Why VNET is One of 2025’s Top Tech Stocks
In a market full of hype, the company’s steady climb shows why it just might be the real deal

- Chinese tech stocks are rebounding, led by AI and the rise of companies like DeepSeek.
- VNET is solidifying its market position with strong earnings and impressive growth in its high-margin wholesale data center business.
- VNET’s valuation remains attractive, making it compelling choice for investors looking to capitalize on China’s resurgence.
VNET Group (VNET), one of the stock market’s top performers, is known for cutting-edge AI-driven data center services. The company caters to a broad range of businesses in an increasingly digital world—from internet giants to multinational corporations.
VNET is set apart not just by its technology but also by its impressive growth trajectory. With a shift toward higher-margin wholesale internet data center (IDC) services and a focus on AI-related applications, the company is capitalizing on emerging opportunities. But is its valuation as enticing as its recent stock performance suggests?

Climbing to new heights in China’s tech sector
VNET operates “carrier-neutral” and “cloud-neutral” data centers, meaning its facilities enable businesses to connect to a wide range of internet service providers and cloud platforms without being tied to any specific one. This flexibility gives customers more options, improves reliability and reduces costs. By offering these services, the company supports a diverse range of businesses.
VNET, founded in 2008 and publicly listed on the Nasdaq in 2011, has built a substantial footprint across China. The company offers a range of services, including wholesale and retail IDC services, cloud services and virtual private network (VPNs).
An important part of VNET’s value comes from its ability to run high-performance, neutral data centers that meet growing demand for digital transformation, especially in AI and cloud computing. As more businesses turn to AI, the need for powerful computing resources has surged. The company has tapped into this demand, particularly with its wholesale internet data center (IDC) services, which saw an 86% year-over-year increase in revenue in the third quarter of 2024.
VNET’s ability to strengthen its financial position has been a key element of its positive momentum. The company’s focus on high-margin wholesale internet data center (IDC) services, especially those driven by AI demand, has led to faster growth. Its strategic investments in infrastructure, particularly in expanding AI capacity and developing green computing, are strengthening its foundation for long-term profitability.
Of late, VNET’s stock performance has mirrored the broader recovery in Chinese tech. The company’s shares are up more than 100% year to date, buoyed by growing confidence in Chinese tech stocks, as well as the industry’s shift toward more sustainable and profitable ventures. The emergence of companies like privately held DeepSeek, a significant force in AI, has brought renewed attention to China’s tech sector. This surge in AI-driven demand has provided a boost to companies like VNET, whose infrastructure supports AI-heavy workloads.

Growth in earnings bolsters near-term outlook
In its most recent earnings report for the third quarter of 2024, VNET posted impressive revenue growth of 12.4%, bringing total net revenue to $302 million, up from $274 million in the same period last year. A critical driverwas the strong performance of the company’s wholesale Internet Data Center (IDC) business, which saw a remarkable 86% increase in revenue, reaching about $75 million.
This was a standout achievement for VNET, highlighting the growing demand for enterprise data centers, driven by the rising adoption of AI applications. Adjusted EBITDA for the third quarter came in at $85 million, marking a solid 17% year-over-year increase. This growth reflects the company’s ability to manage operational costs more efficiently while capitalizing on high-margin revenue streams, especially from its wholesale IDC business.
Another positive from the latest earnings report was the company’s return to profitability. For the first time in over a year, VNET reported positive net income of $47 million, compared to a net loss of $5.5 million during the same quarter last year. This improvement was driven by impressive revenue growth and effective cost control. Additionally, its liquidity position remained strong, with nearly $300 million in cash, cash equivalents and short-term investments, giving the company plenty of financial flexibility to continue reinvesting in its business.
Looking at the earnings trends over the last two quarters, VNET has shown considerable progress in scaling its wholesale internet data center (IDC) business. Both capacity in service and the amount of capacity customers use have increased substantially. As of the third quarter of 2024, the wholesale IDC business had a capacity in service of 358 megawatts, a 26-megawatt increase from the previous quarter, and a utilization rate of 78%, up from 75.9% in the second quarter. This uptick in utilization reflects strong demand, particularly from AI-driven applications.
VNET’s strategic focus on high-margin wholesale business is proving successful, driven by its ability to meet the increasing demand for high-performance computing and AI-related services. In contrast, the retail internet data center (IDC) business has shown signs of stagnation, with flat capacity and a slight dip in utilization rates. While the retail segment continues to account for a significant portion of VNET’s revenue, the company’s pivot toward its wholesale business is helping to offset the slowdown in retailing, positioning it for sustained growth.

Reasonable valuation strengthens the case for investing
VNET’s valuation presents an intriguing opportunity for investors, especially when you consider its position in Chinese tech. The company is trading with a forward non-GAAP price-to-earnings (P/E) ratio ratio of 76, which seems high compared to the sector median of 22. However, this ratio should be understood in context because VNET’s strong growth potential in AI and data center services likely justifies the premium. Additionally, the high P/E ratio reflects broader optimism in China, fueled in part by the rise of innovative technologies like DeepSeek.
When we dive deeper into VNET’s valuation, the numbers tell a story. The company’s enterprise value-to-sales (EV/S) ratio stands at 4.9, which is above the sector median of 3 but reflects the company’s high growth potential, especially in the rapidly expanding wholesale IDC market. Meanwhile, its price-to-sales (P/S) ratio of 2.9 is just a touch above the sector median of 2.8, signaling its valuation is reasonable for a company on the cutting edge of AI and digital infrastructure in China. While it may not be the cheapest stock in the sector, it’s also far from the most expensive, making its valuation compelling for long-term growth investors.
The positive sentiment of analysts covering VNET supports that judgment. Of the 13 analysts rating the stock, 12 have assigned a “buy” or “overweight” recommendation. The average price target of $16 per share suggests attractive upside potential from the current trading price of around $12.50/share. This strong analyst consensus reflects confidence in the company’s continued growth prospects.

Investment takeaways
VNET’s prospects for growth are closely tied to the surging demand for AI infrastructure, its strategic shift toward higher-margin services and the recovery of Chinese technology. With a strong market position and ongoing investment in cutting-edge data center technology, the company is well-positioned to seize both current and emerging opportunities in tech and data infrastructure.
If the Chinese technology market continues to strengthen, VNET’s leadership in data centers could drive further upside in its shares. While its P/E ratio may seem high, the company’s competitive EV/S and P/S ratios, paired with robust growth prospects and a positive analyst outlook, suggest the stock remains an attractive investment for those looking to tap into the expanding Chinese tech market. And, unlike some other tech stocks, VNET offers this opportunity at a reasonable price tag.
Andrew Prochnow, Luckbox analyst-at-large, has more than 15 years of experience trading the global financial markets, including 10 years as a professional options trader.