VNET's Surge: Is the Goldman Upgrade Already Priced In or a Signal of a Guidance Reset?

The market's reaction to Goldman's upgrade was a classic "buy the rumor" event. The stock's 10.85% surge was driven by a broad bullish China stock thesis, not a detailed reassessment of VNET's near-term financials. Before the note, the consensus view was one of deep skepticism, anchored in weak recent performance. The company's Q3 2025 revenue miss-reporting $297.93 million against a $335.87 million estimate-was a stark reminder of execution challenges. More telling was the trailing EPS of -$0.30, a figure that priced in significant losses and set a low bar for near-term improvement. In that context, Goldman's bullish China forecast provided a high-level benchmark for optimism. The bank projects the MSCI China Index to climb 20% to 100 by end-2026, a forecast that framed the broader market's potential trajectory.

Goldman's specific upgrade, adding VNET to its APAC Conviction List, was meant to reset near-term expectations for the company. The rationale was clear: expectations for increased new order volumes and an improved EBITDA outlook could signal a turnaround. This thesis found immediate support in a major operational catalyst: a 40MW wholesale order for VNET's Gu'an IDC Campus. The market's bet was that this order momentum, if sustained, could bridge the gap between the company's weak recent results and the powerful earnings-driven rally Goldman sees for the entire Chinese market.

The expectation gap here is wide. The upgrade and the stock surge suggest the market is pricing in a rapid acceleration in VNET's order book and profitability, aligning it with the broader 20% index forecast. Yet the company's financials from just weeks prior show a business still struggling to meet basic revenue estimates. The market is essentially saying: "Forget the past quarter; the future is about this new order flow and the AI-driven data center boom Goldman sees for China." This is a bet on a guidance reset, not a confirmation of one. The stock's pop shows the rumor is powerful, but the reality of VNET's financials suggests the market may be getting ahead of itself.

The Reality Check: Does VNET's Financials Support the New Expectations?

The bullish narrative from Goldman is a powerful story, but it runs headlong into a stark financial reality. The market's recent surge priced in a dramatic turnaround, yet the company's own numbers tell a story of a business still struggling to meet basic expectations. This is the core expectation gap.

The most recent data point is a clear miss. In its Q3 2025 report, VNET posted revenue of $297.93 million, falling significantly short of the $335.87 million analysts had forecast. More critically, the company's trailing EPS is -$0.30. This deeply negative earnings figure sets a low bar, but it also underscores that the business is still operating at a loss. The upgrade is betting that this negative trajectory is about to reverse, but the financials show no such acceleration yet.

The path to profitability is long and steep. Analysts expect the company's EPS to grow from ($0.06) to $0.51 per share next year. That's a massive swing from a loss to a profit, but it's a projection, not a guarantee. It implies that the operational improvements and order flow Goldman cites must materialize quickly and sustainably to close this gap. The market is being asked to believe the guidance reset is already underway, but the company's recent performance suggests it's still catching up.

Even with the Goldman boost, the stock's technical position reveals persistent skepticism. Despite the 10.85% surge on the upgrade news, VNET's share price remains below its 200-day moving average of $8.72. This technical level is a key benchmark for longer-term momentum. Trading below it signals that a significant portion of the market remains unconvinced by the new bullish thesis. The stock's move above its 200-day average earlier in the month was a positive signal, but it has since retreated, highlighting the volatility and uncertainty that still surround the stock.

The bottom line is that the bullish expectations are not yet supported by the financial print. The company's recent revenue miss and negative earnings create a high hurdle for any guidance reset to clear. The market is pricing in a rapid turnaround, but the reality of a slow climb from a loss to a profit suggests this optimism may be ahead of the facts. For the stock to hold its ground, VNET must soon start delivering results that beat even the modest consensus estimates, proving the upgrade was not just a rumor, but the start of a new reality.

The Catalysts and Risks: What Could Close or Widen the Expectation Gap?

The bullish thesis now hinges on a few key catalysts and risks. The immediate test is whether announced order volumes convert into recognized revenue and improved EBITDA, which Goldman cited as a reason for the upgrade. The standout example is the 40MW wholesale order for VNET's Gu'an IDC Campus. This substantial commitment validates ongoing demand, but its impact is still ahead of the print. The market is betting this order is the start of a trend that will alleviate underutilization and provide visibility into 2025 targets. If VNET can announce a steady stream of similar deals, it would prove the upgrade was based on real operational momentum, not just a forecast. The stock's recent surge suggests the market is already pricing in this conversion. The risk is that these orders remain announcements, failing to materialize into the cash flow needed to close the earnings gap.

A major structural overhang remains: refinancing its elevated debt. This concern is not diminished by the recent optimism. The company faces significant debt maturities between 2025 and 2027, a period when its own earnings are still projected to be weak. Any pressure on its balance sheet could cap upside, regardless of order flow. The market is being asked to believe management can navigate this while scaling capacity. If the company's cash burn or leverage metrics worsen, it could force a painful refinancing negotiation, directly challenging the growth narrative Goldman is supporting.

Finally, the broader market benchmark is clear. Goldman forecasts corporate profits in China could grow as much as 14% in 2026. For VNET to justify its elevated expectations, its earnings growth must accelerate toward that level, not lag behind. The stock's performance will be judged against this backdrop. If VNET's growth remains a laggard, even a successful order conversion may not be enough to sustain the rally. The expectation gap will widen if the company's financials fail to keep pace with the powerful earnings-driven bull run Goldman sees for the entire Chinese market.

The setup is now a race between operational execution and financial risk. The catalysts are visible, but the risks are embedded in the balance sheet. The market has bought the rumor; the coming quarters will test if the reality can deliver.