1Q26 Preview: Expect Beat, Guidance Intact + Strong Demand

Research evidence excerpt

1Q26 Preview: Expect Beat, Guidance Intact + Strong Demand

, its supply will be key to support China's AI growth. If there is any relaxation of US

export control of AI chips or WFE, it will be a bonus for China's IDC growth. Chart 1 - Quarterly Capex to Sales Ratio: BAT

vs AGM

Chinese CSPs capex to sales ratio at 15% vs 30%+ in the US. Our updated forecast implies

2026 Chinese CSPs' capex of ~US$62bn (BABA, Tencent, Bytedance), vs US$523bn at US

peers (AMZN, GOOG and MSFT). The implied 2026 Chinese CSPs' capex to rev at ~15% is

still much lower than that of the US at ~31%. The much lower capex density reflects China's

higher capex discipline, less FOMO pressure, US chip restrictions and limited access to the

global capital markets. However, as inference demand has been rising sharply and local chips

become more available, China's AI infra investment will likely rise significantly. Given little

electrical power constraint, China will likely deploy more electrical power to make up for .

computing power disadvantage. Source: Company, Jefferies

Expect VNET to beat in its upcoming 1Q26 results on May 26. We expect VNET to deliver Table 1 - VNET 1Q26 Preview Summary

24%/43% rev/EBITDA growth for 1Q26, and announce new contracts wins (but no guidance

upgrade yet). Our 2026E rev/EBITDA are 2.0%/4.3% above cons, and higher than the top end of

its guidance. We believe VNET is well positioned to benefit from the upcycle of China AI capex,

given its substantial power reserves in Ulanqab (Inner Mongolia) and Hebei. Meanwhile, as

AI adoption broadens beyond hyperscalers into enterprises and AI-native companies, VNET’s

retail IDC business could also provide an additional upside lever. . Source: Company, Visible Alpha, Jefferies

Edison Lee, CFA * | Equity Analyst