Hello, ladies and gentlemen. Thank you for standing by for the Second Quarter 2025 Earnings Conference Call for VNET Group, Inc. [Operator Instructions] Participants from our management include Mr. Ju Ma, Rotating President; Mr. Qiyu Wang, Chief Financial Officer; Ms. Xinyuan Liu, Head of Investor Relations of the company. Please note that today's conference call is being recorded. I will now turn the call over to the first speaker today, Ms. Xinyuan Liu. Please go ahead.

Thank you, operator. Hello, everyone, and welcome to our second quarter 2025 earnings conference call. Our earnings release was distributed earlier today, and you can find a copy on our IR site as well as on Newswire services. Please note that today's call will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. For detailed discussions of these risks and uncertainties, please refer to our latest annual report and other documents filed with the SEC. VNET does not undertake any obligations to update any forward-looking statements, except as required under applicable laws. Please also note that VNET's earnings press release and this conference call include the disclosure of unaudited GAAP and non-GAAP financial measures. VNET's earnings press release contains a reconciliation of the unaudited non-GAAP matters to the unaudited GAAP matters. A summary presentation, which we will refer to during this conference call, can be viewed and downloaded from our IR website at ir.vnet.com. Next, I'd like to alert you that we will be utilizing text-to-speech technology powered by Newlink.ai to deliver this quarter's prepared remarks by Mr. Ju Ma, our rotating President; and Mr. Qiyu Wang, our CFO. The management team will join the Q&A session in person. Additionally, this conference is being recorded. A webcast of this conference call will also be available on our IR website at ir.vnet.com. Now let's get started with today's presentation. Mr. Ma, please go ahead.

Good morning, and good evening, everyone. Thank you for joining our call today. I'll start with an overview of our major accomplishments during the second quarter of 2025. We delivered strong quarterly results, thanks to continued effective strategic execution. On the operational side, our wholesale IDC business maintained its significant growth momentum, supported by our customers' fast move in pace. As of June 30, 2025, our wholesale capacity in service grew by 17.5% quarter-over-quarter to 674 megawatts, an increase of around 101 megawatts. Wholesale capacity utilized by customers rose by 17% quarter-over-quarter to 511 megawatts, an increase of around 74 megawatts, while the utilization rate was stable at 75.9%, reflecting a fast-moving pace in our wholesale data centers. Our retail IDC business continued to progress smoothly, supported by growing AI-driven demand from customers. Both our high-quality wholesale and retail IDC services continue to attract customers from various industries in the second quarter. I'll dig into those details on the next slide. On the financial side, both our revenues and adjusted EBITDA maintained solid growth. Specifically, our total net revenues increased by 22.1% year-over-year to RMB 2.43 billion for the second quarter. Notably, wholesale revenues reached RMB 854 million for the quarter, representing impressive year-over-year growth of 112.5%, fueled by the rapid growth of our wholesale IDC business. Our adjusted EBITDA for the second quarter also increased by 27.7% year-over-year to RMB 732 million with an adjusted EBITDA margin of 30.1%, up 1.3 percentage points year-over-year. Moving on to our new order wins on Slide 5. In the second quarter, driven by growing demand from customers for intelligent deployment, we secured a combined capacity of around 4 megawatts in retail orders from customers in the IT services, Internet, AIoT and financial services sectors. These orders span multiple retail data centers in…

Good morning, and good evening, everyone. Before we start the detailed discussion of our second quarter performance, please note that unless otherwise stated, all the financials we present today are for the second quarter of 2025 and are in renminbi terms. Furthermore, unless otherwise specified, all the growth rates I'm reviewing are on a year-over-year basis. Let's turn to Slide 13. In the second quarter, we continued to pursue high-quality, high-margin business. Our total net revenues increased by 22.1% to RMB 2.43 billion, mainly driven by the rapid growth of our wholesale business. Our adjusted cash gross profit rose by 34.9% to RMB 1.06 billion, while our adjusted EBITDA also grew year-over-year by 27.7% to RMB 732.5 million. Let's look more closely at our top line. As you can see on Slide 14, in the second quarter, wholesale revenues, our key revenue growth driver, increased significantly by 112.5% to RMB 854.1 million, mainly attributable to sales at the N-OR Campus 01 and E-JS Campus 03. Retail revenues continue to account for the largest part of our total net revenues, reaching RMB 959 million for the second quarter. Our non-IDC business revenues were RMB 621 million for the second quarter. During the second quarter, we maintained solid margins, thanks to our continuous efforts to enhance overall efficiency. As shown on Slide 15, our adjusted cash gross margins improved to 43.6% from 39.5% in the same period last year. Our adjusted EBITDA margin rose to 30.1% compared with 28.8% in the same period last year. Moving on to liquidity. On Slide 16, we maintained robust and healthy liquidity, bolstered by a net operating cash inflow of RMB 366.6 million during the second quarter, bringing the net operating cash flow for the first half of the year to RMB 562.3 million. Our cash…

[Operator Instructions] Your first question comes from Tom Tang with Morgan Stanley.

And first of all, congratulations on very strong quarterly results, especially on the wholesale business. So my question is mainly about the future demand and orders. So we noticed that NVIDIA has regained its permission to ship their new chipsets to China again last month. So just wondering, based on our communication with our big customers, what is our current expectation of their future demand and the pattern of their order tendering? [Foreign Language]

[Foreign Language]

Thank you for your question. And now the market is relatively active. And according to the report of the third party institutions, we find that in the regions where the digital economy is relatively active, for example, in the Greater Beijing area and in the Yangtze River Delta, I think the AI demand is relatively strong and also the relation between supply and demand has improved a lot.

[Foreign Language]

And your question is also mentioned about the bidding and also the demand for the big client. Since you also have noticed that this year, our delivery plan is over 400 megawatts, it is relatively large. And also the new orders should be delivered in 6 months. So we will pay more attention to the demand released around September.

[Foreign Language]

So in addition to the 20-megawatt wholesale business, I think we are also paying a lot of attention to the potential demand, and we are also communicating for this potential demand. I think most of them are highly relevant to the AI.

Your next question comes from Edison Lee with Jefferies.

I have 2, right? Number one, can you update us on the build-out of wind power in Ulanqab and when that will actually come into effect and how that's going to impact the revenue and also the margin of the company? Number two, can you comment on your MSR on wholesale because it seems that your MSR or your MRR on the wholesale in the second quarter is actually up on a year-on-year basis. So maybe if you can explain a little bit what is driving that unit price, that will be great. [Foreign Language]

[Foreign Language]

I think now the wind power project in Ulanqab is well underway. I think by the end of this year and also in the beginning of next year, it will go to deliver power. But I think this is relatively a new trial for us, so we cannot expect impact on our P&L. However, I think it will mainly deliver positive impact on our IR. So I think the details on the statistics and the figures will be offered when it began to deliver power.

[Foreign Language]

And so for the second question, I think it has 2 factors. The first one is I think the wholesale price is relatively very stable. And you also mentioned that the improvement in MSR, I think it's mainly due to the seasonal effect factors because of the increase in the revenue from the electricity bills and also in this quarter, we have the one-off income.

Your next question comes from Daley Li with BofA Securities.

I have 2 questions here. The first one is regarding our gross margin. Our adjusted gross margin was quite a healthy growth and improvement. And for our GAAP level, gross margin, if we look at quarter-on-quarter, it seems dropped a little bit and what's the reason behind this? And how do you think the future normalized gross profit margin? Second question about the new financing channel, the REITs. Could you please update us on the progress of the private REITs and the C-REITs going forward? [Foreign Language]

[Foreign Language]

Thank you for your question. For the changes in the GP margin, I think it's affected by the timing of turning the [indiscernible] into [PPE] and also the depreciation. So there can be some seasonal factors that leads to the fluctuation. But if we exclude the -- if we only consider the cash GP margin, I think it's still varied on a healthy and a steady increase.

[Foreign Language]

And also for the REIT project, we have been actively promoting the REIT projects. We have the public and also the private REITs. And I think we have and also, as mentioned, this year through the REITs project, we have to have a recovery of RMB 2 billion.

Your next question comes from Timothy Zhao with Goldman Sachs.

Great. Congrats on the very strong results. Two questions here as well. First is regarding your guidance, pretty glad to see that you raised guidance actually 2 months ago. But after the very strong first half results, just wondering how management thinks about the second half outlook? So if my calculation is correct, I think towards the high end of your guidance, I think the second half growth implied only around single-digit growth. Just wondering how should we think about the second half outlook? Secondly is regarding the retail IDC business. As I see there is some revenue decline on this retail IDC revenue in the second quarter of this year versus a stronger first quarter. Just wondering what is the reason behind? [Foreign Language]

[Foreign Language]

Thank you for your question. As mentioned, in spite of the upgrading in the guidance, I think the guidance for the second half of this year is still relatively conservative. So our consideration is that we needed to watch -- we need to watch and see that if the utilization speed and the pace of our customers or clients will not be affected by the chips. And if our wholesale utilization business can maintain its speed, I think we can upgrade the guidance for the second half of the year.

[Foreign Language]

And your second question is relatively to the IDC revenue from -- for the retail business. Yes, there can be some slight decline, but I think it's still within the reasonable range. And I think the revenue for the retail IDC will maintain a relatively stable and even some increase.

Your next question comes from Andy Yu with DBS.

Congratulations on solid results. So I have a question regarding the second half outlook. Could management share some color on whether the rapid momentum of our client movement can be sustained? Also, do we expect that the impact of AI chip supply constraints could affect senior orders or customer movements in the second half of '25? Let me translate the question. [Foreign Language]

[Foreign Language]

So as for the outlook for the second half of this year. I think if we compare the second half with the first half of this year, I think, I am relatively optimistic about the second half because if we take into account the delivery of the -- delivery in the first half of this year, and we will also closely follow the rules of the new orders unleashed by our clients. And I think we will be very optimistic generally about the second half of this year. And also as for the move-in pace of our clients, I think according to the practice once the order has been confirmed, we usually have very fast move in pace.

[Foreign Language]

And also as for the supply of the chips of AI, we will closely follow the companies like [NVIDIA chips] and also the domestic chips. And I think the expectation will be very clear, very soon. As also according to our experiences of serving our clients or customers, I think once the order is confirmed, the move-in pace will be very fast. And also as for the wholesale business, we have also confirmed with the core clients that the orders at hand for rest of our clients will not be affected.

Your next question comes from Sara Wang with UBS.

Thank you for the opportunity to ask a question. And again, congratulations on the very solid results. I only have one question -- is that management just mentioned that there could be potential new tenders from the customers. Do we expect similar customers and similar workload going forward? Or there could be some change? [Foreign Language]

[Foreign Language]

So thank you for your question. I think our clients unleash their demand gradually. And from the demand side, I think in terms of the business, the demand for AI remain unchanged.

Your next question comes from [indiscernible] with CICC. We will just pause for a moment to see if we'll have [indiscernible] back in the queue. That does conclude our call and conference for today. Thank you for participating. You may now disconnect.