已经研判出来，这种结构性的供需矛盾或延续到2028年前后。

Wen Teng, Rotating President, VNET Group, Inc.: The sector is currently in a tight equilibrium. The release of effective compute capacity is constrained by power availability, chip supply chains, and other real-world bottlenecks. Multiple industry analysts expected this structural imbalance to persist until around 2028.

Wen Teng, Rotating President, VNET Group, Inc.: 这样的话，像我们互联这种公司，具备了全链条综合实力的头部企业，带来持续的发展红利。

Wen Teng, Rotating President, VNET Group, Inc.: For us, which is a top-tier player with an end-to-end capability, this will definitely create sustained tailwind for us.

Wen Teng, Rotating President, VNET Group, Inc.: 对于刚才您提到的未来价格的预期，对于我们存量项目将按照合同约定的价格来执行。对于新项目，我们会综合考虑同区域客户的价格、建设的成本以及资源的稀缺性、竞争格局，以及我们公司的目标收益率来定价。

Wen Teng, Rotating President, VNET Group, Inc.: On pricing, existing projects will follow agreed contract rates. For new projects, pricing will factor in peer rates in the same region, construction costs, resource scarcity, the competitive landscape, as well as our target returns.

Wen Teng, Rotating President, VNET Group, Inc.: 好，谢谢。

Wen Teng, Rotating President, VNET Group, Inc.: Thank you.

Julia Jiang, Senior Manager of Investor Relations, VNET Group, Inc.: Next question please.

Operator: Your next question comes from Timothy Zhao with Goldman Sachs. Please go ahead.

Timothy Zhao, Analyst, Goldman Sachs: Great. Thank you management for taking my question. I have two questions. One is regarding the moving pace in the second quarter and quarter to date. Just wondering if management can share any color, because I saw the overall wholesale IDC revenue was a little bit weaker than expected in the second quarter, whether that was a reason because of the moving pace in early quarter, and how does that trend into third quarter? My second question is regarding your CapEx outlook. Given the very strong order wins and the very strong order delivery plan over the next couple years, and also you announced the overseas plan.

Just wondering if you can share any color on your CapEx outlook into next year and specifically on the overseas projects, could you share any color on the timeline, on the delivery pace, and overall your view on the unit economics? 那我很快翻译一下。感谢管理层接受我的提问，我有两条问题。第一条问题是关于我们的批发型IDC的收入，我看到在二季度似乎比我们想的要稍微弱一些，那这个是不是受到了move-in节奏的一些影响？那我们现在在三季度，这个季度以来，我们看到的客户move-in的节奏是怎样的？那第二个是想请教一下，我们对于整个资本开支的计划，特别是对于明年，我们看到公司有比较强的一个订单的展望，以及出海的计划，那我们这部分的资本开支是怎么考虑的？那关于出海，可不可以再分享得更加具体一些？我们整体的时间交付节奏是怎样？特别是关于海外的单位经济模型和国内是怎么去比较的？谢谢。

Wen Teng, Rotating President, VNET Group, Inc.: 这里是唐文，我先回答您第一部分的这个问题，关于批发客户的节奏的问题。随着我们Q2稳定这个节奏，到了Q3，接着这个节奏，我们接着往前去发展。我们也看到客户上下节奏是多因素的一个共同的结果。除了芯片供给外，也有客户自己模型持续迭代、项目落地的他们的进度相关。综合来看，2026年的下半年上架节奏较为上半年会有边际性的这种改善。

Wen Teng, Rotating President, VNET Group, Inc.: This is Tang Wen. I will take your first question regarding the moving pace of our wholesale customers. We actually maintain a very steady moving pace in Q2, and we are going to sustain that momentum. Honestly speaking, the moving pace is a result of multiple factors, and in addition to chip supply, there are also factors related to how fast our customers are iterating their models and how fast they are progressing their projects. Overall, we are expecting to see a faster moving pace in the second half of this year, marginally compared to the first half.

Wen Teng, Rotating President, VNET Group, Inc.: 我再加一句。国产卡当前处于产能的爬坡的周期。很明显，2026年的下半年，国内芯片的产能已经确定，下半年陆续去释放，推动了这个上架的节奏。

Wen Teng, Rotating President, VNET Group, Inc.: Just a quick add. We are now in a period where the domestic produced chips are quickly ramping up in terms of the production. The production capacity has been fairly clear for the second half of 2026, and we are going to see a release of this production capacity. That will definitely push our moving pace higher.

Peter Zhang, SVP of Operational Finance, VNET Group, Inc.: 你好，我是Peter。关于第二个问题，我跟您做这样一个回答。那首先来讲，整个CapEx的投入逻辑还是基于我们的客户需求，也是交付来去实际投入。那对于明年来讲，我想我们会在明年年初，基于实际交付的目标量化以后，我们到时候会公布这样的一个计划。对，CapEx。那海外来讲，其实也是会基于包括前面我们也提到，就是去500兆瓦的储备。那如果我们来言，也会比较谨慎地去开发。核心还是取决于客户的一些长期的订单。

Wen Teng, Rotating President, VNET Group, Inc.: This is Peter. I will take your second question. On CapEx, essentially, our logic is that our CapEx is centered around demand as well as our actual deliveries. We normally disclose the full year CapEx for 2026 once we have a quantitative delivery target for the whole year. So that is for our CapEx plan. Moving on to the overseas development. As we have noted, we do have 500-megawatt reserved resources. Overall, we will maintain a prudent approach when it comes to developing these resources. We will have to follow the orders. We need to get the orders first before we develop these resources.

Sharon Liu, Executive Vice President, VNET Group, Inc.: 我是Sharon。关于这个CapEx我再做一些补充。首先国内的CapEx，像Peter讲的，我们还是按照客户未来的一些交付进度对应CapEx，这个单千瓦的造价其实也是会保持稳定的。就像我们这次季报公布的，其实公司未来的一些订单和客户的预留的可见度是非常高的，所以我们也会按照这个节奏来安排公司的CapEx。

Wen Teng, Rotating President, VNET Group, Inc.: This is Sharon. Quick add on the CapEx plan. Like Peter has already mentioned, the CapEx for domestic product will be closely tied to the delivery schedule and the overall unit economics for the domestic IDCs. I mean, per kilowatt is stable. Overall, as we have mentioned in our earnings report, we have a strong order pipeline and great customer retention ratio that offers us a high visibility into the CapEx. As we have disclosed, we have close to 500 megawatts of overseas reserved resources, and we are planning to deliver these resources in batches. Given that the construction cost is relatively high in overseas countries, therefore, we will strictly maintain our overseas outlay.

Initially, we would only use our own fund to acquire the land, and only when we have obtained or secured firm orders from our customers will we start the mechanical and electrical fit out.

Julia Jiang, Senior Manager of Investor Relations, VNET Group, Inc.: Next question, please.

Operator: Your next question comes from Daley Li with BofA Securities. Please go ahead.

Daley Li, Analyst, BofA Securities: Hi, management. Thanks for taking my question. I have two questions here. One is I would like to have follow-up on the overseas expansion. In this quarter, we have secured quite strong resources. Could you update us more about the overseas strategy and for the next 2 to 3 years, which countries or areas should be our focus and the overall development pipeline and the revenue scale in future? My second question is about the CATL cooperation. We also made an announcement about the cooperation with CATL, our future new shareholder. Could you update us the transaction with Shandong Hi-Speed, the progress, and also could you share more color about the more detailed cooperation going forward?

Wen Teng, Rotating President, VNET Group, Inc.: This is Tang Wen. I will take your first question. Given that Peter and Sharon has already covered, I would like to briefly just make a quick add on our overall strategy when it comes to our overseas resource development. Yes, you are right. VNET has recently added 500 megawatts of new overseas reserved resources. The key for the company is to stay responsive to our customers’ needs when they are going overseas. We would respond to those demand and implement our projects overseas. The very first project to be delivered is going to be in Southeast Asia. While deepening our presence there, we are also evaluating opportunities in Middle East and Europe to broaden our global footprint.

Wen Teng, Rotating President, VNET Group, Inc.: 关于您第二个问题，关于CATL入股的进展和合作的一些计划。

Wen Teng, Rotating President, VNET Group, Inc.: Second question on CATL’s investment and specific collaboration updates.

Wen Teng, Rotating President, VNET Group, Inc.: 今天我们刚发布了与宁德的战略合作协议的新闻稿。双方已经建立了全面的战略合作关系，共同把握算力协同发展的历史机遇。

Wen Teng, Rotating President, VNET Group, Inc.: Today we have issued a joint press release with CATL. We have already built a full-scale strategic partnership. We are going to capture the surging demand from AI. With the global energy and AI revolutions converging, the integrations of computing and energy has become a key driver for both digital growth and decarbonization. We see a huge opportunity in this space.

Wen Teng, Rotating President, VNET Group, Inc.: 我们的合作将构建有几个方面，三层的算力体系。一个是吉瓦级的算力工厂，另一个是分布式的算力网络。同时，还有一个是零碳的token生态。

Wen Teng, Rotating President, VNET Group, Inc.: Our collaboration will be focused in three areas. We plan to roll out a three-layer integrated architecture or ecosystem. Number one, a gigawatt-scale compute energy facilities. Number two, building a distributed compute-energy networks. Number three, build a zero-carbon token ecosystem.

Wen Teng, Rotating President, VNET Group, Inc.: 以此，我们来打造覆盖全国的、辐射全球的算力协同网络，致力成为智能时代数字能源基础建设这块的定义者和行业的引领者。

Wen Teng, Rotating President, VNET Group, Inc.: The goal is to build a national and eventually global network and to become the defining player in digital energy infrastructure for the AI era.

Wen Teng, Rotating President, VNET Group, Inc.: 我们已经开始了我们的协同发展，等待形成了一个确定后的进展后，我们公司将及时地向市场同步相关的信息。

Wen Teng, Rotating President, VNET Group, Inc.: We are seeing synergies in this collaboration and will disclose more progress as we see more definitive progress, and we will disclose them to the market in a timely manner.

Julia Jiang, Senior Manager of Investor Relations, VNET Group, Inc.: Next question, please.

Operator: Your next question comes from Sara Wang with UBS. Please go ahead.

Sara Wang, Analyst, UBS: Thank you for the opportunity to ask the question. Again, congratulations on the very strong results. I just have one question. I noticed that the second quarter new booking is very strong, but it is concentrated in one customer. Just wondering if there is any specific reason behind, or how shall we think about customer mix going forward? Do we see potential for maybe sizable order wins from the emerging AI leaders?

感谢提问的机会，还是恭喜公司取得非常强劲的业绩。我想请问一下，二季度的订单很强，但集中在一个客户，这有没有什么特别的原因？然后我们怎么想未来的客户的构成，以及我们会不会有一些更多来自于新的这些AI公司的比较大的订单？谢谢。

Wen Teng, Rotating President, VNET Group, Inc.: 谢谢你的问题。你也看到，公司上半年以来已签订了862兆瓦的订单，其中510兆瓦来自于一个互联网头部客户。本季度与一个领先的云计算企业签订了345兆瓦。

Wen Teng, Rotating President, VNET Group, Inc.: Thank you for the question. As you have noted that we have signed a cumulative 862 megawatts new orders in the first half. Specifically, 510 megawatt order was signed with a leading internet company. In Q2, we signed a 345 megawatt new order with another leading computing enterprise.

Wen Teng, Rotating President, VNET Group, Inc.: 从客户的结构来看，除了深耕头部的互联网企业和云厂商的合作之外，公司也在持续拓展AI的模型企业、AI相关的高成长的企业和各行业的龙头的增量客户。后续我们将进一步优化批发业务的客户结构，推动业务的多元性发展。

Wen Teng, Rotating President, VNET Group, Inc.: In terms of the customer mix, in addition to deepening the collaboration with the leading internet companies as well as hyperscalers, the company is also actively exploring or expanding the customer base, expanding to more AI model companies as well as high growth companies in the AI industry, as well as leading companies from various verticals. So going forward, we will keep fine-tuning the customer mix of our wholesale customers to pursue a more diversified customer base.

Julia Jiang, Senior Manager of Investor Relations, VNET Group, Inc.: Next question, please.

Operator: Your next question comes from Yeming Li with Citi. Please go ahead.

Wen Teng, Rotating President, VNET Group, Inc.: Hi, thanks for the opportunity to ask this question, and congratulations to company again. My question is about the OpEx side. Just wondering, because you’ve got very good OpEx performance this quarter, is this level of cost efficiency sustainable going forward? Or company has some other guidance on the cost side? That’s my only question. [Foreign language]

Peter Zhang, SVP of Operational Finance, VNET Group, Inc.: 你好，谢谢你的问题。降本可能是我们一直持续要去做的，包括Q2其实也看到一些成效。从长期来讲，我们还是基于整个的投入吧，看一个是规模效应，看能够进行多少这些我们的成本的一个优化。第二来讲，就现有的一些动作，包括人云、AI的工具等等，我们会持续去做。这个后续可能基于每次发布，我们来看具体数字。

Wen Teng, Rotating President, VNET Group, Inc.: Thank you for your question. This is Peter. Cost reduction has been an ongoing theme for us, and we have already seen some clean results in Q2. I think over the long run, we will leverage the economies of scale to reduce the overall operational cost. Specifically, we will continue pursue measures like headcount control, maximizing the efficiency of AI tools within the company. In terms of the concrete benefits we see from these initiatives, we will disclose them in a timely manner to the market.

Julia Jiang, Senior Manager of Investor Relations, VNET Group, Inc.: Next question please.

Operator: Your next question comes from Ethan Zhang with Nomura. Please go ahead.

Ethan Zhang, Analyst, Nomura: Okay, thanks management, congratulations for the results. I have two questions. First, I noted that we added around 1.5 gigawatt new resources or land banks during the second quarter. Around 900 is in domestics. Just wonder what is the location and could you share more colors about the power supplies and the government approvals? My second question is about financials. I noted that Q2’s cash gross margin is quarter-over-quarter declined a bit. Could you elaborate a bit on that?

你好，郭立诚，恭喜这个业绩。有两个问题，第一个是看到我们二季度增加了这一些资源储备，能不能给我们介绍一下它的地理位置以及一些电力供应的一些情况？第二个是看到二季度的我们这个调整后的毛利率有一些下降，环比的这个趋势能不能也跟我们稍微解释一下，谢谢。

Peter Zhang, SVP of Operational Finance, VNET Group, Inc.: 好，我先回答您第一个问题。本公司在第二季度新增了国内的储备资源，超过了900兆瓦。主要的地区集中在内蒙、华东地区。

Wen Teng, Rotating President, VNET Group, Inc.: Thank you for your question. For your first question, in Q2, we added 900 megawatt new resources in China. They are primarily located in Inner Mongolia and East China regions.

Peter Zhang, SVP of Operational Finance, VNET Group, Inc.: 未来三年，我们公司还依据市场的需求，持续在内蒙古乌兰察布等地获批，获取更多新的资源。

Wen Teng, Rotating President, VNET Group, Inc.: In the next three years, the company will continue to obtain new resources in Inner Mongolia, particularly the Ulanqab area.

Peter Zhang, SVP of Operational Finance, VNET Group, Inc.: 你好，关于那个毛利率环比的维度，主要跟两方面的影响。第一个就是我们Q2的整个用电量，相较于Q1是大幅度增加。因为用电我们是pass-through，所以对于毛利率这个有一定的影响。那第二个来讲，还有一个小的因素，就是Q1我们还是有一些收入。主要是这两个因素导致整体来讲这个比较正常的波动。

Wen Teng, Rotating President, VNET Group, Inc.: This is Peter. I will take your second question on gross margin and the sequential decline in particular. There are two reasons. Number one, the utility usage in Q2 was significantly higher than that of Q1. Because we are adopting a pass-through mechanism, that weighs on our gross margin. Reason number two is we had a one-off gain in Q1. Together these two combined weighed on the gross margin.

Julia Jiang, Senior Manager of Investor Relations, VNET Group, Inc.: Next question, please.

Operator: Your next question comes from Mingran Li with CICC. Please go ahead.

Mingran Li, Analyst, CICC: Thank you very much for taking my question and congrats on the strong results. I only have one question. We noted that the customer demand remained very strong in the first half of the year, and we currently have approximately 355 megawatts of reserved capacity. Could management share how long it typically takes for reserved capacity to convert into orders? Based on the current type of pipeline and ongoing discussions, is there potential for additional large-scale capacity reservation in the second half of the year?

感谢管理层的提问，也再次恭喜公司今天的业绩。我这边只有一个问题，是关于咱们上半年看到公司的市场和订单增长都非常强劲，那目前公司也一共有差不多350兆的预留容量，那么这个预留容量通常来说多长时间会转换成正式订单，以及从当前跟客户沟通还有一些项目储备的情况来说，我们等下半年还有没有可能出现一些规模比较大的新增的预留需求，谢谢。

Wen Teng, Rotating President, VNET Group, Inc.: 我来回答您这个问题。订单和预留的容量一般体现在一份销售的协议当中。订单代表了客户已经正式确认了承诺使用的容量，而预留的容量是客户在同一地点预先锁定的未来的扩容的资源，用来保障后续业务扩张的资源供给。从我们公司的历史实践来看，过往客户预留的容量最终均能实现落地来执行。预留具备很高的订单转化率是相当确定的，是公司高质量的潜在订单的储备。关于您说的355兆瓦预留向正式订单的转换点时，主要取决于客户自身的业务上线的节奏，会随着客户项目推进分批次转成正式的订单，我们会在后续的季度中持续披露实际的落地情况。

Wen Teng, Rotating President, VNET Group, Inc.: Thank you for question. This is Cheng Wen. Orders and reserved capacity are typically covered in the same sales agreement. Orders are capacity customers have formally committed to. Reserved capacity is future expansion resources pre-locked at the same site to support their growth. Historically, all customer reservations have converted into firm orders, making this a high-quality backlog with a strong conversion certainty. The actual timing for the 350 megawatt depends on each customer’s own deployment schedule and will happen in batches as their projects progress. We will disclose actual order conversions in subsequent quarterly reports. Thank you.