VNET Group: Solid Wholesale Execution Overshadowed By Balance Sheet Reality

VNET Group remains rated Neutral as the market shifts focus from event-driven catalysts to fundamentals amid uncertainty around the CATL transaction. Despite strong wholesale IDC demand and recurring revenue, higher capex, negative free cash flow, and rising leverage weigh on VNET’s valuation and sentiment. The CATL deal’s closure, expected Q4, is critical; delays or regulatory hurdles could exacerbate downside risk given VNET’s balance sheet pressures. Wholesale order momentum is robust, but lack of raised guidance and no immediate financial impact from CATL keep the stock in 'show-me' mode. VNET Group (VNET) shares sold off after the print despite reporting Q2 revenue that was ahead of consensus and management reaffirming the 2026 outlook. The wider-than-expected miss on earnings, a longer-than-expected move-in after the CATL