The decrease in value of GDS Holdings' stock by 16% occurred today.
The decrease in value of GDS Holdings' stock by 16% occurred today.
The announcement of higher capital expenditures than anticipated took a toll on GDS Holdings' (GDS 1.65%) stock on Tuesday. Despite reporting third-quarter earnings that surpassed expectations in terms of net income, investors appeared more focused on the upcoming costs. As a result, GDS's shares ended the day with a 16% decrease in value, while the S&P 500 index saw a 0.4% increase.
A somewhat improved third quarter
For the quarter, GDS was able to boost its revenue by approximately 18% compared to the same period the previous year, reaching 2.97 billion yuan ($410 million). The highly specialized tech company also significantly reduced its net loss, reporting a figure just short of $28 million, or $0.02 per share. The third-quarter 2023 deficit was substantially higher, amounting to nearly $60 million.
Although GDS fell short of the consensus analyst estimate for revenue ($413 million), its net loss was considerably less than the projected $0.19 per share.
A significant escalation in projected capex
GDS maintained its existing full-year 2024 revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) forecasts, with revenue expected to fall between $1.57 billion and $1.62 billion, and EBITDA anticipated to range from $684 million to $711 million. A bottom-line prediction was not provided.
However, the company substantially elevated its expectations for capital expenditures. The anticipated spending for the year now stands at $1.52 billion, representing a significant leap from the initial forecast of $898 million.
In light of the increased capital expenditures, investors might be cautious about further investing in GDS Holdings due to financial concerns. Despite GDS's impressive third-quarter financial performance, the substantial rise in projected spending could overshadow the positive revenue growth and net income improvement.