VNET Group (VNET) Q2 2026: Wholesale IDC Capacity Surpasses 1GW, Driving 29% Revenue Growth
VNET's wholesale internet data center (IDC) business marked a milestone by exceeding 1 gigawatt (GW) of capacity in service, underpinning strong revenue growth and expanding operational scale. Strategic resource accumulation and a new partnership with CATL signal a pivot toward integrated compute-energy ecosystems. The company’s disciplined delivery roadmap and robust order book offer clear visibility into sustained growth amid evolving AI-driven demand.
Summary
- Wholesale Capacity Expansion: Surpassing 1 GW of wholesale IDC capacity establishes a platform for multi-year growth.
- Strategic Collaboration: Partnership with CATL aims to innovate integrated compute-energy infrastructure supporting AI and green energy trends.
- Order Visibility: Long-term contracts and a strong delivery schedule enhance revenue predictability and operational discipline.
Business Overview
VNET Group is a leading carrier- and cloud-neutral internet data center services provider in China, generating revenue primarily through its wholesale and retail IDC businesses. The wholesale IDC segment offers large-scale data center capacity to cloud service providers and hyperscalers, while the retail IDC business serves smaller customers with cabinet-level hosting. Additional revenue streams come from non-IDC services including cloud and business VPN offerings.
Performance Analysis
In the second quarter of 2026, VNET reported total net revenues of RMB 2.78 billion (US$409.5 million), reflecting a 14.2% year-over-year increase. The wholesale IDC business was the primary growth driver, with revenues rising 29.3% to RMB 1.10 billion (US$162.8 million), now representing 39.8% of total revenue and surpassing retail IDC revenue for the first time. Retail revenues grew 9.1% year-over-year, while non-IDC revenues remained relatively flat.
Adjusted EBITDA increased 25.4% year-over-year to RMB 918.3 million (US$135.3 million), with the margin expanding to 33.0%. Adjusted cash gross profit rose 9.4%, although adjusted cash gross margin declined slightly to 41.8% due to higher utility costs and increased depreciation from rapid capacity expansions. Net loss attributable to shareholders widened to RMB 135.6 million (US$20 million), primarily due to unfavorable changes in fair value of financial instruments. Adjusted net income turned positive, reaching RMB 7.4 million (US$1.1 million).
- Capacity Milestone: Wholesale IDC capacity in service grew 49.4% year-over-year to 1,007 megawatts (MW), surpassing 1 GW for the first time.
- Utilization and Commitments: Utilization rate stood at 73.9%, with 96.3% of capacity committed under long-term agreements averaging seven years in length.
- Order Backlog: Year-to-date wholesale order wins totaled 862 MW, complemented by 355 MW in reserved capacity, underscoring strong demand visibility.
These results demonstrate VNET’s ability to scale infrastructure rapidly while maintaining strong customer commitments and operational discipline, positioning the company well to capitalize on the accelerating AI-driven demand for high-performance computing infrastructure.
Executive Commentary
"We achieved robust growth across our key financial and operational metrics in the second quarter of 2026, as our execution capabilities and high-quality deliveries continued to attract new orders. We secured a 345MW wholesale order from a leading cloud service provider in the second quarter, bringing our total wholesale order wins to 862MW year-to-date."
Josh Sheng Chen, Founder, Executive Chairperson
"Wholesale revenues again surpassed retail revenue this quarter, accounting for 39.8% of our total revenue and further underscoring the growing demand for our wholesale service. Adjusted EBITDA increased by 25.4% year-over-year to RMB 918.3 million, with margin expansion reflecting ongoing operational efficiency gains."
Peter Zhihua Zhang, Senior Vice President, Operational Finance
Strategic Positioning
1. Accelerated Wholesale IDC Expansion
VNET’s wholesale IDC business is the primary growth engine, with capacity in service surpassing 1 GW and utilization rates near 74%. The company’s ability to secure large-scale orders from leading cloud providers and hyperscalers reflects its competitive positioning in high-performance data center infrastructure tailored for AI workloads. The long-term contracts with a weighted average lease term of seven years provide revenue stability and visibility.
2. Strategic Resource Reserve Buildout
The company significantly expanded its land bank, adding approximately 1.4 GW of capacity reserves in Q2, including 908 MW domestically in key regions such as Inner Mongolia and the Yangtze River Delta, and 478 MW overseas. This diversified resource portfolio supports multi-year growth and flexibility to meet evolving customer demand, especially as AI infrastructure needs intensify.
3. Partnership with CATL for Compute-Energy Integration
VNET’s strategic cooperation agreement with Contemporary Amperex Technology Co., Limited (CATL) aims to develop a three-layer integrated compute-energy ecosystem combining gigawatt-scale compute-energy facilities, distributed networks, and a zero-carbon token system. This initiative aligns with broader industry trends toward green energy and digital infrastructure integration, positioning VNET as a potential leader in next-generation digital energy infrastructure.
4. Operational Efficiency and Cost Discipline
The company achieved a 25.4% increase in adjusted EBITDA with margin expansion despite increased depreciation and utility costs. Management emphasized ongoing efforts in headcount control and economies of scale to sustain cost efficiency. Adjusted operating expenses as a percentage of revenue declined to 9.8% from 15.0% year-over-year, reflecting disciplined expense management amid expansion.
5. Prudent Overseas Expansion Strategy
While overseas capacity reserves reached 478 MW, management indicated a cautious approach to overseas capital deployment, aligning new investments with secured customer orders to ensure capital efficiency. Southeast Asia is the initial focus for overseas development, with evaluations underway for the Middle East and Europe to broaden the global footprint.
Key Considerations
VNET’s Q2 results highlight the company’s strategic emphasis on scaling wholesale IDC capacity to capture AI-driven demand while maintaining operational discipline and financial health.
- Wholesale Demand Sustainability: Strong order wins and reserved capacity suggest durable demand, but conversion timing depends on customer deployment schedules.
- Margin Pressure from Expansion: Increased depreciation and utility costs weigh on gross margin, though adjusted EBITDA margin benefits from efficiency gains.
- Capital Allocation Discipline: CapEx remains guided by delivery schedules and customer orders, with cautious overseas investment to mitigate risk.
- Strategic Partnerships as Differentiators: The collaboration with CATL reflects a forward-looking investment in integrated compute-energy infrastructure, potentially creating competitive moats.
Risks
Risks include potential delays in converting reserved capacity to firm orders, fluctuations in utility and construction costs impacting margins, and execution risks associated with overseas expansion and new strategic initiatives. Additionally, macroeconomic uncertainties and regulatory changes in China and overseas markets could affect growth trajectories.
Forward Outlook
For the full year 2026, VNET reiterated guidance of total net revenues between RMB 11.5 billion and RMB 11.8 billion, representing 15.6% to 18.6% growth year-over-year, and adjusted EBITDA in the range of RMB 3.55 billion to RMB 3.75 billion, up 19.2% to 25.9%. Capital expenditures are expected to be RMB 10 billion to RMB 12 billion, supporting planned delivery of approximately 450 to 500 MW of new capacity. Management emphasized continued strong demand, disciplined execution, and strategic investments aligned with evolving AI infrastructure needs.
Takeaways
VNET’s Q2 performance confirms its leadership in the Chinese IDC market, particularly in the wholesale segment critical for AI infrastructure growth. The company’s ability to secure large-scale orders and expand capacity rapidly, combined with a strategic focus on integrated compute-energy solutions, positions it well for long-term growth. Investors should monitor order conversion timelines, margin trends amid expansion, and execution progress on overseas projects and strategic partnerships.
- Wholesale IDC Leadership: Surpassing 1 GW of capacity and securing 862 MW of orders year-to-date highlight VNET’s dominance and growth runway in the high-performance data center market.
- Strategic Innovation: The CATL partnership may unlock new market opportunities in green digital infrastructure, differentiating VNET amid intensifying competition.
- Execution and Capital Discipline: Maintaining operational efficiency and prudent capital allocation will be critical as the company scales and pursues overseas expansion.
Conclusion
VNET’s second quarter results demonstrate strong operational execution and strategic foresight amid a rapidly evolving AI infrastructure landscape. The company’s wholesale IDC expansion, robust order book, and innovative partnerships provide a solid foundation for sustained growth and value creation.
Industry Read-Through
VNET’s milestone of surpassing 1 GW wholesale IDC capacity and its focus on integrated compute-energy ecosystems reflect broader industry trends toward consolidation among top-tier data center providers and the increasing importance of green, AI-optimized infrastructure. Other industry participants should note the structural supply-demand imbalances and the premium placed on resource reserves and strategic partnerships. The cautious overseas expansion approach also signals the challenges and capital intensity of global data center deployments, underscoring the need for disciplined growth strategies.