Highlights

• JD will report its 2Q26 results in mid-Aug 26; we expect revenue and earnings to slightly beat consensus expectations, supported by resilient core retail profitability, a smaller-than-expected decline in JD Retail revenue and narrower instant retail losses. Group net profit is guided to return to positive yoy growth, while JD Retail’s margin should remain broadly stable. Easing subsidy-related base effects should support a gradual 2H26 retail recovery, while European expansion progresses. Instant retail loss reduction remains the key investor focus. Maintain BUY with a higher target price of HK$156.00 (US$40.00).
   

Analysis

• Core retail earnings to remain resilient despite softer revenue. We forecast 2Q26 group revenue declining 4.5% yoy to Rmb340.8b (better than market expectation of 8%) with revenue growth guided to be around 2ppt better than JD Retail’s. The pace of decline improved in June and should moderate further in 3Q26. Electronics and home appliances revenue is expected to fall 13% yoy to Rmb155.2b, reflecting the high subsidy-related base and smartphone and computer price increases, while general merchandise revenue is forecasted to grow 1% yoy to Rmb104.5b, supported by relatively resilient supermarket and grocery demand despite weaker macro headwinds. Against the backdrop of revenue pressure, group net profit is expected to return to yoy growth, as gross margin improvement outweighs the impact of higher operating expenses, particularly AI-related R&D spending. Following a 25% yoy growth in 2025 retail operating profit to Rmb51.4b and margin expansion from 4.0% to 4.6%, JD Retail continues to demonstrate resilient profitability.
   
• The key debate remains instant retail. While losses are narrowing, the pace of improvement appears slower than peers. Management indicated instant retail losses narrowed from Rmb7b in 1Q26 to Rmb6b in 2Q26, while total new business losses (including Jingxi and international) remained just below Rmb10b. In our view, JD.com (JD) continues to face a trade-off between reducing subsidies and maintaining order volume, making meaningful unit economics improvement more challenging. Although the company continues to target a reduction in annual instant retail losses from Rmb37b in 2025 to Rmb23b in 2026, execution remains the key risk, particularly given seasonally weaker profitability in 3Q.