GDS (GDS) Q3 2025: 65% of New Bookings AI-Driven as CREIT Monetization Unlocks Capital
AI infrastructure demand is now the dominant force in GDS’s growth trajectory, with 65% of new bookings tied to AI workloads and a robust CREIT platform unlocking capital for expansion. Management is leveraging a strategic blend of powered land reserves and capital recycling to position for an inflection in China’s data center market. Investors should watch for accelerated bookings and additional asset injections as the AI arms race intensifies across Tier 1 Chinese cities.
Summary
- AI Demand Now Core to Growth: Majority of new bookings directly linked to AI infrastructure buildout.
- CREIT Platform Enables Capital Recycling: Asset monetization through China’s first data center REIT enhances funding flexibility.
- Inflection Point in China Data Centers: Market signals and customer CapEx suggest a multi-year AI investment cycle is underway.
Performance Analysis
GDS delivered double-digit top-line and EBITDA growth, with revenue up 10.2% and adjusted EBITDA up 11.4% year over year, reflecting a sustained recovery since last year’s trough. Organic area utilization expanded by 23,000 square meters in the quarter, putting the company on pace for a record year of move-ins. The company’s pro forma adjusted EBITDA for the first nine months rose 15.4%, after normalizing for the impact of asset deconsolidation associated with the ABS and CREIT transactions.
New bookings reached 75,000 square meters (240 megawatts) through the first nine months, with management targeting nearly 300 megawatts for the full year—a notable step up from prior years. AI-related demand comprised approximately 65% of bookings in 2025, underscoring a structural pivot in customer requirements and technology mix. The company’s CREIT (China real estate investment trust) units, trading at a 45.8% premium to IPO, provide a recurring mechanism for asset monetization and capital recycling.
- Operating Cash Flow Self-Funding: After asset monetization, China business is nearly self-funding, with CapEx net of proceeds at RMB 2.7 billion versus RMB 2.5 billion in operating cash flow.
- Balance Sheet Strengthened: Net debt to EBITDA improved to 6.0x from 6.8x at year-end 2024, aided by asset sales and lower effective interest rates (now 3.3%).
- Book-to-Bill Compression: Shorter book-to-build periods have accelerated revenue conversion, but management signals a temporary slowdown in new bookings will moderate growth into next year.
GDS’s growth cadence is tightly coupled to the pace of AI infrastructure investment by major Chinese tech firms, with visibility into 70,000 square meters of backlog move-ins for 2026. The CREIT platform is expected to drive further capital efficiency and support the next phase of expansion.
Executive Commentary
"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 commitment 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."
William Huang, Founder, Chairman, and CEO
"With the creation of the CREIT 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 five to six year investment cycle. Even if we take a very conservative view on potential future exit multiples into the CREIT, 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."
Dan Newman, Chief Financial Officer
Strategic Positioning
1. AI-Centric Customer Base and Bookings Mix
AI infrastructure is now the dominant driver of GDS’s order book, with 65% of 2025 bookings tied to AI workloads—mainly inferencing in Tier 1 markets, but also including training. Major Chinese tech customers have signaled multi-year CapEx commitments, and GDS’s powered land reserves (900 megawatts) are positioned to capture this demand. The company is actively acquiring additional powered land, especially in low-tariff locations near Tier 1 cities, to secure future growth as AI demand expands.
2. Capital Recycling via CREIT Platform
The CREIT, China’s first data center REIT, enables GDS to monetize assets efficiently and repeatedly, providing a structural advantage in accessing domestic equity capital. The platform’s first asset injection (RMB 2.4B EV) has already been completed, with another RMB 4–6B targeted for the first post-IPO injection in 2026. This approach supports a five-to-six-year investment cycle, unlocking capital for reinvestment and sustaining high returns on equity (mid-20s% levered IRR).
3. Operational Agility and Supply Chain
GDS’s rapid build capability—nine to twelve months for new data centers— is a differentiator in capturing time-sensitive AI projects. Management reports no material supply chain bottlenecks in China, allowing for fast scaling in response to customer requirements. The company’s ability to secure power quotas and government support, built over a decade of relationship management, further reduces operational risk.
4. Pricing and Contract Dynamics
While legacy contract renewals continue to pressure average pricing (MSR) down by 3–4% annually, new-build pricing has stabilized over the past two years. Development costs are near historical lows, supporting attractive returns on new assets. Management emphasizes that the risk-adjusted returns for new data centers remain solid, even as overall market pricing finds a floor.
5. Competitive Moat: Land, Power, and Financial Strength
Access to powered land and capital market funding is now the primary competitive advantage in China’s data center market. GDS’s combined land bank and financial resources position it ahead of peers, as customers increasingly prioritize partner reliability and balance sheet strength for gigawatt-scale AI deployments.
Key Considerations
GDS’s Q3 results highlight a business model increasingly shaped by AI-driven demand, capital recycling, and operational agility, but also exposed to evolving regulatory and market risks. The company’s strategic direction is to scale up powered land holdings, accelerate asset monetization, and maintain financial discipline even as it becomes more aggressive in new business acquisition.
Key Considerations:
- AI Demand Concentration: The business is increasingly reliant on AI infrastructure projects, which could amplify cyclicality as customer investment cycles evolve.
- CREIT Monetization Pace: Successful asset recycling depends on regulatory approvals and sustained CREIT market appetite; delays could constrain expansion capital.
- Power and Land Acquisition: Competition for power quotas and land near Tier 1 cities is intensifying, though GDS’s relationships and track record provide an edge.
- Pricing and Renewal Headwinds: Downward resets on legacy contracts will continue to weigh on average revenue per square meter, though new-build returns remain robust.
- Execution on Accelerated Booking Targets: Management’s internal forecasts anticipate higher bookings next year, but a temporary lull in new orders could moderate near-term growth.
Risks
GDS faces heightened exposure to regulatory shifts, especially around power quota allocations and carbon targets, which could impact project timelines and cost structures. Customer concentration in AI and cloud hyperscalers increases sensitivity to their investment cycles. Additionally, CREIT asset monetization relies on continued regulatory support and market liquidity; any disruption could slow capital recycling and expansion.
Forward Outlook
For Q4 2025, GDS expects:
- Revenue to track at the midpoint of full-year guidance
- Adjusted EBITDA at or above the top end of full-year guidance
For full-year 2025, management maintained guidance:
- Organic CapEx around RMB 4.8 billion, net CapEx (after monetization) at RMB 2.7 billion
Management highlighted several factors that will shape 2026 and beyond:
- Short-term moderation in growth due to subdued bookings since Q2 2025
- Expectations for higher bookings next year and accelerated growth thereafter as new AI projects ramp
Takeaways
GDS’s Q3 results confirm the company’s pivot to AI-centric growth, with capital recycling via CREIT providing a scalable funding model as China’s data center market enters a new investment cycle. Investors should focus on the pace of new AI bookings, CREIT asset injections, and management’s ability to secure additional powered land as key levers for future value creation.
- AI Momentum is Structural: The majority of new business is now AI-driven, anchoring GDS’s long-term relevance in China’s digital infrastructure buildout.
- CREIT Unlocks Capital Efficiency: Asset monetization is not only lowering leverage, but also enabling a repeatable, high-return investment cycle.
- Watch for Booking Acceleration: The next phase of growth hinges on management’s ability to convert pipeline AI demand into contracted bookings and to navigate regulatory complexities in land and power acquisition.
Conclusion
GDS is leveraging its CREIT platform and powered land reserves to capture an AI-driven inflection in China’s data center market. Execution on accelerated bookings and efficient asset recycling will determine whether GDS can sustain its leadership as the AI infrastructure cycle matures.
Industry Read-Through
GDS’s results and strategy provide a clear signal that China’s data center sector is entering a robust AI investment cycle, with hyperscale and cloud customers driving multi-year demand for both training and inference capacity. CREIT-style monetization may become a model for other capital-intensive infrastructure providers, especially as regulatory scrutiny on power and carbon intensifies. Operators with deep local relationships and balance sheet strength will be best positioned to secure scarce powered land and capture the next wave of AI-driven growth. Investors in adjacent sectors—such as semiconductors, power utilities, and construction—should monitor the pace and scale of AI data center expansion as a leading indicator of broader digital infrastructure demand in China and potentially other emerging markets.