JD: Another pullback? Keep calm — a rebound is near!---

Among China's three major e-com giants, $JD.com(JD.US) was the first to report Q4 results.Broadly speaking, the print was roughly in line against a very low bar.

1) State subsidies faded, growth plunged: JD's total revenue growth slowed sharply to +1.5% YoY this quarter, with QoQ deceleration of over 13ppt.The key driver is the rolling off of state subsidies, which had made JD the biggest beneficiary and set a high base; as subsidies faded, JD took the hardest hit.

That said, the outcome was slightly better than Bloomberg consensus, as the market had largely priced this in.

2) Electrified categories dragged, other lines cushioned: Sales growth in electrified categories turned sharply negative to -12%, becoming the primary culprit of the revenue slowdown.Other segments, though also affected by weaker cross-selling from electrified categories and with slower growth vs. last quarter, proved more resilient and helped cushion the top line.

Specifically, general merchandise grew 12%.Service revenue from 3P merchant services and logistics rose 20% YoY, which was decent and broadly in line with sell-side expectations.

Notably, logistics-type revenue growth slowed by nearly 12ppt QoQ, the sharpest drop after electrified categories.This suggests the scale of on-demand/food-delivery operations likely fell vs. the previous two quarters.

3) Bigger loss than during the food-delivery war: Adj. operating loss was ~RMB 3.1bn, marking the first loss since 2017 and larger than losses in the Q2–Q3 investment peak.Still, this was well telegraphed and roughly in line with Bloomberg estimates. (On a GAAP basis, operating loss was much higher and missed, due to ~RMB 1.6bn one-off intangible amortization.)

4) Retail margin down, limited loss narrowing in new biz: The sharp widening of group loss was driven by JD Retail, whose profits had peaked during the subsidy windfall and fell as subsidies faded.Meanwhile, loss reduction in new businesses was less than expected despite planned cuts in food-delivery spending.

JD Retail's OP was RMB 9.8bn, down ~2.5% YoY and clearly below the RMB 13–15bn per quarter seen in the first three quarters.However, it was better than more bearish sell-side expectations.

The swing factor missing estimates was new businesses, with an actual loss of RMB 14.8bn vs. the market's RMB 13.8bn.This did not deliver the meaningful narrowing expected from reduced food-delivery investment.

Either subsidies in food-delivery/instant retail remained sizable to defend order volume, or overseas and other new-biz investments exceeded expectations.Watch for more color on the call.

5) Costs and expenses: By segment, despite the fade in state subsidies, core-site GPM still rose (+110bps YoY), roughly matching last quarter's improvement.Margin compression was mainly due to higher opex (self-funded consumer subsidies replacing state subsidies).

At the group level, the pattern was similar: GPM continued to improve, but higher expenses weighed on profits.

By expense type, fulfillment and marketing ratios increased notably.This aligns with shipping subsidies in instant retail (traditional e-com shipping costs may also be up) and self-funded subsidies replacing state subsidies.

6) Generous shareholder returns; sustainability bears watching: In FY25, the company repurchased ~$3.0bn of shares and fully canceled them, equal to ~6% of total shares outstanding at end-FY24.It also declared an FY25 annual dividend totaling ~$1.4bn. The combined payout equals ~12% of pre-earnings market cap, a very generous return.

However, FY25 FCF was only RMB 17.3bn, clearly below buybacks plus dividends.With core-site profits likely down YoY in FY26 and if new businesses remain deeply loss-making, the sustainability of such high buybacks is in question.

Dolphin Research view:

1) On current results, both trend and absolute performance were undoubtedly weak.After the subsidy windfall faded, revenue growth plunged from high-teens to nearly flat at ~1%.

Profitability was also hit, as JD Retail, which had been printing record margins and strong cash generation, began to see profits decline once subsidies disappeared.

Meanwhile, the company did not 'tighten the belt' and continued investing across instant retail, overseas, and lower-tier markets, limiting loss narrowing in new businesses.

As a result, JD recorded its first adj. operating loss since 2017, underscoring how tough the situation is.

2) Underlying business trends and logic

1) In the core retail segment, given the subsidy fade and the high base in Q4 FY24–H2 FY25, sales of electrified categories will likely keep declining visibly in H1 FY26.Home appliances were the main drag this quarter; smartphones may also turn into a headwind in 2026.

At the same time, with more self-funded subsidies and operating deleverage as revenue shrinks, retail profit release likely peaked in FY25 and may still decline YoY through FY26.The trend remains negative.

Unless general merchandise and 3P maintain solid growth, or even strengthen in 2026, to offset the weakness in electrified categories.

2) Another core question is how JD will adjust its investment and loss stance in new businesses as core-site earnings power weakens post-windfall.This print suggests JD may keep a relatively active investment posture in the near term.

On the one hand, while JD has largely stopped promoting food-delivery, and order volumes likely fell vs. prior quarters, loss narrowing was not significant.The company explicitly set a 2026 target to double the market share of its instant retail business (including restaurant, non-restaurant, and 7Fresh), implying continued scale investment even if the total will be lower than this year.

On the other hand, as flagged last quarter, JD revived the 'Jingxi' brand, re-entering white-label and lower-tier markets, and highlighted the 'Billion-Yuan Supermarket' channel with a 3-year plan to invest RMB 20bn.Moves in overseas have been even more frequent, with reports that JoyBuy in Europe is entering an investment phase, including user acquisition and logistics buildout.

Therefore, while new-biz losses may narrow vs. FY25, the absolute loss could still be in the high tens of billions of RMB per quarter to over RMB 10bn.Some major brokers project total new-biz losses to fall from RMB 46bn in FY25 to RMB 39bn in FY26; that now looks uncertain.

This keeps JD in a negative narrative of weakening core cash generation while new businesses continue to bleed.

3) On valuation, we look from two angles: a downside base case under pessimistic assumptions, and a neutral, more reasonable case.In the conservative case, we take group profits including new-biz losses. Assuming no sizable restart of state subsidies in FY26, leading to negative revenue in electrified categories, and operating deleverage drives lower retail OPM, putting retail profits into slight negative growth (low-single-digit %).

For new businesses (food-delivery, Jingxi, overseas), despite some narrowing in absolute food-delivery losses, overseas investment and losses likely expand.Combined, we expect new-biz losses of ~RMB 40bn in FY26.

Total group net profit would be ~RMB 20bn+ (no add-backs for SBC or any adjustments).Against a pre-earnings market cap just under RMB 250bn, that implies ~12–13x, which is not cheap; there is still downside room, e.g., toward ~10x.

However, markets rarely value this strictly.Given new-biz investment and losses are under management control and can be throttled back, the negative setup can be adjusted at will.

In the neutral case, valuing JD on core retail OP, the current market cap implies ~6x PE.Add generous shareholder returns, with buybacks plus dividends equating to ~14% of market cap, providing a notable floor.

Overall, JD is clearly in the bottom range on both trend and valuation.Any repair likely hinges on how fast management reins in the 'spray-and-pray' stance in new businesses.

The good news: management stated on the call that food-delivery investment peaked in FY25 and will decline in FY26.Meanwhile, state subsidies in FY26, while lower in magnitude and stricter in standards, will still improve meaningfully vs. the sharp reduction in Q4. Core electrified categories should see a clear recovery in H1 FY26.

With earnings exiting the trough, JD's valuation has room to repair, e.g., from ~6x core profits toward 8–10x.

Detailed Q4 takeaways:

I. Subsidy payback as expected; self-operated retail turned negative

1) Self-operated retail revenue was RMB 226.1bn, down 2.5% YoY, underperforming the ~+3% growth in online physical goods retail in Oct–Nov.This was driven by subsidy fade and the high base, with electrified categories, especially home appliances, seeing a marked decline. JD, having been the biggest beneficiary, took the biggest payback.

The good part is that this was well known and priced in, so while weak, growth matched market expectations.

Electrified categories revenue fell 12% YoY, deeply negative but broadly as expected.Stats Bureau data show home-appliance sales at scale fell 14–19% YoY in Oct–Nov. However, smartphones and other communications products were still in a sales peak, growing over 20% YoY, partly offsetting appliance weakness.

By contrast, helped by supermarkets and apparel (retail added ~6 more stores QoQ, and brands in JD Fashion exceeded 1,000), general merchandise grew nearly 12% YoY.Growth slowed (higher base and less traffic from electrified categories) but remained solid in double digits.

2) Services slowed but proved more resilient: Service-type revenue also cushioned the top line.Commission and ad revenue grew 15% but slowed notably QoQ as platform traffic declined (self-run turned negative).

In magnitude, self-operated retail growth fell nearly 14ppt QoQ, while commission & ad slowed by less than 9ppt.This indicates JD's 3P merchant ecosystem and monetization are improving at the margin.

Logistics-type revenue, including JD Logistics and instant retail delivery, grew nearly 24% YoY this quarter.That was a notable slowdown vs. the ~35% pace during the food-delivery investment peak, implying JD's food-delivery/instant retail volumes did fall QoQ.

Overall, with weaker traffic from both subsidies and food-delivery, total revenue growth plunged from 15% last quarter to just 1.5%.Structurally, general merchandise, 3P, and logistics delivered decent growth, cushioning the steep drop in electrified sales and barely keeping total revenue in positive territory, broadly matching expectations.

II. Retail profit fell as expected; why didn't new-biz losses narrow?

By business line:1) JD Retail revenue, similarly dragged by electrified categories, turned negative to -1.7% growth, though slightly better than Bloomberg consensus.

2) JD Logistics (JDL) revenue grew 21% YoY.It softened at the margin but remained strong. Per JDL's own filing, growth mainly came from intragroup instant delivery (JDL acquired Dada's instant delivery business in Q4), while external-customer revenue was flat.

3) New businesses including food-delivery posted revenue of RMB 14.1bn, down from RMB 15.6bn last quarter and slightly below market expectations.This likely reflects smaller scale and lower revenue contribution from food-delivery.

On profits, group GAAP operating loss was as high as RMB 5.85bn, much worse than the Q2–Q3 food-delivery investment peak.The core reason is that retail, which had been at record profitability during the subsidy windfall, saw profits decline as subsidies faded, while new-biz losses remained elevated.

By segment:1) JD Retail OP was RMB 9.8bn, down ~2.5% YoY and clearly below the RMB 13–15bn per quarter in the first three quarters. Versus expectations, Bloomberg consensus was much lower (RMB 7.8bn), so it wasn't as bad as feared.

2) JDL's operating profit was also slightly below expectations.Despite solid revenue growth, OP grew only 3%, dragged by instant retail/food-delivery delivery subsidies with low margins or even losses.

3) The worst vs. expectations was new businesses, with an actual loss of RMB 14.8bn vs. RMB 13.8bn expected.Pre-earnings, the market broadly anticipated meaningful loss narrowing on reduced food-delivery investment and UE improvements, but the actual QoQ reduction was less than RMB 1bn.

Either order volumes in food-delivery/instant retail declined but subsidies stayed high to defend a floor in scale, or overseas and other new-biz investments exceeded expectations.Watch the call for further explanation.

III. GPM up, opex ratio worse — more of an allocation issue

From a cost/expense angle, group GPM was 16.9%, up 30bps YoY rather than down, which was surprising at first glance.On closer look, more spending was recognized in opex instead.

By segment, despite subsidy fade, core-site GPM still rose +110bps YoY, roughly matching last quarter.Retail OPM declined due to higher opex (self-funded consumer subsidies replacing state subsidies).

Another factor: new-biz GPM improved sharply from -6.4% last quarter to +2.3%.Again, more spending was booked to opex, without much substantive change.

On expenses, by segment:1) JD Retail's opex ratio was 13.9%, up 120bps YoY and higher than the GPM improvement, hence the slight OPM decline.

2) For new businesses, while GPM improved QoQ, opex as a share rose from 96% to 103%, so operating loss margin actually widened QoQ.

By expense type, total opex was RMB 60.9bn, +36.5% YoY.Growth slowed vs. Q2–Q3, but with revenue decelerating sharply, the opex ratio expanded slightly (+10bps QoQ).

Fulfillment and marketing shares increased notably, consistent with instant retail shipping subsidies and self-funded subsidies replacing state subsidies.R&D also spiked unusually, likely due to ~RMB 1.6bn intangible amortization recognized this quarter.

For the same reason, adj. operating loss was ~RMB 3.1bn, roughly matching market expectations.GAAP operating loss was RMB 5.85bn, ~RMB 1.7bn worse than expected, essentially due to the one-off amortization above.