--- title: "JD.com's Profitability Inflection Point: Why the Market Is Not Buying It" type: "News" locale: "en" url: "https://longbridge.com/en/news/295891258.md" description: "JD.com reported Q2 2024 Non-GAAP net profit attributable to shareholders of RMB 8.9 billion, a 20.8% year-over-year increase that exceeded expectations. However, total revenue fell 2.9% year-over-year to RMB 346.4 billion, marking the first quarterly negative growth since its listing. Affected by the revenue decline and market concerns, JD.com's US shares dropped 7.3%, while its Hong Kong shares fell over 10% during trading. The profit growth was mainly driven by reduced losses in new businesses and improved retail margins, but the shift to negative revenue growth has sparked investor concerns about long-term growth potential" datetime: "2026-08-14T06:34:39.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/295891258.md) - [en](https://longbridge.com/en/news/295891258.md) - [zh-HK](https://longbridge.com/zh-HK/news/295891258.md) --- # JD.com's Profitability Inflection Point: Why the Market Is Not Buying It On one hand, there is revenue: RMB 346.4 billion, a 2.9% year-over-year decline. This marks the first time since JD.com's listing in 2014 that quarterly revenue has contracted. On the other hand, there is profit: Non-GAAP net profit attributable to shareholders reached RMB 8.9 billion, up 20.8% year-over-year, beating the consensus estimate by approximately RMB 1 billion. In the financial report, Xu Ran stated, "The profitability trajectory has reached a clear inflection point." The market's reaction was overwhelmingly negative. Following the earnings release, JD.com's US shares closed down 7.3% at $29.3. On August 14, JD-SW opened 6.5% lower in Hong Kong, dropping more than 10% during the session, with trading volume nearly doubling from the previous day. Despite beating profit expectations, the stock was still sold off heavily. Why? ## First Negative Revenue Growth Sparks Market Panic The revenue breakdown is not complex. Q2 product revenue was RMB 267.1 billion, down 5.4% year-over-year, primarily dragged down by electronics and appliances: revenue from these categories was approximately RMB 157.9 billion, a decline of 11.8%. The high base effect from last year's national subsidies, combined with rising global memory chip prices, created a squeeze from both ends. General merchandise and services are filling the gap. Revenue from daily general merchandise grew 5.6% year-over-year to RMB 109.2 billion; service revenue increased 6.8% to RMB 79.3 billion, raising its share of total revenue to 22.9%, with platform and advertising revenue up 8.3%. JD Retail's operating profit was RMB 13.5 billion, with a margin of 4.6%, hitting a record high for a major promotional season. The core business remains stable. What the market is focused on is another curve. **Over the past six quarters, JD.com's year-over-year revenue growth rates were +15.8%, +22.4%, +14.8%, +1.5%, +4.9%, and -2.9%. After peaking at 22.4% in Q2 2025, the growth rate has been sliding, officially turning negative in Q2 this year. A single quarter of decline is not scary; what is frightening is that this trend shows no sign of bottoming out.** ## The Quality of the RMB 8.9 Billion Profit: Half Comes from Reduced Losses in Food Delivery **How did operating profit turn around by RMB 5.4 billion? Breaking it down, there are three sources.** **First, reduced losses in food delivery.** Operating losses from new businesses (food delivery plus Joybuy in Europe) narrowed from RMB 14.78 billion to RMB 9.85 billion, a reduction of nearly RMB 4.9 billion. During the conference call, Xu Ran stated that total investment in food delivery saw a year-over-year loss reduction of over 50%, with per-order subsidies significantly decreasing while order volume continued to grow healthily. **Second, marketing contraction.** Q2 marketing expenses were RMB 20.3 billion, RMB 6.7 billion less than the same period last year, a decrease of 24.8%. The expense ratio dropped from 7.6% to 5.9%. Last year coincided with the fiercest phase of the food delivery subsidy war, where marketing expenses surged to RMB 27 billion; they have now clearly returned to normal levels. **Third, retail stability.** JD Retail's operating profit was RMB 13.5 billion, basically flat compared to RMB 13.9 billion in the same period last year, showing no further deterioration. The RMB 6.7 billion cut from the marketing budget went into R&D. Q2 R&D expenses were RMB 7.3 billion, up 37.7% year-over-year, with the expense ratio rising to 2.1%. R&D investment across the group increased by 53% in the first half of the year. The group's gross margin was 17.1%, expanding by 1.2 percentage points year-over-year, approaching historical highs. Retail gross margin rose from 17.3% to 18.5%, driven by an increased proportion of asset-light revenue from platforms and advertising. However, one point must be clarified: a quarterly inflection point is different from a trend inflection point. Looking at the first half of the year combined, JD.com's net profit attributable to shareholders was RMB 12.231 billion, still down 28.3% year-over-year; Non-GAAP net profit attributable to shareholders fell 19.1% year-over-year. The reason lies in Q1: Non-GAAP net profit was RMB 7.4 billion, more than half less than the RMB 12.8 billion in the same period last year. Q2's impressive figures are built half on Q1's deep hole and half on the low base from last year's food delivery war. ## The Bill for Electronics and Appliances Will Only Be Settled in Q3 **The root cause of the negative revenue growth lies in home appliances and 3C products.** Xu Ran offered two explanations: the high base effect of national subsidies and rising memory chip prices. She also provided a timeline: starting in Q3, the impact of the high base from national subsidies will gradually dissipate, and the growth rate of electronics and appliances will rebound. JD.com is confident in maintaining its market share. The year-over-year decline in electronics and appliances was -11.8% in Q2, following -8.4% in Q1. The low base facing Q3 is already improving. This is precisely the confidence behind JD.com's guidance that "retail business will return to positive revenue growth in Q3." But guidance is just words; execution is fact. The "inflection point" will only hold if three conditions are met simultaneously in Q3: revenue returns to positive growth, food delivery losses continue to narrow, and retail margins remain high. If any one of these fails, the market will reprice the stock. Investment banks have already split into two camps. JPMorgan maintains an Overweight rating with an H-share target price of HKD 148, but added that "the time for re-rating has not yet arrived." CLSA lowered its full-year profit forecast but maintained an Outperform rating. Goldman Sachs maintains a Buy rating with a target price of HKD 169. HSBC raised its target price from HKD 137 to HKD 144. Jefferies analysts were the most optimistic, raising their target price from HKD 190 to HKD 194, betting on a return to positive retail revenue in the second half of the year. Nomura maintains a Buy rating with an ADR target price of $41. **The optimists are betting precisely on the Q3 results.** ## Cooling Food Delivery War: JD.com Braked Earliest Zooming out, JD.com hit the brakes earlier than its peers. In 2025, JD.com's new businesses, including food delivery, burned through RMB 46.6 billion for the full year, almost equal to JD Retail's annual operating profit. In Q2 this year, losses from new businesses narrowed from RMB 14.78 billion to RMB 9.85 billion. Regulators were also hitting the brakes during the same period: In June, the State Administration for Market Regulation released the "Ten Guidelines for Regulating Subsidies on Food Delivery Platforms (Draft for Comments)," explicitly targeting long-term large-scale subsidies. Alibaba cut its investment in Taobao Flash Shopping by half in the new fiscal year, making monthly unit economics (UE) positivity by FY2027 a mandatory goal. Meituan's Q1 revenue grew 5.6%, with an operating loss of RMB 6.47 billion. The logic of burning cash for market share is being recalculated across the industry. **JD.com's current loss reduction involves cutting food delivery subsidies while enhancing synergy with retail:** Quarterly active users grew by double digits year-over-year, and quarterly active customers in lower-tier markets increased by 40% year-over-year, contributing 40% of new users in Q2. The underlying synergy between food delivery fulfillment and JD Logistics is being integrated. Food delivery is shifting from a "cash-burning entry point" to a "high-frequency fulfillment network." The next moves in this strategy involve Joybuy and Jingxi. With the RMB 46.6 billion loss from food delivery in 2025 as a precedent, the market is now most wary of whether overseas expansion will incur another RMB 46.6 billion loss. ## The Answer for the Stock Price Lies in Q3 Today's drop in Hong Kong shares has already priced in the "first revenue decline plus concerns over overseas investment." Going forward, the market will no longer just price in profit figures, but three key issues: **when growth will return, how long the bleeding from food delivery will continue, and where the next pitfall for new businesses lies.** What truly remains unpriced in the financial report are two other sets of figures. One is cash flow: Free cash flow over the past twelve months was RMB 31 billion, three times that of the same period last year, with total cash and equivalents on hand amounting to RMB 235 billion. The other is shareholder returns: Approximately $1 billion worth of shares were repurchased in the first half of the year (equivalent to 2.5% of outstanding shares), and since 2023, approximately $13 billion has been returned to shareholders, with about $1 billion remaining in the repurchase program. The quality of profits depends on free cash flow, and JD.com stands firm on both counts. **Regarding the market's biggest concern—overseas expansion—the financial report actually hides an overlooked signal:** Joybuy's revenue doubled over two quarters, and its loss rate improved quarter-over-quarter. Management explicitly stated that investments are "disciplined and scalable." This differs from the strategy used when food delivery started in 2025, which prioritized scale regardless of profitability. Now, for every new investment discussed externally, JD.com puts the per-unit economic model first. **How long the reduction in food delivery losses can sustain is the most critical fundamental variable to watch in the next earnings report.** Management's path involves three overlapping lines: decreasing per-order subsidies, scaling to dilute delivery costs, and increasing the proportion of commission and advertising revenue. The pace of loss reduction could be faster than market expectations. Conversely, if the industry subsidy war reignites due to a competitor's actions, the pace of loss reduction could be temporarily disrupted. The pricing power for the entire sector will lie with Alibaba in the coming two weeks. On August 20, Alibaba will release its June quarter earnings. The profit margins of Taotian Group and the loss trajectory of Taobao Flash Shopping will determine whether the e-commerce sector continues to face valuation compression or takes a breather. Let's reorder the tracking list: First, whether retail growth in the Q3 report can turn positive, as management has already guided; Second, the unit economics (UE) of food delivery and the slope of total investment loss reduction; Third, after Alibaba's earnings on August 20, where the valuation anchor for the e-commerce sector will be. These three signals are more honest than any investment bank's report. Market risks exist; investment requires caution. This article does not constitute personal investment advice, nor does it consider the specific investment objectives, financial status, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. 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