GDS Holdings Limited announced its second-quarter 2025 financial results, reporting a 12.4% year-over-year revenue increase and a significantly reduced net loss. The company also successfully completed the initial public offering and listing of its China REIT (C-REIT) on the Shanghai Stock Exchange, generating substantial net cash proceeds and leading to a downward revision in capital expenditure guidance. This strategic move and solid operational performance have been met with a positive market reaction, particularly for its Hong Kong-listed shares.

Shanghai, China – GDS Holdings Limited (NASDAQ: GDS; HKEX: 9698), a leading developer and operator of high-performance data centers in China, announced its unaudited financial results for the second quarter ended June 30, 2025, revealing a period of solid financial performance and a significant strategic milestone with the successful listing of its China REIT (C-REIT).

Second Quarter 2025 Financial Performance

GDS Holdings reported a net revenue of RMB2,900.3 million (US$404.9 million) for the second quarter of 2025, marking a 12.4% increase from RMB2,579.6 million in the same period last year. This growth was primarily attributed to the continued ramp-up of the company’s data centers. Concurrently, the company significantly narrowed its net loss to RMB70.6 million (US$9.9 million), a substantial improvement from a net loss of RMB231.8 million in the second quarter of 2024. The net loss margin consequently improved to 2.4% from 9.0% year-over-year.

Adjusted EBITDA (non-GAAP) advanced by 11.2% year-over-year to RMB1,371.8 million (US$191.5 million), compared to RMB1,233.2 million in the second quarter of 2024. The adjusted EBITDA margin stood at 47.3%. Gross profit also saw a robust increase of 21.8% to RMB688.9 million (US$96.2 million).

As of June 30, 2025, GDS held RMB13,123.8 million (US$1,832.0 million) in cash. The company also reported a 10.1% decline in net interest expenses year-over-year, reaching RMB405.0 million (US$56.5 million).

C-REIT Listing and Strategic Capitalization

A pivotal development for GDS during the quarter was the successful initial public offering (IPO) and listing of its China REIT (C-REIT) on the Shanghai Stock Exchange. The C-REIT, which commenced trading on August 8, 2025, raised RMB2,400 million in gross proceeds. GDS is entitled to receive net cash proceeds of approximately RMB2,073 million from the sale and purchase of the project company. GDS concurrently reinvested RMB480 million, securing a 20% ownership stake in the C-REIT.

This strategic asset monetization involved the C-REIT acquiring a 100% equity interest in a project company holding stabilized data center assets from GDS. The transaction also led to the de-consolidation of approximately RMB30 million of net debt and other liabilities. Investor demand for the C-REIT was robust, with the IPO units experiencing heavy oversubscription through institutional bookbuilding and retail public offerings.

In conjunction with the C-REIT, GDS revised its total capital expenditure guidance for 2025 downward to RMB2,700 million from the previously projected RMB4,300 million, reflecting enhanced funding flexibility and reduced future capital expenditure burdens.

Market Reaction and Operational Efficiency

The news was met with a positive market response, particularly for GDS’s Hong Kong-listed shares (9698.HK), which experienced a significant price increase of 15.67% as of September 12, 2025.

Operationally, GDS continued to expand its footprint and improve efficiency. Total area committed and pre-committed increased by 8.1% year-over-year to 663,959 sqm. Area utilized grew by 14.1% to 479,186 sqm, resulting in a utilization rate of 77.5%, an increase from 72.4% in the second quarter of 2024.

William Huang, Chairman and CEO of GDS, commented on the results:

"Our disciplined execution drove another quarter of solid operational and financial performance. We continued to accelerate the delivery of our backlog while maintaining a selective approach to new orders. The successful initial public offering of our C-REIT on the Shanghai Stock Exchange marks a key strategic milestone. Moving forward to the second half of the year, we are well-positioned to capture new business opportunities in Tier 1 markets, driven by tailwinds of AI evolution."

Dan Newman, Chief Financial Officer, added:

"In the second quarter of 2025, our revenue increased by 12.4% and adjusted EBITDA grew by 11.2% year-over-year, with an adjusted EBITDA margin of 47.3%. On the funding side, we raised net proceeds of US$676 million through new convertible senior notes and equity. Our new C-REIT platform provides us with enhanced financing flexibility. We remain focused on creating sustainable, long-term value for our business partners and shareholders."

Broader Context and Implications

The successful C-REIT listing provides GDS with a sustainable funding mechanism, reducing its reliance on traditional debt and improving capital efficiency. This asset monetization strategy, coupled with strong operational metrics, is seen by analysts as a bullish indicator for the company. The C-REIT’s implied Enterprise Value to EBITDA (EV/EBITDA) multiple of 22 times, as noted by some analysts, suggests a significant premium compared to GDS’s current EBITDA ratio of 15x, indicating that GDS’s shares may be undervalued. This favorable valuation in the C-REIT transaction could lead to increased investor confidence and a re-evaluation of GDS’s equity.

The revised lower capital expenditure guidance further underscores GDS’s improved capital allocation efficiency, allowing it to better manage its growth while maintaining financial discipline.

Looking Ahead

Looking forward, GDS appears well-positioned to capitalize on the growing demand for high-performance data centers, particularly driven by the "tailwinds of AI evolution." The company’s dual REIT strategy, encompassing both its C-REIT and potential U.S. REIT structures, aims to stabilize long-term value and enhance liquidity. Continued focus on strategic debt management and an asset-light model are expected to strengthen its balance sheet further, potentially narrowing any credit-related valuation discounts.

Analysts also point to several potential catalysts, including the possibility of a dual-primary listing structure in Hong Kong, which could attract more China-focused funds. Furthermore, GDS’s re-inclusion in the MSCI China Standard Index in August 2025 is anticipated to generate fresh fund inflows from certain exchange-traded funds (ETFs) and benchmark-hugging fund managers, broadening its shareholder base and providing additional liquidity to the stock. The company’s performance suggests a sustained trajectory of growth and strategic development within the competitive data center sector.