Goldman Sachs recently issued a research report adding five companies, including VNET Group (VNET.US), to its Asia-Pacific "Strong Buy" list, making VNET Group the only IDC company selected for this designation. Goldman Sachs analysts indicated that VNET Group is transitioning from a traditional retail IDC operator to a high-growth wholesale IDC operator, benefiting from intensifying AI investment. The company is expected to enter a phase of accelerated revenue and EBITDA growth in the coming years, providing investors with a compelling investment opportunity.
As China's leading third-party neutral data center operator, VNET Group is expected to derive approximately 75% of its 2025 revenue from IDC business, with the remaining 25% coming from cloud computing and value-added services. Goldman Sachs forecasts that during the 2024-2027 period, VNET Group's wholesale IDC business revenue and EBITDA will achieve a compound annual growth rate of 52%-55%. Meanwhile, the company's overall EBITDA margin is projected to improve from 29.4% in 2024 to 33.3% in 2027.
Regarding market concerns about chip supply issues, Goldman Sachs believes that Chinese cloud service providers have increasingly adopted multi-chip solutions, utilizing domestic GPUs for AI inference. Goldman Sachs has accordingly raised its capital expenditure forecasts for Chinese cloud service providers. The report also noted that if Nvidia's China-specific chips based on the Blackwell architecture receive approval, VNET Group's new order volume in 2026 could be even stronger.
Furthermore, Goldman Sachs analysts expect that benefiting from robust AI demand growth and reduced dependence on foreign chips, combined with VNET Group's rapid delivery capabilities and strong track record in serving AI hyperscale clients, the company's new order volume may increase significantly by the end of 2025 or early 2026. This would provide stronger support for capital expenditure and EBITDA prospects in 2026 and beyond.
From a valuation perspective, VNET Group's current stock price corresponds to approximately 10x 12-month forward EV/EBITDA, while Goldman Sachs forecasts a 23% EBITDA compound annual growth rate for 2024-2027. As new orders gradually materialize and the wholesale IDC business continues to increase its contribution to revenue and EBITDA, VNET Group has room for further valuation recovery. Based on 12x 2026 forward EV/EBITDA, Goldman Sachs has set a 12-month target price of $13 for VNET Group.