Record Order Backlog Positions GDS for Earnings Growth Acceleration from 2H27E

Overview

GDS is a leading player in China’s neutral data center market, operating primarily a wholesale-focused business model. Goldman Sachs believes management’s comments on robust AI and non-AI demand, together with the record order backlog, improve earnings visibility over the next several years. As orders are progressively moved in and recognized as revenue, GDS China’s revenue and EBITDA growth are expected to become more pronounced after 2H27E; overseas DayOne has strong near-term visibility on contract move-ins and mid-term expansion potential.

Core views

Order backlog and new move-ins are the core drivers of medium-term earnings growth. Goldman Sachs expects capacity move-ins of 235MW, 700MW, and 1GW in 2026E–2028E, respectively.Goldman Sachs expects total utilized capacity to reach 3.1GW by 2028E, representing a 49% CAGR in 2026E–2028E; utilized area growth will trail capacity growth due to higher power density.GDS China’s renewal repricing will lower unit pricing and margins, offsetting part of the benefit from higher move-in volumes.Goldman Sachs raises its GDS China 2026E revenue and adjusted EBITDA forecasts by 1%–2%; it raises 2027E–2028E revenue forecasts by 2% and 9%, respectively, while adjusted EBITDA forecasts remain broadly unchanged.DayOne is advancing expansion in Europe and Southeast Asia. Goldman Sachs raises its 2026E–2028E revenue forecasts by 1%–6% and adjusted EBITDA forecasts by 2%–7%.

Analysis framework

The report analyzes EBITDA changes over the next three years using order conversion, capacity move-ins, and contract renewal repricing as key variables, and applies a sum-of-the-parts valuation to GDS China and DayOne separately.

Methodology notes

• Valuation methodsSum-of-the-Parts Valuation (SOTP)

  Values GDS China and DayOne separately and incorporates a holding-company discount.

  Applies a target EV/EBITDA multiple of 13.5x to GDS China’s 2027E EBITDA and 23x to DayOne’s 2027E EBITDA, adjusts for GDS’s 19.9% equity interest in DayOne, and applies a 10% holding-company discount.

• Earnings ForecastingEBITDA Waterfall Analysis

  Breaks down YoY EBITDA changes into contributions from net move-ins and losses from renewal repricing.

  Assumes annualized EBITDA of RMB2.2 million per MW and quantifies the impact of lower renewal pricing for existing contracts on earnings growth.

Asset mapping & comparison

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

• GDS.US

  Core covered name

  Strengths

  Leading position in China’s neutral data center market, continued resource expansion in key computing-power clusters, strong order backlog, and exposure to AI and cloud customer demand.

  Weaknesses

  Lower renewal pricing weighs on unit pricing and margins, while free cash flow yield is negative and leverage remains high over the forecast period.

  Comparison

  The same company as 9698.HK but listed through a different security; valuation also incorporates the value of GDS’s 19.9% interest in DayOne.

  Risks

  Move-in demand and utilization improvement fall short of expectations, customer churn, weaker domestic pricing, and slower deleveraging progress.

• 9698.HK

  Hong Kong-listed security of GDS Holdings

  Strengths

  Shares the same fundamentals as GDS.US and benefits from order conversion and DayOne value realization.

  Weaknesses

  Also faces risks from renewal repricing in the China market and earnings delivery.

  Comparison

  Goldman Sachs’ target price is HK$48, implying 40.2% potential upside; the GDS.US target price is US$49.

  Risks

  Changes in FX assumptions, valuation multiple de-rating, and weaker-than-expected ramp-up of overseas operations.

• DayOne

  GDS’s overseas data center business, in which it holds a 19.9% stake

  Strengths

  Expanding in Southeast Asia and Europe, with high near-term visibility on contract move-ins; planning a 300MW campus in Spain and securing solar and energy-storage resources in Malaysia.

  Weaknesses

  Did not disclose financial or operating performance in 2Q26; overseas expansion remains in the scale-building and profitability ramp-up phase.

  Comparison

  Goldman Sachs assigns a 23x target EV/EBITDA multiple to its 2027E EBITDA, above the 13.5x multiple for GDS China.

  Risks

  Slower ramp-up of overseas revenue and profitability, project execution risk, and energy supply risk.

Key data

• Cumulative order backlog471MW (as of June 2026)Including 263MW added in 2Q26 and 208MW added in 1Q26.
• Order conversion lag12–18 monthsTypical time lag from securing orders to revenue and EBITDA recognition.
• GDS China adjusted EBITDA YoY growth8% in 2027E; 19% in 2028EExcluding one-off items.
• Contract renewal repricing drag in 2026E–2028EApproximately 2/2.5/1 percentage pointsEstimated drag on adjusted EBITDA YoY growth.
• GDS China utilized capacity3.1GW in 2028E2026E–2028E CAGR is expected to be 49%.
• DayOne 2025E–2028E growthRevenue CAGR 100%; adjusted EBITDA CAGR 118%Goldman Sachs forecast.
• GDS.US target price and upsideUS$49; 42.4%Current price: US$34.41.

Impact & implications

If orders move in as expected, accelerating revenue and EBITDA growth at GDS China after 2H27E could drive a valuation re-rating. The current valuation implies more than 9x 2027E EV/EBITDA for GDS China and does not include DayOne’s value; however, lower renewal pricing, capital expenditures, and rising leverage mean earnings and cash-flow delivery still require ongoing validation.

Risks

• Capacity move-in demand or utilization improvements fall short of expectations.
• Pricing trends in China and overseas markets are weaker than expected, particularly if contract renewal price cuts widen.
• Customer churn risk.
• DayOne’s overseas revenue and profitability ramp-up is slower than expected.
• Deleveraging progress slows, increasing pressure from capital expenditures and rising net debt.
• Changes in FX assumptions or lower target valuation multiples.

What to watch

• New orders and the pace at which the order backlog converts into actual move-ins.
• The proportion of contract renewals in 2H26E and 2027E, actual renewal pricing, and MSR changes.
• Improvement in GDS China’s utilized capacity, revenue growth, and adjusted EBITDA margin in 2H27E.
• Capacity commitments, energy infrastructure, and profitability ramp-up at DayOne projects in Europe and Southeast Asia.
• Net debt, interest coverage, and deleveraging execution.