VNET (VNET) Q3 2025: Wholesale IDC Revenues Surge 83% as AI Demand Drives Capacity Race
VNET’s Q3 marked an inflection in wholesale data center scale, propelled by rapid AI-driven deployments and robust customer move-ins. The company’s outsized wholesale revenue expansion and capacity delivery highlight its differentiated execution in a constrained supply environment. Management’s upgraded full-year guidance and commentary on resource planning signal confidence in sustained AI-led industry momentum into 2026.
Summary
- AI-Driven Wholesale Momentum: Surging wholesale orders and accelerated move-ins underscore VNET’s position as a key beneficiary of China’s AI infrastructure buildout.
- Resource Planning Intensifies: Management is proactively securing land, power, and capacity to stay ahead of customer demand and industry bottlenecks.
- Funding and Capital Recycling: Innovative REITs and asset securitization strategies support aggressive CapEx while maintaining balance sheet flexibility.
Performance Analysis
VNET delivered a standout quarter with top-line growth sharply outpacing historical trends, anchored by an 82.7% year-over-year surge in wholesale IDC (Internet Data Center) revenues. This segment, now the company’s primary growth engine, benefited from both rapid capacity delivery and customer move-ins, particularly at the NOR Campus 01 site. Wholesale capacity in service rose 16.1% sequentially, while utilization held at a healthy 74.3%—a signal that new capacity is being absorbed quickly rather than left idle.
Retail IDC, while growing modestly at 2.4% YoY, continues to benefit from AI-driven demand, with monthly recurring revenue (MRR) per cabinet rising for the sixth consecutive quarter. Margins remained solid: adjusted cash gross margin improved to 40.7%, and adjusted EBITDA margin expanded to 29.4%, reflecting operational leverage and efficiency gains even as CapEx intensity remains high. Operating cash flow and liquidity remain robust, with management highlighting a net operating cash inflow and a healthy cash position to support ongoing expansion.
- Wholesale IDC Scale-Up: Q3 saw 109 MW of new capacity delivered, with mature utilization rates approaching 95%, reinforcing VNET’s execution edge in a supply-constrained market.
- Retail Stability and Upsell: Retail MRR per cabinet growth is being driven by high-density cabinet upgrades and value-added services, even as competition remains intense.
- CapEx and Leverage: CapEx for the first nine months reached RMB 6.24 billion, with full-year spend guided at RMB 10-12 billion, largely allocated to wholesale expansion. Leverage ratios remain within management’s comfort zone, aided by capital recycling initiatives.
Overall, the quarter validated VNET’s dual-core strategy, with AI demand acting as a structural tailwind for both wholesale and retail segments. The company’s ability to deliver capacity at scale and speed is translating into tangible financial outperformance.
Executive Commentary
"Our wholesale IDC business sustained its robust growth trajectory, driven by our rapid delivery capabilities and customers' fast-moving pace. As of September 30, 2025, our wholesale capacity in service grew by 16.1% quarter over quarter to 783 megawatts... while the utilization rate was 74.3%, reflecting customers' continuous demand for our high-quality, high-performance AIDC services."
Ju Ma, Rotating President
"Our adjusted cash gross profit rose by 22.1% to RMB 1.05 billion, while our adjusted EBITDA also grew year-over-year by 27.5% to RMB 758.3 million... We maintained robust and healthy liquidity bolstered by a net operating cash inflow of RMB 809.8 million during the third quarter."
Qi Yu Wang, Chief Financial Officer
Strategic Positioning
1. Wholesale IDC as Core Growth Engine
Wholesale IDC, large-scale data center services for hyperscalers and enterprise clients, is now the clear driver of VNET’s growth. The company secured three major wholesale orders totaling 63 MW in Q3, with continued momentum into Q4 (including a 32 MW order in the Yangtze River Delta). Management’s focus on rapid delivery and high utilization rates (with mature sites at nearly 95%) positions VNET as a preferred partner for AI and cloud deployments under tight timelines.
2. AI-Driven Industry Transformation
AI is reshaping the Chinese IDC landscape, shifting demand from project-based delivery to platform-based, integrated AIDC (Artificial Intelligence Data Center) solutions. VNET’s “Hyperscale 2.0” framework and dual-core strategy are designed to capture both AI training and inference workloads. Management highlights that AI-related investments by hyperscalers are accelerating, with demand for high-density, power-rich sites outpacing available supply.
3. Resource and Capacity Planning Discipline
Access to land, power, and construction-ready sites is a growing competitive moat. VNET ended Q3 with 1.8 GW of total wholesale resource capacity (306 MW under construction, 414 MW for short-term, and 291 MW for long-term future development). Management is planning resource reserves on a five-year horizon, reflecting confidence in sustained demand and a proactive approach to mitigate supply constraints.
4. Capital Structure and Funding Innovation
VNET is leveraging private REITs and asset securitization to recycle capital, enabling aggressive CapEx without overextending the balance sheet. Two new wholesale IDC REITs are in the pipeline, with management expecting no impact on consolidated financials due to continued control. A recent AAA domestic rating further broadens funding options, including low-cost science and tech innovation bonds.
5. Retail IDC Upsell and Differentiation
Retail IDC, focused on smaller enterprise and cloud clients, is being repositioned through cabinet upgrades (higher density, AI-ready), and incremental value-added services. Growth in MRR per cabinet and stable utilization rates (now at 64.8%) demonstrate successful upselling and adaptation to evolving customer needs, despite a competitive backdrop.
Key Considerations
VNET’s Q3 results reflect a business at the intersection of structural AI demand and operational execution, but also highlight the capital intensity and resource planning required to sustain leadership. Investors should weigh the following:
Key Considerations:
- AI Infrastructure Tailwind: Surging AI workloads are driving hyperscaler investment, creating durable demand for high-density, low-latency data center capacity.
- Execution on Delivery: VNET’s ability to meet T+6 (six months) and even T+3 (three months) delivery timelines is a clear differentiator with customers prioritizing speed to market.
- Resource Bottlenecks Loom: Industry-wide constraints on power and land require disciplined, long-horizon planning—VNET’s five-year resource strategy is a key risk mitigant.
- Funding Model Evolution: Asset recycling and REITs bolster liquidity, but sustained CapEx needs mean ongoing dependence on innovative financing and market receptivity.
- Retail Upsell Potential: Continued MRR per cabinet growth in retail shows VNET’s ability to monetize existing assets and adapt to customer AI requirements.
Risks
Capital intensity and resource scarcity remain central risks, with potential for delays or cost overruns in site development and power acquisition. Competitive dynamics, especially from peers expanding into lower-cost regions, could pressure margins or limit market share gains. Customer concentration in hyperscale accounts and evolving AI chip landscape introduce further uncertainty, while execution on funding initiatives is critical to sustain growth.
Forward Outlook
For Q4 2025, VNET guided to:
- Continued strong wholesale capacity deliveries, with 132 MW planned for Q4 2025 and Q1 2026 combined
- Retail IDC MRR per cabinet expected to sustain sequential growth
For full-year 2025, management raised guidance:
- Total net revenues: RMB 9.55–9.867 billion (up 16–19% YoY)
- Adjusted EBITDA: RMB 2.91–2.945 billion (up 20–21% YoY, or 24–26% excluding one-time 2024 gains)
Management highlighted several factors that shape the outlook:
- Customer move-in pace and power utilization will drive revenue recognition
- CapEx for 2026 will be sized to match continued wholesale expansion, with funding sourced from asset securitization and domestic bonds
Takeaways
Investors should recognize VNET’s ability to convert AI demand into tangible growth, while remaining vigilant on execution and funding risks as the industry enters a new phase of capital intensity.
- AI Demand Converts to Revenue: Wholesale IDC is now the clear engine, with rapid delivery and customer move-ins translating to top-line outperformance and margin expansion.
- Resource and Funding Discipline: Five-year planning for land and power, combined with innovative REITs, positions VNET to stay ahead of industry bottlenecks.
- Future Watchpoints: Monitor pace of wholesale order wins, execution on capacity delivery, and ability to recycle capital efficiently as CapEx needs remain elevated.
Conclusion
VNET’s Q3 results underscore its execution strengths and strategic positioning in China’s AI infrastructure race. With wholesale IDC scaling rapidly and capital recycling supporting growth, the company is well-placed to capture AI-driven upside—provided it can sustain delivery, funding, and resource acquisition discipline.
Industry Read-Through
China’s AI infrastructure buildout is accelerating, with hyperscaler and enterprise demand for high-density, low-latency data center space outstripping supply. Leading IDC operators with rapid delivery capabilities and access to land and power are gaining share, while capital intensity and resource bottlenecks raise barriers to entry. Innovative funding models, such as REITs and asset securitization, are becoming essential for all players. The shift toward AI inference workloads and customer preference for speed-to-market are likely to shape industry dynamics and competitive positioning across the broader Asia-Pacific data center landscape.