VNET (VNET) Q2 2025: Wholesale IDC Revenue Soars 113% as AI Demand Accelerates Buildout
VNET’s wholesale IDC business delivered triple-digit revenue growth, powered by surging AI-driven demand and rapid capacity expansion. The company’s Hyperscale 2.0 framework is reshaping its business model toward AI-optimized data centers, while robust liquidity and capacity commitments support an ambitious multi-year delivery pipeline. Management’s guidance remains conservative, but upside potential hinges on sustained AI order momentum and chip supply clarity.
Summary
- AI-Driven Wholesale Surge: Wholesale IDC revenue more than doubled as hyperscale customers accelerated deployments.
- Strategic Delivery Execution: Rapid capacity buildout and modular construction underpin VNET’s competitive edge in the AI infrastructure race.
- Conservative Guidance Signals Upside Optionality: Management’s outlook reflects caution, but order momentum and chip supply trends could drive further upgrades.
Performance Analysis
VNET’s second quarter results underscore a decisive pivot toward large-scale, AI-driven data center solutions. Total net revenues rose 22% year-over-year, with the wholesale IDC (Internet Data Center, large-scale infrastructure for cloud and enterprise clients) segment standing out: wholesale revenues soared 113% year-over-year, now accounting for a significant share of incremental growth. This was fueled by accelerated customer move-ins, particularly at the NOR Campus 01 and EJS Campus 03 facilities, and supported by a stable utilization rate of 75.9% across wholesale capacity. Mature capacity utilization reached a robust 94.6%, highlighting operational efficiency and strong demand absorption.
Retail IDC, VNET’s traditional colocation business for smaller clients, remains the largest revenue contributor at RMB 959 million, though sequential revenue softness was noted. The retail utilization rate ticked up to 63.9%, and monthly recurring revenue (MRR, a key metric for data center operators) per cabinet climbed, reflecting healthy pricing and value-added services. Adjusted EBITDA margin expanded to 30.1%, demonstrating operating leverage from scale and efficiency initiatives. Liquidity remains solid, with RMB 4.66 billion in cash and equivalents, and net operating cash flow of RMB 366.6 million for the quarter.
- Wholesale Revenue Expansion: The 113% year-over-year jump in wholesale revenue is the clearest indicator of VNET’s successful pivot to hyperscale clients and AI infrastructure demand.
- Margin Improvement: Adjusted cash gross margin rose to 43.6%, up from 39.5% a year ago, driven by operational scale and efficiency gains.
- Capex Commitment: First-half capex reached RMB 3.89 billion, with full-year spend guided at RMB 10–12 billion, reflecting an aggressive expansion plan focused on wholesale delivery.
While retail remains stable, the narrative this quarter is defined by VNET’s ability to capture and deliver on hyperscale AI opportunities, with financial performance reflecting successful execution and strategic repositioning.
Executive Commentary
"Our wholesale IDC business maintained its significant growth momentum supported by our customers' fast move in pace. As AI permeates every aspect of the world, new growth opportunities for data centers, the bedrock of AI infrastructure, continue to emerge."
Zhu Ma, Rotating President
"We continued to pursue high-quality, high-margin business. Our adjusted cash gross profit rose by 34.9%... Our adjusted EBITDA margin rose to 30.1% compared with 28.8% in the same period last year."
Qi Yu Wang, Chief Financial Officer
Strategic Positioning
1. Hyperscale 2.0 and AI-Optimized Data Centers
VNET’s Hyperscale 2.0 framework marks a shift from traditional project-based IDC delivery to a platform model offering comprehensive, AI-optimized solutions (AIDC, Artificial Intelligence Data Center). By leveraging modular construction and building standardization, VNET can cut construction cycles by one-third and flexibly adapt to customer-specific requirements. This approach positions VNET as a first mover in China’s rapidly evolving AI infrastructure landscape.
2. Capacity Pipeline and Delivery Track Record
With 674 megawatts of wholesale capacity in service (up 17.5% QoQ) and 326 megawatts under construction (55% pre-committed), VNET’s delivery pipeline is both robust and visible. The company plans to deliver 400–450 megawatts in 2025—triple last year’s total—reflecting confidence in long-term demand and execution prowess. Eight data centers are under construction, concentrated in the Beijing area and Yangtze River Delta.
3. Financial Discipline and Capital Allocation
Despite aggressive expansion, VNET maintains a prudent approach to debt (net debt/EBITDA at 5.3x) and has authorized a $50 million share buyback, signaling confidence in future cash flow and value creation. The company is also advancing public and private REITs (Real Estate Investment Trusts, asset monetization vehicles) to recycle capital and support further growth.
4. ESG and Green Data Center Leadership
VNET’s A grade in the Carbon Disclosure Project’s Supplier Engagement Assessment highlights leadership in energy efficiency and low-carbon operations, which is increasingly important as hyperscale clients prioritize sustainability. Wind power initiatives in Inner Mongolia are expected to deliver incremental benefits, with revenue and margin contributions to be detailed upon full ramp.
Key Considerations
VNET’s Q2 marks a strategic inflection, with execution on AI-driven demand, modular construction, and capital discipline setting the stage for long-term leadership in China’s data center market.
Key Considerations:
- AI Infrastructure Demand: Surging AI workloads are driving wholesale orders and rapid client move-ins, particularly in digital economy hubs like Beijing and the Yangtze River Delta.
- Delivery Cadence and Visibility: Fast construction and high pre-commitment rates provide strong revenue visibility through 2025 and beyond.
- Retail IDC Stability: Retail revenues softened sequentially but remain stable, with utilization and MRR per cabinet improving, providing a steady base.
- Capital Recycling via REITs: Four to five REITs projects are in progress, targeting RMB 2 billion in asset-level recoveries this year, supporting balance sheet flexibility.
Risks
AI chip supply constraints remain a potential headwind, with management monitoring the impact of both Nvidia and domestic chip deliveries on customer order timing. High capex and leverage necessitate strong execution and ongoing access to capital markets. Retail IDC softness and reliance on large wholesale clients could expose VNET to demand cyclicality or concentration risk if AI momentum falters.
Forward Outlook
For Q3 2025, VNET did not provide specific quarterly guidance, but reiterated its full-year outlook:
- Total net revenues: RMB 9.15–9.35 billion (11–13% YoY growth)
- Adjusted EBITDA: RMB 2.76–2.82 billion (14–16% YoY growth; 18–20% excluding 2024’s one-time gain)
Management highlighted:
- Conservative guidance reflecting caution around potential chip supply disruptions.
- Upside potential if wholesale client move-ins and AI demand remain robust through year-end.
Takeaways
VNET’s Q2 results validate its strategic pivot to AI-centric, hyperscale data center solutions, with execution and financial discipline supporting a multi-year growth trajectory.
- AI Demand Is the Growth Engine: Wholesale IDC growth is now the primary driver, with rapid delivery and high utilization rates setting VNET apart in a crowded market.
- Operational Agility Matters: Modular construction and fast delivery cycles enable VNET to capture time-sensitive AI workloads, strengthening client relationships and revenue visibility.
- Watch for Further Guidance Upside: If chip supply stabilizes and wholesale orders continue, management signaled willingness to raise guidance again in the second half.
Conclusion
VNET’s Q2 2025 results reflect a business at the intersection of AI demand and data center innovation. Execution on wholesale delivery, capital discipline, and modular construction are positioning VNET as a leader in China’s next-generation data center market. The outlook remains constructive, but investors should monitor chip supply, capex discipline, and the pace of AI order flow for signs of sustained momentum.
Industry Read-Through
VNET’s wholesale IDC surge and modular buildout highlight intensifying demand for AI-ready data center infrastructure in China, with implications for operators, equipment vendors, and energy providers. The shift toward AIDC solutions and platform-based delivery models is likely to accelerate industry consolidation, favoring players with scale, engineering agility, and access to capital. AI chip supply constraints and power sourcing innovation (such as wind power) are emerging as key battlegrounds, with lessons for global data center peers navigating similar secular tailwinds and operational challenges.