Why GDS Holdings shares soared 17% on Wednesday

GDS Holdings (GDS 17.14%) posted a pair of convincing beats in its latest quarterly earnings report, and investors were only too happy to reward the company for that performance. They bid up the price of its American depositary shares (ADS) sharply after news of the results made headlines on Wednesday, to the point where they ended the day more than 17% higher in price. This compared very well with the increase of 0.4% a S&P 500 index on Hump day.

A second quarter tops estimates

For the second quarter, GDS managed to increase its net income by 14% year-on-year to more than 2.83 billion yuan ($397 million). If the one-time revenue items from the same quarter in 2023 are excluded, that growth rate rises to nearly 18%.

There was also encouraging movement on the bottom line, where the data center operator’s net loss deepened only slightly. This amounted to nearly 232 million yuan ($33 million), compared with a deficit of 225 million yuan ($32 million) in the year-ago period. On a per ADS basis, the latest net loss figure was 1.30 yuan ($0.18).

Regardless of trajectory, both line items beat analysts’ average estimates. Forecasters following GDS shares expect the niche technology company to earn 2.79 billion yuan ($391 million) on the top line and post a much larger net loss per ADS of 1.82 yuan ( $0.26).

Selected guidance has been reaffirmed

GDS also reaffirmed its guidance for the full year 2024. It expects its total revenue to be 11.34 billion yuan to 11.76 billion yuan ($1.59 billion to 1.65 billion dollars), with adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) falling to 4.95 billion yuan to 5.15 billion yuan ($694 million to $722 million). It did not provide any guidance for net profit or loss.