JD.com, Inc.

Hello and thank you for standing by for JD.com's first quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. After management, prepared remarks will be a question and answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Sean Zhang, Director of Investor Relations. Please go ahead.

Thank you. Good day, everyone. Welcome to JT.com Q1 2025 earnings conference call. With us today is CEO of JT.com, Ms. Sandy Xu. She will kick off the call with her opening remarks, and our CFO, Ms. Ian Shan, will discuss the financial results. Then we'll open the call to questions from analysts. Before turning the call over to Sandy, let me quickly cover the safe harbor. Please be reminded that during this call, our comments and responses to your questions reflect management's view as of today only and will include forward-looking statements. So please refer to our latest Safe Harbor statement in the earnings press release on our website, which applies to this call. We'll discuss certain non-GAAP financial measures. So please refer to the reconciliation of non-GAAP measures to the comparable GAAP measure in the earnings press release. Please also note all figures mentioned in this call are in RMB, unless otherwise stated. So now let me turn the call over to our CEO, Sandy. Sandy, please.

Thank you, Sean. Hello, everyone. Thank you for joining our earnings conference call today. Our business maintained robust momentum in the last quarter of 2024 and kicked off 2025 with an even stronger set of results in Q1. our total revenues were up 16% year-on-year, a further acceleration from the prior quarter with healthy growth across the board. We meaningfully outpaced total retail sales and online retail sales of physical goods in the same quarter. We continued to enhance our supply chain capabilities and solidified market leadership in our electronics and home appliances category, while further tapping into the vast market potential in the general merchandise category and building up our user man share. Our business also continued to see healthy profit growth during the quarter. Our non-GAAP net profit was up 43% year-on-year to 12.8 billion RMB, with net margin expanding by 82 bps to 4.2%. This was primarily driven by year-over-year improvement in our growth margin, a trend that we've sustained for 12 quarters in a row as our team continues to focus on driving best-in-class user experience, lower cost, and higher efficiency. Let's first look at our category performance. We saw continued healthy demand for electronics and home appliances on our platform in Q1, leading to a further acceleration in revenue growth to 17% year-over-year. The healthy demand in this category demonstrates the underlying strength and vast potential of domestic consumption, as well as JD's unparalleled strengths in supply chain, and user man-share. Citi's business model enables us to seize structural opportunities in the industry, driven by the government's consumption stimulus policies, the innovation of technologies, and continuous rollout of new product models. We are confident to generate more vitality and resilience in our long-term growth. in electronics and home appliances. Moving on to general merchandise. In Q1, revenue growth here also accelerated sequentially to 15% year-on-year. To break this down, supermarket category revenue growth hit double digits for the fifth consecutive quarter. In particular, It had a robust promotion season during the Chinese Lunar New Year with revenues and users both on a solid growth trajectory. The momentum of supermarket category is expected to carry on throughout 2025. This performance is the result of continued refinements across every stage of our retail supply chain. from enhanced procurement capabilities and improved fulfillment efficiency to a stronger user experience and increased user man-share. Supermarket offers massive market scale with fragmented players and relatively low online penetration. So we see a lot of headroom to step up our growth and profit improvement in this key category. Our fashion category further accelerated revenue growth in Q1, driven by a continually enhanced assortment of brands and merchants, along with growing user recognition. Supported by our differentiated roadmap to scale our fashion business scale and strengthen user man-share, we anticipate strong operational tailwinds throughout the year. We expect supermarket, fashion, and other high potential growth categories within general merchandise, which we are only beginning to unlock to further propel our long-term growth trajectory. Moving on to user growth and engagement, another bright spot in Q1. During the quarter, our quarterly active customer number was up double digits year-on-year with increased average user shopping frequency and notable acceleration. JD Plus recorded double-digit year-on-year growth in both shopping frequency and our pool in Q1. Overall, we are pleased with the robust user traction we have attained. It's a reflection of the strong momentum of our core retail business and our ever enhancing user experience. We constantly review and always strive to improve our user experience. Particularly in Q1, our team tackled a number of sticking points to further streamline our after sales services and continued to increase AI adoption. to improve efficiency and the personalization of search and recommendation, AI shopping guide consultation, as well as delivery and after sales services, among others. We believe our user momentum will get stronger as we continue to optimize user experience and work on user synergies across our businesses. We've also made steady progress in executing our low-price strategy and building out our 3P ecosystem. In Q1, our net promoter score, the NPS, on price competitiveness improved both year-on-year and sequentially, demonstrating that our low-price efforts are better resonating with our users. Growth of order volume and user base in lower-tier markets also continued to outpace that of higher-tier markets on our platform. On the 3P ecosystem side, as we further expanded merchant base and product offerings, both our 3P order volume and 3P buyers increased strongly year on year. This momentum also contributed to the robust growth of our marketplace and marketing revenues, which were up 16% year-on-year in Q1, a meaningful pickup compared to preceding quarters. Over the years, we've built a very robust and scaled retail business with strong supply chain capabilities and best-in-class user experience. Retail remains the cornerstone of JD. and serves as the foundation from which we will continue to pursue more exciting growth opportunities. One recent notable opportunity is our rapid growing food delivery business. Starting from core retail, JD is expanding into on-demand retail, meeting users' diverse needs in different shipping scenarios, shopping scenarios. Food delivery has the highest shopping frequency and contributes the majority of orders within on-demand retail. Moreover, food delivery is a vast market with abundant and tapped demand and opportunities. And JD has the right culture strength, including the established system, fulfillment network, talents, as well as business model to effectively address these demands. It's important to note that at JD, we do not see food delivery as a standalone business. It's deeply rooted and well integrated into JD's robust retail infrastructure and ecosystem, a pivotal differentiator. In a very brief time, JD Food Delivery has made remarkable headway in the aspects of order volume on boarded merchants and rice. In particular, as we speak, JD Food delivery order volume today is reaching close to 20 million orders, another important milestone that we expect to surpass very soon. This demonstrates our incentive, strategies, and strong execution at the right time On-demand retail with food delivery included will generate powerful synergies with our core retail and other businesses, such as JD Health, and drive overall growth and efficiency gain across the entire JD ecosystem in the years to come. In addition to food delivery, we are excited to work on a number of other initiatives. For example, In April, we launched a 200 billion RMB export to domestic sales program to work with export manufacturers to expand domestic market presence. It will also enrich product supplies on our platform, particularly those featuring great quality and low price. In addition, We've also been driving the application of AI and automation technologies across the demand, supply, and fulfillment aspects of our entire ecosystem, such as better connecting user demand with our product offerings, improving efficiency of our warehousing and fulfillment operations, and developing AI-enabled tools to create better cost-effective for our 3P merchants. We are excited as AI is transforming the retail industry. As the largest retailer in China, we see abundant adoption scenarios. In summary, Q1 was very productive and exciting. Our core retail business progressed favorably with robust growth on both top-line profits and we are more excited as we are tapping into a set of great growth opportunities to expand our future plans. Beyond a solid core business, we believe it is important for companies to hold a long-term perspective, remain steadfastly focused on its strategic priorities, while maintaining flexibility to adapt to industry dynamics. We believe JD today is on ever more solid footing, and we are making the necessary investments to support our sustainable long-term growth and bring value to society at large. This concludes my remarks. Now let me pass it over to Ian.

Thank you, Sandy, and hello, everyone. We had a robust start of the year amid the steady rebound in China's macroeconomy and consumption. In Q1, our total revenues growth accelerated to 16% year on year. We recorded a double-digit growth and acceleration across our major revenue streams, including electronics and home appliances, general merchandise, and service revenues, particularly marketplace and marketing. This performance stands as a strong proof of our ever-enhancing supply chain capabilities and user experience. In terms of profitability, our growth margin expanded by 60 bits year-on-year to 15.9% in Q1, sustaining a 12-quarter streak of year-on-year improvement. Non-GAAP net income attributable to ordinary shareholders was up 43%. to RMB $13 billion, with non-GAAP net margin expanding by 82 bps to 4.2%. Alongside our strong financial results, we remain dedicated to delivering shareholder returns. In April, we completed annual cash dividend payouts of US dollar $1.44 billion, or $1 per million. In terms of share buybacks year-to-date in 2025, we repurchased a total of 80.7 million Class A ordinary shares, equivalent to 40.4 million EDS, which accounted for 2.8% of our ordinary shares outstanding as of December 31, 2024. The progress demonstrated our dedication to creating value for our shareholders and our strong conviction in JD's long-term growth and financial performance. Now, let's turn to our Q1 financial performance. Our net revenues grew by 16% year-on-year to RMB 301 billion in Q1. Breaking down the mix, product revenues grew by 16% year-on-year, of which electronics and home appliances revenues were up 17%, and general merchandise revenues were up 15%, both at a faster pace compared to the prior quarter. For electronics and home appliances, we saw sustained strong consumption momentum in China. as the government continues to implement stimulus policies. JD is well positioned with our supply chain advantages to fulfill consumer demands, provide best-in-class trading experience, and further enhance our market position and user mindshare. Within general merchandise, both our supermarket and fashion categories recorded double-digit revenue growth in Q1. with further acceleration from a quarter ago. General merchandise remains an important engine for our long-term sustainable growth, as it represents huge market potential, and we will persistently strive to improve our operations and user experience in this category. Service revenues growth also accelerated to 14% year-on-year in Q1, Within services, marketplace and marketing revenues were up 16%, and logistics and other service revenues were up 13%. For marketplace and marketing, its growth pace continued to accelerate sequentially in Q1, and both commission and advertising revenues maintained double-digit growth momentum. This was a result collectively driven by many improving trends on our platform, including the increasing user traffic and engagement, our improving traffic allocation efficiency, as well as our expanding 3P merchant base and product offerings. Now, let's turn to our segment performance. JD Retail achieved robust growth in both top line and profitability. Its revenues were up 16% year-on-year in Q1, driven by a solid performance across all major categories. In addition, in Q1, JD Retail's gross margin continued to improve for the 12th consecutive quarter as we continued to boost our procurement capabilities and accelerate growth of our high-margin revenue streams. In terms of operating income in Q1, JD Retail's non-GAAP operating income was up 38% year-on-year to RMB 13 billion, and the operating margin was up 76%, 4.9%. We are well on track to continue to drive healthy top-line and profit trajectory for JD Retail as we move forward. Next, JD Logistics. JD Logistics' revenues grew by 11% year-on-year in Q1, with both internal and external revenues sustaining double-digit growth momentum. Its soft performance in terms of non-GAAP operating income in the quarter was in line with our expectations, as it proactively invested to upgrade fulfillment capacity and user experience. In addition, JD Logistics has been working on increasing automation levels, across its workstreams, such as warehousing, sorting, transportation, and last mile delivery. This enables JD Logistics to improve its frontline employee productivity and safety, as well as to further optimize its operational efficiency. Moving to new business. In Q1, revenues of new business turned around to a positive growth of 18% year-on-year. At the same time, its non-GAAP operating loss widened to RMB 1.3 billion. Both were mainly driven by the fast growth of our Jinxi business in Q1, a key pillar for us to penetrate into low-tier markets with a broad assortment of value-for-money products to better serve user demands and expand our user base there. JD full delivery by segment is also recorded on the new business. As it just started to scale at the end of Q1, the financial impact was not meaningful in the quarter. We are making very fast progress and gaining traction with consumers, merchants, and riders with our differentiated business philosophy and model. In particular, we have good ROI the user acquisition. Quarter to date in Q2, we've seen more tangible results from JD Delivery's user traffic, retention, as well as the great potential to synergize with our retail business and the entire ecosystem. Next, let's turn to our consolidated profit performance. In Q1, at the group level, our gross profit was up 20% year-on-year to RMB 48 billion. Gross margin was up 60 bps, up to 15.9%. It's primarily driven by JD Retail's gross margin improvement, highlighting the high-quality development of our core minutes. Non-GAAP net income attributable to ordinary shareholders at the group level increased by 43% year-on-year to RMB 13 billion in Q1, with non-GAAP net margin up 82 bps to 4.2%. Our last 12-month free cash flow as of the end of Q1 was RMB 38 billion, compared to RMB 61 billion in the same period last year. This was primarily due to cash outflows associated with the trading program and our efforts to secure product supplies to meet robust consumer demand. And this partially offset by our profit extension. By the end of Q1, our cash and cash equivalents, restricted cash, and short-term investment totaled RMB $203 billion. In summary, the strong performance in Q1 once again validates the effectiveness of our long-term strategic roadmap and our strong execution. Particularly, we're confident for 3D retail to steadily unleash its potential in both scale and operational efficiency improvement. At the same time, We are proactively making exciting headway into new business to build powerful synergies across the JD ecosystem and explore long-term opportunities. It takes tremendous efforts, but eventually will generate greater value for our customers, shareholders, and the society at large. With that, I will turn it back to Sean. Thank you. Thank you, Sandy and Ian. For the Q&A session, you are welcome to ask questions in Chinese or English. And our management will answer your questions in the language you ask. We'll provide English translation for convenience purpose only. In case of any discrepancy, please refer to our management statement in the original language. Operator, we can open the call for a Q&A session. Thank you.

Thank you. The question and answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask questions, we will take two questions at a time from each caller. If you have more than two questions, please request to join the question queue again after your first question has been addressed. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question is from Ronald Kyung from Goldman Sachs. Please go ahead.

谢谢Sandy, Ian和Shawn. And how do you see this industry pattern? What are the expectations? Second, I would like to ask Dingdong Sales. As we see the growth of this category, there is acceleration and the profit rate is also expanding. As I just said, the growth of clothing and Japanese white. Thank you, Sandy, Sean, and Ian. Two questions from me. One is on our food delivery. What do we see as the medium-term result for the food delivery initiative beyond maybe three to six months, one to two quarters of pretty intense investments? And how do we see the food delivery industry landscape in the medium term? Second question is on JD Retail with the acceleration that you've commented on across categories, also the margin expansion that we've seen. What have we done in driving particularly apparel and general merchandise strength? and what is our strategy in sustaining just overall healthy momentum beyond the training program into the second half. Thank you.

Thank you, Ronald, for your question. I will answer the delivery business first. Everyone is very concerned about this. Actually, when I started speaking, I also briefly shared the latest progress of our in-house retail and delivery business. I will talk about it in more detail. First of all, from our point of view, in-house retail and delivery business are actually starting from our core retail business. It will naturally extend to in-house retail. The purpose is to see that users do have such shopping needs. As a retail platform, we also need to provide users with a more diversified shopping scene and experience. Thank you, Ronald.

Let me first take the question on on-demand retail and food delivery that people really focus on. So I shared my thoughts regarding on-demand retail and food delivery business in the opening remarks. Let me elaborate further here. First, from a strategic perspective, on-demand retail and food delivery business is a natural extension from JD's core retail business. so with the goal to provide users with a more diverse shopping experience and scenarios. Food delivery has the highest order volume mix and frequency within on-demand retail. Therefore, JD food delivery business is deeply rooted in JD overall business ecosystem. It is not a standalone business. We believe on-demand retail, including food delivery, will create great synergy with JD existing business in terms of users supply chain, and fulfillment going forward?

First of all, the Chinese food delivery market is very large, and it can accommodate many platforms. Secondly, we see that there are still a lot of needs that have not been met in terms of users, merchants, and handlers, including users' needs for food safety and quality food delivery, merchants' needs for reasonable commission, and handlers' needs for better protection. In our view, the needs of the industry are in line with the current capabilities of Jindong, as well as our culture and the advantages of the business we have built over the years. These include Jindong's good and cheap brand mentality, the three-in-one logistics theory that we have been following, the reasonable profit level of the software, and the operational and management capabilities of the logistics.

那我们有这个能力也有意愿去满足我们用户和行业的这些需求。 Yeah, so food delivery is a massive market with significant demand waiting to be fulfilled. So first, food delivery market in China is still growing rapidly with ample room for multiple platforms to thrive. Currently, there are demands from users, merchants, and riders waiting to be fulfilled, including user demand for food safety and quality. merchants' demand for reasonable commissions, and riders' demand for better protection. JD has the right strength, culture, advantage to address such demands, including JD's better and cheaper brand awareness, the $0.35 principle that insists on taking only reasonable profits, and its strong logistic operation and management capabilities. So JD is both capable and willing to address this demand.

So let me elaborate a little bit further here. JD brand image of better and cheaper.

JD has already built the mindshare of better and cheaper among our nearly 600 million annual active customers, which will help our food delivery business quickly build user trust and meet user demand for safe and quality meals. Of course, as you know, JD also established the industry's strictest merchant onboarding review standards and management system, which will further enhance user mindshare and trust for JD.

Yes, and about the 3-in-5 theory, this is also a business concept proposed by our founders at the beginning of their business. It maintains our own stable and reasonable profit level, but at the same time, it also gives our partners a very reasonable space for profit growth, and at the same time, it also gives employees a very good power. For the take-out business, we will continue to provide better delivery policies and better traffic for high-quality merchants, so that they can focus more on the quality of their products, which will eventually lead to a positive cycle. As you can see, we did have a policy before May of this year that allowed merchants to get a full-year free delivery policy.

Regarding 35 cents principle, it is a principle that our founder insisted on and JD adheres to since day one of our operation, which is maintaining healthy yet only reasonable profit margin. By lowering commission rates and providing better traffic support to quality merchants, we can enable merchants to focus on food quality. This is a positive cycle. So, for example, merchants joining JD Food Delivery Platform before May 2025 will enjoy zero commission for the year.

然后在物流的运营和管理能力方面, 我们京东的即时零售配送的网络和系统 其实已经搭建很多年了。 而且我们在我们的京东物流的 B2C物流的运营和管理上面也有深厚的 In logistics operation and management capability,

So JD existing on-demand retail delivery network and system, as well as our rich experience in B2C e-commerce logistic operation management, can be directly applied to food delivery. By providing food social insurance, including the five insurance and one housing fund in China for the full-time delivery riders, and offering accident insurance and health insurance for part-time riders, JD can improve rider retention and satisfaction, therefore providing our users with better services.

关于具体的业务目标和规划, 在现阶段其实我们更加关注的还是用户和商家的体验, 当然我们也关注业务规模和投入的ROI。 Regarding specific business objectives, our current focus for PutDiary is one on user and merchant experience,

Number two, on business scale. Number three, on investment ROI. Food delivery business can generate great synergies with JD existing business. Our mid- to long-term goal is to further strengthen the synergy effect and operational capability across JD ecosystem, providing sustainable growth driver in the long term.

Yes, what I want to say is that today, actually, our So as of today, our system and operational capabilities still have a long way to go. We still have a lot of homework to do. Our focus right now is to improve operational efficiency around our system.

In the first quarter, we achieved a steady rise in overall performance. The Japanese and white categories also continued the growth of the double-digit number. Among them, the increase in commercial and fashion income reached the double-digit number, and the rate of improvement was accelerated. In the past two years, the business team has also continuously improved its business ability and user experience, and also helped the Japanese and white categories gradually release the potential for growth.

Ronald, for your second question, in the first quarter, we achieved broad-based growth. General merchandise category also maintained its momentum of double-digit revenue growth year-on-year, with both supermarket and fashion categories hitting double-digit growth and further accelerating on a sequential basis. Over the past two years, our team has been relentlessly enhancing operational capabilities and user experience. which is generating results and helping to unlock the growth potential of the general merchandise category.

In the past year, we have firmly invested in new users to let more users know more about Jingdong clothing and choose Jingdong clothing. This year, we will further enhance the brand and business richness. At the same time, we play an advantage in the supply chain, focusing on the quality of core products, professionalism, etc. We will provide users with more new products and support brands and merchants to gain higher quality growth on our platform.

to take a closer look for fashion category, including apparel. Over the past year, we made a lot of efforts in building user mindshare, attracting more users to use JD as their choice for apparel needs. This year, we will further expand our brand selection and merchant base. We will also leverage our supply chain advantages to reinforce our differentiated user mindshare, such as value for money and professionalism for core fashion categories. Additionally, we will provide users with more new releases and best-selling SKUs. This will also empower brands and merchants to achieve higher quality growth on our platform.

In the past two years, the merchant team has continued to improve its business capability. It has achieved double-digit growth in revenue in five consecutive seasons, and the market capacity is still constantly improving. The market size of the Chinese merchant industry is huge, and Jingfeng Supermarket can continue to play out an efficient self-sufficiency model.

The supermarket category team has been continuously enhancing its operational capabilities over the past two years, achieving double-digit revenue growth for five consecutive quarters, with the momentum continuing to pick up. The total addressable market of the Chinese supermarket industry is massive. JD can leverage its efficient 1P business model and supply chain advantages while further unlocking the synergies brought by food delivery and on-demand retail to meet users' diverse needs across different shopping scenarios.

At the same time, we will focus on improving user growth and user experience, improving the performance of the platform ecosystem, driving this year's and the next year's income growth. In terms of user growth and experience, our number of customer purchases in the quarter has continued to increase in the sixth quarter, and the Q1 increase has accelerated to more than 20%. While we see the growth momentum of general merchandise, we will continue to focus on user growth and user experience

as well as ecosystem development to drive sustainable revenue growth this year and beyond. In terms of user growth and user experience, our quarterly active customers have maintained double-digit growth for six consecutive quarters, with Q1 accelerating to over 20% year-on-year. and effective driver for our revenue growth. Going forward, we will further refine our user operation capabilities and provide high-quality shopping experience across core retail, on-demand retail, and food delivery business, sustaining healthy growth in both user base and engagement throughout the year.

We see that the user experience of 3P business is constantly improving. In terms of platform ecosystem, as 3P user experience continued to improve on our platform,

we saw rapid growth in our 3P user base and order volume, which outpaced the overall growth of JD Retail. With a more established 3P ecosystem and a stronger user mindshare towards our 3P offerings, we expect 3P to gradually unlock growth potential in the mid to long term.

Thank you. Let's go to the second question, please.

The next question can also be asked. Please go ahead.

短期以及中长期的单位经济模型UE那我们在拉动用户活跃度方面我们也看到数据有显著的提高接下来我们应该怎么去想财务方面的投入以及策略呢第二个问题是关于这个AI方面的我们看到不同的电商平台也透过这个AI来提高这个广告的投放效率 JD has achieved a remarkable result in the food delivery business. with a daily volume already close to 20 million a day. Can management share with us some of the key metrics like user retention, cross-selling opportunity with the retail business, short-term, medium-term, and long-term unit economic targets? After our investment in food delivery business, we have witnessed a very strong user growth in engagement level. So how should we think about the financial impact for this new investment and the strategy? And my second question is related to AI. Different e-commerce platforms have used AI to improve advertising ROI. As JD3P ecosystem continues to improve, can management share with us how AI has helped enhance JD advertising system and algorithm? Other than advertising, how is AI being applied to our other business segments too? Thank you.

Thank you for your question. Let me answer the takeaway question first. Yes, our team has been looking at the data. We also expect that if we can't get more than 20 million orders today, this milestone will be very fast and can be broken. This is also very important for our business. Our team is also very excited. We have also gradually seen that the takeaway for our entire Jindong Thank you, Kenny, for your question.

Yes, our team is paying close attention to this data right now. If we don't achieve 20 million today, it will happen very soon in the near future. This is an important milestone, and we feel very encouraged by this progress. In a very brief time of three months after launch of JD Food Delivery, we have seen groundbreaking progress and very positive results. On the user side, Food Delivery daily order volume is growing very rapidly. we have gradually observed food delivery positive impact on traffic and user acquisition, as well as boosting overall traffic conversion rate. Currently, repeat rate among food delivery users are very healthy. Since food delivery business is integrated in JD app, we are Also seeing initial cross-selling trend emerging on JD's platform, primarily in supermarket and lifestyle service categories.

On the business side, we also saw that the supply of delivery to the business was achieved in a short period of time, from nothing to nothing. Now we have more than one million stores. The demand for business opening is still very high. Many stores are also in the process of system integration. This has also caused a lot of pressure on our team for the business to integrate into the system.

On the merchant side, we expanded from zero to over one million onboarded stores in a short period of time, and merchant onboarding demand remains exceptionally strong and we feel the pressure for sure. With a lot of stores that are currently under the system connecting process, This also enables us to rapidly expand our location-based product offering.

This also enables us to rapidly expand our location-based product offering. These have also shown that the potential of the industry is huge. This also proves that the needs of users, customers, and beginners are also very strong. At the same time, our team execution ability is also very strong, but we are also gradually building our own ability.

On the rider side, we see same momentum. So the responses from riders are very positive with many riders showing great enthusiasm. We even don't have sufficient uniforms for new signed up JD riders. So definitely seeing very strong interest from a large number of riders eager to join JD platform. All this demonstrated the immense potential of the industry. We are seeing very strong demand from all three parties. While this also validating our precise understanding of user demand and our strong execution capability, our team, we have to say we are still in the stage of building our fundamental capabilities.

Yes, but indeed, our business actually develops in dozens of days. Fast development takes dozens of days. So, in fact, many of our operating movements and system capabilities are still in the process of construction and in the process of continuous optimization, including some of these cross-products. to provide users with better experiences, to improve our own operating capabilities, our system functions, and to create a healthier ecosystem for our customers. At the same time, of course, we also provide our delivery men with more guaranteed jobs. The specific investment is actually based on the needs of these three partners.

We also fully realize that JTDW is still in the very early stage with rapid development. We have to note that JTDW is only launched within a few dozen days. So some of the operational initiatives are still being implemented and the system optimization is still ongoing. I think we're able to share more details, including UE and cross-category synergies at a later stage. Our current focus is to work on enhancing user experience, upgrading operational capabilities, building a healthier ecosystem for merchants, and providing secure employment for riders. Our investment will be centered around to center around better meeting the needs of these three parties, namely users, merchants, and riders.

This is indeed a long-term, sustainable business. Of course, there will be a certain investment in the short term. At the same time, we also believe that as the scale grows, this business itself will gradually release its scale effect and at the same time improve efficiency. And more importantly, as I just said, this business is still growing in our entire ecosystem. Therefore, we made a strategic decision to enter the food delivery business

with the focus on building a sustainable long-term business rather than achieving short-term financial targets for any particular quarter of the year, we're confident that as the business grows, it will gradually realize economic scale and operational efficiency improvements. More importantly, Being deeply rooted within JD's overall ecosystem, the food delivery business holds significant synergetic potential with our on-demand retail and our core retail operations going forward, including driving incremental growth in user traffic, purchase frequency, and cross-selling, while enhancing efficiency and reducing costs through optimized delivery network utilization and data-driven technology enhancements.

The second question is about advertising. Let me answer it. First of all, we are actively embracing the huge opportunity of AI and automation. We believe that AI and automation can deeply accelerate the retail industry, not only to improve operating efficiency and reduce costs, but also to greatly improve user experience and bring about innovative modes. Let me share my thoughts on your second question on AI adoption in advertising. We are actively embracing the tremendous opportunity presented by AI and automation.

We firmly believe these technologies will profoundly transfer the retail industry, not only by enhancing operational efficiency and reducing costs, but also by significantly improving user experience and innovating business models. Currently, we are testing and applying AI technologies across numerous retail scenarios and the entire supply chain network.

In terms of demand, we are using AI to better identify and stimulate demand to improve demand and supply efficiency. For example, we are using AI to optimize our search engine. At the same time, we are actively exploring more new AI applications, including more efficient AI navigation. In the supply chain, we will continue to update a series of tools based on AI to help customers reduce their cost. At the same time, we will also use AI to improve the efficiency of sales in the process of hiring, selecting products, and pricing. We will also use the unique supply chain advantages and accumulations of Jingdong to develop AI intelligence to help sell and improve people's efficiency.

On the demand side, we are leveraging AI to better identify and stimulate user demand, enhancing the precise matching between demand and supply. For example, we are using AI to reform the search recommendation system. In the meantime, we are actively exploring innovative AI applications, including more efficient AI-powered shopping assistance. On the supply side, we are consistently upgrading a series of AI power tools for merchants to reduce cost and improve efficiency. Concurrently, we are enhancing the productivity of JD1P procurement and sales operations through AI, optimizing efficiency during sourcing, product selection, and pricing. Leveraging JD's unique supply chain advantage and experience, we are developing AI agents to significantly boost productivity for ourselves and human personnel.

Of course, on the fulfillment side, not only AI

but also automation holds a lot of potential for efficiency gain. We're implementing robotics automation technology across standardized warehouse process to enhance operation efficiencies at every stage, reduce employment workload and drive productivity and reduce operational costs through our warehouse operations.

Let's talk about the application of AI in the advertising business. First of all, the advertising team is currently improving the algorithm of advertising by using the AI model. Improving the recommendation effect leads to an improvement in the transfer rate. Of course, it will also accelerate the growth of advertising revenue. At the same time, we are also exploring and landing the AI agent in the advertising investment field. The merchant can use simple instructions to let AI perform complex advertising investment operations. Especially in the past two years, we have more than 1 million new business owners who have joined the JD platform. We also believe that this type of AI agent can help these business owners to significantly improve the efficiency and effect of their advertising, to reduce the cost and difficulty of their business. So far, you can see that our advertising revenue has also achieved double-digit growth and is also accelerating growth. In terms of AI application for advertising business, our advertising R&D team is leveraging AI large language model to enhance ad algorithm and recommendation effectiveness, driving higher ad conversion rates

and accelerating the ad revenue growth. We are actively developing and implementing AI-powered advertising agents that can execute complex ad campaigns through simple commands from merchants. We particularly focus on serving the over 1 million merchants who have joined JD Platform in the past two years. We believe AI agents can help merchants enhance ad efficiency and campaign effectiveness while significantly reducing operational costs and complexity for business. Currently, our advertising revenue has continuously achieved double digit growth with accelerating momentum we firmly believe there is significant potential for monetization, particularly through AI large language model-driven efficiency gains that will fuel sustainable long-term growth.

Of course, I forgot to mention that the production of advertising and marketing materials is also a basic application of AI. With the popularization of video models and applications, I believe this will have a more promising and obvious effect. So in general, we think that there are a lot of scenarios that affect our own supply chain. Of course, I forgot to mention AI, there's a great potential for AI adoption in advertising content generation.

So in summary, we believe JD differentiated capability and extensive scenario across the entire supply chain provide the most fertile ground for widespread AI adoption in retail and supply chain operation, presenting us with unique opportunity to deeply integrate AI into every retail scenarios. ultimately enhancing operational efficiency, enhancing user experience, and unlocking long-term revenue and profit growth potential.

Thank you. Thank you. Thank you.

The next question is from Alicia from Citigroup. Please go ahead.

Hello, thank you, Sandy, Ian, Sean, 晚上好,恭喜强劲的业绩,两个问题, 第一个问题是今天晚上其实京东628就要开始了, 能否请管理层分享一下今年京东628的整体策略, 以及公司对这次628的销售有什么预期吗? 然後第二個問題是我們公司現在其實在做一些很長期的一些投入 那這些投入是不是有希望能讓公司保持雙位數的增長的動力 然後我們公司長期高個位數的這個net margin的目標會改變嗎? 謝謝

Thank you, Alicia. Let me answer the question about 618. In fact, 618, our overall consumer mindset is still around good and cheap. In fact, it is consistent with the past year. So this year, our 618, the real 618 vinegar will follow the past year's rules from 8 p.m. on May 31st. But before that, we... Thank you. Thank you. This year, of course, is also the first time that Huanxin National Supply and our Jingdong take-out launched Jingdong 618. So we will also have additional benefits for the customer to bring the customer a comprehensive and extreme experience. Then in the business side, we will also provide the customer with a variety of subsidies and incentive policies. The focus is on the content and advertising platform to help the customer realize the outbreak and long-term business.

Thank you, Alicia. I'll answer your question regarding 618. So first of all, this year's JD618 campaign is centered around better and cheaper, aiming to enhance consumer mindshare by offering a wider range of product and use case, as well as a bunch of straightforward discounts so in terms of schedule following our tradition this year's JD 618 campaign start at 8 p.m. on May 31st before this will launch a so-called heartbeat shopping festival to meet consumer demand bringing constant shopping surprises to user and The Heartbeat Shopping Festival has officially started 8 p.m. tonight, China time, and we welcome all investor analysts to jump in and experience it firsthand and help support consumption in China. In terms of marketing campaigns, this year there are more shopping scenarios and promotional activities. This year also marks the debut of the national trading subsidy and JD food delivery debut on JD 618 campaign, offering user an ultimate value for money experience with extra subsidies. In terms of merchant support, this year JD 618 will provide multiple subsidy and traffic incentives for brands and merchants. focusing on content ecosystem and advertising to help merchants achieve explosive sales, a sustainable operation resulting in more predictable growth.

Over the past year, the government has introduced a series of policies to improve consumption. We can see that the overall situation of consumption is continuing to improve. Jingdong Pingjie Extreme User Experience has also achieved a healthy growth in user size and sales industry. As the consumer market continues to rise, plus 618 Dacu, we are very optimistic about 618 Dacu.

Since the beginning of this year, driven by a series of policies to boost consumption, the overall consumption trend has continued to improve, which will also promote the ongoing economic growth. Leveraging the ultimate user experience, JD has achieved healthy growth in both user base and scale, With the consumer market heating up and all preparations that we have done for the JD618 campaign, we are more confident about the user growth and sales this year during JD618 campaign and bringing consumers with better and cheaper shopping experiences. Alicia, regarding your question about JD's long-term growth and net margin targets,

First, JD's business model is built on supply chain capabilities and centered around the user experience. Our long-term investment will focus on enhancing user experience, driving user growth, and strengthening our advantages in 1P business model and logistics services.

The specific investment direction includes, first of all, in terms of user experience and growth, our continuous supply of rich and high-quality products and the ability to improve service users. to meet the needs of more users. For example, in the cleaning business, real-time retail and take-out, we brought users' rapid growth and high-end orders. It also helped us improve the user data in the Jindong ecosystem, and created opportunities for cross-examination and joint value with new businesses.

Specifically, first, in terms of user experience and user growth, we have been continuously enriching the supply of quality products on our platform and our ability to serve users, meeting their diverse demands. For example, our efforts in Jingxi business, on-demand retail, and food delivery have helped to accelerate user growth. The high-frequency, high-volume orders have also supplemented user data for the entire JD ecosystem, generating cross-selling opportunities and synergies with our core business.

In terms of self-sufficiency, we will continue to invest in the perfect financial ability, including the ability to improve the financial ability, the ability to plan the product, through custom-made reimbursement and other capabilities to create differentiated product supply advantages. At the same time, we continuously promote our leading supply chain system in the industry. Through the advantage of the scale of our own supply chain, we drive the decline and efficiency improvement of purchase costs.

In terms of our 1P capabilities, we have been improving our operations in categories such as electronics and home appliances and general merchandise, including supermarket and fashion categories. For example, we've been strengthening the operational capabilities, including category planning capabilities of our procurement and sales team. We aim to create a differentiated product supply advantage through capabilities like customization and exclusive sales. At the same time, we are constantly strengthening our industry-leading supply chain system, leveraging the scale benefits to drive down procurement costs and improve efficiency.

In terms of logistics, we will continue to upgrade and strengthen the end-of-the-line delivery network and capabilities of Jindong.

In terms of our logistics capabilities, we have made efforts to further upgrade our last-mile fulfillment network and capabilities. In addition, we will be leveraging automation and AI technologies to progressively implement intelligent solutions across all logistics operations with the aim to drive sustainable, firm cost reduction and efficiency gains.

We believe that these long-term investments will further strengthen Jindong's supply chain advantages and continue to improve users' experiences and users' mindsets within product and price services, bringing about continuous increase in user size and activity. We are confident that we will achieve faster growth We are confident that these efforts will further strengthen JD's supply chain advantages and continue to enhance user experience and mindshare on our enriched products, price competitiveness, and service quality.

This will drive better user growth and engagement and position us for accelerated growth going forward. In the long run, our profit margins will continue to improve with the expansion of our business scale and increase the operational efficiency. JD's long-term goal of achieving high single-digit net margin remains unchanged.

Next question, please.

Thank you. The next question is from Thomas Chong. Jeffrey, go ahead.

Thanks, management, for taking my questions. My first question is about the trade-in program and subsidies to electronic categories. How should we think about the trend for smartphones and home appliances over the next few quarters? And my second question is about capital return. Can management comment about the latest updates on shareholders' return like my back? Thank you.

Thank you, Thomas. We also see that since last year, the country has launched a series of stimulus policies Thank you, Thomas. Since last year, a series of stimulus policies introduced by the government have already shown positive results.

The trading program not only boosted consumer demand and driven sales of home appliances and mobile phones, but also promoted the industry's shift towards offering more high-end and intelligent product selections. We are seeing significant potential in Chinese consumer markets.

We also expect that mobile home appliances will continue to grow in the second quarter.

We also expect to see very strong momentum of the electronic category, including mobile phone and home appliance categories in the second quarter. We'll continue to enhance our supply chain and service capabilities to provide users with better shopping experience, converting potential demand into sales and increasing our market share in the electronics categories. Let me update the latest progress of our shareholder feedback. The company has repurchased about 80.7 million ordinary stocks, which is equivalent to 40.4 million ADS. The total amount of repurchase is about $15 million, which is equivalent to 2.8% of the share price of the circulation stock on December 31, 2024. The average repurchase price is $37.08. At the same time, in March, the company announced its cash incentives for the year of 2024, which were scheduled to be sent out in April, and each ADS sent a US dollar.

Now, let me update the latest progress of our shareholder return. Year-to-date, in 2025, we have repurchased a total of around 80.7 million ordinary shares, equivalent to 40.4 million APS, for a total of about 1.5 billion U.S. dollars. This represented about 2.8% of our ordinary shares outstanding as of December 31st, 2024. Our average share buyback price was $37.18 per ADS. In addition, in March, we announced annual cash dividends for the year of 2024 and completed the dividend payment in this April totaling 1.44 billion U.S. dollars, or 1 U.S. dollar per EDS. Going forward, we remain committed to give back to our shareholders through dividends and share buybacks. At the same time, we will keep focused on achieving long-term healthy growth in business scale, profitability, and cash flow. We aim to share our success with shareholders through various ways.

Okay. Thank you, Thomas.

Thank you. We are now approaching the end of the conference call. I will now turn the call over to JD.com. Sean, thanks for closing remarks.

Thank you all for joining us on the call today, and thanks for your questions. If you have further questions, please contact me and our team. We appreciate your interest in JD.com and look forward to talking with you next quarter. Thank you.