With the business potentially at an important milestone, we thought we'd take a closer look at GDS Holdings Limited's (NASDAQ:GDS) future prospects. GDS Holdings Limited, together with its subsidiaries, develops and operates data centers in the People's Republic of China. On 31 December 2024, the US$6.9b market-cap company posted a loss of CN¥777m for its most recent financial year. As path to profitability is the topic on GDS Holdings' investors mind, we've decided to gauge market sentiment. In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

View our latest analysis for GDS Holdings

GDS Holdings is bordering on breakeven, according to the 18 American IT analysts. They anticipate the company to incur a final loss in 2025, before generating positive profits of CN¥108m in 2026. Therefore, the company is expected to breakeven just over a year from today. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 68%, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Given this is a high-level overview, we won’t go into details of GDS Holdings' upcoming projects, however, take into account that typically a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

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One thing we would like to bring into light with GDS Holdings is its debt-to-equity ratio of 147%. Typically, debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on GDS Holdings, so if you are interested in understanding the company at a deeper level, take a look at GDS Holdings' company page on Simply Wall St. We've also compiled a list of relevant factors you should further examine:

1. Valuation: What is GDS Holdings worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether GDS Holdings is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on GDS Holdings’s board and the CEO’s background.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.