Ulanqab IDC power usage reaccelerates, and UBS believes it carries positive signaling value for VNET's 1Q26 performance

Overview

This report is UBS's monthly data tracking of China's internet data center industry, focusing on Ulanqab IDC power consumption and implied net capacity additions. The report notes that Ulanqab data center power consumption reached 500GWh in March 2026, up 90.1% YoY. Although lower than 98.2% in February 2026 and 116.6% in 2025, it still maintained strong growth and implied 37MW of net new data center capacity.

Core views

The core view is that Ulanqab IDC power consumption and implied net capacity additions reaccelerated significantly in 1Q26, reflecting continued solid customer move-ins and supply chain improvement. Implied net new utilized data center capacity in Ulanqab was 71MW in 1Q26, versus only 4MW in 4Q25, when it was affected by chip supply constraints. UBS believes this change has positive signaling value for VNET's 1Q26 move-ins and financial performance.

Analysis framework

The report is based on Ulanqab government-disclosed data center power consumption and converts changes in power usage into implied net additions in data center capacity, measured as IT power x PUE; it also compares Ulanqab's implied net MW additions with VNET's utilized MW net additions on a quarterly basis to assess the impact of industry demand, customer move-ins, and supply chain improvement on company operations.

Methodology notes

• Operational data trackingIDC power-consumption implied capacity method

  Map changes in data center power consumption to implied net MW additions

  UBS uses monthly Ulanqab data center power consumption to estimate the net increase in utilized data center capacity under the IT power x PUE framework, in order to observe IDC demand and move-in trends.

• Valuation methodologyEV/EBITDA target multiple

  VNET valuation method

  The report discloses that UBS values VNET based on a target EV/EBITDA multiple, but this excerpt does not provide the specific multiple, target price, or rating.

• Valuation methodologySOTP

  GDS valuation method

  The report discloses that UBS uses the SOTP method to value GDS, but this excerpt does not provide segment assumptions, target price, or rating.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• VNET

  Net additions in Ulanqab IDC capacity are used as a positive indicator for VNET's move-ins and financial performance

  Strengths

  Continued customer move-ins, supply chain improvement, and a significant rebound in implied net capacity additions in 1Q26.

  Weaknesses

  4Q25 was affected by chip supply constraints; at the company level it still faces refinancing, hyperscale cloud customer growth, and customer churn risks.

  Comparison

  Implied net additions in Ulanqab were 71MW in 1Q26, higher than 4MW in 4Q25; VNET's utilized MW net additions fluctuated between 2Q24 and 4Q25 in the chart.

  Risks

  Unreasonable refinancing costs, lower-than-expected hyperscale cloud customer growth, difficulties in securing land and utility resources in tier-one cities, and rising retail business customer churn.

• GDS

  A comparable name in China's IDC industry; the report discloses the use of SOTP valuation

  Strengths

  Benefits from the industry logic of rising AI and cloud demand.

  Weaknesses

  May be affected by slower growth in China's cloud/AI industry, power outages, or rising electricity prices.

  Comparison

  The report does not provide a detailed comparison of valuation or operating data between GDS and VNET.

  Risks

  Slower growth in China's cloud/AI industry, reputational damage from power failures, interest rates staying high, and intensified competition caused by oversupply of data centers in Southeast Asia.

• China IDC industry

  Monthly Ulanqab power consumption is used as a tracking indicator for changes in industry demand and utilization

  Strengths

  Power consumption in March 2026 rose 90.1% YoY, showing demand remains strong.

  Weaknesses

  The industry is highly affected by AI demand, the cloud business cycle, interest rates, power costs, and the regulatory environment.

  Comparison

  March YoY growth was lower than 98.2% in February and 116.6% in 2025, but absolute growth remained strong.

  Risks

  AI demand below expectations, data center failures damaging reputation, higher-than-expected interest rates, and a weaker-than-expected regulatory environment.

Key data

• Ulanqab data center power consumption in March 2026500GWhUp 90.1% YoY, continuing the growth momentum.
• Implied net capacity addition in March 202637MWMeasured as total data center capacity, IT power x PUE.
• Implied net new utilized capacity in Ulanqab in 1Q2671MWA significant improvement versus 4MW in 4Q25.
• Implied net new utilized capacity in Ulanqab in 4Q254MWThe report says this was affected by chip supply constraints at the time.
• Implied net MW additions in Ulanqab in 2Q25160MWThe peak in the quarterly series shown in the chart.
• VNET utilized MW net additions in 1Q260MWThe chart shows no green bar in 1Q26, visually identified as 0; further verification is needed against the original chart and company disclosures.

Impact & implications

The report is positive on demand signals for China's IDC industry. Net capacity additions in Ulanqab rebounded from the low in 4Q25 to 71MW in 1Q26, implying recovery after earlier chip supply constraints and also supporting the view that AI and cloud customer move-in trends remain solid. For VNET, the improvement in Ulanqab data is viewed as a positive leading indicator for 1Q26 move-ins and financial performance; for the industry, if AI and cloud business continue to grow and financing and power costs remain manageable, IDC operators' fundamentals are likely to benefit.

Risks

• AI demand is weaker than expected.
• One or more data centers experience failures and damage the industry's reputation.
• Interest rates are higher than expected, increasing financing pressure.
• The regulatory environment is weaker than expected.
• VNET may be unable to refinance at a reasonable cost.
• Hyperscale cloud customer growth is lower than expected.
• Difficulties in securing land and utility resources in tier-one cities.
• Retail business customer churn is higher than expected.
• GDS faces risks including slower growth in China's cloud/AI industry, power outages or rising electricity prices, interest rates remaining high, and intensified competition caused by oversupply of data centers in Southeast Asia.

What to watch

• Whether Ulanqab data center power consumption in subsequent months continues to maintain high YoY growth.
• Whether VNET's actual utilized MW net additions, customer move-ins, and financial performance in 1Q26 and subsequent quarters validate Ulanqab's leading-indicator role.
• Whether improvement in chip supply continues and whether it still constrains customer rack deployments and capacity utilization.
• Whether growth in AI and cloud business demand is stronger than expected.
• Changes in power costs, interest rates, and IDC license/PUE regulatory requirements.
• VNET's refinancing progress and financing costs.
• Competition and supply changes for GDS in the China and Southeast Asia markets.