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, there 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 JD.com Q1 2025 earnings conference call. With us today is CEO of JD.com, Ms. Sandy Xu. She will kick off the call with her opening remarks. And our CFO, Ms. Yan Shan, will discuss the financial results. Then we will 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 we'll include forward-looking statements. So please refer to our latest safe harbor statement in earnings press release on our website, which applies to this call. We'll discuss certain non-GAP financial measures. So please refer to the reconciliation of non-GAP measures to the comparable GAP measures in the earnings press release. Please also note all figures mentioned in this call are in R&B 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 maintains 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 percent -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-GAP net profit was up 43 percent -on-year to 12.8 billion R&B with net margin expanding by 82 bits to 4.2 percent. This was primarily driven by -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 percent -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. JD'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 percent -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 up 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 the 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, onboarded merchants and the right. 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 initiative, 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, 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 the 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. That is better connecting user demand with our product offering delivery options, 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 tap into a set of great growth opportunities to expand our future time. Young, 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 macro economy 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. .9% in Q1, sustaining a 12 quarter streak of year on year improvement. Non-Gap Net income attributable to ordinary shareholders was up 43%. The RMB 13 billion. With non-Gap Net margin expanding by 82 bits 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 annum. 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 ADS. Which accounted for .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 go by 16% year on year to RMB 301 billion in Q1. Breaking down the mix, product revenues grow 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 mind share. 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 maintain 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 growth margin continued to improve for the 12th consecutive quarter. As we continue 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 operating margin was up 76.9%. 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 expectations. As it proactively invested to upgrade procurement capacity and user experiences. In addition, JD logistics has been working on increasing automation levels across its work stream. Such as warehousing, sorting, transportation and last mile delivery. This enables JD logistics to improve its front line 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 food 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 for user acquisition. Further to date in Q2, we've seen more tangible results from JD food 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 bips, up to 15.9%. It's primarily driven by JD retail's gross margin improvement. Highlighting the high quality development of our companies. Non-Gap Net income attributable to ordinary shareholders at the group level increased by 43% year on year to RMB 13 billion in Q1. With non-Gap Net margin up 82 bips 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 equivalent, restricted cash, and short-term investments 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 JD retail to steadily unleash its potential in both scale and operational efficiency improvement. At the same time, we're 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 Yin. 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 purposes 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 Kyeong from Goldman Sachs. Please go ahead.

Thank you, Sandy, Ian and Sean. I have two questions. First, about the food delivery. After a couple of very high-level investments in the future, what do you think the company's goal in the food delivery industry and the industry's pattern are? Second, about the growth of the food delivery industry. As the food delivery industry grows, the speed of growth and profit is also expanding. You mentioned the growth of clothing and clothing products. What are the strategies that have been used to drive the growth of the food delivery industry? In addition to the growth of clothing and clothing products, what are the strategies that our company has to maintain the growth of food in the next half year? Please let me translate. Thank you, Ronald. I'm going to go ahead and answer the question. I think the first question is about the food delivery industry. What are the strategies that we have used to drive the growth of the food delivery industry? And what are the strategies that we have used to drive the growth of the food delivery industry? Thank you.

Thank you.

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's overall business ecosystem. It is not a standalone business. We believe on-demand retail, including food delivery, will create great synergy with JD's existing business in terms of users, supply chain, and fulfillment going forward.

First of all, the Chinese food delivery market is very large and can accommodate multiple platforms. Secondly, we see that there are still a lot of needs for users, businesses, and the starting end that have not been met. This includes the needs for food security and quality delivery, the needs for business to justify the use of funds, and the needs for the starting end to be better guaranteed. These needs in the industry are in our opinion very compatible with the current capabilities of JD, and the cultural and business advantages of our own construction over the years. This includes the good and cheap brand new JD products, and the three-part physical theory that we have been working on, the reasonable level of profit, and the overall management and operation capabilities of the logistics industry. We are willing to meet the needs of our users and industry.

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, and advantage to address such demands, including JD's better and cheaper brand awareness. The 35-cent principle that insists on taking only reasonable profits and its strong logistics operation and management capabilities. So JD is both capable and willing to address these demands.

So let me

elaborate a little bit further here. So this is a good 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.

Regarding the 35

-cent 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.

In

logistic operation 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 user with better services. Regarding specific business objectives, our current focus for food delivery 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.

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 is to right now is to improve operational efficiency of our system.

In the first quarter, we achieved a broad base growth. General merchandise category also maintained its momentum of -day-date revenue growth year on year, with both supermarket and fashion categories hitting -day-date 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

particular, in terms of fashion categories, including clothing, we have been committed to investing in user experience and making more users understand JD clothing and choose JD clothing. This year, we will further enhance the richness of brand and merchant, and at the same time, we will play the advantage of the supply chain, focusing on the manufacturing of core product, and the professionalism of the brand and merchant. We will also provide more new products and help brands and merchants to achieve higher quality and

growth on our platform. To take a closer look for fashion categories, 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.

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.

As the Japanese supermarket category continues to grow, we will focus on improving user growth and user experience, improving the development of the platform's ecosystem, driving the growth of new year and future income. In terms of user growth and experience, our purchase of users has continued. The growth rate of Q1 has been further accelerated to 20% or more, which has become an effective driving force for our revenue growth. Next, we will enhance user-centric operation, providing high-quality shopping experiences, including core retail, market retail, and takeaway, to users, and driving user growth and activity in this year's trend of healthy growth.

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% -on-year, an 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 also constantly improving. The number of 3P users and orders are both showing a growing trend, and maintaining the overall sales rate. As the platform's ecosystem improves, and users' recognition of 3P business in the Middle East and continued growth of the new system, in the long term, 3P business will gradually release growth potential.

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.

Thank you. The next question is from Kenneth. Please go ahead.

Good evening. Thank you, Mr. Manager, for answering my question. I have two questions. The first is about the delivery of food. We see that JD's delivery has also received very good results. In the past few months, we have received nearly 20 million orders. The data can be managed by the management team and shared with users' processes, data of cross-selleries, and the short-term and -long-term unit economic model, U1. In terms of the activity of the user, we see that the data has significantly improved. Next, how should we think about the investment and strategy in finance? The second question is about AI. We see that different e-commerce platforms also use AI to improve advertising delivery efficiency. With the 3P ecosystem of JD gradually improving, the management team can also introduce to us how AI can respond to other business applications. JD has achieved a remarkable result in the food delivery business with a daily volume already close to 20 million. Can management share with us some of the key metrics like user retention, cross-selling opportunities 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 these new investments and the strategy? My second question is related to AI. Different e-commerce platforms have used AI to improve advertising ROI. As JD's 3P 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.

Thank you, Kenny, for your question. Yes, our team is playing 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. You know, we have been working on this for a long time, and 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.

Now we have more than a million stores in our stores. The demand for commercial opening is still very high. Many stores are also in the process of integrating the system. This has also caused a lot of pressure on our team to enter the stores. Indeed, the demand is very high. This also helps us to quickly and richly establish the commercial supply based on the location.

On the merchant side, we expanded from zero to over one million onboarded stores in a short period of time. Merchants' 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.

On the merchant side, the response is also very positive. We also see a lot of merchants joining the hospital. Our platform's merchant service is also in a state of severe shortage. We are also working on it. This has also shown that the potential of the industry is huge. This also proves that the demand for the user, the demand for the merchant and the user is also very strong. At the same time, our team's execution capabilities are also very strong. We are also gradually building our own capabilities.

We are also seeing a lot of new users joining the platform. We are seeing a lot of new users joining the platform. We are seeing a lot of new users joining the platform. We are seeing a lot of new users joining the platform. We are seeing a lot of new users joining the platform. We are seeing a lot of new users joining the platform. We are seeing a lot of new users joining the platform. But we are still in the stage of building our fundamental capabilities.

Yes, but our business is actually developing in a few days. It's a fast-growing process. So, in fact, we are still in the process of developing our system capabilities. We are still in the process of building and continuously optimizing. Including some of these cross-productive pull-out functions, etc. In the next few days, we can share more information with you, including the benefits. At this stage, our focus is still to provide users with better experiences to improve our own operating capabilities and the functions of our system. And then create a healthier ecosystem for the business. At the same time, of course, we also provide more secure work for our delivery guys. The specific investment is actually all around the needs of these three partners.

We also fully realized that JDW is still in the very early stage with rapid development. We have to note that JDW delivery 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 are 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 better meeting the needs of these three parties, namely users, merchants, and riders.

We do believe that delivery is a long-term business. Of course, there will be some investment in the short term. At the same time, we believe that as the scale of the business increases, it will gradually release its scale and efficiency, and improve efficiency. And more importantly, this business is still in our ecosystem. In the future, we may have a huge value for our business and even our logistics. So, the flow of users, the frequency of purchase, and the cross-category purchase can contribute to us. At the same time, delivery of delivery, technical data, and other aspects can also bring an increase in efficiency and cost.

Therefore, we made a strategic decision to enter the full 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 are confident that as the business grows, it will gradually realize economic scale and operational efficiency improvements. More importantly, being deeply rooted within JD overall ecosystem, the full 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 enhancement. The

second question is about advertising. I will answer this one. First of all, we are actively embracing the huge opportunity of AI and automation. We believe that AI and automation can deeply re-sale the retail industry, not only increasing operating efficiency and reducing costs, but also greatly improving user experience and bringing innovative models. We are currently also implementing AI technology in the multi-stage and supply chain of retail.

Let me share my thoughts on your second question on AI adoption and 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.

At the supply chain, we are using AI to better identify and stimulate demand to enhance the high-efficiency and accurate connection between demand and supply. For example, we are using AI to optimize our search and push system, while also exploring more new AI applications and more efficient AI adoption. At the supply chain, we are continuously updating a series of AI tools to help customers reduce their cost. At the same time,

we

are also using AI to improve the efficiency of self-purchase in the search, product selection, and pricing. We are also using the unique supply chain advantages and accumulations of JD to develop AI smart systems to help purchase and improve the performance.

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 and recommendation system. In the meantime, we are actively exploring innovative AI applications, including more efficient AI power 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 JD's 1P procurement and sales operations through AI, optimizing efficiency during sourcing, product selection, and pricing. Leveraging JD's unique supply chain advantages and experience, we are developing AI agents to significantly boost productivity for our sales and human personnel. Of course, on the fulfillment side, not only AI, but also automation holds a lot of potential for efficiency gain. We are implementing robotics automation technology across standardized warehouse processes to enhance operation efficiency at every stage, reducing employment workload and drive productivity and reduce operational costs through our warehouse operations.

Let's talk about AI applications in advertising. First of all, the advertising team is currently improving advertising algorithms through AI models, improving the recommended effect, and driving the improvement of the conversion rate. Of course, it will ultimately promote the speed of advertising revenue growth. At the same time, we are also exploring and landing the AI agent in the field of advertising placement. The business can perform complex advertising placement operations through simple instructions. Especially in the past two years, we have more than a million new customers who have entered JD's platform. We believe that this kind of AI agent can help these customers significantly improve the efficiency and effect of their advertising placement to reduce the cost and difficulty of their business. As you can see, our advertising revenue has also achieved double-digit growth and is also increasing rapidly. I believe that there is still a lot of room for future advertising conversion.

In terms of AI applications for advertising business, our advertising R&D team is leveraging an AI large language model to enhance ad algorithm and recommendation effectiveness, driving higher ad conversion rate, and accelerating the ad revenue growth. We are actively developing and developing new AI models to improve the efficiency of our advertising business. We are also developing and implementing AI power advertising agents that can execute complex ad campaigns through simple commands from merchants. We particularly focus on serving the over one million merchants who have joined JD's 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.

In general, we believe JD's supply chain has a lot of opportunities. This has provided a suitable ground for AI in the wide application of retail and supply chain. It has also provided opportunities for us to infiltrate AI applications into every part of our business to help us drive long-term revenue and profit. Of

course, I forgot to mention there's a great potential for adoption in advertising content generation. So in summary, we believe JD differentiated capability and extensive scenario across the entire supply chain provides 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.

The next question is from a lady from City Group. Please go ahead.

Hello. Thank you. Sandy, Yan, Sean, good evening. Congratulations on your performance this year. Thank you. Thank you.

Thank you, Alicia. I will answer the question about 618. In fact, the overall consumption of 618 is still good and cheap. It is actually consistent with previous years. This year, the real 618 is still following the previous year's habits from 5.31 p.m. to 8 p.m. But before that, we will use

the

new shopping season to meet the needs of consumers in advance. Of course, it also brings continuous shopping surprises for everyone. So tonight at 8 o'clock, it's officially starting the new shopping season. So it is also welcome for investors and analysts to come to the front to experience the promotion of consumption. So in terms of marketing activities, we will have more rich shopping scenes and marketing activities this year. So this year, of course, we also have the new national subsidies and our first time to launch Jingdong 618. So we will also have additional benefits for the investors to bring the customer an all-round ultimate advantage experience. So in business, we will also provide the customers with multiple subsidies and exciting policies. So the focus is to develop a more secure growth in content,

and in terms of advertising,

to help businesses to achieve the boom of sales and long-term sales management.

So we will also be offering a wide range of products and use cases, as well as a bunch of straightforward discounts. So in terms of schedule, following our tradition, this year's Jingdong 618 campaign starts at 8 p.m. on May 31st. Before this, we'll launch a so-called heartbeat shopping festival to meet consumer demand, bringing constant shopping surprises to users. 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, the build on JD 618 campaign offering users 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.

This year, with the government's policy of promoting consumer growth, we can see that the overall situation of consumers is improving. The user experience of JD food delivery has also achieved growth in the size and sales level. With the continuous rise in consumer demand, we can see that the growth of JD 618 is also very confident. This will also bring good and cheap shopping experiences to consumers.

This year, we are also seeing 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 JD 618 campaign. We are more confident about user growth and sales this year during JD 618 campaign, and bringing consumers with better and cheaper shopping experiences. In addition,

we are also seeing the growth of JD business model, which is a key component of the JD business model. This year, we are also seeing the growth of JD business model, which is a key component of the JD business model. The specific

direction of investment includes, first of all, the continuous supply of rich and high-quality products and the ability to improve the service of users and meet more user needs, such as the supply of cleaning services, the immediate retail and take-out services. This brings the speed of growth of users, high-quality orders, and also helps us improve JD's user data, creating a chance to meet the demand and the value of the cleaning service.

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

our 1P capabilities, we have been improving our operations in categories such as electronics and home appliances, and we have also been improving our general merchandise, including supermarket and fashion categories. For example, we have 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 our logistics capabilities, we have made efforts to further upgrade our last-mile fulfillment network and capabilities. In addition, we have been 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 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 positional development. This will also 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 from Jeffery's LN.

Good evening. Thank you for answering my questions. I have two questions. The first is about the impact of the climate change on our electricity industry, especially when we look at mobile phones and powering up our future. The second is that the management can share with us the latest news about our shareholding. 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 update on shareholders' return like my back? Thank you.

Thank you, Thomas. We can see that since last year, a series of policy changes have been made in the country. The trade-in program has not only boosted consumer demand and efficiency, This has also led to a significant increase in consumer demand. And it has also boosted the development of the industry. We can see that China's consumption potential is very high.

Thank you, Thomas. Since last year, a series of policy changes introduced by the government have already shown positive results. The trade-in 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 the Chinese consumer market.

We also

expect to see a very strong momentum of the electronic category, including mobile phone and home appliance categories in the second quarter.

We will continue to enhance our

supply chain and service capabilities to provide users with better shopping experience, converting their potential demand into sales, and ensuring that sales can provide better consumer experience and service experience for users. I will now introduce the latest developments in the shareholding program. The company has purchased about 80.7 million shares of the stock, which is equivalent to 40.4 million ADS. The total purchase is about 15 million dollars. The total purchase is about 15 million dollars. The total purchase is about 15 million dollars. The total purchase is about 15 million dollars. The total purchase is about 15 million dollars. The total purchase is about 15 million dollars.

The total purchase is about 15 million dollars. -to-date in 2025, we have repurchased a total of around 80.7 million ordinary shares, equivalent to 40.4 million ADS, for a total of about 1.5 billion US dollars. This represented about 2.8 percent of our ordinary shares outstanding as of December 31, 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 US dollars, or 1 US dollar per ADS.

Next, we will continue to firmly share and repurchase shares. At the same time, we will continue to pay attention to the long-term growth trend of business size, profits, and cash flows, and share our business success with shareholders in different ways.

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.

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.