Here's the story for data center operator GDS Holdings (GDS) right now: business is good, but it's getting more expensive to run. The company reported its fourth-quarter 2025 results, showing revenue growth powered by the ongoing AI boom, while profits got pinched by the cost of keeping all those servers humming.

Net revenue climbed 8.6% from a year ago to 2.92 billion Chinese yuan. In dollar terms, that's $417.8 million, which just barely edged past the analyst consensus of $417.7 million. So, the top line is moving in the right direction.

The catch is on the bottom line. Adjusted gross profit did increase by 5.8% to 1.48 billion yuan ($211.3 million), but the margin—the percentage of revenue left as profit—slipped to 50.6% from 51.9% a year earlier. The company pointed directly at "elevated utility expenses" as the culprit. Adjusted EBITDA, another measure of profitability, followed a similar path: it rose 5.2% to 1.37 billion yuan, but its margin also narrowed. It seems the wave of AI demand is lifting sales, but the rising tide of electricity bills is soaking some of the gains.

Earnings per American depositary share came in at 2.47 yuan (35 cents), a significant drop from 22.51 yuan in the year-ago quarter. The company reported a loss in U.S. dollar terms that was wider than the penny loss analysts were expecting. On the balance sheet side, the company ended the year with a solid war chest of 14.3 billion yuan ($2.05 billion) in cash and equivalents.

The Physical Footprint Tells a Growth Story

If you look at the physical metrics, the demand story becomes clearer. The total area of data center space that customers have committed to or pre-committed to grew 6.4% year-over-year to over 670,000 square meters. More importantly, the space actually being used by customers jumped 11.4% to over 504,000 square meters. The utilization rate for active data centers improved to 75.5% from 73.8%. So, they're filling up the space they have.

Interestingly, the area currently under construction dropped significantly, from over 102,000 square meters a year ago to about 74,000 square meters. But for the projects they are building, the pre-commitment rate—how much space is already spoken for—rose to 66.1%. This suggests a more disciplined approach: building less speculative space and focusing on projects with clearer customer demand.

Chief Financial Officer Dan Newman highlighted the company's efforts to keep its finances flexible. "Recently, we raised $685 million through sale of DayOne shares and a private placement of convertible preferred shares, further solidifying our financial position," Newman said. He also noted the company completed asset monetization deals in 2025. "We are well prepared in terms of funding capabilities for data center capacity expansion to address the compelling new opportunities in our core business," he added.

A Cautious Look Ahead

For the full 2026 fiscal year, GDS provided an outlook that signals growth but with a note of caution. The company expects total revenue between 12.40 billion and 12.90 billion yuan, with adjusted EBITDA forecast between 5.75 billion and 6.00 billion yuan. Capital expenditures are projected to be a hefty 9.0 billion yuan as they invest in new capacity.

When you convert that revenue guidance to U.S. dollars, it translates to a range of $1.749 billion to $1.819 billion. That's just below the consensus estimate among analysts, which was around $1.84 billion. So, while the company is guiding for growth, it's setting expectations slightly under what the market was hoping for.

The optimism from the top, however, is squarely focused on artificial intelligence. Chairman and CEO William Huang called 2025 the company's "strongest year for bookings and customer move-ins in the past five years," and he directly credited rising AI demand.

"We strongly believe that demand will further accelerate during the AI era," Huang said. "Heading into 2026, we remain committed to disciplined and sustainable growth, viewing AI as a transformative catalyst for our long-term success."

In short, GDS is riding the AI wave and seeing real demand, which is filling up its data centers. The challenge is that the power needed for all that AI computation isn't free, and those costs are currently growing faster than revenue, putting a squeeze on margins. The company is betting big—and raising capital—that the long-term AI opportunity will outweigh the near-term utility bill sting.