Bank of America: VNET wholesale business expected to keep growing in third quarter as chip supply slows customer move-ins

What is supporting third-quarter growth?

BofA expects VNET's third-quarter 2026 revenue to be 2.91 billion yuan, up 13% year on year and 5% quarter on quarter; adjusted EBITDA is expected to be 927 million yuan, up 22% year on year and 1% quarter on quarter.
Growth is expected to come mainly from the wholesale data center business: revenue is forecast at 1.23 billion yuan, up 29% year on year and 11% quarter on quarter, accounting for 42% of total revenue, compared with 37% a year earlier. Retail data center revenue is forecast at 1.05 billion yuan, up 5% year on year and broadly flat quarter on quarter; non-data-center revenue is expected to be 637 million yuan, broadly stable year on year.
BofA expects the third-quarter adjusted EBITDA margin to be 31.8%, up 2.5 percentage points year on year but down 1.2 percentage points from 33.0% in the second quarter.

BofA believes China's AI chip supply is improving more slowly than expected and forecasts that the pace of wholesale customer move-ins in the third quarter will be similar to that in the second: newly utilized wholesale capacity is expected to be 58 megawatts, compared with 57 megawatts in the second quarter.
The bank expects third-quarter capacity utilization to fall from 73.9% at the end of the second quarter and has therefore lowered its adjusted EBITDA forecasts for 2026 through 2027 by about 1%.

Data from the Ulanqab Municipal Development and Reform Commission show that local data center electricity consumption rose 77% year on year in the third quarter of 2026, indicating that capacity expansion remains strong.
But based on electricity consumption, BofA estimates that newly utilized local data center capacity in the third quarter was 142 megawatts, below the second quarter's 229 megawatts. The capacity figure is an estimate based on monthly electricity consumption; the actual value is affected by temperature.

BofA cut its price target from 13.2 dollars to 6.5 dollars, mainly because market discussion about the sustainability of AI capital spending drove sector valuations lower. The bank reduced the forward 12-month EV/EBITDA multiple used for its target from 12 times to 9 times.
The 9-times valuation is 30% below the average for Chinese data center peers, which BofA attributes to VNET's lower share of revenue from wholesale data centers. The bank maintains its Buy rating based on the expansion of the wholesale business and potential business synergies with CATL.