JD.com, Inc. (NASDAQ:JD) Q1 2025 Earnings Call Transcript

JD.com, Inc. (NASDAQ:JD) Q1 2025 Earnings Call Transcript May 13, 2025

JD.com, Inc. beats earnings expectations. Reported EPS is $8.41, expectations were $1.05.

Operator: 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’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, Director of Investor Relations. Please go ahead.

Sean Zhang: Thank you. Good day everyone. Welcome to JD.com’s 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, Mr. Ian 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 questions reflect management’s view as of today only and will include forward-looking statements, so please refer to our latest Safe Harbor statement in the earnings press on our website, which applies to this call. For a discussion of certain non-GAAP measures, please refer to the reconciliation of non-GAAP measures to the comparable GAAP measure in the earnings press release.

Please also note all figures mentioned in this call are in RMB unless otherwise stated. Now let me turn the call over to our CEO, Sandy. Sandy, please.

Sandy Xu: Thank you Sean. Hello everyone. Thank you for joining our earnings conference call today. Our business maintained robust momentum in the last quarter of 2024 and kicked off 2025 with an even stronger set of results in Q1. Our total revenues were up 16% year-on-year, a further acceleration from the prior quarter with healthy growth across the board. We meaningfully outpaced total retail sales and online retail sales of physical goods in the same quarter. We continued to enhance our supply chain capabilities and solidified market leadership in our electronics and home appliance categories, while further tapping into the large market potential in the general merchandise category and building up our user mind share. Our business also continued to see healthy profit growth during the quarter.

Our non-GAAP net profit was up 43% year-on-year to RMB 12.8 billion, with net margin expanding by 82 BPs to 4.2%. This was primarily driven by year-over-year improvement in our gross 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 costs and higher efficiencies. 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 further acceleration in revenue growth to 17% year-over-year. The healthy demand in this category demonstrates the underlying strength and vast potential of domestic consumption as well as JD’s unparalleled strength in supply chain and user mind 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 roll-out of new product models. We are confident to generate more vitality and resilience in our long term growth in electronics and home appliances. Moving onto general merchandise, in Q1 revenue growth here also accelerated sequentially to 15% year-on-year. To break this down, supermarket category revenue growth hit double digits for the fifth consecutive quarter. In particular, it had a robust promotion season during the Chinese Lunar New Year with revenues and users both on a solid growth trajectory. The momentum of the supermarket category is expected to carry on throughout 2025.

This performance is the result of continued refinement across every stage of our retail supply chain, from enhanced procurement capabilities and improved fulfillment efficiency to a stronger user experience and increased user mind share. Supermarket offers massive market scale with fragmented players and a 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 our continually enhanced assortment of brands and merchants along with growing user recognition. Supported by our differentiated road map to scale our fashion business scale and strengthen user mind 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 onto 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’s has recorded double-digit year-on-year growth in both shopping frequency and ARPU 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 certain recommendations, AI shopping guide consultations, 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 have also made steady progress in executing our low price strategy and building on 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 expand the merchant base and product offerings, also our 3P order volume and 3P buyers increased strongly year-on-year. This momentum also contributed to the robust growth of our marketplace and marketing revenues, which were up 16% year-on-year in Q1, a meaningful pick-up 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 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 packed demand and opportunities, and JD has the right culture and strength, including the established systems, fulfillment network, talent, as well as business model to effectively address this demand. 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’s food delivery has made remarkable headway in the aspects of order volume, on-boarding merchants, and [indiscernible]. In particular as we speak, JD’s food delivery order volume today is reaching close to 20 million orders, another important milestone that we expect to surpass very soon. This demonstrates our incentive strategies and strong execution at the right time. On demand retail with food delivery included will generate powerful synergies with our core retail and other businesses, such as JD Health, and drive overall growth and efficiency gains 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 RMB 200 billion export to domestic sales program to work with export manufacturers to expand domestic market presence.

It will also enrich product supply on our platform, particularly those featuring great quality and low price. In addition, we’ve also been driving the application of AI and automation technologies across the demand, supply and fulfillment aspects of our entire ecosystem, such as better connecting user demand with our product offerings and 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 and profits, and we are more excited as we tap into a set of great growth opportunities to expand our future TAM.

Beyond a solid core business, we believe it is important for companies to hold a long term perspective, remain steadfastly focused on its strategic priorities while maintaining flexibility to adapt to industry dynamics. We believe JD today is on a 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.

Ian Shan: 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 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 strong proof of our ever-enhancing supply chain capabilities and user experience. In terms of profitability, our gross margin expanded by 60 BPs year-over-year to 15.9% in Q1, sustaining a 12-quarter streak of year-on-year improvement. Non-GAAP net income attributable to ordinary shareholders was up 43% to RMB 13 billion, with non-GAAP net margin expanding by 82 BPs to 4.2%.

Alongside our strong financial results, we remain dedicated to delivering shareholder returns. In April, we completed a new cash dividend payout of US $1.44 billion or $1.00 per ADS. 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 2.8% of our ordinary shares outstanding as of December 31, 2024. The progress demonstrated our dedication to creating value for our shareholders and our strong conviction in JD’s long term growth and financial performance. Now let’s turn to our Q1 financial performance. Our net revenues grew by 16% year-on-year to RMB 301 billion in Q1. Looking down the mix, product revenues grew by 16% year-on-year, of which electronics and home appliances revenues were up 17% and general merchandise revenues were up 15%, both at a faster pace compared to the prior quarter.

For electronics and home appliances, we saw sustained strong consumption momentum in China as the government continued to implement stimulus policies. JD is well positioned with our supply chain advantages to fulfill consumer demand, 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 revenue growth also accelerated to 14% year-on-year in Q1.

Within services, marketplace and marketing revenues were up 16% and logistics and other services revenues were up 13%. For marketplace and marketing, its growth pace continued to accelerate sequentially in Q1 and both commissions and advertising revenues maintained double-digit growth momentum. This was a result collectively driven by many improving trends on our platform, including 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 continued to boost our procurement capabilities and accelerate growth of our high margin revenue streams. In terms of operating income in Q1, JD Retail non-GAAP operating income was up 38% year-on-year to RMB 13 billion, and operating margin was [indiscernible] 4.9%. We are well on track to continue to drive healthy top line and profit trajectory for JD Retail as we move forward. Next, JD Logistics – JD Logistics revenue grew by 11% year-on-year in Q1, with both internal and external revenues sustaining double-digit growth momentum. A soft performance in terms of non-GAAP operating income in the quarter was in line with our expectations as we proactively invested to upgrade fulfillment capacity and user experience.

In addition, JD Logistics has been working on increasing automation levels across its work streams, such as warehousing, sorting, transportation and last mile delivery. This enables JD Logistics to improve its frontline employee productivity and [indiscernible], as well as to further optimize its operational efficiency. Moving to new business, in Q1 revenues of new business turned around to 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 [indiscernible] 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 demand and expand our user base there.

JD food delivery by segment is also recorded under 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 ROIs with user acquisition. Quarter-to-date in Q2, we have seen more tangible results from JD food delivery user traffic, retention, as well as great potential to synergize with our retail business and the entire ecosystem. Next, let’s turn to our consolidated profit performance in Q1. At the group level, our gross profit was up 20% year-on-year to RMB 48 billion. Gross margin was up 60 BPs, up to 15.9%, primarily driven by JD Retail gross margin improvement, highlighting the high quality development of our [indiscernible].

Non-GAAP net income attributable to ordinary shareholders at the group level increased by 43% year-on-year to RMB 13 billion in Q1, with non-GAAP net margin up 82 BPs to 4.2%. Our last 12-month free cash flow as of the end of Q1 was RMB 38 billion compared to RMB 61 billion in the same period last year. This was primarily due to cash outflows associated with the trading program and our efforts to secure product supply to meet robust consumer demand. This was partially offset by our profit expansion. By the end of Q1, our cash and cash equivalents, 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 road map and our strong execution, particularly we’re confident for JD Retail to steadily unleash its potential in both scale and operational efficiency improvements.

At the same time, we are proactively making exciting headway into new business to build powerful synergies across the JD ecosystem and explore long term opportunities. It takes tremendous effort, but eventually we will generate greater value for our customers, shareholders and society at large. With that, I will turn it back to Sean. Thank you.

Sean Zhang: Thank you, Sandy and Ian. For the Q&A session, you are welcome to ask questions in Chinese or English, and our management will answer the questions in the language you asked. We will provide English translations for convenience purposes only. In case of any discrepancy, please refer to our management statement in our original language. Operator, we can open the call for the Q&A session. Thank you.

Q&A Session

Operator: Thank you. The question and answer session for this conference call will start in a moment. [Operator instructions] Your first question is from Ronald Keung from Goldman Sachs. Please go ahead.

Ronald Keung: [Chinese spoken] Thank you Sandy, Sean and Ian. Two questions from me. One is on our food delivery. What do we see as the medium term result for the food delivery initiative beyond maybe three to six months from the two quarters of pretty intense investments, and how do we see the food delivery industry landscape in the medium term? Second question is on JD Retail – with the acceleration that you’ve commented on across categories, also the margin expansion that we’ve seen, what have we done in driving particularly apparel and general merchandise strength, and what is our strategy in sustaining just overall healthy momentum beyond the training program into the second half? Thank you.

Sandy Xu: [translated] Thank you Ronald. Let me first take the question on on-demand retail and food delivery, that people really focus on. I shared my thoughts regarding on-demand retail and the 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 a goal to provide users with a more diverse shopping experience and scenarios. Food delivery has the highest order volume mix and frequency within on-demand retail, therefore JD food delivery business is deeply rooted in JD overall business ecosystem. It is not a standalone business. We believe on-demand retail, including food delivery, will create great synergies with JD’s existing business in terms of users, supply chain and fulfillment going forward.

Food delivery is a market with significant demand waiting to be fulfilled. First, the food delivery market in China is still growing rapidly with ample room for multiple platforms to thrive. Currently, there is demand from users, merchants and riders waiting to be fulfilled, including user demand for food safety and quality, merchant demand for reasonable commissions, and rider demand for better protection. JD has the right strengths, culture and advantage to address such demands, including JD’s better and cheaper brand awareness, the $0.35 principle that insists on taking only reasonable profit, and its strong logistics operation and management capabilities. JD is both capable and willing to address these demands. Let me elaborate a little bit further here, JD brand image of better and cheaper.

JD has already built the mind share 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 on-boarding review standards and management system, which will further enhance user mind share and trust for JD. Regarding $0.35 principle, it is a principle that our founder insisted on and JD adheres to since day one of our operations, 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.

For example, merchants joining the JD food delivery platform before May 2025 will enjoy zero commissions for the year. The largest operation and management capability for JD existing on-demand retail delivery network and systems, as well as our rich experience in B2C ecommerce logistics operation management, can be directly applied to food delivery. B providing full social insurance, including the five insurance and one housing fund in China for full time delivery riders and offering accident insurance and health insurance for part time riders, JD can improve rider retention and satisfaction, therefore providing our users with better service. 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 in ROI.

The food delivery business can generate great synergies with JD’s existing business. Our mid to long term goal is to further strengthen the synergy effect and operational capability across JD core systems, providing sustainable growth drivers in the long term. As of today, our systems and operational capabilities still have a long way to go, we still have a lot of homework to do. Our focus right now is to improve operational efficiency on our system.

Ian Shan: [translated] Ronald, for your second question, in the first quarter we achieved broad-based growth. General merchandise category also maintained its momentum of double-digit revenue growth year-on-year with both supermarket and fashion categories hitting double-digit growth and further accelerating on a sequential basis. Over the past two years, our team has been relentlessly enhancing operational capabilities and user experience, which is generating results and helping to unlock the growth potential of the general merchandise category. To take a closer look, for fashion category including apparel, over the past year we made a lot of efforts in building user mind share, 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 mind share, 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 one team business model and supply chain advantages while further [indiscernible] the synergies brought by food delivery and on-demand retail to meet users’ diverse needs across different shopping scenarios.

While we see the growth momentum of general merchandise, we will continue to focus on user growth and user experience, as well as ecosystem development to drive sustainable revenue growth this year and beyond. In terms of user growth and user experience, our quarterly active customers have maintained double-digit growth for six consecutive quarters with Q1 accelerating to over 20% year-on-year, an effective driver for our revenue growth. Going forward, we will further refine our user operation capabilities and provide high quality shopping experience cross core retail, on-demand retail, and food delivery business, sustaining healthy growth in both user base and engagement throughout the year. In terms of platform [indiscernible] system, as 3P user experience continued to improve on our platform, we saw revenue growth in our 3P user base and order volume which outpaced the overall growth of JD Retail.

With a more established 3P ecosystem and stronger user mind share towards our 3P offerings, we expect 3P to gradually [indiscernible] growth potential in the mid to long term.

Sean Zhang: Thank you. Let’s go to the second question, please.

Operator: Thank you. The next question is from Kenneth Fong from UBS. Please go ahead.

Kenneth Fong: [Chinese spoken] JD has achieved a remarkable result in the food delivery business with daily volume already close to 20 million a day. 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 investment strategies? My second question is related to AI. A different ecommerce platform has used AI to improve advertising ROI. As JD 3P ecosystem continues to improve, can management share with us how AI has helped enhance JD’s advertising system and [indiscernible]? Other than advertising, how is AI being applied to other business segments too? Thank you.

Sandy Xu: [translated] Thank you Kenny for your question. Yes, our team is paying close attention to this data right now. If we don’t achieve 20 million today, it will be–it will happen very soon in the near future. This is an important milestone and we feel very encouraged by this progress. In the 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 rates. Currently, repeat rates among food delivery users are very healthy. Since food delivery business is integrated in JD app, we are also seeing initial cross-selling trends emerging on JD’s platform, primarily in supermarket and [indiscernible] service categories.

On the merchant side, we expanded from zero to over 1 million on-boarded stores in a short period of time, and merchant on-boarding 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 offerings. On the rider side, we see the same momentum, so the responses from rider are very positive with many riders showing great enthusiasm. We even don’t have sufficient uniforms for new signed up JD riders, so that we’re seeing very strong interest from a large number of riders eager to join the JD platform. All of this demonstrates the immense potential of the industry. We are seeing very strong demand from all three parties while also benefiting our precise and standing up user demand and the strong execution capability of our team.

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

Before we entered, we made the strategic decision to enter the food delivery business with a 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 economies of scale and operational efficiency improvements. More importantly, being deeply rooted within JD’s overall ecosystem, the food delivery business holds significant synergistic 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 cost through optimized delivery network [indiscernible] and data-driven technology enhancements.

Let me share my thoughts on your second question on AI adoption in advertising. We are actively embracing the tremendous opportunity presented by AI and automation. We firmly believe these technologies will profoundly transform 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. On the demand side, we are leveraging AI to better identify and stimulate user demand, enhancing the precise matching between demand and supply. For example, we are using AI to reform the search recommendation system. In the meantime, we are actively exploring innovative AI applications, including more efficient AI-powered shopping assistants.

On the supply side, we are consistently upgrading a series of AI-powered tools for merchants to reduce cost and improve efficiency. Concurrently, we are enhancing the productivity of AI 1P procurement and self-operations through AI, optimizing efficiency during sourcing, product selection and pricing. Leveraging JD’s unique supply chain advantage and experience, we are developing AI agents to significantly boost productivity for ourselves and procurement personnel. Of course on the fulfillment side, not only AI but also automation holds a lot of potential for efficiency gains. We are implementing robotic automation technology across standardized warehouse process to enhance operational efficiency at every stage, reducing employment workload and driving productivity, and reduce operational costs through our warehouse operations.

In terms of AI applications for advertising business, our advertising R&D team is leveraging AI and large language models to enhance algorithms and recommendation effectiveness, driving higher ad conversion rates and accelerating ad revenue growth. We are actively developing and implementing AI-powered advertising agents that can execute complex ad campaigns through a simple command from merchants, with particular focus on serving the over 1 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. Of course, I forgot to mention there’s great potential for AI adoption in advertising content generation. In summary, we believe JD’s differentiated capabilities and extensive scenarios across the entire supply chain provides the most fertile ground for widespread AI adoption in retail and supply chain operations, presenting us with a unique opportunity to deeply integrate AI into every retail scenario, ultimately enhancing operational efficiency, enhancing user experience, and unlocking long term revenue and profit growth potential. Thank you.

Operator: Thank you. The next question is from Alicia Yap from Citigroup. Please go ahead.

Alicia Yap: Hello, thank you. [Chinese spoken]

Sandy Xu: [translated] Thank you Alicia. I’ll answer your question regarding 618. First of all, this year JD’s 618 campaign is centered around better and cheaper, aiming to enhance customer mind share by offering a wider range of product and use case, as well as a bunch of straightforward discounts. In terms of schedule, following our tradition, this year’s JD 618 campaign starts at 8:00 pm on May 31. Before this, we will launch a so-called Heartbeat Shopping Festival to meet customer demand, bringing constant shopping surprises to users. The Heartbeat Shopping Festival has officially started at 8:00 pm tonight China time, and we welcome all investors and 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 debuted 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 subsidies and traffic incentives for brands and merchants focusing on content ecosystem and advertising to help merchants achieve explosive sales and sustainable operations, resulting in more predictable growth. Since the beginning of this year, driven by a series of policies to boost consumption, the overall consumption trend has continued to improve, which will also promote the ongoing economic growth.

Leveraging the ultimate user experience, JD has achieved healthy growth in both user base and scale with the consumer market picking up, and all preparation that we have done for the JD 618 campaign. We are more confident about user growth and sales this year during the JD 618 campaign and bringing consumers better and cheaper shopping experiences.

Ian Shan: [translated] Alicia, regarding your question about JD’s long term growth and net margin targets, first, JD’s business model is built on supply chain capabilities and centered around the user experience. Our long term investments will focus on enhancing user experience, driving user growth, and strengthening our advantages in 1P business model and logistics services. Specifically first in terms of user experience and user growth, which have been continuously enriching the supply of quality products on our platform and our ability to serve users, meeting their diverse demands. For example, our efforts in Jingxi business, on-demand retail and food delivery have helped to accelerate user growth. The high frequency, high volume orders have also supplemented user data for the entire JD ecosystem, generating cross-selling opportunities and synergies with our core business.

In terms of our 1P capabilities, we have been improving our operations in categories such as electronics and home appliances and general merchandise, including supermarket and fashion categories. For example, we have been strengthening the operational capabilities, including category planning capabilities of our procurement and sales teams. 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 made efforts to further upgrade our last mile fulfillment network and capabilities.

In addition, we will be leveraging automation and AI technologies to progressively implement intelligent solutions across all logistics operations with the aim to drive sustainable long term cost reductions and efficiency gains. We are confident that these efforts will further strengthen JD’s supply chain advantages and continue to enhance user experience and mind share on our enriched products, price competitiveness, and service quality. This will drive better user growth and engagement and position us for accelerated growth going forward. In the long run, our profit margins will continue to improve with the expansion of our business scale and increased operational efficiency. JD’s long term goal of achieving high single digit net margin remains unchanged.

Sean Zhang: Next question, please.

Operator: Thank you. The next question is from Thomas Chong with Jefferies. Please go ahead.

Thomas Chong: [Chinese spoken] Thanks management for taking my questions. My first question is about the trading program and [indiscernible] electronics category. How should we think about the trends on smartphones and home appliances over the next few quarters? My second question is about capital return. Can management comment about the latest update on shareholders return buyback? Thank you.

Sandy Xu: [translated] Thank you Thomas. Since last year, a series of stimulus policies introduced by the government have already shown positive results. The trading program not only boosted consumer demand and drove sales of home appliances and mobile phones, but also promoted the industry’s shift towards offering more high end and intelligent product selections. We are seeing significant potential in Chinese consumer markets. We also expect to see 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 a better shopping experience, converting potential demand into sales, increasing our market share in the electronics categories.

Ian Shan: [translated] Now let me update the latest progress of our shareholder return. Year to date in 2025, we have repurchased a total of around 80.7 million ordinary shares, equivalent to 40.4 million ADS for a total of about US $1.5 billion. This represented about 2.8% 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 dividend for the year of 2024 and completed the dividend payment this April, totaling US $1.44 billion or $1.00 per ADS. 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.

Sean Zhang: Okay, thank you Thomas.

Operator: Thank you. We are now approaching the end of the conference call. I will now turn the call over to JD.com’s Sean Zhang for closing remarks.

Sean Zhang: 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.

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