Analyst Upgrade for GDS Holdings Reflects Increased AI Demand Fueled by DeepSeek and Other Chinese Platforms
GDS Holdings Limited Receives Strong Buy Upgrade
Analyst Upgrade Overview
On Thursday, analyst Frank G. Louthan from Raymond James raised the rating of GDS Holdings Limited (NASDAQ: GDS) from Outperform to Strong Buy. He has set a price target of $53 per share for the company, indicating a bullish outlook on its future performance.
Fourth-Quarter Performance Highlights
Recently, GDS Holdings reported their fourth-quarter results, showing a 9.1% year-over-year increase in net revenue. The reported figures reached CN¥2.69 billion, which is approximately $371 million. This growth can be attributed to the gradual expansion of their data center operations across various locations.
Financial Forecast and Guidance
GDS Holdings has expectations for a strong financial performance in the fiscal year 2025, forecasting total revenues between CN¥11.29 billion and CN¥11.59 billion. They also projected adjusted EBITDA to fall within the range of CN¥5.19 billion to CN¥5.39 billion.
Clarification on Market Reaction
Louthan explained that the market may have misinterpreted both the fourth-quarter results and the forward guidance provided by GDS. This confusion arose because the reported results did not include results from the subsidiary DayOne, which has been categorized as a discontinued operation following recent capital-raising activities in December 2024. Consensus estimates had factored in the combined results from both GDS and DayOne, leading to a perception that GDS missed its targets.
Key Developments and Insights
Further insights by Louthan suggest that the spin-off of the P-REIT has a positive long-term effect on the company’s overall valuation. Although it may reduce immediate revenue and EBITDA numbers, it is seen as beneficial for GDS’s stock performance.
Focus on AI Demand
Management at GDS is preparing for increased demand for artificial intelligence services. The company is strategically positioning itself to meet the needs of platforms like DeepSeek and other AI-driven businesses in China. Recently, GDS secured 150 MW in new contracts, and is now experiencing a faster billing cycle of 12 months, compared to the previous three-year cycle. This acceleration in billing suggests a more efficient revenue collection process.
Updated Estimates for Revenues and EBITDA
In light of recent developments, Louthan adjusted the 2025 revenue and EBITDA estimates for GDS Holdings. The new projected figures are CN¥11.45 billion in revenue and CN¥5.29 billion in EBITDA, a decrease from earlier expectations of CN¥14.08 billion and CN¥6.47 billion, respectively. For the year 2026, Louthan forecasts revenue to reach CN¥12.87 billion and EBITDA to be around CN¥5.84 billion, with these figures excluding contributions from DayOne.
Current Stock Performance
As of Thursday, GDS shares faced a decline, dropping by 6.48% to a trading value of $28.66. This decline comes in the wake of the fourth-quarter results and the outlook provided by the company.
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Note: GDS Holdings is a company engaged in data center development and operations, catering to the expanding demand for cloud services and digital solutions.
