JD.com, Inc.

Hello and thank you for standing by for JD.com's first quarter 2026 earnings conference call. At this time, all participants are in listen-only mode. After management's 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, Head of Investor Relations. Please go ahead.

Good day, everyone. Welcome to JD.com's first quarter 2026 earnings conference call. With us today are CEO of JD.com, Ms. Sandy Xu, and CFO, Mr. Ian Shen. Sandy will kick off the call with her opening remarks, and Ian will discuss the financial results. Then we'll open the call to questions from analysts. Please note, unless otherwise stated, all Comparison in this call will be against our resolve for the comparable period of 2025. Before turning the call over to Sandy, let me quickly cover the safe harbor. Please be reminded, during this call, our comments and responses to your questions reflect management's view as of today only, and will include forward-looking statements. Please refer to our latest safe harbor statement in the earnings press release on the IR website, which applies to this call. we'll discuss certain non-GAAP financial measures. And also please refer to the reconciliation of non-GAAP measures to the comparable GAAP measures in the earnings press release. Please also note all figures mentioned in this call are in R&D and less otherwise stated. Now let me turn the call over to our CEO, Sandy.

Thank you, Sean. Hello, everyone. Thank you for joining our first quarter 2026 earnings conference call. We kicked off 2026 on firm ground. In Q1, our total revenues grew by 4.9% year-on-year, marking a sequentially accelerated pace as key growth drivers stayed firmly on track. We saw a sequential rebound in electronics and home appliances categories. While our general merchandise, marketplace, and marketing revenues maintained double-digit growth trajectory in the quarter, Moreover, our profitability continues to see steady growth. JD Retail's operating margin expanded by 0.7 percentage point year-on-year to 5.6% in the quarter, nearing historical highs. This expansion, achieved against a high comparison base for margin, underscores our operational resilience and healthy makeshift. Our new business segment also delivered a meaningful sequential loss reduction in the quarter, led by improved efficiency at JD Food Delivery, while Jinxi and international business maintained prudent investment discipline. Overall, we are pleased with this strong start to the year, with our emerging growth drivers taking solid shape while our profitability across all segments steadily trending upward. Moving to our operational highlights, I would like to share three areas of robust progress we made during the first quarter. First, we maintained robust momentum in both user base expansion and engagement. In Q1, both our quarterly active customer and annual active customer base grew by over 20% year-on-year, with AAC hitting a new record. This growth was powered by both healthy organic user growth in core JD retail and strategic contributions from our new businesses, including food delivery and SIMC. Notably, JD Plus members, our most loyal and high-value user group, delivered another quarter of double-digit year-on-year growth in membership scale. Beyond scale, the quality of our user engagement is reaching new heights. Our quarterly customer shopping frequency rose by a notable 37% year-on-year in Q1, a powerful testament to the synergies we are successfully unlocking across our core retail engine and new businesses initiatives. This new momentum in both scale and frequency provides a solid foundation for us to further optimize the overall value of our user ecosystem. As our user base continues its rapid growth over multiple consecutive quarters, our strategic focus is clear, fostering deeper loyalty and driving the upward migration of user quality are the key next steps towards advancing our long-term growth roadmap. Second, our core retail business demonstrated strong resilience in Q1. We delivered revenue growth in line with expectations while driving operation margin toward historical peaks. Despite notable near-term headwinds, including the high trading base and rising product prices for electronics. This performance underscores the enduring strength of our supply chain-driven model, which consistently enables us to navigate market cycles while delivering a steady upward trending performance. Q1 JD Retail's revenues grew by 1.8% year-on-year, with broad-based sequential acceleration across all revenue streams. Looking at category performance in Q1, while revenues of electronics and home appliances were down 8.4% year-on-year, this still represents a sequential improvement. Moving ahead, while we navigate ongoing external headwinds in Q2, we remain confident in a stronger performance in electronics and home appliances in the second half of the year. Our confidence is rooted in our continuous efforts to strengthen our supply chain capabilities, prioritize superior user experience, and drive systemic cost optimization and efficiency gains. Our general merchandise category remains a standout with revenue growth accelerating sequentially to 14.9% year-on-year in Q1, led by supermarkets, healthcare, home goods, apparel, among others. Following six consecutive quarters of strong double-digit growth, general merchandise has contributed over half of our total GMV, solidifying its position as an increasingly important growth driver. we maintain a positive outlook for this momentum to continue throughout 2026 as we leverage our supply chain advantages and increasing scale benefits to continue to provide our users with diversified, reliable product offerings, competitive pricing, and premium services. With a vast total addressable market and deepening user man share, we are well-positioned to capture the significant market opportunities ahead. DigiRetail's advertising and commission revenues have become a powerful engine for high-quality growth. We are pleased to report another quarter of strong double-digit growth in retail advertising and commission revenues for Q1. This performance served as a primary catalyst for the 18.8% year-on-year growth in our total marketplace and marketing revenues at the group level. As a high-margin business, advertising and commission continues to structurally optimize our revenue mix, providing a resilient foundation for margin expansion. We expect advertising and commission revenues to remain an important growth driver for JD Radio throughout 2026, fueled by the following factors. Our supply chain strength, expanding user base, enhanced 3P ecosystem, and traffic allocation efficiency optimized AI-powered advertising conversion and deepening synergies across our . Notably, JD Food Delivery business is already proving its strategic value, contributing an incremental 3% to advertising revenues in Q1. By effectively expanding our user touchpoints, food delivery is creating high-frequency monetization opportunities that complement our core retail operations. In addition to top-line resilience, another compelling highlight this quarter is the encouraging expansion of JD Retail's profitability. Operating profit surged by 16.5% year-on-year to 15 billion RMB, reaching a record high for quarterly profit and driving operating margin to 5.6% against the challenging external complexities we outlined earlier. This is fundamentally answered in our supply chain strengths, which continue to yield expanding economies of scale and optimize the procurement efficiencies. These strengths field a broad-based gross margin expansion across our categories, listing retail's gross margin to a remarkable 18.6% in the quarter, up 1.8 percentage point year-on-year. This margin uplift was further amplified by a favorable revenue mix shift. Particularly, they increased the contribution from high margin streams, such as advertising and commissions. We believe JD Retail's margin profile is a clear reflection of our evolving structural efficiencies, which we expect to provide further headroom for optimization going forward. Moving on to our new business segment, we are beginning to see the fruits of our efficiency-oriented strategy marked by a significant sequential narrowing of losses and deepening synergies with our core retail businesses. In Q1, city food delivery achieved the steepest sequential reduction in loss to date. While sustaining healthy order volumes, food delivery continued to improve its operating efficiency and diversify revenue streams, resulting in material improvement in unit economics. This progress underscores our commitment to a rational, healthy development of the business and reinforces our clear stance against involution within the sector. We fully embrace the regulatory guidance and will continue to align our business strategy with full compliance, prioritizing operational efficiency and high-quality growth as we move forward. For Jingxi and Joybuy, All the initiatives advance steadily in line with their strategic roadmap, while adhering to prudent investment discipline continue to deepen its penetration in lower tier markets, particularly tier six and rural townships, successfully tapping into new user growth opportunities for our platform. JoinBuy has seen solid momentum since its official launch in March, with the order volume and user retention trending healthily. By the end of Q1, its same and next day delivery service spanned over 30 major European cities, serving a population of over 40 million. Collectively, the total investment in our new businesses segment narrowed by over 30% sequentially. This was driven by our rational expansion strategy and an efficiency-first operating philosophy. Building on this solid execution in Q1, we now have clearer visibility to further deliver on our efficiency-oriented investment goals for the new business segment throughout the full year. We also continue to integrate AI across our entire value chain, from demand identification and stimulation, 1P and 3P supply sourcing, to autonomous logistics and premium customer services. In particular, we made further headways in logistics automation. In Q1, JD Logistics launched its next-generation Longzhu hacker robotic arm This proprietary technology is optimized for handling packages of diverse sizes and shapes, as well as automated cage loading. This milestone marks the successful transition of this technology from the lab to real-world operations and enables us to significantly boost our sorting efficiency and competitive edge. Additionally, Our AI-powered digital human, JoyStreamer, has transitioned from a functional tool to an intelligent AI agent with a number of merchants and live streaming sessions that utilize this technology surging tenfold year on year in Q1. Our goal is simple, to translate AI innovations into tangible retail experiences and sustainable value. We are well positioned to lead at the forefront of AI commerce and capture the vast opportunities ahead. In summary, Q1 has been defined by strong execution and strategic consistency. Our performance across all segments has validated our roadmap, contributing to both resilient top-line growth and robust profitability. With this solid foundation, we are confident in our full-year trajectory and long-term prospects. We will maintain the operational activity necessary to proactively navigate Q2 fluctuations, including a high trading base and rising product prices for electronics. We are fully leveraging our supply chain-driven model Our commitment remains unwavering to scale our business by delivering a premium user experience with continuous cost optimization and efficiency gains. With that, let me turn the call over to Ian.

Thank you, Sandy. Hello, everyone, and thanks for joining the call today. In the first quarter, our strategic execution remained firmly on track. as we delivered a resilient overall financial performance. Total revenues grew by 5% year on year, while non-GAAP net profit attributable to ordinary shareholders came in at RMB 7.4 billion, reflecting a strengthened sequential momentum across both our top and bottom lines. Notably, our core retail segment returned to growth this quarter. while delivering healthy year-on-year profit extension. We also recorded a significant sequential loss narrowing in our new business segment, led by consecutive loss reductions in food delivery. Alongside our resilient financial results, we remain fully committed to shareholder return. During the first quarter, we repurchased a total of approximately 44.5 million Class A ordinary shares, equivalent to 22.3 million ADS, for a total of US dollar 631 million. This represents around 1.6% of our total ordinary shares, outstanding as of December 31st, 2025. In addition, we complete our annual cash dividend payment in April, totaling approximately US $1.4 billion, or $1 per AES. Our continuous execution of our shareholder return plan underscores our strong conviction in JD's long-term value creation. Now, let's go through our Q1 financial performance Our total net revenues were up 5% year-on-year to RMB $316 billion in Q1. Breaking down the mix, product revenues were up 1% year-on-year, driven by a 15% surge in general merchandise, which effectively cushioned the temporary decline in electronics and home appliances against a high trading base. Both categories saw sequential growth acceleration. Notably, general merchandise has extended its double-digit growth streak to six consecutive quarters. Within this, supermarkets outperformed by sustaining its double-digit growth momentum, which further accelerated in Q1 compared to the previous quarter. As we move ahead, We expect the impact of the high trading base and the rising product price for electronics to persist in Q2, which will temper the growth trajectory of electronics and home appliances. But we remain confident in a stronger performance in the second half of the year. Service revenues grow by 21% year-on-year in Q1. Within this, Marketplace and marketing revenues rose 19%. Advertising revenues remained a key driver. Hosting is the sixth consecutive quarter of double-digit growth. By optimizing traffic allocation and conversion, we have effectively translated robust user engagement into superior ROI for our brands and merchants. a trend we expect to sustain throughout the year. Logistics and other service revenues were up 22% year-on-year. This growth was driven by both incremental delivery revenues from our full delivery business and the robust performance across JD Logistics' diverse service offerings. Now, let's turn to our segment performance. JD retail revenues were up 2% year-on-year in Q1. While we continue to navigate near-term headwinds in electronics and home appliances, we remain confident in a second-half rebound in those categories. Meanwhile, our emerging growth drivers, including general merchandise and marketplace and marketing services, are expected to sustain their robust momentum. JD Retail's gross margin expanded by 1.8 percentage points year-on-year to an impressive 18.6% in the quarter. This expansion was attributable to our enhanced supply chain capabilities, which led to gross margin appreciation across all major categories. In addition, it also reflected a favorable mixed shift as our high-margin general merchandise and marketplace and marketing revenues outpaced the overall growth. Consequently, JD Retail's non-GAAP operating income increased by 16% year-on-year to RMB $15 billion in Q1, reaching the highest quarterly level for JD Retail, with operating margin rising 70 bps to 5.6%. This was achieved through a strategic balance of gross margin expansion, marketing efficiency, and increasing investment in R&D for long-term growth. Notably, JD Retail's marketing expense ratio has declined year on year for three consecutive quarters, a strong testament to the deepening synergies with our new business initiatives. Moving to JD Logistics, its revenues grow by 29% year-on-year in Q1, driven by incremental contribution from food delivery. On the profitability front, JD Logistics' non-GAAP operating income surged by 600% year-on-year in Q1, This exponential growth was driven by technological leverage from our AI and robotics initiatives alongside broader operational optimization. In our new business, revenues came in at R&D 6.3 billion, reflecting a moderated pace due to the resegmentation of our on-demand deliverer revenues from new business to JD Logistics. Non-GAAP operating loss in new business narrowed significantly on a sequential basis to RMB 10.4 billion led by JD Food Delivery, while Jingxi and international business remained disciplined in their investments. In particular, JD Food Delivery delivered its most significant sequential loss reduction since inception. driven by its improved unique economics as we continue to boost operating efficiency and diversify revenue streams, combined with a disciplined, rational response to market dynamics, turning to our consolidated profit performance. Group-level growth margin expanded by 90 bps year-on-year to 16.8% in Q1. This extension was primarily driven by the strong performance of JD Retail, serving as a clear validation of the structural progress as we have made in broadening and strengthening our margin advisors. In terms of OPEX, total operating expense as a percentage of revenues increased year on year in the quarter. primarily reflecting increased marketing spending in JD food delivery and higher R&D investment to fuel our long-term growth and efficiency improvement. Consolidated non-GAAP net income attributable to ordinary shareholders was R&D 7.4 billion in Q1, representing a non-GAAP net margin of 2.3%. Regarding our liquidity, last 12 months free cash flow as of the end of Q1 stood at RMB 22 billion compared to RMB 38 billion in the prior year. This primarily reflects cash outflows associated with the trading program alongside fluctuations in operating income. By the end of Q1, Our cash and cash equivalents, restricted cash, and short-term investments totaled RMB $216 billion. In summary, Q1 was another quarter that underscored the resilience and adaptability of our supply chain-driven model. We achieved a sequential acceleration in top-line growth. while successfully navigating a complex external environment. Both JD Retail and New Business delivered robust profitability improvements and steadily moved along the strategic roadmap. Our scalable AI applications are increasingly transforming our core assets into a distinct competitive mode. in the era of AI commerce. With this solid foundation, we are firmly committed to unlocking long-term value for our shareholders. This commitment is underpinned by our proven track record of growth, a clear trend of margin expansion, and our solid shareholder returns. 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 English or Chinese. Our management will answer the question in Chinese, and we will provide English translation for convenience purpose only. In any case of discrepancy, please refer to our management statement in the original language. Operator, we can open the call for Q&A now.

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 two questions have been addressed. Your first question today comes from Kenneth Fong with UBS. Please go ahead.

Hey, Sandy Chong. Good evening. Thank you for accepting my question. Congratulations on a very promising performance. I have two questions. The first one is about growth. We saw a quarter of high-tech pressure. JD Retail has achieved the growth of the supermarket this year. And in March, under the background of the growth of the big pot, we still maintained a steady performance. Can the management city observe some changes in consumer behavior? Thank you management for taking my questions. and congrats on the strong quarter. My first question is on the growth. Despite facing a high base in the first quarter, GT Retail still deliver better than expected growth and maintain solid performance even as overall market decelerate in March. Has management observed any shift in consumer behavior, particularly in the context of price increase in electronic categories? How should we think about the growth trend over the next few quarter? And my second question is about the margin. against the backdrop of macro uncertainty intensify industry competition and increase platform subsidies alongside with a rising asp in electronic products how should we assess jdr margin trajectory going forward thank you uh

In the first quarter, we can see that sales performance is stable. The increase in revenue is improving. Although the increase in revenue has been affected by high-tech products, we have strengthened the market position through our supply chain capability and the new platform. The increase in revenue in Japan is very strong. It has maintained its double position and has accelerated to 15%, especially in commercial products. Thank you, Kenny.

Let me answer your first question regarding growth. In Q1, JD Retail delivered a solid performance with revenue growth accelerating Q1Q for electronics and home appliance. While our growth was impacted by the high base from trading subsidies last year, we leveraged our supply chain capabilities and strong user mindshare to win even greater trust from users, which helped us further consolidate our market leadership. For general merchandise category, revenue growth maintained a double-digit pace and further accelerated to 15% year-on-year. Notably, our supermarket category recorded double-digit growth for the ninth consecutive quarter. This clearly shows that our growing user mind share in the general merchandise category

Regarding the impact of 3C and home appliances on the price of products, first of all, it is affected by the rise in global storage costs. We also saw that since March, mobile phones and computer products have seen a significant increase in the industry. The increase in this round is widespread and widespread. In the short term, there will be a certain degree of control over some of the consumer needs. At the same time, the sales structure accelerates to the medium and high-end models and the top brands. The more uncertain the period is, the greater the special value of Jingdong will be. We will also use the efficiency advantage of the self-serve chain to bring users a better experience in terms of price and service. At the same time, we will also bring more efficient and more certain sales to the brand. In addition, Jingdong is indeed a relatively high-end and brand-class product. Our advantages will also be more obvious. We are also confident that our market position will be further improved.

Regarding the impact of price hikes in the 3C and home appliance industries, so yes, due to the rising memory cost, we have seen industry-wide price hikes for smartphones and PCs since March. This round of price increases is sharp and widespread. So in short term, it indeed dampens consumer demand to some extent. At the same time, we are seeing consumer purchase are shifting toward mid- to high-end models and top-tier brands. But in a challenging time, JD's unique proposition becomes even more clear. We will leverage our efficiency of our supply chain to bring users a better experience in both price and service. At the same time, we'll help brands achieve more efficient sales with greater certainty Our unique competitive edge is even more pronounced for the mid-to-high-end models and top-tier brands. So overall, as a result, we believe our market position will further solidify.

展望今年后面几个季度,在二季度的确我们会面对国补更高技术的影响。 The increase in the price of mobile phone and computer products will affect the consumer sentiment. The sales of electric products is expected to be gradually suppressed. We will continue to strengthen our users' minds and help the brand provide more certain sales. In the second half of the year, we will have more confidence in the recovery of medium speed, especially in the electric products. As technology returns to normal, Looking at the full year, the rest of the year, in the second quarter, sales of electronic home appliance

are expected to continue to face temporary fee pressure. This is due to the even higher base from trading program last year, combined with the impact of price hikes on smartphones and PCs impacting consumer sentiment. We will continue to strengthen our mind share while helping brands achieve more certain sales. Moving into the second half of this year, we have stronger confidence in growth acceleration, especially for home appliance category as the comparison base returns to normal and the continuous expansion of our omni-channel sales network further create greater sales potential for home appliance category. At the same time, we are confident in the healthy growth for both general merchandise and advertising and commission revenues. JD's growth engines are becoming more diversified. This gives us confidence to deliver healthy growth for the full year, even in a volatile year.

In the first quarter, JD's net profit gained double-digit growth. Profit also steadily improved to 5.6%. This is mainly due to The first is the improvement of the gross profit. Whether it is a mature power supply category or a fast-growing daily product category, through the ability of the supply chain to drive the efficiency of the industry, while bringing a family to the brand, it also achieves the improvement of its own profitability. The gross profit has achieved the same improvement. At the same time, the efficiency of marketing is also improving. The market fee and fee rate of retail has been optimized in the same way for three consecutive seasons. As new business such as delivery and surprise effectively drives the overall platform traffic, we are also more precise and more efficient in configuring marketing resources to improve the overall investment efficiency. Finally, we also pay great attention to the investment of R&D. While we increase our profit and marketing efficiency, we also pay great attention to R&D investment. In the first quarter, JD Retail achieved double-digit growth in operating profits

Its operating margins also expanded steadily to 5.6%. This was primarily driven by first growth margin expansion. For both our mature electronics and home appliances and fast-growing general merchandise categories, we have leveraged our supply chain capabilities to drive industry efficiency. While creating value for grants, we have also enhanced our own profitability, achieving year-on-year expansion in gross margins across categories. In the meantime, marketing efficiency improvement. JD Retail's marketing expense and expense ratio have seen year-on-year optimization for three consecutive quarters. As new businesses, including JD Food Delivery and Jinxi, effectively drive traffic growth for our platform, we are allocating marketing resources with greater precision and efficiency, thereby enhancing the overall return on our marketing expenses. Lastly, while improving our gross margin and marketing efficiency, we remain deeply committed to R&D development, particularly in AI. In Q1, our R&D expense continued to meaningfully increase and is expected to maintain an upward trend for some time ahead. We believe such investment will gradually translate to operational benefits, driving AI-powered efficiency gains, and further optimizing our overall cost structure.

In the future, the performance of EG2 will further verify the long-term stability improvement of the revenue rate of retail businesses, Our long-term profit and loss target is unchanging. Again, long-term profit and loss driving power includes self-sufficiency. We will continue to strengthen our self-sufficiency, play an advantageous role in our business, and continue to steadily improve our product profit and loss. As of Q1, the sales profit and loss has been increased by 16 consecutive seasons, and there is still room for improvement. The second is the improvement of product types. We can see that the profitability of products such as commercial supermarkets still has a greater room for improvement. In addition, the optimization of the product structure along with the optimization of the power supply type will also have a room for profitability improvement for the long term. The third is platform ecology. We will continue to promote the healthy development of platform ecology. The revenue of high profitability, such as central and advertising, will increase rapidly. Looking ahead,

Our Q1 performance already further validates JD Retail's ability to deliver steady margin expansion over time, so we remain firmly committed to our long-term, high single-digit margin target. The key drivers of this include, first, our 1P capabilities will continue to enhance our 1P supply chain strength and leverage scale benefits to drive consistent product sales growth margin expansion. JD Retail's gross margin has delivered year-on-year improvement for 16 consecutive quarters, and we believe there is still upside potential. Second, category improvement. We see meaningful margin upside in categories including supermarket. Additionally, as we continue to optimize the product mix within our electronics and home appliances categories, We expect further margin expansion over the long term. Third, platform ecosystem. We will be driving the healthy development of our platform ecosystem. This will support our high margin service revenues, such as commission and advertising, to grow at a robust pace, contributing to our overall margin expansion. That said, we are still at a lower tick rate level compared to the industry. and we believe there is substantial potential for improvement for us. In the long term, as China's largest retailer with supply chain at its core, JD has the industry's most diverse application scenarios for AI and automation. This presents significant potential for us to continuously enhance user experience, reduce costs, and drive greater efficiencies.

Okay. Thank you, Kenny. We can go to the next analyst.

Your next question comes from Ronald Kang with Goldman Sachs. Please go ahead.

Thank you. How do we think about how to determine the strength of this short-term investment? And then to achieve a single target or a single body mass. If from a normal machine that is expected in the next three years, what will the investment of JoyBuy have an impact on the overall regulation of our new business? And how should the ROI be expected? Secondly, I would like to ask AI agents about the decision-making and purchase of different AI assistants to drive consumers' search and purchase. How does Jindong play out the advantages and advantages of being China's largest e-commerce and retail company? Thank you, management, for taking my question. First is about international, since that you've launched Joybi across six countries in Europe. How should we frame the near-term investment intensity to drive a critical volume scale? And how do we think about the longer-term impact on an exterior basis on new business loss? and the ROI from this investment. The second is on AI agents, which are increasingly driving consumer search and purchasing. So how will JD leverage the unique moat as China's largest retailer in this? And what are your defensive or offensive strategies in light of agent-to-agent interactions and on partnerships? Thank you.

Thank you, Ronald, for your question. First of all, about Joybuy. Joybuy officially launched on March 16. With the advantage of our supply chain and localization operation, we are currently cooperating with high-quality brands around the world to provide European users with all kinds of products with high price competitiveness. At the same time, with the help of the logistics network that we established in Europe, we have also introduced 211's logistics delivery system into Europe. Thank you, Ronald, for your question.

First, on JoyBuy. JoyBuy was officially launched on March 16. So it leveraged JD's supply chain capabilities and localized operations Now JoyBuy partners with top global brands to offer European users a full category of products at competitive pricing. At the same time, backed by our self-built logistic network in Europe, JoyBuy is bringing JD signature same and next day delivery speed that we offer in China to European consumers. Currently, JoyBuy maintains an encouragingly high user rating on Trustpilot, a leading consumer review platform. Our high-quality products and excellent delivery experience are helping us winning trust of local customers.

We will proceed according to the designated strategy. As the scale of the business grows, the overall investment may rise gradually, but at the same time, as the volume grows, the scale of our operations will also gradually emerge, and the loss of the single army will also continue to improve. So the overall investment in international business is still cyclical.

In terms of investment, in Q1, investment of our international business remains stable Q1 as we keep improving operating efficiency. Over the next few quarters, we will execute our established strategy. As our business grows healthily, the overall investment may gradually increase as well. That said, as order volume grows, the economic upscale will kick in and continuously improve our union economics. So overall, we believe our international business investment is highly manageable and remains in line with our initial expectations.

展望未来的话,国际业务是惊动坚定不移的长期战略,我们也会逐步的推进业务的布局和能力建设。 We will also continue to adhere to financial discipline in the process of business expansion. At the same time, we will pay attention to the efficiency of investment and production, and achieve sustainable growth in business health. In terms of ability construction, we will also invest in the ability of product supply chain logistics and technical systems. This will provide more competitive product supply and better experience for consumers in Europe. and further establish the advantage of Joy-Buy in Europe. From a long-term perspective, these investments will also transform into the certainty of the long-term flow of users. Then, with the gradual release of the scale effect, it will improve our long-term ROI. We also believe that with the core supply chain of JD.JPY, including the efficient self-sufficiency mode, which adds the ability of logistics to travel, JD.JPY also has the industry efficiency in the global scope,

Looking ahead, international expansion is a long-term strategy for JD. We will steadily expand our footprint and build our capabilities. In the meantime, we will strictly maintain our financial discipline and focus on ROI to drive healthy, sustainable growth. In terms of capability building, we'll focus our investment on key supply chain areas including product fulfillment technology systems, etc. This will allow us to bring a more competitive product offering to European users, improve delivery experience, and further differentiate the joy-buy experience. Over the long run, this investment will translate into better user retention, unlock economic scale, and drive long-term ROI. We are confident that JD's core supply chain model, especially our highly efficient 1P model, combined with strong logistic capabilities, give us the potential to redefine industry efficiency and user experience on a global scale.

Regarding the second question about AI, we believe that no matter how the technology is developed, whether it's agents helping users complete the purchase action or users completing it themselves. In fact, the underlying logic of the retail industry will not change. It will always use experience, cost, and efficiency as the core to satisfy users' constant pursuit of product price service. This is also the core component that Jingdong has built in the past 20 years. We will use AI, robotics, automation, and these new technologies to continuously improve users' experience. and at the same time, reduce our own operating costs and increase efficiency. Here, I will give a few examples.

Regarding the second question on AI, we believe no matter how technology evolves, whether AI assists the shopping, the essence of retail remains unchanged. It has always centered on delivering better user experience, lower cost, and higher efficiency. to meet users' continuous pursuit of better product, price, and service. This is also the core mode of JD that we have been building over the past two decades of deep investment in supply chain. Today, we are leveraging new technologies, including AI and robotics, to further enhance the user experience while reducing cost and improving efficiency. Let me walk you through a few examples.

Let me walk you through a few examples.

On the demand side, we are making a comprehensive upgrade with our self-developed AI agent called Jing Yan to help us more precisely identify, stimulate, and match consumer demands. Jing Yan has provided a more efficient and convenient shopping experience within the JD app. In Q1, we have seen Jingyan demonstrate strong growth momentum with its quarterly active user growing by over 200% year-on-year, while the growth of user engagement was even more robust, increasing by over 300% year-on-year.

In terms of internal work flow or platform capacity, our marketing agent can assist our marketing to analyze the needs of the front-end market, move the business machine to find more suitable merchants and products, and complete the management of daily merchants and products. internal workflow, our procurement and sales agent,

can analyze front-end market demand to uncover new business opportunities and then source more suitable merchants and products. Our procurement and sales agents can also automate routine operational tasks such as merchant and product management, inventory management, and marketing activities. enabling our procurement team to operate and make decisions with greater efficiency. At the same time, we have developed a suite of AI tools to help merchants enhance their operational efficiency, including marketing content generation, JoyStreamer, our digital human live streaming solution, and AI-powered customer service.

And on the fulfillment side,

We are broadly deploying AI and robotic technology to continuously drive up our automation and robotics coverage. Currently, JD's Longzhu Tech series of robots is able to cover the entire logistics chain and has been deployed at a global scale, gradually delivering cost reduction and efficiency gain.

As you can see, we are using the agent's application to open and upgrade our work sessions one by one, which will eventually gradually connect the entire workflow. In fact, it has achieved the form of agent-to-agent. Through agents, we have replaced many low-efficiency middle sessions, which ultimately improved the efficiency of operation.

So therefore, you can see by deploying this agent, we are connecting and upgrading individual process into a seamless end-to-end workflow, which essentially building an agent-to-agent framework. By replacing inefficient intermediary layers, we are positioned to realize step change in the overall efficiency. Thank you, Ronald. We can go to the next analyst.

Your next question comes from Alicia Yap with Citigroup. Please go ahead.

Hello, 晚上好,管理層, 謝謝接受我的提問, 恭喜那個搶金的業績, 兩個問題, 第一個問題是, 隨著外賣行業競爭格局的逐步改善, 然後京東能至於在這個領域持續的投入, 以驅動金融部獲取和業務的交叉銷售, 請教管理層, 就是京東外賣的業務的目標, 是否含實現盈利, And then in addition, do you plan to achieve a profit-loss balance at the same time as your business? Or do we see the takeaway business as a long-term strategic investment and plan to maintain a small loss or a close profit-loss balance in the long term? Then the second question is, how does the management team view the future competitive pattern of the commercial industry? Because there are large chain supermarkets, e-commerce, and real-time retail. How will the future market share be distributed? And in these modes, what kind of mode is Jindonggeng inclined to set up? As the food delivery landscape gradually improves, we understand that JD remains committed to investing in this area to drive new user acquisition and also cross-selling. So can management share whether the goal is to operate the business profitably? Or furthermore, does JD actually aim to break even at the same time as the competitors? Or does management view food delivery as a long-term strategic investment that will continue to operate at a slight loss or maybe just near a break-even point? And then second question is that what is management view on the future FMCG and also the fresh category landscape? So what could be the shares split between the large supermarket chain, the online, the on-demand, the quick commerce? What will be the preferred models that JD1 and which model will be more profitable? And then any views and thoughts on the competition's landscape evolving? Thank you.

Thank you. First of all, during the first quarter, Jindong's take-out has achieved the highest level of sales since its establishment. The take-out model is clearly improving. As the take-out revenue improves and the advertising system improves, the commission and advertising revenue generated during the first quarter take-out Group growth is nearly double. At the same time, in the face of industry subsidies competition, we have always maintained rationality. Based on different users, groups, and different regions, we continue to improve the efficiency of precision operation and marketing, and promote the development of take-out through supply chain model innovation. We are also fully implementing the management requirements of the industry, and we are always adhering to the rule of law.

First, in Q1, while keeping healthy order volume, JD Food Delivery achieved biggest sequential loss reduction to date, with solid progress in UE improvement. On food delivery's revenues, as we continued to optimize operations and upgrade advertising systems, total revenues of commission and advertising surged nearly two times on a quarter-on-quarter basis in Q1. At the same time, we maintain a rational approach amidst industry-wide subsidy competition. We continue to refine our operations and marketing efficiency across different user groups and regions. Furthermore, through supply chain innovation, we are advancing the growth of this business. We also fully implement regulatory requirements and remain committed to compliant operations.

At the same time, the takeaway business will ultimately achieve profit. But I would like to remind you that Jindong takeaway is not an independent business. We are continuing to speed up the release of takeaway value. In terms of users, let's look at the scale first. The takeaway continues to drive the overall flow of Jindong and the health growth of users. Q1 Jindong DAU and the number of users bought in the same quarter increased by more than 20%. The annual user size has reached a new high in history. This has also promoted the growth of our overall advertising revenue. Looking at the activity, the delivery business has better met the needs of the existing high-quality users in Jindong, which led to a 37% increase in the overall shopping frequency in Jindong. We believe our food delivery business will eventually achieve profitability.

However, JD Food Delivery is not a standalone business. We have been unlocking its synergetic value within our business ecosystem. On user's front, first user skill, JD Food Delivery has been driving healthy growth in traffic and user base for our platform. In Q1, both our DAU and quarterly active customers increased by over 20% year-on-year, and the number of our annual active customers reached a record high. This also contributed to our advertising revenue growth. Second, user engagement. As food delivery effectively fulfills the demands of our existing high-quality users, it helps to drive a 37% year-on-year increase in user shopping frequency on our platform. Third, cross-sales. We've also seen stronger cross-category purchases among food delivery users, particularly in supermarket categories and our on-demand retail offerings.

In terms of supply, the delivery is rich in the other geographical locations on the JDM, including the supply of various products and businesses such as restaurants, shopping malls, and Japan. This can also better strengthen our cooperation with the brand. In terms of delivery, we are opening and testing the joint effects of delivery, delivery and logistics. On the supply side, food delivery also enriches the location-based supply on our platform, expanding categories from dining and supermarket to general merchandise.

This also enables us to deepen partnerships with merchants and brands. On the fulfillment side, we have been unlocking and testing synergies between food delivery and logistics fulfillment to develop a robust last-mile infrastructure. This not only enhances our on-demand delivery capacity, but accelerates the coordination and optimization of our overall logistics operations and management.

那外卖和及时零售是京东重要的长期战略方向。 我们会以长期的视角推动业务的健康发展。 Food delivery and on-demand retail are long-term strategies for JD.

We will drive healthy development of the businesses through a long-term perspective.

我来回答Alicia关于商超的问题。 First of all, China's commercial industry has a huge market size of nearly 100,000 billion yuan. However, the current market pattern still shows the characteristics of high dispersion. This also means that there is a lot of room for improvement in efficiency and cost. This also shows us that the online penetration rate of this industry also has a wide room for improvement. Let me answer Alicia's second question on supermarkets.

So first, China's supermarket sector has a massive market size, nearing 10 trillion RMB in scale, yet it remains highly fragmented. So this indicates significant room for potential cost of optimization and efficiency gain, as well as for the growth in online penetration. Within the supermarket category, we operate multiple models, including 1P model, which focus on delivering a reliable consumer experience, 3P platform model which offers selection and diversity, and additionally the on-demand retail model which has been growing rapidly on JD in recent years. So these models are not simply replacing one another. Instead, they address diverse consumer demands across different shopping scenarios by emphasizing distinct advantage in efficiency, timelessness, and selection.

那么京东超市作为深耕供应链的B2C零售商, 在商品的选择、供应链及仓储管理、成本价格的优势以及用户体验上有巨大的优势。 Although the competition in the industry is intense, as the largest supermarket in China, Jingdong Supermarket has also shown a strong growth tendency. It has achieved a steady growth of double-digit income in nine consecutive seasons. Regarding profitability, we have also used the advantage of scale and supply chain capability to continuously improve the profitability of supermarkets. Looking forward to the future, Jingdong Supermarket will continue to We will continue to maintain stable growth and gradually increase our profit and loss capacity. We are confident that our scale advantage will further release its effect. We believe that in the end, the competition in the commercial industry will also return to the essence of experiencing cost efficiency. Then, Jingdong Supermarket can provide better products at a lower price for users by continuously improving its operating chain ability. At the same time, it can also help the brand to continue to bring definite volume sales. We are full of confidence in the long-term health growth of Jingdong Supermarket. It will also become an important growth driving force for us in the next few years.

As a B2C retailer with deep supply chain expertise, JD Supermarket holds significant competitive advantage across product selection, supply chain, and warehouse management, cost and price competitiveness, and user experience. Despite intense market competition, as the largest supermarket in China, JD Supermarket has demonstrated remarkable growth resilience, achieving double-digit revenue growth for nine consecutive quarters. On profitability, we continue to enhance the profitability of supermarket category by leveraging our scale advantage and supply chain capabilities. Looking ahead, we still see substantial runway for improvement in both gross margin and our fulfillment expense ratio, allowing us to unleash results from our scale and sustain steady growth while gradually expanding our profitability We believe that competition in the supermarket sector will ultimately return to the focus on user experience, cost, and efficiency. By leveraging our continuously improving self-operated supply chain capability, JD Supermarket delivers better products at lower price to customers. While helping brands achieve consistent and incremental sales, we are highly confident that in the long-term healthy growth of supermarkets, which is becoming a key growth engine for us in the coming years. Thank you, Alicia. Let's go to the next analyst, please.

Your next question comes from Thomas Chong with Jefferies.

Please go ahead. Thomas Cheung, your line is now live. Please proceed with your question.

Good evening. Thank you for accepting my question. I have two questions. The first is that the management can share the progress of the company's ecosystem on the platform, including our 3P, the number, the ratio, and the expectations for the next few seasons. Hi, good evening. Thanks, management, for picking my questions. I have two questions. My first question is about the latest updates about our ecosystem strategies, including number of 3P merchants contribution, as well as the outlook over the next few quarters. And my second question is about capital return. Can management share the latest updates about the return to shareholders? Thank you.

Okay. 京东的平台生态的核心始终是围绕体验成本和效率的。 那通过不同的模式为用户提供最优的产品价格和服务的组合, 满足多样化的体验需求。 我们的生态建设取得了不错的进展。 To share with you, each indicator of the first quarter maintains a rapid growth trend. In the first quarter, the number of active businessmen in Jingdong remains the same as the number of three-digit increases. We have introduced more high-quality brands and industry-level businessmen to provide more abundant products to users. At the same time, the delivery business has also brought us a large number of quality restaurant businessmen, which has further expanded our service sector. Our platform ecosystem always centers on user experience, lower cost,

and enhanced efficiency. By leveraging different business models, we provide the best combination of products, price, and services to meet diverse consumer needs. We've made solid progress in our platform ecosystem development. Let me share a few key indicators that maintain rapid growth in Q1. First, our active merchant base. It maintained a triple-digit year-on-year growth rate in Q1. We've onboarded more high-quality brands and industrial belt merchants, providing users with a more diverse product supply. Meanwhile, our food delivery business has also brought in a large number of quality restaurant merchants, further expanding our service scope. Second, users. We've seen positive feedback from users. The number of users who shopped 3P offerings on our platform grow at a fast pace, outpacing the growth of our total users. This also supported the fast growth of 3P order volume, which accounted for over 50% of our total orders in Q1.

从财务结果看, Q1 3P的GNV增速快于大盘。 The more important thing is that our commission and advertising revenue has achieved double growth in six consecutive seasons. The continuous improvement of this high profitability revenue ratio is leading to the improvement of JD's overall profitability. For the long term, we believe that 3P's GNV ratio will exceed our own profit. The platform ecosystem will also become an important driving force that supports JD's revenue growth and profit expansion.

From a financial perspective, in Q1, our 3P GMV grew faster than 1P and total GMV. More importantly, our marketplace and marketing revenues have delivered double-digit growth for six consecutive quarters. The increase in contribution from these high-margin revenue streams continues to drive our overall profitability. Over the long term, we believe 3P GMV contribution will surpass 1P. Our platform ecosystem will become a key driver for both our revenue growth and margin expansion.

Regarding return on shares, this year's first quarter, the company repurchased about 44.5 million common shares, almost 22.3 million ADRs. The total return is $6.3 billion, equivalent to 1.6% of the flow rate of December 31, 2025, which is still close to $1.4 billion. From August to July of next year, we will proceed according to the rhythm. At the same time, the company also announced the annual cash growth interest in March of 2025, which has been issued according to the plan in April. Regarding shareholder returns in the first quarter,

we repurchased a total of around 44.5 million ordinary shares, equivalent to 22.3 million ADS, for a total of US$631 million, representing 1.6% of our total ordinary shares outstanding as of the end of 2025. The remaining amount of our ongoing repurchase program is US$1.4 billion, and the expired date will be August next year. We expect to continue to execute our share buyback as planned pace. In addition, we announced the annual cash dividend of $1 per ADS for the year of 2025 in March and the completed payment in April as planned. Going forward, we remain committed to returning value to our shareholders through dividends and share buybacks At the same time, we will maintain focus on achieving healthy, long-term growth in business skills, profitability, and cash flows. We aim to share JD's success with our shareholders in multiple ways.

Thank you. That's all the questions we can take today. So let me just wrap up since we are running over time. Thank you for joining us on the call today and thanks for your question. 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 again next quarter. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.