--- title: "JPMorgan Backs JD.com: Substantial Improvement in Earnings Structure, Valuation Still Severely Undervalued" type: "News" locale: "en" url: "https://longbridge.com/en/news/286203052.md" description: "JD.com's Q1 results beat expectations, with a substantial improvement in its earnings structure. JPMorgan believes that the resilience of retail margins and the narrowing losses in new businesses have established an upward trajectory for earnings. Despite significantly improved cash flow and strong fundamentals, the current P/E ratio remains low, failing to fully reflect structural dividends, and market consensus is expected to see double-digit upward revisions in the coming quarters" datetime: "2026-05-13T05:50:44.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/286203052.md) - [en](https://longbridge.com/en/news/286203052.md) - [zh-HK](https://longbridge.com/zh-HK/news/286203052.md) --- # JPMorgan Backs JD.com: Substantial Improvement in Earnings Structure, Valuation Still Severely Undervalued JD.com Group's first-quarter 2026 performance comprehensively exceeded market expectations, confirming a substantial improvement in its earnings structure. JPMorgan maintained its "Overweight" rating on the stock, stating that these results validated its previous contrarian view—that market consensus had not fully reflected JD.com's earnings upside potential. JD.com Q1 adjusted net profit reached RMB 7.4 billion, 24% higher than JPMorgan's forecast and 38% above market consensus. According to Zhuifeng Trading Desk, Yao Cheng, Head of China Securities Research at JPMorgan, pointed out in a quick review of the results on May 12 that this performance established three key conditions: **the sustainability of retail margins, the reliability of the path to narrowing losses in new businesses, and the accelerated increase in high-margin service take rates.** In terms of market impact, JPMorgan expects these results to drive double-digit upward revisions in market consensus for JD.com's revenue and earnings over the next few quarters. The stock's current price implies a 2027 forward P/E ratio of only 8x. JPMorgan believes this valuation does not yet reflect the aforementioned structural improvement trends and has incorporated valuation re-rating into its expectations. ## Significant Earnings Beat, Retail Margins Hit Record High JD.com's total revenue in the first quarter was RMB 315.7 billion, a year-on-year increase of 5%, exceeding JPMorgan's and market consensus estimates by 2% and 1%, respectively. Adjusted operating profit was RMB 5.6 billion, 177% higher than JPMorgan's forecast. The adjusted operating margin was 1.8%, far surpassing the 0.7% and 0.8% expected by JPMorgan and Bloomberg consensus, respectively. Regarding the earnings structure, JD.com's retail revenue grew by only 1.8% year-on-year, but its operating margin expanded to 5.6%, an increase of 0.7 percentage points from the same period last year and 0.4 percentage points above JPMorgan's forecast, hitting a record high. JPMorgan noted that the margin beat was mainly driven by two factors: **first, the improvement in retail business margins; second, the cooling competition in China's food delivery market, leading to reduced subsidy spending.** Adjusted diluted earnings per ADS were RMB 5.12, exceeding JPMorgan's and Bloomberg consensus estimates by 26% and 44%, respectively. GAAP net profit was RMB 5.8 billion, a year-on-year increase of 52%. ## Accelerating Service Revenue, Significant Quarter-on-Quarter Narrowing of Food Delivery Losses The improvement in revenue structure was another key highlight of this quarter's performance. The year-on-year growth rate of service revenue accelerated to 20.6%, benefiting from the shift in revenue structure towards higher-margin platform and commission-based businesses. This structural shift helps to continuously expand overall margins against a backdrop of relatively moderate revenue growth. In terms of new businesses, management explicitly confirmed a significant quarter-on-quarter narrowing of losses in the food delivery business. JPMorgan believes this trend corroborates that the most aggressive investment phase for the food delivery business has passed. The report pointed out that compared to loss reduction in instant retail, the expansion of international business in 2026 is expected to be more prudent, a combination that will help sustain the overall earnings improvement of the group. ## Continuous Cash Flow Improvement, Significant Upside Potential in Valuation Remains Cash flow also showed marked improvement. Free cash outflow narrowed significantly from RMB 21.6 billion in the first quarter of 2025 to RMB 6.5 billion in the current quarter. Regarding valuation, JPMorgan maintained its target price for JD.com's US shares at $38, corresponding to a 9x 2027 forward P/E ratio (three-year average), equivalent to an 11x 2026 forward P/E ratio. In comparison, most Chinese e-commerce peers are currently valued at below 10x. JPMorgan pointed out that JD.com's current 8x 2027 forward P/E ratio implies insufficient pricing of the earnings improvement trend by the market. 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