Company Coverage
JD.com (9618 HK): 2Q26: Resilient Earnings on Margin Improvement and FD Loss Reduction; Revenue Outlook Turns Softer
Analyst
Highlights
- JD’s 2Q26 earnings were above expectations. Revenue declined 2.9% yoy to Rmb346.4b, 1.7% ahead of our estimate, despite a high comparison base for electronics and home appliances. Non-GAAP operating profit increased to Rmb5.5b from Rmb0.9b in 2Q25, while non-GAAP net profit rose 20.8% yoy to Rmb8.9b, beating our and consensus estimates by 14 15%, supported by solid JD Retail profitability and continued narrowing of losses at JD Food Delivery.
- Maintain BUY with a lower target price of HK$148.00 (US$38.00).
Analysis
- Revenue under pressure, but core retail profitability remained resilient. JD.com’s 2Q26 revenue declined 2.9% yoy to Rmb346.4b, vs +4.9% in 1Q26, but came in 1.6% above our forecast. Electronics and home appliances revenue fell 12% yoy (1Q26: -8%), mainly due to the high trade in comparison base and upstream price pressures, while general merchandise revenue grew 6% yoy (1Q26: +15%). Marketplace and marketing revenue rose 8% yoy (1Q26: +19%), while logistics and other service revenue growth moderated to 6% yoy (1Q26: +22%). JD Retail revenue declined 5% yoy (1Q26: +2%), with EBIT margin deteriorating 1ppt yoy to 4.6%, despite remaining at a record level for a peak promotional quarter.
- Gross margin expanded, with new business losses narrowing. Gross margin expanded 1.2ppt yoy and 0.3ppt qoq to 17.1% in 2Q26, supported by improving supply-chain efficiency and a more favourable revenue mix. Non GAAP operating margin rose 1.3ppt yoy to 1.6%, but edged down 0.2ppt qoq. JD Retail/JD Logistics/New Businesses operating margins came in at 4.6%/3.5%/-135.7%, vs 5.6%/1.7%/-164.9% in 1Q26, with the improvement in new businesses mainly reflecting continued loss reduction at JD Food Delivery, whose losses narrowed by over 50% yoy.
- Food delivery loss reduction supports earnings recovery. JD Food Delivery losses narrowed significantly yoy in 2Q26 on improving efficiency and monetisation. Further loss reduction should reduce the drag on group earnings while supporting user engagement and cross-selling.
- AI and overseas expansion provide medium-term optionality. JD continued to deepen AI deployment across retail, logistics and industrials, with JoyInside connecting nearly 200 brands, JD Logistics deploying thousands of autonomous vehicles, and JD Industrials rolling out more than 70 AI agents in 1H26. Meanwhile, Joybuy continued to expand in Europe, highlighting potential upside from JD’s overseas retail and supply-chain capabilities.
- International outlook: International operations remain in an early investment phase, with quarterly losses of about Rmb1b-2b. Management plans to expand cautiously, prioritising execution in existing European markets before entering additional cities and countries, while keeping overall investment disciplined and controllable.
- Food delivery outlook: Food delivery losses have narrowed materially from about Rmb13b in 3Q25, with losses at around Rmb7b in 1Q26 and around Rmb6b in 2Q26. Management expects 3Q26 losses to more than halve yoy, implying losses of around Rmb6b or below. Unit economics have also improved significantly, with loss per order narrowing to below Rmb5 from around Rmb10 at the early stage of the business, supporting further loss reduction.
- Cash generation remained solid. 2Q26 operating cash flow rose to Rmb37.7b, while free cash flow increased 44.6% yoy to Rmb31.8b. JD also repurchased US$1.0b of shares in 1H26, equivalent to about 2.5% of shares outstanding, reinforcing its commitment to shareholder returns.
- 3Q26 outlook: Retail growth turns positive with accelerating earnings momentum. Retail revenue is expected to return to positive growth of 3-3.3% yoy, with two-year CAGR remaining in the mid- to high single-digits as the high subsidy base in electronics normalises. General merchandise should continue to outgrow electronics, while advertising growth is expected to accelerate. Retail margin should remain broadly stable yoy despite further GM improvement, partly offset by higher AI/R&D investment. At the group level, 3Q26 revenue growth should turn positive and slightly outpace retail, while net profit growth should accelerate from +21% yoy in 2Q26, with further net-margin improvement.
Highlights
- JD’s 2Q26 earnings were above expectations. Revenue declined 2.9% yoy to Rmb346.4b, 1.7% ahead of our estimate, despite a high comparison base for electronics and home appliances. Non-GAAP operating profit increased to Rmb5.5b from Rmb0.9b in 2Q25, while non-GAAP net profit rose 20.8% yoy to Rmb8.9b, beating our and consensus estimates by 14 15%, supported by solid JD Retail profitability and continued narrowing of losses at JD Food Delivery.
- Maintain BUY with a lower target price of HK$148.00 (US$38.00).
Analysis
- Revenue under pressure, but core retail profitability remained resilient. JD.com’s 2Q26 revenue declined 2.9% yoy to Rmb346.4b, vs +4.9% in 1Q26, but came in 1.6% above our forecast. Electronics and home appliances revenue fell 12% yoy (1Q26: -8%), mainly due to the high trade in comparison base and upstream price pressures, while general merchandise revenue grew 6% yoy (1Q26: +15%). Marketplace and marketing revenue rose 8% yoy (1Q26: +19%), while logistics and other service revenue growth moderated to 6% yoy (1Q26: +22%). JD Retail revenue declined 5% yoy (1Q26: +2%), with EBIT margin deteriorating 1ppt yoy to 4.6%, despite remaining at a record level for a peak promotional quarter.
- Gross margin expanded, with new business losses narrowing. Gross margin expanded 1.2ppt yoy and 0.3ppt qoq to 17.1% in 2Q26, supported by improving supply-chain efficiency and a more favourable revenue mix. Non GAAP operating margin rose 1.3ppt yoy to 1.6%, but edged down 0.2ppt qoq. JD Retail/JD Logistics/New Businesses operating margins came in at 4.6%/3.5%/-135.7%, vs 5.6%/1.7%/-164.9% in 1Q26, with the improvement in new businesses mainly reflecting continued loss reduction at JD Food Delivery, whose losses narrowed by over 50% yoy.
- Food delivery loss reduction supports earnings recovery. JD Food Delivery losses narrowed significantly yoy in 2Q26 on improving efficiency and monetisation. Further loss reduction should reduce the drag on group earnings while supporting user engagement and cross-selling.
- AI and overseas expansion provide medium-term optionality. JD continued to deepen AI deployment across retail, logistics and industrials, with JoyInside connecting nearly 200 brands, JD Logistics deploying thousands of autonomous vehicles, and JD Industrials rolling out more than 70 AI agents in 1H26. Meanwhile, Joybuy continued to expand in Europe, highlighting potential upside from JD’s overseas retail and supply-chain capabilities.
- International outlook: International operations remain in an early investment phase, with quarterly losses of about Rmb1b-2b. Management plans to expand cautiously, prioritising execution in existing European markets before entering additional cities and countries, while keeping overall investment disciplined and controllable.
- Food delivery outlook: Food delivery losses have narrowed materially from about Rmb13b in 3Q25, with losses at around Rmb7b in 1Q26 and around Rmb6b in 2Q26. Management expects 3Q26 losses to more than halve yoy, implying losses of around Rmb6b or below. Unit economics have also improved significantly, with loss per order narrowing to below Rmb5 from around Rmb10 at the early stage of the business, supporting further loss reduction.
- Cash generation remained solid. 2Q26 operating cash flow rose to Rmb37.7b, while free cash flow increased 44.6% yoy to Rmb31.8b. JD also repurchased US$1.0b of shares in 1H26, equivalent to about 2.5% of shares outstanding, reinforcing its commitment to shareholder returns.
- 3Q26 outlook: Retail growth turns positive with accelerating earnings momentum. Retail revenue is expected to return to positive growth of 3-3.3% yoy, with two-year CAGR remaining in the mid- to high single-digits as the high subsidy base in electronics normalises. General merchandise should continue to outgrow electronics, while advertising growth is expected to accelerate. Retail margin should remain broadly stable yoy despite further GM improvement, partly offset by higher AI/R&D investment. At the group level, 3Q26 revenue growth should turn positive and slightly outpace retail, while net profit growth should accelerate from +21% yoy in 2Q26, with further net-margin improvement.
Analyst
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