JD.com's Q1 dual trends: Retail surges, new businesses narrow losses
On May 12, JD Group released its unaudited financial report for the first quarter.
The highlight is that both revenue and adjusted net profit exceeded market expectations; yet the worry is clear, as net profit attributable to parent nearly halved year-on-year.
Against the backdrop of pressure on electronics categories and continued cash drain from new businesses such as delivery services, this financial report reflects the complex situation faced by a leading e-commerce giant during a key period of strategic transformation.
Financial data shows that JD recorded a total revenue of RMB 315.7 billion this quarter, up 4.9% year-on-year, topping Bloomberg's consensus estimate of RMB 311.4 billion; non-GAAP net profit attributable to parent was RMB 7.4 billion, down about 42% from RMB 12.8 billion in the same period last year, but still far above the range from 17 broker forecasts of RMB 5.2 to 6.1 billion.
The coexistence of “better-than-expected” results and “significantly shrinking” profits is the core clue for understanding JD now.
01 Steady Revenue Growth, Net Profit Halved
Breaking down JD’s income statement for the first quarter, one can clearly see the dual-track pattern of “retail generating cash, new businesses bleeding cash.”
This quarter, net profit attributable to ordinary shareholders was RMB 5.1 billion, down 53.1% from RMB 10.9 billion in the same period last year. This is the third time in the past four quarters that JD’s net profit attributable to parent has halved year-on-year.
There are two main direct causes for the sharp decline in profit.
First, the operating loss from new businesses reached RMB 10.4 billion, becoming the biggest drag on profit. These segments generated only RMB 6.3 billion in revenue this quarter, yet required about RMB 12.2 billion in expenses, meaning nearly RMB 2 was spent for every RMB 1 earned.
Compared with the RMB 14.8 billion loss in Q4 2025, the loss for Q1 has clearly narrowed, which JD CFO Dan Su described in the conference call as “a further significant sequential narrowing.”
Second, a fine of about RMB 635 million from the State Administration for Market Regulation was recognized this quarter. Excluding this exceptional factor, profit performance would improve somewhat, but would still not reverse the overall downward trend.
Across-the-board increases in expenses are a deeper reason.
In Q1, fulfillment expense grew 18.5% year-on-year, marketing expense soared 45.8%, R&D spending jumped 48.6%, general and administrative expense rose 48.7%, all far outpacing the 4.9% rise in revenue.
The sharp rise in marketing expense points to persistent subsidy input for new businesses like delivery, while R&D spending is closely related to strategic investment in AI. Both underline JD’s logic of “trading profit for the future.”
On the positive side, the core retail business shows considerable profitability resilience.
JD Retail achieved operating profit of RMB 15 billion in Q1, up about 17% year-on-year, with operating margin rising from 4.9% to 5.6%, marking a historical high.
Dan Su attributed margin improvement to “improved gross margin” and “higher marketing efficiency,” and specifically noted that retail business market fee rate has optimized year-on-year for three consecutive quarters.
However, the sustainability of profit quality still requires cautious scrutiny.
JD's free cash flow for Q1 was negative RMB 6.5 billion, though it still holds about RMB 215.7 billion in cash and equivalents; negative free cash flow means operating activities' cash can’t cover capex and investment demand.
Given that losses from new businesses are hard to fully offset in the short term, and share buybacks are ongoing, cash flow management remains a key metric to watch this year.
02 The "Temperature Difference" Among Three Business Segments
JD’s three main business segments showed marked divergence this quarter: core retail made steady progress, logistics expanded, while new businesses were deeply mired in losses.
The “temperature difference” among them reflects JD’s shift in strategic focus and the pains of transformation.
Retail segment revenue was RMB 268.6 billion in Q1, up only 1.8% year-on-year, but profit grew 17%, highlighting “slow revenue, fast profit” efficiency improvement.
More noteworthy is the deep change in revenue structure: electronics and home appliance revenue was RMB 132.2 billion, down 8.4% year-on-year; daily commodities reached RMB 112.6 billion, up 14.9%, now nearly matching the scale of electronics revenue. Daily commodities now account for 46% of product revenue, a record high.
This shift means JD is transforming from a retail company dominated by 3C appliances into a platform powered by both electronics and daily commodities.
JD CEO Xu Ran said in the conference call that supermarket categories have achieved double-digit growth for nine straight quarters, with daily commodity growth further rising to 15%. Declines in electronics are closely tied to the high base effect of subsidies and industry-wide price increases for mobile phones and computers since March.
Xu Ran admitted that second quarter sales for electronics will likely face "continued periodic pressure," but is more confident about recovery in growth for the latter half of the year.
Strong growth in service revenue is another highlight. Platform and advertising services rose 18.8% year-on-year, logistics and other services jumped 21.7%, combined service revenue reached RMB 70.9 billion, further rising to 22.4% of total revenue.
Rapid growth in advertising benefitted from a flourishing third-party merchant ecosystem and AI-driven ad conversion optimization. Management revealed in the conference call that synergy with delivery contributed about 3% incremental boost to ad revenue.
Logistics segment revenue was RMB 60.6 billion in Q1, up 29% year-on-year, operating margin surged from 0.3% to 1.7%, showing marked improvement.
Some of this growth is from opening local instant delivery services to external merchants following the October 2025 acquisition, rapidly boosting external revenue.
Profit attributable to owners was RMB 880 million, up 95.2% year-on-year. The logistics company also announced a planned open market buyback of up to $1.2 billion in shares.
In JD’s overall architecture, logistics has long been identified as a “heavy asset infrastructure,” with thin margins and heavy investment. Now at a 1.7% operating margin, while still not high, it has steadily improved for several quarters, somewhat offsetting new business losses.
New businesses (including JD Delivery, Jingxi, Production Development, overseas, etc.) generated RMB 6.3 billion revenue and RMB 10.4 billion operating loss in Q1, compared to a loss of just RMB 1.3 billion in the same period in 2025. The rapid expansion in losses mainly stems from delivery’s continued large-scale investment since 2025.
A widespread market concern is: is this spending worth it? Signals from management show unit loss per delivery is improving.
On the earnings call, Xu Ran stressed “the delivery business will eventually achieve profitability,” and stated delivery continues to boost JD's overall traffic and user growth.
As previously disclosed, delivery has received over 240 million user orders and market share has exceeded 15%. On previous calls, management had stated that growth in delivery orders brings traffic synergy to JD’s main e-commerce site.
However, an internet industry insider told Wallstreetcn that when various companies are subsidizing instant retail, JD’s efforts are relatively smaller, so its market share has declined from the peak, thus its synergy to the main site is weaker. The ROI of new businesses needs further quarterly data for verification.
Sources close to JD reveal that JD is pinning delivery market share expansion hopes on growth of the Qixian Kitchen. At the start of the year, JD stated its goal for JD Delivery to reach 30% market share by 2026.
03 Efficiency and Long-Term Game
Looking through the financials, one can spot a thread running across all segments — JD is shifting from rapid expansion back to an efficiency-first track.
This matches the broader trend for e-commerce in 2026, as regulators explicitly call for deep rectification of “excessive competition,” the platform economy is collectively bidding goodbye to rough subsidy contests and shifting toward technology-driven, efficiency-focused operations.
In the delivery sector, policy and capital market constraints on irrational subsidies are strengthening. JPMorgan has lowered its forecast for JD’s new business losses in 2026 from RMB 45 billion to about RMB 35 billion.
Xu Ran also said in the conference call that if the market remains stable, JD’s total delivery investment in 2026 will be lower than in 2025, and efficiency will be key in the next stage of competition.
In terms of AI and tech, JD's R&D spending grew 48.6% year-on-year to RMB 6.9 billion in Q1, with management expecting “sustained growth in R&D expenses for some time ahead.”
Concretely, JD has open sourced its foundational JoyAI-LLM Flash large model and JoyAI-Image-Edit image editing model; it has built the world’s first fully embodied smart data infrastructure, with plans to accumulate 10 million hours of real-world scenario video data within two years.
These investments are based on AI already being deeply embedded in JD’s retail customer service, logistics sorting, ad recommendations, supply chain forecasting, and thousands of other sub-scenarios, and its contribution to gross margin and marketing efficiency is being gradually realized.
However, the 48%+ R&D growth far exceeds the 4.9% revenue growth, meaning financial returns from AI are still at an early stage. In the conference call, management revealed that AI-driven ad conversion is now contributing only about 3% incremental revenue to advertising, and scale effects need further amplification.
Internationally, JD launched the European retail brand Joybuy in Q1; the “211” service now covers over 30 European cities and more than 40 million people, and the logistics brand JoyExpress has also expanded abroad.
This is seen externally as JD’s “new strategic direction,” and was frequently mentioned by founder Liu Qiangdong, but it’s still only contributing modestly in the short-term and needs a longer incubation period.
New businesses lost RMB 10.4 billion this quarter, R&D investment was RMB 6.9 billion and is still growing, $631 million was returned to shareholders via buy-back, international business is still being invested — all testing JD’s cash management capabilities.
This quarter’s free cash flow was negative RMB 6.5 billion, 12-month rolling value is RMB 21.6 billion. Management stressed in the conference call, “Relying on a solid financial foundation, JD will continue to deliver shareholder returns,” but if loss reduction in delivery and other new businesses is slower than expected, sustained pressure on free cash flow cannot be ignored.
Altogether, JD’s Q1 report is a distinctly segmented answer sheet: core retail profitability hits record highs, logistics expansion accelerates, but the logic of high investment for growth still faces ongoing validation.
As the industry shifts from “growth by subsidy” to an efficiency-first track, JD’s ability to deliver a more balanced report card for controlling delivery losses, stabilizing electronics category, and realizing lasting value from AI and globalization will determine its overall performance this year.
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