VNET Group (Nasdaq: VNET) reported Q2 2026 net revenue of RMB2.78 billion, up 14.2% year over year, while diluted loss per ADS widened to RMB0.54 from RMB0.06. Wholesale IDC growth and lower operating expenses lifted adjusted EBITDA, but capacity-related depreciation compressed GAAP gross margin and operating cash flow declined.
Core Financial Results
Revenue growth was concentrated in wholesale IDC services. However, depreciation associated with VNET’s rapid capacity expansion increased faster than revenue, causing GAAP gross profit to decline despite the higher top line.
Lower operating expenses offset that pressure further down the income statement, supporting higher operating profit and adjusted EBITDA. The attributable net loss still widened, mainly because financial instruments produced a fair-value loss instead of the prior-year gain.
| Metric | Q2 2026 | Q2 2025 | Year-over-year change |
|---|---|---|---|
| Net revenue | RMB2.78 billion | RMB2.43 billion | +14.2% |
| Gross profit | RMB505.2 million | RMB547.7 million | -7.8% |
| GAAP gross margin | 18.2% | 22.5% | -4.3 percentage points |
| Adjusted cash gross profit / margin | RMB1.16 billion / 41.8% | RMB1.06 billion / 43.6% | Profit +9.4%; margin -1.8 points |
| Operating profit | RMB229.3 million | RMB173.0 million | Approximately +32.5% |
| Net loss attributable to VNET | RMB135.6 million | RMB11.9 million | Loss widened by RMB123.7 million |
| Diluted loss per ADS | RMB0.54 | RMB0.06 | Loss widened |
| Adjusted EBITDA / margin | RMB918.3 million / 33.0% | RMB732.5 million / 30.1% | EBITDA +25.4%; margin +2.9 points |
| Adjusted net income (loss) | RMB7.4 million income | RMB53.6 million loss | Returned to adjusted profit |
| Operating cash flow | RMB218.1 million | RMB366.6 million | Approximately -40.5% |
The non-GAAP figures exclude items including depreciation and amortization, share-based compensation, and changes in the fair value of financial instruments, depending on the measure.
Business and Segment Performance
Wholesale IDC remained VNET’s primary growth engine, increasing its share of total revenue to 39.8% and surpassing retail revenue. Retail IDC also grew, while the non-IDC business was nearly flat.
| Business | Q2 2026 revenue | Q2 2025 revenue | Year-over-year change |
|---|---|---|---|
| Total IDC | RMB2.15 billion | RMB1.81 billion | +18.6% |
| Wholesale IDC | RMB1.10 billion | RMB854.1 million | +29.3% |
| Retail IDC | RMB1.05 billion | RMB958.7 million | +9.1% |
| Non-IDC | RMB628.4 million | RMB621.4 million | +1.1% |
Wholesale capacity in service reached 1,007MW, up 49.4% from 674MW a year earlier. Customer-utilized capacity increased to 744MW from 511MW, but overall utilization slipped to 73.9% from 75.9% because capacity was added faster than customer utilization. VNET also had 585MW under construction and 970MW of committed capacity, equal to a 96.3% commitment rate for capacity in service.
Retail capacity in service declined to 50,081 cabinets from 52,131, and utilized cabinets fell to 32,314 from 33,292. Nevertheless, retail utilization edged up to 64.5%, while monthly recurring revenue per cabinet rose 9.9% to RMB9,799. The higher revenue per cabinet helped retail revenue grow despite the smaller utilized cabinet base.
Capacity Expansion Pressures Gross Margin and Cash Conversion
Depreciation and amortization added back in the adjusted cash gross profit reconciliation increased approximately 27.8% to RMB656.5 million. This was faster than revenue growth and drove the decline in GAAP gross profit and gross margin. Adjusted cash gross margin also fell to 41.8% from 43.6%, showing that the margin pressure was not entirely a non-cash depreciation effect.
VNET offset this pressure through lower operating expenses. Adjusted operating expenses declined approximately 25.9% to RMB271.0 million, falling to 9.8% of revenue from 15.0%. That operating leverage explains why adjusted EBITDA margin expanded even as both GAAP and adjusted cash gross margins contracted.
Cash conversion was less favorable. Operating cash flow declined to RMB218.1 million, while purchases of property and equipment totaled RMB1.51 billion. At quarter-end, cash, restricted cash and short-term investments totaled RMB7.21 billion, compared with RMB4.18 billion of short-term debt and RMB19.24 billion of long-term debt. VNET obtained RMB3.77 billion of new debt, refinancing, equity and other financing during the quarter.
Below the operating line, the company recorded a RMB47.1 million fair-value loss on financial instruments, compared with a RMB70.4 million gain a year earlier. This RMB117.5 million adverse swing was the primary reason cited for the wider attributable net loss, even though adjusted net income turned positive.
Full-Year Guidance
VNET reaffirmed all previously issued full-year 2026 ranges. The outlook calls for adjusted EBITDA to grow faster than revenue at the midpoint, alongside substantial spending on capacity expansion.
| Metric | Latest 2026 guidance | Previous guidance | Change |
|---|---|---|---|
| Net revenue | RMB11.5 billion-RMB11.8 billion | RMB11.5 billion-RMB11.8 billion | Reaffirmed |
| Revenue growth | 15.6%-18.6% | 15.6%-18.6% | Reaffirmed |
| Adjusted EBITDA | RMB3.55 billion-RMB3.75 billion | RMB3.55 billion-RMB3.75 billion | Reaffirmed |
| Adjusted EBITDA growth | 19.2%-25.9% | 19.2%-25.9% | Reaffirmed |
| Capital expenditure | RMB10 billion-RMB12 billion | RMB10 billion-RMB12 billion | Reaffirmed |
Management Commentary
Management connected wholesale growth to new orders and capacity deliveries. VNET secured a 345MW wholesale order from a leading cloud service provider during Q2, bringing year-to-date wholesale order wins to 862MW.
The company also secured approximately 1.4GW of land-bank capacity during the quarter, including 908MW in mainland China and 478MW overseas, taking total capacity above 4GW. Management said the order backlog, customer commitments and delivery schedule provided visibility into future wholesale growth.
On August 18, 2026, VNET signed a strategic cooperation agreement with CATL covering integrated computing and energy infrastructure. The announcement described the planned technology and infrastructure collaboration but did not quantify its expected revenue, costs or capital requirements.
Recent Insider Transactions
The supplied six-month insider data reported 126,540 shares purchased and 69,072 shares sold across four transactions, for net purchases of 57,468 shares. Only two individual records included a clearly identified transaction direction and value; no conclusion about insiders’ outlook can be drawn from these sales alone.
| Date | Insider | Role | Action | Reported price | Reported value |
|---|---|---|---|---|---|
| June 1, 2026 | Sean Shao | Director | Sale | US$10.60 | US$636,000 |
| May 18, 2026 | Zhihua Zhang | Officer | Sale | US$10.52 | US$95,437 |
Risks Investors Should Monitor
- Expansion-related margin pressure: Higher depreciation caused GAAP gross margin to fall, while the decline in adjusted cash gross margin indicates additional pressure on cash-based gross profitability.
- Capital intensity and financing requirements: Quarterly operating cash flow was well below property and equipment purchases, and full-year capital expenditure guidance remains RMB10 billion to RMB12 billion. Continued expansion therefore requires close attention to debt, refinancing and other funding sources.
- Utilization during the ramp-up period: Wholesale capacity increased faster than utilized capacity, reducing overall utilization. Revenue growth depends on converting committed and newly delivered capacity into customer utilization.
- Below-the-line earnings volatility: Changes in the fair value of financial instruments materially widened the reported loss, while interest expense rose to RMB204.5 million from RMB157.5 million. These items can cause GAAP net results to diverge from operating performance.
Summary
VNET’s Q2 2026 growth was led by wholesale IDC revenue and a rapid increase in capacity, while lower operating expenses supported higher adjusted EBITDA and a wider EBITDA margin. The trade-off was weaker gross margins, lower operating cash flow and continued reliance on external financing for expansion. Future results will depend on converting committed capacity into utilization, managing capital spending and financing costs, and stabilizing cash-based gross profitability.
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