VNET (VNET) Q2 FY24 Earnings call transcript Aug 28, 2024
In the recent earnings call for the second quarter of 2024, VNET Group Inc. highlighted a robust performance driven by strategic execution and a strong focus on AI trends. The company reported a net revenue increase of 9.4% year-over-year, reaching RMB 1.99 billion, with an adjusted EBITDA growth of 7.3% to RMB 574 million.
Strategic Execution and Growth Drivers
VNET's wholesale business, which is the key revenue growth driver, showed an impressive 81% year-over-year increase, reaching RMB 402 million. The company's capacity in service for the wholesale business was steady at 332 megawatts, with a capacity utilized rate rising by 4.9 percentage points quarter-over-quarter to 75.9%. The retail IDC business also maintained its smooth development, with capacity in service increasing to 52,177 cabinets and a stable utilization rate of 63.7%.
Innovative AI Strategies
VNET's focus on AI trends was a significant highlight of the call, with the company showcasing its strategic investments and advanced capabilities in this area. The company has won several large orders, including a 200 megawatt order from an existing customer in the Internet industry, and 2 new IT services orders for 19 megawatts and 16 megawatts, respectively. VNET is confident in the growth potential of its cutting-edge Ulanqab IDC campus, which is expected to support large language model training demands, especially from customers in the Internet, autonomous driving, and financial services sectors.
Financial Performance and Future Outlook
VNET's financial performance was also a topic of discussion, with the company reporting a net profit of RMB 71.8 million in the second quarter of 2024, a significant improvement from the net loss of RMB 159 million in the first quarter. The company's focus on profitability and cost control measures, coupled with strategic investments, have contributed to these positive results.
Looking ahead, VNET expects total net revenues to be in the range of RMB 7.8 billion to RMB 8 billion for the full year of 2024, with adjusted EBITDA expected to be in the range of RMB 2.22 billion to RMB 2.28 billion. The company's CapEx guidance has also been raised to RMB 5 billion to RMB 5.5 billion, reflecting the strong demand for AI-related services and the company's strategic investments in this area.
Analysts' Questions and Management's Responses
During the Q&A session, analysts raised questions about the underlying demand in China, the cost-effectiveness of AI-related data centers, and the company's financing plans. Management provided detailed responses, highlighting the strong demand for IDC capacity, the company's innovative approaches to reduce the cost of constructing AI-oriented data centers, and the company's prudent financing strategies.
Overall, VNET's earnings call provided a comprehensive overview of the company's strong performance, strategic focus on AI trends, and financial health. The company's confident outlook, coupled with its innovative strategies and operational efficiency, positions it well for continued growth and success in the competitive IDC market.