JD 2Q26 First Take: results were steady, if subdued. Revenue and profit only slightly beat Bloomberg consensus and lagged some bulge-bracket estimates. As a result, the market reaction was muted.

In detail. Highlights follow.

1) Total revenue was approx. 3.46bn, down 2.9% YoY, a touch better than Bloomberg cons. of -4.1%.Growth continued to deteriorate, but with 2Q retail sales at the weakest level since 2022, the market was prepared.

Adj. OP came in at 5.48bn, marginally above Bloomberg cons.YoY, this was a sharp improvement vs. last year when profits were largely wiped out by the food-delivery price war.

2) In core Retail (Mall), revenue fell 4.7% YoY. Segment profit was ~13.5bn (-3.3% YoY), with OPM up 10bps.

Two reads. First, JD’s self-help on margins appears largely played out, with no further major upside surprise on OPM. Second, despite multi-year low revenue growth and fading scale benefits, margins still trended up.

3) By category, electronics/appliances performed better than expected, down ~12% YoY vs. -8% last quarter. The further slowdown was modest.

In contrast, general merchandise growth and ad revenue growth decelerated more, each by ~10ppts. While within expectations, this suggests JD may be hitting a ceiling in using these two lines to offset electronics weakness and lift overall margins.

4) On shareholder returns, the company spent approx. $1bn on buybacks in 1H, a slower pace than last year. Annualized, this equals ~5% of the current market cap.

As JD does not need heavy AI capex, FCF exceeded 30bn this quarter. Against this backdrop, the lighter buyback may disappoint some investors.$JD.com(JD.US) $JD-SW(09618.HK)