On August 18, Vnet Group Inc. (NASDAQ:VNET) reported earnings for a quarter in which its wholesale data center capacity broke through 1 gigawatt for the first time, a threshold that has become shorthand for scale in the AI infrastructure race. Total net revenues climbed 14.2% year over year to RMB2.78 billion, with wholesale IDC service now generating nearly 40% of that total. Underneath the milestone, though, sits a business absorbing higher costs to get there, and investors are left weighing which story carries more weight.
The Order Book Keeps Swelling
Vnet’s wholesale segment carried the quarter. Wholesale IDC revenue jumped 29.3% to RMB1.10 billion, while wholesale capacity in service rose 49.4% to 1,007 megawatts, finally clearing the gigawatt mark management has been chasing. Customers are also using what got built: utilized capacity grew 45.5% to 744 megawatts, and mature facilities are running at 92.5% utilization, a sign new capacity isn’t sitting empty.
The order book backs up the growth story. Vnet won 347 megawatts of new orders in the second quarter, including a 345-megawatt deal with a leading cloud service provider in the Greater Beijing area, pushing year-to-date wholesale orders to 862 megawatts. Add 355 megawatts of customer reservations, and total demand visibility now tops 1.2 gigawatts. Management also disclosed a strategic cooperation agreement with CATL, the new energy technology company, to build what it calls a three-layer integrated compute-energy ecosystem pairing Vnet’s data center buildout with CATL’s power technology.
The results showed up on the bottom line too. Adjusted EBITDA grew 25.4% to RMB918.3 million as margins expanded to 33% from 30.1% a year earlier, and adjusted net income turned positive at RMB7.4 million versus a loss of RMB53.6 million in the same period last year. Retail MRR per cabinet rose 9.9% to RMB9,799, and more than 90% of wholesale IDC revenue is now recurring, backed by a weighted average remaining lease term of seven years.
Costs Are Rising With It
The same growth filling the order book is also squeezing margins. Adjusted cash gross margin slipped to 41.8% from 43.6% a year earlier, driven by higher utility costs that get passed straight through to customers under the company’s current billing structure, a mechanic that weighed heavily on the second quarter’s cost base.
Rotating President Wen Teng flagged a deeper structural issue: power availability and chip supply chains are constraining how much of the built capacity can actually be turned into usable compute, even as national programs like East Data West Compute try to balance resources geographically. He described “clear structural mismatches” in the industry, where aggregate capacity doesn’t always translate into effective supply of high-power smart computing resources. Management is counting on a ramp-up in domestic chip production to speed customer move-ins in the back half of 2026, a dependency the company doesn’t fully control.
All of this is being financed with debt. Net debt stood at 4.6 times annualized adjusted EBITDA and total debt at 6.4 times, while full-year 2026 capital expenditures are guided to RMB10 billion to RMB12 billion, more than the company’s RMB7.21 billion cash position on hand.
What The Market Is Pricing In
Hedge fund ownership fell from 42 funds in the prior quarter to 37 in the latest one, a modest pullback in institutional conviction. Short interest sits at 24.16% of the float, a level that signals heavy skepticism and plenty of money positioned against the stock. As of August 26, Vnet trades at a forward price-to-earnings ratio of 17.95, a multiple that doesn’t look demanding next to the double-digit revenue and EBITDA growth management is guiding toward.
Where This Leaves Investors
Vnet’s second quarter shows a company converting AI infrastructure demand into real revenue and order backlog, with 1.2 gigawatts of orders and reservations already lined up. That growth is arriving alongside thinner gross margins, a debt load north of six times EBITDA, and a supply chain the company doesn’t fully control. Management is betting that faster domestic chip production and long-dated customer leases smooth both problems out over time.
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