JD.com Q4 conference call: Delivery investment will be lower than last year, and the usage of the Yanxi large model has surged a hundredfold

On March 5th, JD Group announced its fourth quarter and full-year results for 2025. Facing high base pressure in the electronics and home appliances category, the company's annual revenue grew by 13% year-on-year to RMB 1.3 trillion, with the core retail business profit margin continuing to improve, and comprehensive product and platform marketing service revenue becoming a key support. Management clarified that in 2026, the focus will be on expanding the daily necessities category, increasing advertising services, and applying AI technology to build a diversified growth engine. The financial report shows that, benefiting from the strong momentum of comprehensive products and third-party platform marketing business, the company effectively hedged against the cyclical impact of the electronics category. JD Retail's annual operating profit margin expanded by 62 basis points to 4.6%, achieving steady growth for several consecutive years. Group CEO Xu Ran stated in a conference call that the fourth quarter performance met expectations, and the overall performance for the year was robust. She stated: “We have successfully built a diversified category portfolio, providing multi-engine drive for the business.” Regarding the progress of new businesses, Xu Ran revealed that JD's food delivery business has maintained healthy growth in scale while losses have narrowed for four consecutive quarters, with total investment in the fourth quarter of 2025 reduced by nearly 20% quarter-on-quarter. She expects that in 2026, the investment scale in the food delivery business will decrease compared to the previous year, while operational efficiency will continue to optimize. The deep implementation of AI technology is another highlight of this financial report. JD's self-developed large language model "Yanxi" has supported over 1,000 business application scenarios, with the Token call volume in 2025 surging nearly 100 times year-on-year. The annual active users of the AI shopping assistant exceeded 150 million, with a user penetration rate of over 20%, driving billions in GMV. Xu Ran stated that AI is reshaping the entire chain of search, recommendation, and logistics automation. She stated: “We expect the user scale of AI shopping assistants to double in 2026.” In terms of capital returns, JD announced a total cash dividend of approximately $1.4 billion for the year 2025, equivalent to $0.5 per share; the total repurchase for the year accounted for about 6.3% of the total share capital, costing approximately $3 billion, with all repurchased shares having been canceled. Group CFO Shan Su added that the annual free cash flow was RMB 6 billion, with total cash and short-term investments reaching RMB 225 billion at the end of the period, indicating a solid financial position. Looking towards 2026, JD's management remains confident in achieving sustainable profit growth. The company will continue to deepen investments around supply chain capabilities, AI technology, and new business layouts to consolidate core barriers and create long-term value for shareholders. Electronics Category Under Pressure, Daily Necessities Supermarket Supports Annual Growth In 2025, JD's product revenue grew by 10% for the year, but the fourth quarter saw a decline of 3% quarter-on-quarter, mainly dragged down by the high base of the electronics and home appliances category. The growth rate of electronics and home appliances for the year was about 7%, significantly weaker than the overall level, facing phase pressure in the fourth quarter. In contrast, the daily necessities category (covering supermarkets, fashion, and health) achieved an annual growth rate of 15%, becoming the core engine driving retail growth. Management stated in the conference call that supermarkets, fashion, and health categories all achieved strong growth, and there is still ample user penetration space in related categories. ** Looking ahead to 2026, management expects that due to the continuous rise in storage chip costs, the prices of mobile phones and digital products will be adjusted upward overall, which will somewhat offset the impact of declining sales. However, overall, the electronic category will still be under pressure in the first half of the year due to high base effects, with growth expected to rebound significantly in the second half. The company stated that it will maintain market share and further strengthen its competitive advantage through supply chain capabilities and offline channel layout. Retail profit margins steadily rising, advertising business becomes a new source of profit JD Retail's adjusted net profit for the entire year of 2025 is expected to grow by 25% year-on-year, with the adjusted operating profit margin increasing by 62 basis points year-on-year to 4.6%, continuing to rise from 2.7% in 2019. The operating profit margin in the fourth quarter remained at 3.2%, slightly under pressure quarter-on-quarter, mainly due to the company's proactive increase in subsidies for electronic categories and investments in research and development and employee compensation. Management pointed out that the improvement in retail profit margins is mainly attributed to three driving forces: the rapid growth of high-margin businesses such as advertising, structural improvements in categories such as supermarkets, and continuous enhancements in operational efficiency. Among them, platform and marketing service revenue grew by 15% year-on-year in the fourth quarter and 19% for the entire year, with advertising revenue achieving double-digit growth in every quarter. Management stated that in 2026, platform and marketing service revenue will continue to maintain rapid growth momentum, contributing to both revenue and profit margin increases. Delivery business losses narrowing quarter by quarter, differentiated path becoming clearer JD's delivery service achieved a continuous improvement in narrowing quarterly losses since its launch in 2025, with fourth-quarter losses reduced by about 20% compared to the previous quarter. Management stated that the overall investment scale in delivery is expected to be lower than the peak level of 2025, but the final pace will depend on market competition dynamics. In terms of differentiated strategy, management emphasized three core advantages: first, adhering to a quality delivery positioning, relying on full-time couriers to enhance service experience; second, continuously optimizing the subsidy structure, implementing differentiated subsidies for different users and regions; third, delivery efficiency will continue to improve with healthy growth in order volume. Additionally, the instant retail business "JD Hourly Delivery" has officially opened over 50 stores as of the end of February, with management positioning it as an innovative model that is deeply coordinated with the delivery business and highly differentiated. Management also stated that the delivery business has already contributed significant user growth and increased shopping frequency to JD's core retail in 2025, and this synergy effect will be further released in 2026. AI fully penetrating the business chain, autonomous logistics expanding overseas Management has listed AI as one of the core strategic directions for 2026. It was introduced that JD's self-developed large model "Yanxi" currently supports over 1,000 actual business scenarios, covering areas such as customer service, procurement, and merchant services; the total token usage of AI in 2025 is expected to grow nearly 100 times compared to 2024. The annual active users of the AI shopping assistant surpassed 150 million in 2025, with a user penetration rate exceeding 20%, driving billions in GMV, and management expects this user scale to double in 2026 In terms of logistics automation, JD.com plans to deploy autonomous delivery vehicles on a large scale during the Double Eleven shopping festival in 2025 and has completed its first overseas unmanned delivery pilot in the UK to support the operation of its overseas all-category e-commerce platform, Joybuy. Management stated that the application of AI technology in areas such as search and recommendation, warehousing fulfillment, after-sales service, and new product development will continue to deepen, citing the example of AI toy and robot hardware sales during the Double Eleven period increasing more than 20 times compared to the 618 period, demonstrating AI's potential to drive consumption of new categories. Accelerating Overseas Expansion, Joybuy European Platform Launching in March Regarding international business, management revealed that JD's European all-category e-commerce platform Joybuy is scheduled to officially launch in March 2026, with relevant regulatory approvals still underway, and the company will update progress in due course. Management indicated that Joybuy's core differentiated advantage lies in logistics experience. JD.com will build its own delivery network in Europe, with JD Express already operational in major cities in the UK, Germany, and other countries, enabling same-day and next-day delivery, along with value-added services such as door-to-door delivery. Additionally, the company aims to introduce high-quality European brands to the Chinese market through Joybuy, further strengthening its global supply chain capabilities and achieving synergy between retail and logistics overseas. Management stated that international business investments will continue to see a modest increase while maintaining financial discipline to ensure long-term value creation. Below is the full transcript of the conference call (organized with AI-assisted translation): Hello everyone, thank you for joining JD Group's fourth quarter and full year 2025 earnings conference call. Currently, all participants are in listen-only mode. After the management completes their prepared remarks, we will move to the Q&A session. Today's meeting is being recorded. If you have any objections, you may disconnect now. Now, I would like to introduce today's host, Mr. Li Ruiyu, Head of Investor Relations. Please go ahead. Li Ruiyu, Director of Investor Relations: Thank you. Hello everyone. Welcome to JD Group's fourth quarter and full year 2025 earnings conference call. Joining us today are Ms. Xu Ran, CEO of JD Group, and Mr. Shan Su, CFO. Xu Ran will first deliver the opening remarks, followed by Shan Su discussing the financial performance. After that, we will open the conference call to accept questions from analysts. Please note that unless otherwise stated, all comparisons in this conference call are based on results from the same period in 2024. Before handing the call over to Xu Ran, I will briefly explain the safe harbor statement. Please note that during this meeting, our comments and responses to your questions only reflect the management's views as of today and will include forward-looking statements. Please refer to the latest safe harbor statement in our earnings press release on the investor relations website, which applies to this conference call. We will discuss certain non-GAAP financial metrics. Please refer to the reconciliation table of non-GAAP metrics to comparable GAAP metrics in the earnings press release. Also, please note that unless otherwise stated, all figures mentioned in this conference call are in RMB Now, let's welcome our CEO Xu Ran. Xu Ran, Chief Executive Officer and Executive Director: Thank you, Li Ruiyu. Hello everyone. Thank you for joining our fourth quarter and full year 2025 earnings conference call. While addressing short-term challenges, our fourth quarter performance met expectations, and the overall performance for the full year 2025 is robust. In the fourth quarter, despite facing a high year-on-year comparison base in electronic products and home appliances, our revenue remained resilient. This is attributed to the continued strong momentum in our daily necessities category as well as platform and marketing revenue. The profitability of our core business, JD Retail, achieved significant growth and market share expansion in the fourth quarter as we further leveraged our supply chain advantages. We strategically invested part of our earnings into price competitiveness, especially in the categories of electronic products and home appliances, as well as into R&D capabilities and talent to ensure long-term advantages. This somewhat slowed the margin expansion of our retail business this quarter, but the impact was well absorbed by our increasingly diversified profit sources, including high-margin platform and marketing services and margin improvements in categories such as supermarkets and health. Outside of our core retail business, our new ventures continue to report steady efficiency improvements and a quarter-on-quarter decline in total investment. Setting aside quarterly fluctuations, 2025 remains a year of strong execution, and we have achieved our expectations set at the beginning of the year. We have made encouraging progress in key long-term growth drivers. Our user base and engagement have gained significant momentum, and our core retail segment has accelerated its recovery to double-digit revenue growth. Despite fierce competition, we have achieved this goal while JD Retail's operating profit margin has expanded for the sixth consecutive year. We are also expanding our moat through several promising new business initiatives. This solid progress is rooted in our continuously deepening supply chain capabilities, which remain the engine for delivering an excellent user experience, optimizing costs, and improving operational efficiency. This is the pillar of our business model, supporting not only our core retail business but also aiding our strategic initiatives to expand into new markets. We believe these strategic pillars will bring us more sustainable and profitable growth. Next, let's talk about operational highlights. I would like to share three highlights for the fourth quarter and full year 2025, as well as some thoughts on 2026. First, our user base has expanded in both scale and depth in the second quarter of 2025 (this seems to be a slip of the tongue, it should be the fourth quarter based on the context). In the fourth quarter, our number of active customers grew by 30% year-on-year, marking a successful milestone of over 700 million annual active customers. This growth is attributed to organic user growth in our core retail business and further driven by new strategic initiatives, including JD Delivery and Jingxi. High-value users have also reached new milestones. Our active platform (JD Platform) maintained (technical failure) by the end of the year. Even more encouraging is the quality of user growth. Throughout the year, user shopping frequency increased by over 40% year-on-year, with broad growth achieved across all user groups, including new users, existing users, and members In addition to user acquisition, JD.com’s delivery service has also played an important role in increasing shopping frequency. We view the expansion of our user base and engagement as a long-term strategic driver for the business, and we expect this to further strengthen in 2026 and beyond. Secondly, our core retail business demonstrated significant resilience in the fourth quarter. Despite facing revenue pressure in the short term, it maintained stable profit margins. For the full year, JD Retail achieved strong double-digit growth in both revenue and (technical failures), with operating profit margins expanding by 52 basis points year-on-year to 4.6%. In the long run, JD Retail's sustained growth and market share expansion trajectory over the years strongly validate the resilience of our supply chain-driven model. Although revenue in the fourth quarter slightly declined by 1.7% year-on-year due to weakness in the electronics and home appliances categories, we have proactively strengthened our supply chain capabilities and deepened user perception. These efforts have begun to show results, with momentum improving so far in 2026. Additionally, we expect to benefit from the restoration of our trade-in program this year, which will provide a favorable backdrop for industry growth. Turning to daily necessities, performance remains strong, with fourth-quarter revenue increasing by 12.1% year-on-year and 15.3% for the full year. Supermarket revenue maintained double-digit growth in the fourth quarter. For the full year, the supermarket growth rate reached 18%, while operating profit margins steadily grew and expanded. Our merchant categories also achieved significant growth in revenue and user perception share for the full year of 2025, with healthy growth in user base, shopping frequency, ARPU, and total transaction volume. These achievements are entirely driven by the team's execution capabilities, rather than external tailwinds. As our category mix continues to evolve towards a more diversified structure, we are confident in maintaining the growth momentum of daily necessities. Another exciting emerging growth driver for JD Retail is advertising revenue, which drove our platform and marketing revenue to grow by 15% in the fourth quarter and 18.9% year-on-year for the full year. This strong growth is attributed to our optimized traffic allocation, enhanced conversion efficiency, and the AI algorithms and agents launched for suppliers and merchants. We are also seeing a strategic shift where advertisers are reallocating budgets to platforms like JD.com, as we are viewed as the most stable daily sales platform, the preferred brand-building ground, and the platform that offers the highest returns throughout the product lifecycle. Notably, the synergy with JD.com’s delivery service has begun to show results, contributing an incremental 2% to 3% to fourth-quarter advertising revenue. We remain confident in maintaining the momentum of advertising revenue in 2026. The third highlight is the robust progress of new businesses. In this segment, JD.com’s delivery service continued to drive healthy development in the fourth quarter. We maintained stable order momentum while further optimizing investments, reducing total investment scale by nearly 20% year-on-year (quarter-on-quarter basis). Since its establishment, JD.com’s delivery service has consistently narrowed its losses quarter-on-quarter, directly stemming from our relentless focus on improving operational efficiency and an ROI-oriented investment framework. In the fourth quarter, the loss rate of JD.com’s delivery service (as a percentage of GMV) significantly narrowed compared to the previous quarter while maintaining scale momentum. More importantly, strategic synergies with the core retail business are deepening. In addition to the strong user momentum mentioned earlier, in the fourth quarter, the cumulative cross-selling rate and shopping frequency of user groups both showed an upward trend In addition, the total number of active merchants has increased by over 270%, partly due to the high-quality restaurants that have joined our platform. Looking ahead, JD.com’s food delivery service will continue to prioritize healthy scale growth while improving its unit economics to a greater extent. We expect that the investment efficiency of our delivery business this year will further improve compared to the levels in 2025. Regarding our other new business initiatives, Jingxi and international operations are progressing as planned. Jingxi continues to successfully penetrate lower-tier markets, expanding our user base and market share. Furthermore, we are pleased to announce that our online retail business in Europe, Ochama, will officially launch this month. We are committed to redefining the local shopping experience by offering same-day and next-day delivery services, which opens up broader growth prospects for JD.com. We will continue to invest in these high-potential areas in a prudent and controllable manner to promote our long-term sustainable development. While executing our core strategy, we are equally excited about the transformative potential of AI. By leveraging our deep supply chain capabilities, we will embed AI throughout the value chain to identify and stimulate demand, procure self-operated and third-party supplies, and lead logistics automation. Let me share a few examples of our AI applications. First, proprietary intelligence. Our large language model "Yanxi" now supports over 1,000 practical application scenarios in areas such as customer experience, procurement, merchant services, and operations. By 2025, the total token usage of "Yanxi" is expected to surge nearly 100 times compared to 2024, driving faster and smarter decision-making across the company. Second, demand cultivation. We are reshaping the shopping journey and enhancing user experience through AI-driven search and recommendations. This year, our AI agents have exceeded 150 million annual active users (AAC) by 2025, with a user penetration rate exceeding 20%, driving business growth. We expect to double this user base by 2026. Third, logistics automation. Alongside digital intelligence, we are leading in the field of automated logistics. By 2025, JD Logistics will continue to redefine logistics efficiency. By the end of the year, we will have deployed over 20 large automated warehouses nationwide. We are also promoting this capability internationally, having launched the first automated technology facility in the UK to efficiently support the local high-quality "211" same-day and next-day fulfillment experience. Fourth, services and innovation. Our multimodal AI and customer service handled over 4.2 billion user inquiries during the Double Eleven promotion, achieving higher satisfaction with less human intervention. Beyond operations, we have launched a series of AI products through joint insights—our hardware AI agent "JD Smart Eye"—in collaboration with 40 hardware brands, unlocking new consumer potential. Compared to the 618 promotion, the sales of JoyInside products integrated with "JD Smart Eye" surged 20 times during Double Eleven. By leveraging AI to redefine our competitive advantages, we are able to further enhance user experience, reduce costs, and improve operational efficiency. We are fully prepared to seize the opportunities brought by AI and unlock new growth frontiers for 2026 and beyond, ultimately positioning us at the forefront of AI e-commerce. In summary, 2025 will be a year of constructive progress and strategic determination Despite facing challenges from the short-term macro environment and high base comparisons, we remain steadfast in honing our supply chain advantages to lay a solid foundation for the future. As we enter 2026, we have already seen a sustained positive trend. Our user momentum remains strong, with the growth trajectory of daily necessities and platform and marketing services seamlessly continuing into the new year (technical difficulties). Meanwhile, we continue to strengthen our competitive advantages in product supply, price competitiveness, and fulfillment experience. This operational strength, combined with our technological advancements and our disciplined, AI-focused approach to new business, gives us confidence in our outlook for 2026. We will continue to be committed to driving sustainable, profitable growth and creating long-term value for our shareholders. Next, I would like to invite Shan Su to speak. Shan Su, Chief Financial Officer: Thank you, Xu Ran. Hello everyone, thank you for joining today's conference call. In the fourth quarter, our total revenue grew by 2% year-on-year, with a non-GAAP net profit of RMB 1.1 billion. Although we faced short-term headwinds in the electronics and home appliances categories, our overall performance remained resilient. This stability is attributed to our strategic focus on diversified growth drivers and profit sources, as well as disciplined investments in new businesses. For the full year, we made significant progress in our core retail segment, new businesses, and user growth and engagement, solidifying our long-term sustainability. While developing our business, we remain firmly committed to delivering returns to our shareholders. Our board has approved a total annual cash dividend of approximately USD 1.4 billion for 2025, equivalent to USD 0.5 per ordinary share or USD 1 per American depositary share. Additionally, we maintain an active approach to share repurchases. In 2025, we repurchased approximately 6.3% of our outstanding shares for a total of USD 3 billion. All repurchased shares have been canceled. These efforts highlight our confidence in long-term development. Now, let's review the financial performance for the fourth quarter and the full year of 2025. Total net revenue in the fourth quarter grew by 2% year-on-year, reaching RMB 352 billion. For the full year, total net revenue grew by 13% year-on-year, reaching RMB 1.3 trillion. By revenue composition, product revenue in the fourth quarter decreased by 3% year-on-year, mainly due to high base effects, but grew by 10% for the full year. By category, revenue from electronics and home appliances decreased by 12% year-on-year in the fourth quarter, but grew by 7% for the full year. We worked closely with our partners to address this high base challenge and are encouraged by the improved momentum seen so far in 2026. On the other hand, the daily necessities category performed strongly, with revenue in the fourth quarter growing by 12% year-on-year and 15% for the full year, thanks to sustained momentum in categories such as supermarkets, fashion, and health throughout 2025. We believe that as we further establish advantages in these high-potential areas, this momentum will continue into 2026. Service revenue grew by 20% year-on-year in the fourth quarter and 24% for the full year It is worth noting that platform and marketing services revenue grew by 15% and 19% year-on-year in the fourth quarter and for the full year, respectively. One key driver of this growth is advertising revenue, which achieved double-digit growth in each quarter of 2025. We enhanced the advertising efficiency of the platform by leveraging technology and our continuously growing user traffic and engagement. Looking ahead to 2026, we expect platform and marketing services revenue to maintain a robust growth momentum, contributing to revenue growth and profitability. Additionally, logistics and other services revenue grew by 24% year-on-year in the fourth quarter and by 27% for the full year, primarily benefiting from incremental delivery service revenue generated by the takeaway business. Now, let's take a look at the performance of each business segment. JD Retail's revenue grew by 2% year-on-year in the fourth quarter, but increased by 11% for the full year of 2025. The quarterly revenue decline was mainly due to the high base effect from electronics and home appliances, but the growth in daily necessities and advertising revenue largely offset this impact. It is important to emphasize that JD Retail is no longer a single-category driven business. We have successfully built a diversified growth matrix that provides multiple engines for the business and demonstrates strong resilience under different market conditions. Notably, JD Retail's gross margin increased by 1.1 percentage points year-on-year in both the fourth quarter and for the full year of 2025. Despite the changing competitive landscape, this continuous improvement has been maintained for several years, reflecting our enhanced supply chain strength and favorable category mix transformation. JD Retail's non-GAAP operating income in the fourth quarter decreased by 2% year-on-year, with the operating margin stable at 3.2%. The pause in margin expansion this quarter was a strategic choice. We invested additional subsidies in electronics and home appliances to offer competitive prices and maintain market leadership, while also increasing R&D investment and employee compensation to boost operational expenses, fueling future growth. For the full year, JD Retail's non-GAAP operating income grew by 25% year-on-year in 2025, with the operating margin increasing by 52 basis points to 4.6%. Over the long term, JD Retail's margin trajectory is very healthy, rising from 2.7% when we began reporting this segment in 2019 to 4.6% in 2025. As we continue to emphasize high-margin advertising business and improve efficiency in categories such as supermarkets, we are steadily moving towards our long-term margin goals. Next, looking at JD Logistics, its revenue grew by 22% year-on-year in the fourth quarter and by 19% for the full year. With the incremental contribution from the takeaway business (technical issues), JD Logistics' non-GAAP operating income decreased by 17% year-on-year in 2025, but grew by 3% in the fourth quarter. JD Logistics remains committed to investing in enhancing customer experience, expanding service capabilities in domestic and international markets, and advancing AI and robotics technology. We believe these are necessary investments to pave the way for JD Logistics' long-term sustainable revenue and profit growth. New business revenue surged by 201% year-on-year in the fourth quarter and grew by 157% for the full year, primarily driven by the rapid expansion of takeaway, Jingxi, and international businesses. The segment's non-GAAP operating loss in the fourth quarter narrowed to RMB 14.8 billion This quarter-on-quarter improvement is mainly attributed to the narrowing of losses in JD.com’s food delivery service, with losses significantly reduced by about 20% compared to the previous quarter, continuing the trend of ongoing improvement since its launch. Entering 2026, our primary goal for the food delivery business is to drive healthy order volume growth while deepening synergies with our core retail business. We believe that investments in the food delivery business peaked in 2025 and will show a declining trend this year. Market competition is becoming more rational. Besides food delivery, we will continue to explore promising opportunities in JD.com’s retail and international businesses with financial discipline to ensure long-term value creation. Regarding the consolidated performance, the Group's non-GAAP gross margin expanded by 32 basis points year-on-year to 15.6% in the fourth quarter, and increased by 18 basis points to 16% for the full year. This improvement is mainly due to the continuous gross margin expansion of JD Retail. The non-GAAP net profit attributable to ordinary shareholders in the fourth quarter was RMB 1.1 billion, and RMB 27 billion for the full year, with non-GAAP net profit margins of 0.3% and 2.1%, respectively. Our recent profitability mainly reflects our strategic investments in new businesses. We believe these initiatives will broaden the Group's growth potential and sustainably drive long-term growth and margin improvement. The free cash flow for the full year 2025 was RMB 6 billion, compared to RMB 44 billion in the same period last year. This mainly reflects cash outflows related to the trade-in program and fluctuations in operating income. Our accounts receivable have also declined for two consecutive quarters, mainly due to the healthy recovery of receivables related to the trade-in program. By the end of the year, we concluded with a strong liquidity position, with cash and cash equivalents, restricted cash, and short-term investments totaling RMB 225 billion. In summary, 2025 was a year of steady strategic advancement, achieving strong growth in our user base, accelerating revenue growth in our core retail business while expanding margins, and establishing increasingly diversified drivers. Additionally, our new businesses have now entered a healthy and promising operational track. We have built a more resilient ecosystem, with synergies between various business segments continuously strengthening. Our focus remains clear. We will continue to concentrate on enhancing user experience, reducing costs, and improving operational efficiency to achieve strong performance in retail revenue and profitability, while advancing our new business initiatives from a long-term perspective. Now, I would like to invite Li Ruiyu to continue. Li Ruiyu, Director of Investor Relations: Thank you, Xu Ran and Shan Su. Next, we will enter the Q&A session. Analysts are welcome to ask questions in Chinese or English. Our management will respond in Chinese and provide English translations for everyone's convenience. In case of any discrepancies, please refer to the management's original statements. Operator, you may now begin the Q&A session. Q&A Session Operator: Q&A Session Operator: The Q&A session of this conference call is about to begin. (Operator instructions) Your first question comes from Ronald Keung of Goldman Sachs Ronald Keung: Thank you, Xu Ran and Shan Su. (In Chinese) Now I will translate. Thank you to the management. My first question is about JD Retail's growth in 2026. As electronic appliances return to normal baselines starting in the second half of the year, daily necessities remain very healthy. Considering the impact of baselines, how should we view the differences in growth rates for JD Retail in the first and second halves of 2026? The second question is about instant retail and takeaway business. Compared to larger competitors, how should we view the path for further improvement in unit economics? How can we achieve differentiation through a supply chain-driven business model? How should we view your commitment and investment in this business? With the regulation and investigation of the delivery industry, does this also contribute to the improvement of unit economics? Thank you. (In Chinese) Shan Su, Chief Financial Officer: Okay, thank you, Ronald. Regarding your first question, first of all, our daily necessities category continues to maintain a very healthy and strong growth trajectory. Looking back at 2025, this category achieved faster growth, even considering the impact of the trade-in program on other categories. Therefore, the daily necessities category is the main growth engine for JD Retail. Subcategories such as supermarkets, fashion, and health have all performed very strongly. Looking ahead to 2026, we are still very confident in maintaining this healthy momentum. The supermarket category still has huge potential in terms of user penetration and subcategory expansion. The fashion category completed many infrastructure works last year, such as merchant recruitment. We will further build growth momentum on this very solid foundation. We expect the health category to continue to maintain its industry-leading position and user mindshare. Regarding electronic products and home appliances, we still face high baseline effects in the short term. In 2026, the government’s trade-in program will continue. However, we must note that the consumption speed and amount of government subsidies in the first half of 2025 were higher than in the second half of 2025. Therefore, for our electronic products and home appliances category, including home appliances, mobile phones, computers, and digital products, we will still be affected by high baselines in the first half of this year. However, we expect growth to improve sequentially compared to the fourth quarter of 2025 and anticipate a stronger recovery in the second half of 2026. Our market share remains resilient. Additionally, we must note that the cost of memory chips continues to rise. Therefore, prices for mobile phones and digital products are expected to rise across the board. This may suppress consumption and affect sales. But at the same time, the increase in average order value will offset the impact of declining sales to some extent. We will continue to consolidate our user mindshare and drive sales by further strengthening supply chain capabilities, expanding proactive offline layouts, and enhancing the overall service experience. Meanwhile, AI and emerging technologies create numerous opportunities for innovation and new product categories, further demonstrating our supply chain strength. Although the initial data contribution from these AI-related new products is still relatively small compared to the current scale of the category, we see significant opportunities and transformations. We will work closely with brands and suppliers to respond quickly, develop new products through the rapid application of new technologies, and meet the ever-changing user demands Looking ahead to 2026, our growth drivers are becoming more diversified. The daily necessities category continues to show a healthy growth trend, while service revenue, including advertising, is also expected to maintain rapid growth momentum. Secondly, we anticipate that the electronics and home appliances category will still be affected by a high base in the first half of this year, with growth accelerating and outperforming the first half in the second half. Overall, we will maintain our market share and user mindset. At the same time, we will continue to leverage technological innovation to drive industry progress. Thirdly, supported by the steady increase in JD's traffic, user base, and shopping frequency, we are confident in achieving healthy and high-quality growth for the entire year of 2026. Regarding your second question, although our food delivery business is still in its early stages in 2025, we have made active investments in operations and R&D. Looking ahead to this year, 2026, we will continue to strengthen our capability building, introduce more quality merchants and products, and enhance user experience. At the same time, we will begin to generate revenue by providing services to merchants, achieving orderly and reasonable monetization. Therefore, our goal is to continuously improve operational efficiency while maintaining a healthy scale of business. We expect total investment in the food delivery business in 2026 to decrease compared to 2025. Of course, this also depends on market competition dynamics. How do we achieve this goal? First, JD's food delivery differentiated advantage includes our commitment to high-quality food delivery positioning. Secondly, a high-quality service experience driven by full-time delivery riders. Thirdly, leveraging our strong supply chain advantages to achieve synergistic integration within the JD ecosystem. We have clear drivers for improving unit economics. First, more diversified revenue sources. Second, continuous optimization of subsidy efficiency, including precise subsidies targeted at different users and regions. Thirdly, with the healthy growth in order volume, the improvement in delivery efficiency brought about by economies of scale. It is also worth noting that our "Seven Fresh Kitchen" is a highly innovative and differentiated business model that is progressing smoothly. It is deeply integrated with JD's supply chain capabilities and generates strong synergies with our instant retail business. As of the end of February, the operational footprint of "Seven Fresh Kitchen" has expanded to over 50 kitchens, and we welcome analysts and investors to come and experience it. Regarding long-term positioning, food delivery and instant retail are JD's long-term strategies, and we will promote strategic progress with a long-term perspective, continuously improving operational efficiency to drive profitability improvement. At the same time, we will continue to unlock the potential synergies between food delivery and core retail businesses, promoting the company's long-term healthy development. In 2025, the food delivery business proved to be a strategic engine for user growth, effectively acquiring new users and significantly enhancing the purchase frequency across our entire platform. In 2026, we expect to achieve further synergy release driven by strong cross-selling and incremental growth in advertising revenue. Finally, regarding the regulation of the food delivery industry, first, we support and welcome regulation that maintains a fair competitive market environment, as it promotes healthy industry development. Second, we always oppose inward competition within the industry. Third, we are committed to promoting high-quality development of high-quality food delivery through continuous innovation in supply chain models. Thank you Next question. Operator: Your next question comes from UBS's Kenneth Fong. Kenneth Fong: Hi, Xu Ran, Shan Su, Li Ruiyu. (in Chinese) Thank you to the management for accepting my question. My first question is about the profitability and investment of the new business. In the context of macro uncertainty, while accelerating investment in overseas and Jingxi businesses? How should management balance growth and profitability? What level of investment should we expect for this new business in 2026? How will this impact the group's profitability? My second question is about overseas business. Can management share some progress, timeline, and financial impact of the acquisition (Ochama)? From a strategic perspective, how will the acquisition (Ochama) position us, and what benefits or synergies should we expect at the group level, particularly from the perspectives of retail, logistics, and the entire supply chain? Thank you. (in Chinese) Xu Ran, CEO and Executive Director: (technical difficulties) Regarding our long-term view on investment and profitability, we are confident in the prospects of the Chinese market and the development of our own business. Based on our judgment of market opportunities, we have made long-term strategic investments, including in international business, lower-tier markets, and instant retail. At the same time, we have been committed to investing in R&D and technology. By enhancing our foundational capabilities and expanding our service offerings, we believe we will continue to unlock new growth opportunities, which will also drive our long-term profitability. The long-term profit margin target for JD.com remains in the high single digits. Regarding JD Retail, we expect healthy growth in profits for the retail business in 2026, and we maintain our long-term target for JD Retail (i.e., high single-digit profit margin). Key drivers include: improved gross profit margins from product sales due to our increasingly enhanced supply chain capabilities; strong growth in high-margin businesses (such as advertising); and continuous improvement in profit margins across categories, including supermarkets. The scale effects of JD Retail will continue to manifest, and as we increasingly adopt AI technology, there is further room for improvement in operational efficiency. Regarding our investment in new businesses, for JD Delivery, its losses narrowed by nearly 20% quarter-on-quarter in the fourth quarter. While maintaining healthy scale expansion, we narrowed the loss rate this quarter by improving operational efficiency and revenue growth. Looking ahead to 2026, we will continue to drive healthy scale growth in the delivery business and further unlock its synergies with core JD Retail. If industry competition trends towards rationality, we expect investment in JD Delivery in 2026 to decrease compared to 2025 levels. For international business, we will gradually increase investment at a controllable scale. We will maintain financial discipline in our investments. For Jingxi, it focuses on lower-tier markets and non-branded product supply. It has achieved meaningful penetration in expanding user growth boundaries, especially in cities ranked six and below. This helps to broaden our user growth boundaries as it offers differentiated product supply from the main app. We expect to slightly increase investment in Jingxi, but we believe its unit economics will continue to improve in 2026, achieving healthy and sustainable business growth Kenneth Fong: (in Chinese) Xu Ran, Chief Executive Officer and Executive Director: Regarding the Ochama transaction you mentioned, it is currently under regulatory review. We will update the market on progress at the appropriate time. Ochama is our all-category online retail platform in Europe, which is scheduled to officially launch in March. Building overseas supply chain capabilities is a long-term initiative that requires time and continuous effort. Based on its trial operation, we have received very positive user feedback, especially regarding the fulfillment experience. The Ochama experience will be a key differentiating factor. We are building our own delivery network in Europe, and JD Express has recently launched. It offers same-day and next-day delivery services in major cities in the UK, Germany, France, and the Netherlands, as well as home delivery services. We welcome all analysts and investors to experience our services. As for synergies, first, in terms of supply chain capabilities, while helping Chinese brands expand globally, we also hope to bring more high-quality international brands into the Chinese market, further strengthening our global supply chain capabilities. Second, in logistics, as Ochama expands in Europe, the synergy between retail and logistics in our overseas business will be further enhanced, consolidating Ochama's competitive advantage. Third, in technology, JD's long-accumulated expertise and strong infrastructure will continue to empower our international business. Liu Qiangdong, Founder and Chairman of the Board: Next question, operator. Operator: Your next question comes from Alicia Yap of Citigroup. Alicia Yap: (in Chinese) Given that the retail sales growth outlook may slow this year, what are management's expectations for your daily necessities GMV and revenue growth? How can JD continue to achieve faster growth in this category in the face of competition and slowing consumption? What specific differentiated areas are you pushing sales in this sector? The second question is, can management share how JD will prepare and position itself to meet potential threats and opportunities from smart commerce? (in Chinese) First, I would like to talk about daily necessities. As I mentioned earlier, we still expect daily necessities to maintain healthy growth in 2026. Looking back, daily necessities have maintained double-digit growth for five consecutive quarters. This is obviously a good sign for the industry, thanks to our continuous development of supply chain capabilities and the operational capabilities of our team. We have also laid a solid foundation for sustained growth. We are confident about 2026. What are the driving forces behind this sustained growth? First, the market potential remains enormous. The overall market size, including supermarkets, fashion, and health, is very large. Therefore, we also have significant growth space. Second, user growth. The takeaway and supply chain business have brought us new traffic, as well as growth in users and buyers. At the same time, we are also accelerating internal synergy In particular, you can see good cross-purchasing among takeaway users in terms of product categories. The third point is the continuous strengthening of supply chain capabilities and user mindset. From the perspective of product categories, they can provide a better user experience and competitive prices. As for the fashion category, by 2025, we also see a significant improvement in our capabilities, including search and recommendation data products. Therefore, more and more fashion brands are willing to cooperate with JD.com. At the same time, we are also applying AI technology to achieve more precise personalized matching in search and recommendations. The advantage of diversity is the core barrier of JD.com's self-operated model, including broader product coverage and strict quality control. In addition, JD Logistics is also our core capability, providing a better quality experience. From the brand perspective, as the most stable daily sales platform in the country, the best brand building ground, and the platform with the highest return throughout the product lifecycle, we can also bring stable and efficient sales to brands. Liu Qiangdong, Founder and Chairman of the Board: Thank you, Alicia. Regarding your first question about the daily necessities category, we shared our views on the healthy momentum of this category. Looking back at our records, first, the daily necessities category has maintained double-digit growth over the past five quarters, significantly outperforming the industry. This is attributed to our continuously evolving supply chain capabilities and significant improvements in operational efficiency, laying a solid foundation for the sustained growth of this category. Therefore, we remain confident in the healthy momentum of the daily necessities category in 2026. The continuous growth drivers include: first, huge market potential, with ample growth space in categories such as supermarkets, fashion, and health. Second, user growth. New businesses, including takeaway and Jingxi, have brought traffic, users, and increased shopping frequency to the JD.com platform. Therefore, we are accelerating internal collaboration and have observed healthy cross-selling trends in categories such as supermarkets. Third, the continuously strengthened supply chain capabilities and user mindset. Therefore, from the category perspective, our supermarket category utilizes JD.com's unique self-operated model to provide an excellent user experience while maintaining competitive prices. Meanwhile, we have seen significant improvements in the foundational capabilities (including search and recommendation) of our fashion category by 2025, attracting more high-quality brands to deepen their cooperation with us. We are also applying AI to achieve more precise and personalized matching in search and recommendations. In the fourth quarter of 2025, our revenue from sports and outdoor products and luxury goods both achieved double-digit year-on-year growth. In terms of the differentiated advantages of this category, the first and most important is that the core of JD.com's self-operated model is key. This includes a more diverse product selection, more competitive prices, and stricter quality control. Second, leveraging the core capabilities of JD Logistics, we provide a faster, more accurate, and high-quality delivery experience. From the brand perspective, JD.com is the most stable daily sales platform. JD.com is the preferred ground for brand building and the platform that provides the highest return throughout the product lifecycle. Therefore, we provide brands with stable and efficient sales performance Xu Ran, Chief Executive Officer and Executive Director: Regarding the second question, we believe that AI and intelligent agent e-commerce present more opportunities than challenges for the evolution of JD.com. Firstly, intelligent agent e-commerce is still in its early stages, primarily affecting front-end user traffic. Our view is that regardless of how traffic patterns change, the core of retail remains user experience, cost, and efficiency. Therefore, as long as we continue to focus on optimizing products, prices, and services, JD.com's supply chain advantages will create greater synergies, further broadening our competitive moat in the era of intelligent agents. At the same time, we are accelerating our technology investments and promoting the adoption of internal large language models. We adhere to an open ecosystem and actively collaborate with industry-leading external AI large model providers. We are transforming into a leading technology-driven retail company. We are expanding the entire chain from supply chain to customers. Since JD.com operates a self-operated business model and has its own logistics service capabilities, the application scenarios for technology and AI are very rich. This creates a true differentiation from platform business models. I will briefly give a few examples. On the demand side, we are reshaping the shopping journey through AI-driven search and recommendations, enhancing user experience. On the supply side, we are continuously improving operational efficiency in procurement, pricing, inventory management, and other areas using AI, replacing manual processes. We are also expanding applications in physical world areas such as fulfillment automation and after-sales service. Beyond operations, we are also unlocking new consumer potential through AI applications, such as our hardware AI agent "JD Smart Eye." As I mentioned earlier, products integrated with "JD Smart Eye" saw sales increase 20 times during the Double Eleven shopping festival compared to the 618 promotion. So you can see that we are actively leveraging AI to reshape our competitive advantages, continuously optimizing user experience while driving cost efficiency. Looking ahead, we are very confident and believe we are well-prepared to seize strategic AI opportunities and solidify our leadership position in AI-driven e-commerce. Next question. Operator: Your next question comes from Thomas Chong of Jefferies. Thomas Chong: Good evening. Thank you to the management for taking my questions. I have two questions. First, can management share the latest progress on shareholder returns? Second, can management discuss whether there have been any changes in the regulatory environment for internet platform companies and how we should view this? Thank you. Liu Qiangdong, Founder and Chairman of the Board: Thank you, Thomas. Despite our long-term strategic investments in 2025, we remain committed to providing returns to shareholders through dividends and share buybacks. We announced an annual cash dividend of $1 per American Depositary Share for 2025, unchanged from last year. The total dividend amount is $1.4 billion. This highlights our commitment to providing sustainable cash returns to shareholders based on long-term sustainable profitability and cash flow. Additionally, we repurchased $3 billion worth of shares in 2025, accounting for 6.3% of the total shares outstanding as of the end of 2024 All repurchased shares have been canceled. We remain committed to delivering returns to shareholders through healthy business development, dividends, and share buybacks. At the same time, we will continue to focus on healthy growth in business scale, profitability, and cash flow, and make long-term strategic investments to share JD's long-term success with shareholders. Xu Ran, Chief Executive Officer and Executive Director: (in Chinese) Shan Su, Chief Financial Officer: I will answer the last question. Regulatory authorities continue to promote standardized development. The healthy development of the platform economy ensures the long-term sustainability of the industry. Therefore, we welcome regulatory guidance. The government is committed to supporting the development of compliant enterprises, and this has not changed. We believe that regulation is not a constraint but a catalyst for promoting the healthy and high-quality development of the industry. Therefore, JD has always regarded compliance as the cornerstone of our business. Whether it is antitrust measures, tax standardization, or preventing cutthroat competition, these efforts align perfectly with JD's long-standing compliance philosophy. Thus, in a normalized regulatory environment, we have created a fairer growth opportunity by preventing bad money from driving out good. As a result, in the long run, the advantages of JD's compliant and sustainable business model will become increasingly prominent. Thank you. Operator: Our conference call is about to end. I will now turn the call over to Mr. Li Ruiyu from JD for closing remarks. Li Ruiyu, Director of Investor Relations: Thank you all for joining our conference call today, and thank you for your questions. If you have any further questions, please feel free to contact me or our team. We appreciate your attention to JD and look forward to communicating with you again next quarter. Thank you. Operator: Thank you for participating in today's meeting. This meeting is now concluded. You may now disconnect. Have a great day. The meeting has ended