GDS Earnings: Strong Utilization in China and Large International Orders

No-moat GDS announced strong second-quarter results in both its China-focused GDSH business and its international-focused GDSI business. GDSH is focused on steadily increasing its EBITDA and reaching cash flow breakeven through increasing the utilization of existing data centers by signing new business with fast move-in rates and that do not require much capital expenditure. In the first half, the company managed to increase the gross area utilized by 37,097 square meters, which is a pace faster than any of the previous four years. It also brought an additional 46,002 sqm into service, which is higher than the previous two years. Net revenue for the China business rose 8.9% year on year, while adjusted EBITDA increased by 4.3%. The EBITDA margin for GDSH fell 210 basis points to 47.8% because of increased power tariffs introduced in the second half of 2023. GDSI is focused on growth and added a whopping 206 megawatts of new orders to bring total IT power committed to 388 MW. Management also indicated that most of these new orders would be converted to revenue within 24 months.