VNET Group, Inc. Sponsored ADR (VNET) AI Stock Analysis

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VNET Group, Inc. Sponsored ADR

(NASDAQ:VNET)

Rating:50Neutral

Price Target:

$5.50

▼(-0.72%Downside)

VNET's overall stock score reflects a mixed outlook. Financial performance shows improvement but is offset by significant leverage and cash flow concerns. Technical indicators suggest bearish momentum, and valuation appears stretched with a high P/E ratio. The positive sentiment from the earnings call, highlighting growth and strong liquidity, partially mitigates these risks.

Positive Factors

Capacity Expansion

Management guided a much higher wholesale capacity delivery target of 400-450MW in FY25E, which is significantly higher compared to the previous year.

Financial Performance

VNET reported a 26% year-over-year increase in adjusted EBITDA, demonstrating strong financial performance.

Growth Outlook

Wholesale IDC revenue surged 87% year-over-year, driven by strong AI demand, indicating rapid expansion in the wholesale business.

Negative Factors

Market Valuation

VNET announced offering of US$430mn convertible senior notes to fund its wholesale capacity expansion.

Price Objective

The price objective was adjusted to US$11.3 from US$13.8 due to a recent sector de-rating related to an AI chip ban.

Sector Challenges

There is a slight reduction in the price objective due to adjustments for the recent AI chip ban impact.

VNET Group, Inc. Sponsored ADR (VNET) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$1.49B

Dividend YieldN/A

Average Volume (3M)5.84M

Price to Earnings (P/E)94.2

Beta (1Y)1.28

Revenue Growth13.93%

EPS GrowthN/A

CountryUS

Employees2,581

SectorTechnology

Sector Strength79

IndustryInformation Technology Services

Share Statistics

EPS (TTM)-0.02

Shares Outstanding263,895,600

10 Day Avg. Volume4,461,781

30 Day Avg. Volume5,844,827

Financial Highlights & Ratios

PEG Ratio0.07

Price to Book (P/B)0.21

Price to Sales (P/S)0.00

P/FCF Ratio-1.19

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$13.75

Price Target Upside148.19% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering6

VNET Group, Inc. Sponsored ADR Business Overview & Revenue Model

Company DescriptionVNET Group, Inc. Sponsored ADR (VNET) is a leading provider of carrier- and cloud-neutral internet data center services in China. The company offers a comprehensive range of data center solutions, including hosting and related services, managed network services, and cloud services. It serves various industries, such as internet companies, government agencies, financial institutions, and large enterprises, providing critical infrastructure for their IT and digital transformation needs.

How the Company Makes MoneyVNET Group, Inc. primarily generates revenue through its extensive portfolio of data center services. The company's core revenue streams include fees from colocation services, where clients pay for space, power, and cooling to house their servers and IT equipment. VNET also earns income from managed network services, offering secure and reliable connectivity solutions. Another significant revenue stream is its cloud services, where the company provides scalable and flexible cloud infrastructure and solutions. VNET's earnings are further bolstered by strategic partnerships with technology firms and service providers, enhancing its service offerings and expanding its market reach.

VNET Group, Inc. Sponsored ADR Earnings Call Summary

Earnings Call Date:May 28, 2025

(Q1-2025)

% Change Since: -8.28%|

Next Earnings Date:Aug 20, 2025

Earnings Call Sentiment Positive

The earnings call highlighted robust growth in wholesale IDC business and strong financial performance, driven by new orders and AI demand. Despite short-term impacts from the H20 chip embargo and high CapEx requirements, the company remains confident in sustained demand and future growth potential.

Q1-2025 Updates

Positive Updates

Strong Wholesale IDC Business Growth

Wholesale capacity in service grew 18.1% quarter over quarter to 573 megawatts, and wholesale revenues reached a new record high of RMB 673 million, representing an 86.5% year-over-year growth.

Record Utilization Rates

Wholesale capacity utilized grew 23.9% quarter over quarter to 437 megawatts, with a utilization rate increase of 3.6 percentage points to 76.2%.

Robust Financial Performance

Total net revenues increased by 18.3% year over year to RMB 2.25 billion, and adjusted EBITDA increased by 26.4% year over year to RMB 682 million.

Successful New Orders and AI Demand

Secured new wholesale and retail orders, including a 6-megawatt wholesale order and 4 megawatts in retail orders, driven by AI and intelligent applications.

Strong Liquidity and Financing

Issued $430 million of convertible senior notes and secured a RMB 500 million sustainability-linked loan.

ESG Achievements

Total energy usage from renewable sources increased fivefold, accounting for 18% of total resources, and achieved top ESG ratings.

Negative Updates

Impact of H20 Chip Embargo

Short-term impact on demand from hyperscale clients due to the U.S. embargo on H20 chips, although demand has since adjusted.

High CapEx Requirements

CapEx for 2025 is expected to be between RMB 10 billion and RMB 12 billion, a substantial increase to support planned capacity deliveries.

Company Guidance

During the first quarter of 2025, VNET Group, Inc. reported substantial growth across various metrics, setting a positive tone for the year. The wholesale IDC business achieved a notable 18.1% increase in capacity in service, reaching 573 megawatts, with a utilization rate improvement to 76.2%. Wholesale revenues soared by 86.5% year over year, totaling RMB 673 million, while adjusted EBITDA rose by 26.4% to RMB 682 million, boasting a margin of 30.4%. The retail IDC business also contributed positively, with a capacity utilization rate of 63.7% and an MRR per retail cabinet of RMB 8,898. Financially, VNET maintained robust liquidity with total cash and cash equivalents of RMB 5.79 billion and strengthened its financing capabilities through a $430 million convertible senior notes issuance and a RMB 500 million sustainability-linked loan. The company reiterated its full-year guidance, expecting total net revenues to range from RMB 9.1 billion to RMB 9.3 billion and adjusted EBITDA between RMB 2.7 billion and RMB 2.76 billion, alongside a capital expenditure plan of RMB 10 billion to RMB 12 billion. Additionally, VNET made notable progress in ESG initiatives, achieving a fivefold increase in renewable energy usage and ranking first among Chinese enterprises in the IT service industry in the S&P Global Sustainability Yearbook.

VNET Group, Inc. Sponsored ADR Financial Statement Overview

Summary

VNET shows signs of recovery with improved profitability and revenue growth in 2024. However, high leverage and negative free cash flow persist as major concerns, indicating potential liquidity issues and operational challenges.

Income Statement

Positive

VNET has shown a significant improvement in its financial performance for 2024, with a substantial increase in revenue and a return to net profitability. The gross profit margin improved, and the EBIT margin turned positive, indicating better cost management. However, the historical volatility in earnings, particularly the negative EBIT in 2023, suggests some ongoing operational challenges.

Balance Sheet

Neutral

The balance sheet shows a relatively high debt-to-equity ratio, indicating significant leverage. Although there is a positive trend in stockholders' equity, the company remains highly leveraged, which poses a risk. The equity ratio is stable, but the company's liability structure needs to be closely monitored.

Cash Flow

Negative

VNET's cash flow performance is concerning, with free cash flow remaining negative over the years. While there was an improvement in operating cash flow in 2023, the inability to generate positive free cash flow consistently indicates potential liquidity issues. The cash flow to net income ratios highlight inefficiencies in converting earnings into cash.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
8.26B	7.41B	7.07B	6.19B	4.83B
	Gross Profit
1.83B	1.29B	1.36B	1.44B	1.08B
	EBIT
669.44M	-1.97B	166.09M	-261.92M	198.22M
	EBITDA
2.22B	-366.56M	1.72B	1.40B	7.62M
	Net Income Common Stockholders
183.20M	-2.64B	-763.92M	500.10M	-2.69B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
1.49B	2.60B	2.66B	1.37B	3.00B
	Total Assets
32.36B	30.39B	26.95B	23.10B	19.37B
	Total Debt
18.09B	17.17B	14.76B	11.12B	8.25B
	Net Debt
16.60B	14.93B	12.10B	9.75B	5.54B
	Total Liabilities
25.44B	23.87B	19.97B	15.49B	12.48B
	Stockholders Equity
6.37B	6.01B	6.61B	7.24B	6.56B
Cash Flow		Free Cash Flow
-3.12B	-997.15M	-450.61M	-1.35B	-1.79B
	Operating Cash Flow
2.01B	2.06B	2.60B	1.39B	714.24M
	Investing Cash Flow
-4.39B	-3.91B	-3.56B	-3.77B	-3.89B
	Financing Cash Flow
-627.65M	3.94B	2.14B	967.58M	4.16B

VNET Group, Inc. Sponsored ADR Technical Analysis

Technical Analysis Sentiment

Negative

Last Price5.54

Price Trends

50DMA

6.33

Negative

100DMA

7.94

Negative

200DMA

5.73

Negative

Market Momentum

MACD

-0.28

Positive

RSI

42.35

Neutral

STOCH

20.57

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For VNET, the sentiment is Negative. The current price of 5.54 is below the 20-day moving average (MA) of 6.08, below the 50-day MA of 6.33, and below the 200-day MA of 5.73, indicating a bearish trend. The MACD of -0.28 indicates Positive momentum. The RSI at 42.35 is Neutral, neither overbought nor oversold. The STOCH value of 20.57 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for VNET.

VNET Group, Inc. Sponsored ADR Risk Analysis

VNET Group, Inc. Sponsored ADR disclosed 85 risk factors in its most recent earnings report. VNET Group, Inc. Sponsored ADR reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

VNET Group, Inc. Sponsored ADR Peers Comparison

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
NABL	71 Outperform	$1.47B	91.85	2.20%	―	7.98%	-40.59%
TDC	66 Neutral	$2.09B	15.70	130.19%	―	-6.53%	240.56%
ZETA	66 Neutral	$3.05B	―	-11.93%	―	40.36%	73.68%
Sector *	61 Neutral	$11.55B	10.41	-6.86%	2.93%	7.50%	-8.30%
DOCN	59 Neutral	$2.58B	27.54	-41.63%	―	13.21%	109.61%
VNET	50 Neutral	$1.49B	94.22	2.28%	―	13.93%	―

* Technology Sector Average

Performance Comparison

VNET

VNET Group, Inc. Sponsored ADR

5.54

3.26

142.98%

TDC

Teradata

22.27

-9.87

-30.71%

DOCN

DigitalOcean Holdings

30.07

-7.44

-19.83%

ZETA

Zeta Global Holdings Corp

13.17

-3.37

-20.37%

NABL

N-able

8.00

-6.02

-42.94%

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.