VNET Group, Inc. (VNET) Q2 2026 Earnings Call Transcript

Hello, ladies and gentlemen. Thank you for standing by for the second quarter 2026 earnings conference call for VNet Group Incorporated. 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 Ting, 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. Zhu 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 Thank you, Operator Hello, everyone, and welcome to our second quarter 2026 earnings conference call.

Our earliest release was distributed earlier today, and you can find a copy on our website as well as on Newswell Services. Please note that today's call will contain further-looking statements made under the Safe Harbor provision of the U.S. Privacy Security Interestation Reform Act of 1995. Further-looking statements are subject differ materially from our current expectations. For detailed discussion of these risks and necessities, please refer to our latest annual report and other documents filed with the SEC. VINIA does not undertake any obligation to update any further-looking statements expected as required under APNIC clause. Please also note that VNet's earliest press release and this conference include the disclosures of unaudited GAAP and non-GAAP financial measures. VNet's earliest press release contains a consolidation of unaudited non-GAAP measures to the unaudited GAAP measures. A summary presentation of which we referred 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 utilize effective speech technology powered by Neolink.ai to deliver this quarter's prepared remarks by Mr. Winton, our rotating president, and Mr. Peter Zhang of ACVP 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 IR website at ir.vignite.com. Now, let's get started with today's presentation. Mr. Tung, please go ahead.

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 1 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 MR 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 R&B 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 R&B 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'll 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, and 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 MW year-to-date in 2026, including the 345 MW I just mentioned and 517 MW 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 discipline 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 AIDC 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 in service increasing by 49.4% year-over-year to 1,007 megawatts, surpassing the 1 gigawatt milestone for the first time. Utilized capacity grew by 45.5% year-over-year to 744 MW with a utilization rate of 73.9%, mainly attributable to customers' fast move-ins at NHB Campus 03 and NOR 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 4 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 percent 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, MR per retail cabinet increased to RMB 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 Wulanchabu 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 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 renminbi 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 RMB 2.78 billion, mainly driven by the rapid growth of our wholesale business. Our adjusted cash growth profit rose by 9.4% to R&B 1.16 billion, while our adjusted EBITDA also grew year-over-year by 25.4% to R&B 918.3 million. Adjusted net income reached R&B 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 NHB 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 R&B 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 maintain the robust and healthy liquidity. Our net operating cash inflow reached R&B 391.8 million during the first half of 2026, excluding the impact of R&B 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 R&B 781.5 million. Our cash position remained solid, with total cash and cash equivalents, restricted cash and short-term investments reaching R&B 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 About 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 Thank you.

We will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're 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.

Thank you, management, for the opportunity to ask the questions, and congratulations on the very large auto win this quarter. So I only have one question. So could you please give us an update on the overall supply and demand situations in our key regions, and if there's any updated outlook for the pricing dynamics there? 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 谢谢您的问题啊 首先从您刚才提到的需求供给 特别是需求这块 这个我们很清晰的看到我们这个行业算利子需求啊

保持稳健的这个向上增长 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 另外一个明显的现象是智算的细分赛道增速更为的突出了 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机会的采购的需求也是很强烈 并且在今年多家大厂已经释放了Gigawatt级的招标体量

主要集中在东树细算的八大枢纽和十个集群内 Thank you for your question. Now, with regard to the demand, we are seeing that the overall computed 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 East Data-West Compute Initiative.

From供给侧来看,全国的数据中心整体供给规模持续的扩张, 但行业呈现出明显的结构性的特点。 总量的资源与高功率制算的有效供给并不是完全的匹配。

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. 行业处于一个仅平衡的格局。 有效算力供给的释放会同步受到了一些像电力配套、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。 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. And for us, which is a top-tier player with an end-to-end capability, this will definitely create sustained tailwind. 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. Thank you.

Next question, please. Your next question comes from Timothy Zell with Goldman Sachs. Please go ahead.

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 a manager 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 the 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 of 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 Unignomics. 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 那我们这部分资本开支是怎么考虑的 那关于出海可不可以再分享的更加具体一些我们整体的时间交付节奏是怎样 那特别是关于海外的这个单位经济模型和国内是怎么去比较的 谢谢

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稳定的这个节奏 到了Q3 这个接着这个节奏 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 除了这个芯片供给外 也有客户自己模型持续接代 项目落地的他们的进度相关 综合来看2026年的下半年 上下节奏较为上半年会有编辑性的这种改善

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 how fast our customers are iterating their models and how fast they are progressing their projects overall we are expecting uh to see a faster moving pace in the second half of this year marginally compared to the first half 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're going to see a release of this production capacity that will definitely push our moving pace higher this is peter i'll take your second question on capex essentially Basically our logic is that our CapEx is centered around demand as well as our actual deliveries. And we normally disclose the full year CapEx for 2026 once we have quantitative delivery targets for the whole year. So that is for now moving on to the overseas development as we have noted we do have a 500 megawatt reserved resources and overall we will maintain a prudent approach when it comes to developing these resources and we will have to follow the orders. We need to get the orders first before we develop these resources. This is Sharon, quick add on the capex plan. Like Peter has already mentioned, the capex for domestic products will be closely tied to the delivery schedule and the overall unit economics for the domestic IDCs, I mean per kilowatt is stable. And overall, as we have mentioned in our earnings reports, that we have a strong order pipeline and great customer retention ratio that offers us a high visibility into the capex. And as we have disclosed, we have close to 500 megawatts of overseas reserve resources and we are planning to deliver these resources in batches given that the construction costs is relatively high in overseas countries therefore we will strictly maintain our overseas outlay initially we would only use ours own fund to acquire the land and only when we have obtained or secured firm orders from our

customers were way stuck the mechanical and electrical fit out next question please your next question comes from daily Lee with Bank of America securities please go ahead hi management thanks for taking a question I have two questions here one is a order to have follow up on the overseas expansion in this quarter we have secured a class strong or sources could you update us more about the overseas strategy and for the next like a two to three years what which countries or area should be our focus and the overall development pipeline and the revenue scale in future my second question is about the ctl on cooperation we also made an announcement about the um cooperation with ctl our future new shareholder and could you either aid us the um the transaction with central high speed, the progress, and also could you share more color about the detail, more detailed cooperation going forward? Okay, I'll just translate it here. Thank you for the support of the organization. I have two questions. The first is about our foreign policy. In this period, we also have a lot of resources for our foreign policy. I want to ask for the future of our foreign policy. The second question is about CTL's cooperation between CTL and Senggau and Senggau. Thank you.

This is Thang文, I will first answer your question. Actually, the question of Peter and Sharon have covered some of the issues. I want to add some of our international strategy. Just a little bit about our business report and Peter and Sharon mentioned.

This is Tom Nguyen, I will take your first question. And 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 is to maintain, I mean for the company, is to stay responsive to our customer's needs when they are going overseas. And we would respond to those demands and implement our project overseas. And the very first project to be delivered is going to be in Southeast Asia. Okay. While deepening our presence there, we are also evaluating opportunities in Middle East and Europe to broaden our global footprint. Second question on CATL's investment and specific collaboration updates.

The both parties have built a whole-time international cooperation to be able to manage the development of the economy and develop the history of the economy.

We have issued a joint press release with CATL, and we have already built a full-scale strategic partnership. We are going to capture the surging demand from AI. And with the global energy and AI revolutions converging, the integration of computing and energy has become a key driver for both digital growth and decarbonization. We see a huge opportunity in this space. Our collaboration will be focused in three areas. We plan to roll out a three-layered integrated architecture or ecosystem. Number one, a gigawatt scale computing facilities, computing energy facilities. Number two, building a distributed computing and energy networks. Number three, build a zero carbon token ecosystem.

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.

We are seeing synergies in this collaboration, and we'll disclose more progress as we see more definitive progress, and we'll disclose them to the market in a timely manner.

Next question, please. Your next question comes from Sarah Wang with UBS. Please go ahead.

Thank you for the opportunity to ask a question, and again, congratulations on the very strong results. so i just have one question um i noticed that um the second order uh second second quarter new booking is very strong uh but it's concentrated in one customer so uh just wondering if there's 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 um 第二季度的订单很强,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一个客户的构成,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。

这些年的问题,您也看到,公司上半年以来,已签订了其中510兆瓦来自于一个互联网投屋的客户,本基督与一个领先的云计算企业签订了345兆瓦。 Thank you for the question.

As you have noted that we have signed a cumulative 862 megawatt new orders in the first half. Specifically, 510 megawatt order was signed with the leading internet company. And in Q2, we signed a 345 megawatt new order with another leading computing enterprise. 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'll keep fine tuning the customer mix of our wholesale customers to pursue a more diversified customer base.

Next question please. your next question comes from Yemen leave with city please go ahead hi thanks for the opportunity to ask this question and can very congratulations to companies again and my question is about the OPEC side so just wondering because you've got very good OPEC performance this quarter is this level of cost efficiency sustainable going forward or company has some other guidance on the So that's my only question.

Thank you for your question. This is Peter. Cost reduction has been an ongoing theme for us and we have already seen some PLIM 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 to 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.

Next question, please. Your next question comes from Ethan Zeng with Nomura. Please go ahead.

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 Around 918 domestics, so just wondering what's the location and could you share more colors about the power supplies and the government approvals. And my second question is about financial. So I noted that Q2's cash growth margin is in quarter-over-quarter decline a bit. Could you elaborate a bit on that? 您好 关键层 恭喜这个业绩有两个问题 第一个是看到我们二阶度增加了这一些这个资源储备 能不能就是给我们就是介绍一下它的地理位置以及一些这个电力供应的一些情况 第二个是看到二阶度的我们这个调整后的劳力率有一些下降环比的这个趋势 能不能就是也给我们这个稍微解释一下 先回答您第一个问题 新增了国内超过了900兆瓦 主要的地区集中在内蒙

Thank you for the 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. In the next three years, the company will continue to obtain new resources in Inner Mongolia, particularly the Ulan Chabu area. This is Peter. I'll 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're adopting a path-through mechanism, so that weighs on our gross margin. Reason number two is we had a one-off gain in Q1, So, together, these two combined weighed on the gross margin.

Next question, please. Your next question comes from Mingren Lee with CICC. Please go ahead.

Thank you for taking my question, and congrats on the strong result. I only have one question. We noted that the cost rate demand remained very strong in the first half of the year, and the county has approximately 355 megawatts of the literacy capacity. could mention how long it typically takes for a reserve capacity to convert into others. And based on the current type of pipeline and ongoing discussion, is there potential for additional large-scale capacity renovation in the second half of the year? That's the question. Thank you for your question. Thank you for your question. I have a question. I have a question. When you saw the company's request Thank you very much. 销售的这个协议当中啊订单的代表了客户已经啊正式确认了承诺使用的这个容量而预留的容量呢是客户在同一地点预先锁定的啊未来的扩容的这个资源啊用来保障啊后续业务扩张的啊资源供给从我们公司的历史实践来看呢过往客户预留的这容量最终均能实现啊落地来执行

预留具备的很高的订单转化率是相当确定的 关于您说的转换点时 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逻辑情况 Thank you for a 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 the future expansion resources pre-locked at the same site to support their growth. Historically, all customer reservations have converted to firm orders, making this a high-quality backlog with a strong converging uncertainty. 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.

Thank you, ladies and gentlemen. That concludes our conference for today. Thank you for participating. You may now disconnect your lines.