Hello, everyone. Thank you for joining us for GDS Holdings Limited Third Quarter 2025 Earnings Conference Call. Today's conference call is being recorded. I will now hand over the call to our host, Ms. Laura Chen, Head of Investor Relations for the company. Please proceed, Laura.

Thank you. Hello, everyone. Welcome to the third quarter 2025 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 we'll refer to during this conference call, can be viewed and downloaded from our IR website at investors.gdsservices.com. Leading today's call is Mr. William Huang, GDS Founder, Chairman, and CEO, who will provide an overview of our business strategy and performance. Mr. Dan Newman, GDS 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 materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in the company's prospectus 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 and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. GDS press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures. I will now turn over the call to GDS Founder, Chairman, and CEO, Mr. William Huang. Please go ahead, William.

Thank you. Hello, everyone. This is William. Thank you for joining us on today's call. During the third quarter, our revenue increased by 10.2%, and our adjusted EBITDA increased by 11.4% year-on-year, maintaining the healthy growth trend since our business began to recover last year. During 3Q '25, our gross additional area utilized was around 23,000 square meters. We are on track to achieve our highest yearly move-in. We continue to deliver the long-term backlog. In addition, we are now delivering the 40,000 square meter, or 152-megawatt order, which we won in the first quarter of this year. By being selective with new business, we have successfully shortened the book-to-build period and brought down our backlog. Nonetheless, we still have visibility for over 70,000 square meters of move-in from the backlog next year. Our total new bookings for the first 9 months is 75,000 square meters or 240 megawatts. We expect to achieve nearly 300 megawatts for the full year, which is a significant step-up from the level of the past few years. Around 65% of our bookings in 2025 are AI-related. Nonetheless, AI demand in China is still at a very early stage. If we look at the big picture, the domestic tech industry has reached a critical juncture with major players making unprecedented financial commitments to AI infrastructure. This marks a definitive end to the previous downturn and signals the beginning of a robust recovery for the data center sector. All of our major customers are committed to the massive scale of this new investment cycle, with CapEx plans of hundreds of billions, underscoring the intensity of the new AI arms race. Leading local chip companies are making continuous development progress in terms of performance, efficiency, and capacity. The growth of the domestic chip segment will secure the long-term growth of the AI infrastructure industry. We have unwavering confidence in the AI demand to come based on the development and the ramp-up of domestic technologies. We believe that new bookings in the coming years could be better, and this is what we are preparing for in our strategic plan. There are 2 essential ingredients to win big in AI: powered land and access to capital. We have already secured around 900 megawatts of powered land in and around Tier 1 markets, which is suitable for AI demand, particularly for AI inferencing. In addition, based on our communications with our customers, we are in the process of securing more powered land in complementary locations, and we believe that 900 megawatts will not be enough. On the financing side, we recently completed the first IPO of a data center REIT in China. The transaction was a huge success. We intend to inject more assets into the REIT next year and establish a continuous pipeline of asset monetization. The REIT gives us a significant competitive advantage in terms of accessing capital from the domestic equity market. It enables us to monetize assets efficiently, repeatedly, and at the lowest possible cost. The China market is at an inflection point. The outlook for the data center industry is very exciting. Our market position is as strong as ever. Over the past few years, we have taken a conservative approach. We improved our asset utilization and significantly strengthened our balance sheet. Going forward, we will maintain our financial discipline while, at the same time, taking a more aggressive approach to new business. I will now pass on to Dan for the financial and operating review.

Thank you, William. Starting on Slide 15. As William mentioned, in 3Q '25, our reported adjusted EBITDA grew by 11.4% year-on-year. At the end of 1Q '25, we deconsolidated the data center project companies, which we sold to the ABS. And then during 3Q '25, we deconsolidated the data center project companies, which we sold to the C-REIT. In order to present a consistent trend, we have adjusted historic numbers to take out the EBITDA contribution of the deconsolidated companies for the first 9 months of 2025 and for the comparative period. On this pro forma basis, our adjusted EBITDA for the first 9 months grew by 15.4%. Turning to Slide 16. Our C-REIT started trading on the Shanghai Stock Exchange on the 8th of August. As of yesterday's close, the C-REIT units were priced at RMB 4.375, 45.8% up from the IPO price. At this level, the C-REIT is trading on 24.6x EV to the projected 2026 EBITDA as disclosed in the C-REIT offering memorandum. The implied dividend yield is 3.6% based on the projected cash available for distribution, also as stated in the offering memorandum. It is our strategic objective to grow and diversify our C-REIT so that it is a viable option for us to recycle capital on a repeated basis, thereby unlocking value for GDS shareholders and freeing up funds for new investment. Under current regulations, we are permitted to apply for approval for the first post-IPO asset injection 6 months after the IPO date, i.e., during 2Q '26. Thereafter, it will take some time to complete the regulatory review process. For the first post-IPO asset injection, we are preparing assets with a target enterprise value of around RMB 4 billion to RMB 6 billion. This compares with an enterprise value of RMB 2.4 billion for the assets which we injected into the C-REIT at IPO. With the creation of the C-REIT platform, we have the opportunity to invest in new data centers, ramp up, operate, and then, once the track record qualifies, to monetize over a 5- to 6-year investment cycle. Even if we take a very conservative view on potential future exit multiples into the C-REIT, the return on new investment is still very compelling. This could not have happened at a better time as we address the upcoming AI demand wave. We think it's a game changer. Turning to Slide 17. For the first 9 months of 2025, our organic CapEx was RMB 3.8 billion. We still expect our organic CapEx for the full year to be around RMB 4.8 billion. However, net of the cash proceeds of the asset monetization, our CapEx will be around RMB 2.7 billion. As shown on Slide 18, our operating cash flow for the full year will be around RMB 2.5 billion. Therefore, after taking into account the asset monetization proceeds, our China business is almost self-funding. Turning to Slide 19 and 20. Our net debt to last quarter annualized adjusted EBITDA multiple decreased from 6.8x at the end of 2024 to 6.0x at the end of 3Q '25. The decrease is mainly due to the cash proceeds of the asset monetization and the deconsolidation of debt of the project companies sold to the ABS and C-REIT as well as the offshore equity capital raise, which we did in 2Q '25. We are benefiting from the favorable interest rate environment in China, with our effective interest rate dropping to 3.3%. Turning to Slide 22. After 9 months, we are on track to achieve the midpoint of our revenue guidance and at or above the top end of our EBITDA guidance for the full year of 2025. Our growth rate during the current year has clearly benefited from the strong new bookings in 1Q '25 and a short book-to-bill period. This gives a clear illustration of how our growth rate can accelerate with a pickup in demand. The relatively subdued new bookings since 2Q '25 will affect our growth rate next year. However, in our internal projections, we foresee higher bookings next year, leading to gross acceleration thereafter. We'd now like to open the floor to questions.

Our first question comes from Yang Liu of Morgan Stanley.

I have 2 questions here. The first one is regarding the China market inflection. As William just mentioned, the China market is approaching the inflection point. What do we need to see to really make that happen in the near future? And in terms of your strategy to be a little more aggressive in China, could you please elaborate more, for example, on location or what type of project, etc., are you planning? The second question is regarding the overall investment profile because now we have a C-REIT platform, and it is a very effective way to recycle capital. What is the new overall investment return with the C-REIT scheme?

Okay. I think the first question is, yes, I think I need to explain the aggressive approach. I think what we see in the market is there is very strong demand in China. I think our customer will announce their big investment in the next 5 years. I think another signal is domestic chips are catching up. Just as I mentioned, I think in terms of efficiency, chip efficiency and production capacity, I think they all improved significantly. That means the real data center opportunity is coming. So we are well-positioned. As I just mentioned, we still have the largest powered land bank in and around Tier 1 markets. This is very good for future inferencing. Another point is, I think, China tech players will continue to make massive investments into infrastructure. So I think in order to capture this opportunity, we will acquire more land in some areas with lower power costs and as close to, let's say, the Tier 1 city as possible. Yes. So this is our strategy. A lot of the land acquisition is in process, and maybe we can make announcements in the next earnings call. That’s number one. Number two, I think Dan can explain about the REITs.

Sure. The unit economics of the data center investment in China is very solid. The selling price is stable. The unit development cost has come down to a level that is very efficient. This allows us to generate typically 11% to 12% cash on cash yield on new investments. What has changed is the way that we can look at and evaluate investment. If we take the approach of investing, which may take 1 year to construct and then 1 year for the customer to fully move in, we have to hold the asset and operate for 3 years to establish the track record required before assets can be injected into the C-REIT. But then in the year following that, which would be year 5 or 6, we can consider an asset injection. Even if we use a conservative exit multiple or cap rate, compared to where we IPO-ed our C-REIT, the IRR over a 5- to 6-year period is in the low to mid-teens. The levered IRR, or return on equity, is well into the 20s. I think fundamentally, this is very attractive.

Yes. I'll add one more point. I think we believe now is the right timing to step into the market because, number one, I think prices are more stable; number two, I think development costs are almost at the historical bottom. So I think this is the right timing to maintain very good returns. It's the right timing.

Our next question comes from Sara Wang of UBS.

Congratulations on the solid results. It's great to hear that GDS is being more aggressive in acquiring new business opportunities. So I have actually one question, but it has two parts. Dan just mentioned we are expecting higher bookings next year. So regarding this booking, does that include potentially new powered land acquired in regions with relatively lower power tariffs? And the second question is that if we are going into complementary markets on top of our 900 megawatts resources, how should we think about any difficulties in acquiring new power quotas? Because this year, we've heard about regulations regarding tightening the new power quota release in China in general?

Okay. The first question, I think that was regarding new bookings next year, right? We're not fully relying on the new acquisition of land. Definitely, if we succeed in securing the powered land, we can do more. So this is our focus base. The second question was about the difficulties in acquiring new power quotas. I think power quotas are generally not easy to come by. But based on our track record and reputation, I see a lot of governments willing to work with us. So for us, it's not that challenging. We have a lot of experience from the past 10 years in building the right relationships with the government and the power companies.

The next question comes from the line of Frank Louthan from Raymond James & Associates.

Can you give us an update on DayOne on private round funding and possible updates for a potential IPO? And then what is the outlook on your customers getting GPUs and being able to ramp their installs going forward? When do we expect that to crack open?

Yes, I think I'll answer that, and maybe Dan can add more color. After Series B, I think DayOne is now fully independent, so we cannot represent DayOne anymore since that time. But we can provide some highlights since we are enjoying the equity value increase. I think all business in Asia Pacific and Europe, which we have already announced, remains very, very positive, and the demand still remains strong. So I think DayOne's business is on the right track and could be better. That’s all I can tell you. Maybe if you are interested, we can introduce you to the appropriate people at DayOne to explain in more detail.

Okay. And on potential for additional installs to ramp?

Frank asked about the new business in DayOne, I think.

Yes. All I can share is that they remain very, very strong with a positive view for the future.

The next question will come from Michael Elias from TD Cowen.

So in the U.S., when we think about the training workloads that we're seeing, we're seeing gigawatt-scale projects getting deployed. I’m curious, when you think about what training will look like in China. Are you seeing the opportunity to deploy at that kind of scale, i.e., in the gigawatt range? And then second question is, can you give us an update, as you think about these AI data centers that you expect to build, what the time frame to build those data centers is and how that varies from traditional cloud data centers? Lastly, any notable constraints or long lead-time items that we should be aware of?

I think scale-wise, our clients talk about gigawatt-level new demand. This is similar to what we saw 3 years ago in the U.S. Every big player is discussing gigawatt-sized new demand. So I think it’s catching up. In terms of time to market, I think in China we can build very fast. I think normally 9 months to 12 months is typical from the piling to delivery. In extreme cases, we can build even within 8 months, which is our record in China.

Any bottlenecks or...

No, I don't think supply chain issues in China are a problem.

The next questions will come from the line of Daley Li of Bank of America Securities.

I have 2 questions here. The first one is about our new orders for the China market, like a near 300 megawatts. Could you share what's the AI exposure? What's the percentage from AI? And is this about inferencing model training for the recent order? Number two, regarding the second cone about the China government guidelines that tightened the data center supplier system in China? Do you see any impact on us and the market?

Yes, regarding the new orders, I think we expect to reach nearly 300 megawatts in terms of new bookings for the whole of 2025. We hit 240 megawatts by the end of the first quarter, and there's some good new business in the fourth quarter. We also stated that, by our estimation, around 65% of the new bookings this year are AI related. We only have a presence in Tier 1 markets. Therefore, the AI exposure in Tier 1 markets will primarily be AI inferencing, which may include a combination of AI inferencing and training, and it's deployed within the established cloud regions and cloud availability terms. About the government guidance on power quotas, this has always happened in the Tier 1 market. We are fortunate that we already prepared for that. That’s why I mentioned we still have almost 900 megawatts of powered land. This power is already paired with carbon quotas in or near Tier 1 markets, which makes it very difficult to apply for new quotas around the Tier 1 market. However, in remote areas, there’s a lot of power availability, but the challenge there is about selling that power, not about obtaining it. This is something we are addressing.

Our next question comes from Timothy Zhao of Goldman Sachs.

Congrats on the solid results. I have 2 questions. The first is about the pricing trend. Can you share your thoughts on the MSR trend into the fourth quarter and next year, especially since the company is entering a peak renewal period for contracts signed maybe 5 to 7 years ago? How should we think about MSR trends next year? The second is about the overall market and the competitive landscape. You've mentioned time-to-market quite a lot. Reflecting on the previous wave of increased data center supply when there was a focus on cloud data centers and 5G networks, how do you currently view the industry supply and demand dynamics?

The first part of your question is about the downward price reset when our installed-base contracts come up for renewal. This has been going on for a few years and will continue for a few more years. The impact of this is reflected in our MSR. Over 2026, we expect the MSR to decrease by 3% to 4%, on average, comparing 1Q versus 1Q, 2Q versus 2Q, and so on. This is not only due to the downward price reset, but also because we have elevated levels of move-in, which dilutes the MSR further. Therefore, that 3% to 4% reflects the combination of these factors.

Yes. I'll add a bit to my points. I think all the new build data centers have seen stable pricing for the past 2 years. Nothing has changed. This is encouraging. Meanwhile, costs are also stable. If you look at all the returns from our new build assets, they're very decent.

Regarding the competitive landscape, Tim asked about the new competition. The key to earning customer trust and reliability now is showing financial capability. Our customers are increasingly focused on your ability to access the capital markets and your current cash position, especially if you're trying to commit to significant projects, such as a 500-megawatt or 1-gigawatt campus in the future. In this respect, we are significantly ahead of our competitors because we have both land capability and the financing capability to meet demand.

Thank you for the questions. Due to the time limits of today's call, I would like to now turn the call back over to the company for any closing remarks.

Thank you once again for joining us today, and we look forward to seeing you next time. Bye.

This concludes today's conference call. You may now disconnect your lines. Thank you.