VNET Shares Rally on Significant Data Center Order and Analyst Reaffirmations

VNET Secures Major Data Center Order, Analysts Reaffirm "Buy" Ratings

U.S.-listed shares of VNET Group, Inc. (VNET) have recently seen renewed positive sentiment from financial analysts, driven by a significant new wholesale data center order and resilient demand in the hyperscale market. The positive outlook comes as the company continues to expand its infrastructure, particularly in high-demand computing sectors.

Strategic Expansion and Key Order Details

VNET, a leading player in China's IT services sector with a market capitalization of $2.1 billion and a robust 18% revenue growth over the past twelve months, announced a substantial 40-megawatt (MW) wholesale order. This critical agreement is with a leading internet company for its new Gu'an IDC Campus located in the Greater Beijing Area. The carrier- and cloud-neutral internet data center services provider will deliver this capacity in phases, specifically to support the customer's core business operations and enable the deployment of domestic chips. The Gu'an IDC Campus is strategically positioned to cater to the computing demands of high-tech industries, including artificial intelligence, high-performance computing, and advanced manufacturing. To optimize efficiency and reduce energy consumption, VNET plans to implement advanced liquid cooling solutions for this project, aiming for a power usage effectiveness level that surpasses the regional average. VNET Founder, Executive Chairperson, and interim Chief Executive Officer, Josh Sheng Chen, stated, "This order underscores our strong execution and ability to attract leading customers in a competitive market." The company operates in over 30 cities across China, serving more than 7,000 customers.

Analyst Endorsements Amid Mixed Earnings

The announcement of the 40MW order has been a catalyst for reaffirmed analyst confidence. DBS reiterated its "Buy" rating on VNET, setting a price target of $12.50. This follows a nearly 20% rally in the stock since DBS last lifted its target from $9 in late July. Morgan Stanley also maintained its "Buy" rating for VNET on August 28, with an unchanged price target of $12.00. These positive ratings highlight the company's ability to attract large-scale customers and its adoption of advanced technologies like liquid cooling.

Despite the operational success, VNET reported its second-quarter earnings for 2025 with mixed results. The company posted an earnings per share (EPS) of -$0.06, significantly missing the anticipated $0.11, resulting in a negative surprise of 154.55%. However, VNET surpassed revenue expectations, reporting $2.43 billion against a forecast of $2.3 billion, a positive surprise of 5.65%. The revenue beat indicates strong underlying business activity and demand for its services, even as profitability faces headwinds. Jefferies, another investment firm, raised its price target for VNET from $24.23 to $25.13 while maintaining a "Buy" rating, further reinforcing the positive sentiment surrounding the company's growth trajectory.

Financial Context and Future Outlook

InvestingPro analysis reveals VNET currently maintains a solid gross profit margin of 23.3%. However, the company is operating with a significant debt burden, a factor that could influence future financial flexibility. The strong revenue growth and significant new contracts suggest a robust demand environment for VNET's data center services, particularly as high-tech sectors like AI and advanced manufacturing continue to expand.

Looking ahead, the successful deployment of the 40MW capacity at the Gu'an IDC Campus and the continued attraction of leading internet companies will be crucial for VNET's sustained growth. The company's strategic focus on advanced technologies, such as liquid cooling, positions it to meet the evolving and intensive computing demands of its clientele. Investors will be watching for further updates on project execution, debt management strategies, and the overall impact of the new order on future earnings and revenue streams, particularly as the company aims to capitalize on the increasing digitalization and AI-driven infrastructure needs in China.