Why GDS Holdings Stock Plummeted 16% Today

News of higher capital expenditures than previously expected put the hurt on GDS HoldingsĀ (GDS -16.22%) stock on Tuesday. The Chinese data center specialist reported third-quarter earnings that beat on the bottom line, but investors were clearly more concerned with those looming expenses. The company’s shares closed the day 16% down in value, in contrast to the S&P 500 index’s 0.4% gain.

A mixed third frame

For the quarter, GDS managed to lift its revenue nearly 18% higher year over year to 2.97 billion yuan ($410 million). The highly specialized tech company also narrowed its net loss considerably; this came in just shy of $28 million, or $0.02 per share. The third-quarter 2023 deficit was nearly $60 million.

Although GDS didn’t quite reach the consensus analyst estimate of $413 million for revenue, its net loss was far narrower than the average $0.19 per share forecast.

A sharp increase in anticipated capex

GDS maintained its existing full-year 2024 guidance for both revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). These stand at $1.57 billion to $1.62 billion for revenue and $684 million to $711 million for EBITDA. Bottom-line guidance was not provided.

However, the company drastically increased its outlook for capital expenditures. This is now anticipated to reach $1.52 billion for the year, quite the leap from the previous estimate of $898 million.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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