Coupang Stock

Hello, everyone. My name is Emily, and I will be your conference operator today. At this time, I would like to welcome everyone to the Coupang 2026 Second Quarter Earnings Conference Call. [Operator Instructions].

Now I'd like to turn the call over to Mike Parker, Vice President of Investor Relations. You may begin your conference.

Thanks, operator. Welcome, everyone, to Coupang's Second Quarter 2026 Earnings Conference Call. I'm pleased to be joined on the call today by our Founder and CEO, Bom Kim; and our CFO, Gaurav Anand. The following discussion, including responses to your questions, reflects management's views as of today's date only. We do not undertake any obligation to update or revise this information except as required by law.

Certain statements made on today's call may include forward-looking statements including statements regarding future financial and operational results. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release, and in our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings.

As we share our second quarter 2026 results on today's call, the comparisons we make to prior periods will be on a year-over-year basis, unless otherwise noted. We may also present both GAAP and non-GAAP financial measures. Additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to the most comparable GAAP measures are included in our earnings release, our slides accompanying this webcast and our SEC filings, which are posted on the company's Investor Relations website.

And now I'll turn the call over to Bom.

Thanks, everyone, for joining us today. Consolidated revenue grew 10% year-over-year in constant currency, that's a step up from the growth in Q1 and in line with the guidance we provided. Adjusted EBITDA margin also came in within the range of guidance. First, Product Commerce [ result saw ] its revenue growth increase to 8% year-over-year in constant currency.

Let me spend a moment on the customer behavior behind that number because the reported rate blends groups moving in different directions. The vast majority of our customer spend never moved. That group is spending at the highest levels in our history and compounding similarly to before last year's data incident. The spend that did leave was a minority of the total and most of it has already returned. Some of these customers were away for months, long enough to settle in somewhere else. These customers not only came back, they returned to their full prior spend levels and have since gone beyond it, compounding their spend at similar high rates as before. And because the customers who returned were, on average, higher spenders than those who haven't, the picture in spend terms is even clearer than in customer counts. The vast majority of the spend, the incident disrupted is back and growing the way it did before.

On top of that, new customers keep arriving. Total WOW membership, for example, now exceeds its levels before the incident. New members begin at the early stage of the spend curve where new members always begin. So record membership shows up in revenue on a lag. Every cohort before them has climbed that curve, and we expect these to do the same. The spend of all customers, excluding just those that left during the incident and haven't returned is growing around 16% year-over-year.which is closer to the spend growth product commerce delivered in Q2 last year before the incident.

Spend growth does outpace revenue growth, but the gap between the 16% and the reported 8% revenue growth is driven mostly by the missing spend of the cohort that hasn't returned. We'll keep chipping away at earning them back. And after we [ lap ] the affected periods, we expect the spend growth for all of product commerce to reflect the growth rate of this underlying customer base because the cohort that has not returned will no longer be in our year-over-year comparison.

On margins, we're continuing to work through the disruption. We plan capacity and fixed costs against the predicted demand curve, and much of that capacity has long lead times. With revenue temporarily below that plan, those costs represent a larger share of revenue today. We could cut them significantly, but we've chosen not to because the right long-term decision is to grow into the capacity and support our customer experience that has always been our North Star.

There are also meaningful volume-based savings in our supply chain that we're missing this year that we expect to recover next year. We've also deliberately increased marketing spend to reacquire customers but we plan to reduce it next year after we've lapped the period. We run this business with precision on capacity utilization and volume economics. That's what allows us to deliver double-digit growth along with expanding margins in normal times. And it's also why a sudden shock is more visible in our numbers than it might be somewhere else. And the same discipline that makes the disruption more visible is what will enable us to reverse it. We've seen elements of this before, coming out of COVID, a sudden shift in the demand curve pressured margins and we return to normal levels.

The shape of the recovery this year won't move in a straight line. Holiday timing and seasonal cost patterns will affect the reported improvement quarter-to-quarter. Gaurav will walk through how that shapes the back half. The [ work ] we're managing to runs through next year. After we lap the effective period next year, we expect to work our way back to the growth and margin structure that product commerce ran at before.

I want to also note a few trends that we track closely and the broader opportunity we see before us. Our cohorts have continued to increase their spend with us year after year, including through this past year. Our oldest cohorts, the customers we acquired about 1.5 decades ago are still increasing their spend today. They now spend nearly 10x what they spent in their first year and climbing. Our newest courts are growing fastest of all at the beginning of the same curve. Each year adds a new cohort at the start of the curve, while every earlier cohort keeps climbing it. All 3 trends, our oldest cohorts continuing to grow spend, the spend of our subsequent cohorts climbing the curve to convert to higher levels and new cohorts joining power our growth. The past year tested us and all 3 trends held. And the spend of our cohorts climbs because spend growth is wallet share growth.

As we expand selection, customers find more and more of the things they buy for which we've broken the trade-off between price, selection and speed. We're saving customers more money and more time with every item we add on Rocket Delivery. Our wallet share or penetration of the overall retail spend in Korea remains below the levels of penetration we see from global peers in markets like the U.S. And we don't view these levels as our ceiling.because penetration follows the strength of the offering. Every trade-off we break brings purchases online that were never in reach before. As the offering improves, the addressable share of retail expands with it.

And the same logic applies to margins. The long-term margin drivers keep compounding. Automation continues to improve productivity across our fulfillment [ and ] logistics network, and margin-accretive offerings like advertising and FLC are still early in their scale. And AI raises the ceiling on both. We think of AI as a multiplier and what it multiplies is a set of assets we've been building for 15 years, the physical network, operating data from billions of orders picked, packed and delivered and direct relationships with tens of millions of customers. Applied to the customer experience, AI improves discovery, personalization and service. Applied to operations, it compounds productivity and lowers the cost to serve. And apply to margin-accretive offerings, it raises the returns for the merchants and brands who are using them, which expands the addressable opportunity itself.

Turning now to developing offerings where we're running the playbook I just described in new markets and categories. In Taiwan, we've built out and continue to expand our own end-to-end fulfillment and logistics network that now delivers the vast majority of our shipments, next day, 7 days a week, the only service in Taiwan to our knowledge that does.

We also began rolling out our Dawn Delivery experience, which became a defining part of the customer experience in Korea to our first neighborhood in Taiwan. And we're building it faster than the first time because Taiwan didn't start from scratch. Taiwan inherits over a decade of technology and process innovation from our [ Korean ] operations, the design, the systems, the operational playbook refined shipment by shipment. It took us 4 years into our logistics journey in Korea before we were able to launch Dawn Delivery, Taiwan reached it in just 1 year.

With the network in place, the work shifts to the input we know best, selection. Our selection in Taiwan today is a fraction of rocket deliveries in Korea. Every item we add is another purchase where our customer saves both money and time. And each of those purchases earns more of their wallet. That's the same dynamic that as our Korean cohorts still climbing 15 years in, and we can already see it taking hold. Our early cohorts in Taiwan are retaining and growing their spend tracing the curve Korea's cohorts produced at the same age. Taiwan is on the same compound in [ Cervus ] Korea, just earlier on it.

Two things to keep in mind as this scales, First, the path won't be linear quarter-to-quarter. Sometimes building selection at the right cost structure means stepping back in a category to rebuild it. Second, today's economics reflects the stage of our build-out, not the destination. As we work out the inefficiencies of an early supply chain and our volumes grow into the network, volume economics engage, and we expect Taiwan's P&L to follow the path that Korea paved.

Let me turn to our on-demand delivery service, which includes both [ Eaton ] Korea and Rocket Now in Japan. We've shared in the past our approach to developing offerings. We make disciplined initial investments where we see the potential for meaningful long-term cash flows. We look for early proof points in customer behavior, and we scale investments only as a results [ of ] validate the opportunity. This cycle is complete when an offering stops drawing on the portfolio and starts funding it. Eats has traveled that entire arc. We entered a category most considered settled with a modest investment and a simple thesis that the same propositions that customers valued in commerce, price, selection and service would matter just as much in food delivery.

Customers responded at every stage, and we invested behind that response. Today, Eats has grown to serve millions of customers and the category itself has grown with us. Food delivery in Korea has more than quadrupled in size since we launched Eats, now reaching a meaningfully higher share of total restaurant spend than when we entered. And we've been a significant driver of that expansion. And the capital story has come full circle.

Rocket Now, our on-demand delivery offering in Japan is in its early investment stage. Eats and Rocket Now are today sustainable on a combined basis. That is the model working end-to-end, disciplined entry, validation, scale and then an offering that carries its successors. We're also extending what Eats built. We've begun rolling out nonfood on-demand delivery, the same network and speed customers already trust apply to new use cases, offering customers even more opportunities to save time and money.

What I've covered today is 1 model running at 3 different stages. Product commerce is furthest ahead with years of investment in infrastructure and selection, customer cohorts still compounding 15 years in and the margin expansion that follows scale. Eats has now run that same cycle in a second category. And Taiwan is midway through it. Building the network, filling in the selection, moving through the same stages that Korea moved through. They represent the same playbook at 3 different points on the same curve. I'm proud of our teams for continuing to build for our customers at every stage. Our ambition from the very beginning has been to build an experience that wows customers so much that they ask themselves, how did I ever live without Coupang? Every item we add, every offering we build and every market we enter is another chance to build to that standard.

With that, I'll turn the call over to Gaurav.

Thanks, Bom. Our Q2 results demonstrate a continuation of the momentum we started to see last quarter. Before I walk through the numbers, I should highlight 2 items that shape the reported numbers this quarter.

First, the Korean won weakened significantly versus the U.S. dollar during the quarter, reaching its weakest level in more than 15 years. As a result, our reported growth rates in U.S. dollars understate the underlying growth of our business and we believe it is especially important to evaluate our results on a constant currency basis this quarter.

Second, our product commerce results this quarter include $410 million in administrative fines recently imposed by Korean regulatory authorities. While these fines are still subject to judicial review, and we plan to appeal them through the courts, we recorded the expense this quarter within OG&A in the P&L. Where relevant, I'll explain our results both with and without the fines.

Let me now walk through the segment results and then cover our consolidated performance. Product Commerce segment net revenues were $7.4 billion for the quarter, growing 1% on a reported basis and 8% in constant currency. This represents a sequential improvement from the 5% constant currency growth rate we reported last quarter. Product Commerce active customers for the quarter were [ $24.7 million ], growing 3% year-over-year and up from [ $23.9 million ] last quarter. As we noted, the sequential decline last quarter reflected the lag effect of the data incident on our trailing 3-month active customer definition. This quarter, we saw the dynamic reverse driven by the number of returning customers and new customer additions. And as Bom noted, WOW memberships now exceeds the level we saw prior to the data incident and returning members are spending today at higher levels than they did before the incident and increasing their spend at similar high rates as prior to the incident.

Product Commerce gross profit for the quarter was $2.3 billion with a gross profit margin of 30.5%. This represents a contraction of approximately 210 basis points year-over-year but an improvement of 25 basis points quarter-over-quarter. The year-over-year contraction is driven primarily by supply chain headwinds and temporarily elevated levels of promotional activities to accelerate customer [ the ] acquisition.

Segment adjusted EBITDA for Product Commerce was $382 million for the quarter, which excludes the fines I mentioned earlier, resulting in an adjusted EBITDA margin of 5.1%. This represents a contraction of approximately 390 basis points year-over-year, resulting from the gross profit margins impact I just described as well as the headwinds from our current capacity and fixed cost structure built against a pre-incident demand curve.

We believe the margin pressure we are experiencing to be relatively short term in nature and not representative of a structural change. Our conviction of the drivers of our long-term margin expansion potential, operational efficiencies, supply chain optimization, continued investment in automation and technology and the scaling of our margin-accretive categories and offerings remains firmly in place.

Within developing offerings, we reported segment net revenue of $1.4 billion growing 20% on a reported basis and 24% in constant currency. Growth continues to be led by Taiwan, Eats and Farfetch driven by increasing levels of customer adoption of these emerging initiatives. Developing offerings generated $226 million in gross profit for the quarter with a gross profit margin of 15.8%, expanding both year-over-year and quarter-over-quarter as these offerings continue to demonstrate the path to sustainable economics.

Segment adjusted EBITDA losses were $219 million, an improvement of $110 million versus last quarter and over 440 basis points of margin improvement over last year. At the consolidated level, we reported total net revenues of $8.9 billion for the quarter, growing 4% on a reported basis and 10% in constant currency. This is in line with the constant currency growth range we guided to last quarter.

Consolidated gross profit was $2.5 billion with a gross profit margin of 28.2%. This represents a contraction of 188 basis points year-over-year, but an expansion of 115 basis points quarter-over-quarter. As with Product Commerce, the year-over-year margin compression continues to reflect the near-term headwinds we have discussed.

OG&A expense was $3.1 billion for the quarter or 34.4% of total net revenues, representing an increase of approximately 610 basis points year-over-year, excluding the $410 million in fines, OG&A expense was approximately $2.6 billion or 29.8% of total net revenues, an increase of approximately 150 basis points year-over-year and down slightly quarter-over-quarter. This underlying year-over-year increase primarily reflects temporarily elevated marketing spend, our continued investments in developing offerings [ and ] a cost-based position against an expected demand curve from prior to the data incident. We view the elevated marketing and promotional spend as a deliberate near-term investment to accelerate growth, not a structural change in our cost base.

Operating loss for the quarter was [ $556 million ]. Excluding the fines, the adjusted operating loss was approximately $146 million, representing a quarter-over-quarter improvement and an operating loss margin of approximately 120 basis points.

Loss before income taxes was [ $533 million ] or $123 million, excluding the fines. We incurred income tax expense of $37 million this quarter. Our tax dynamics continue to reflect the fact that losses in early stage operations in Taiwan and Japan do not generate an offsetting tax benefits at the consolidated level. In addition, the fines recorded this quarter are not deductible for tax purposes in Korea, which further impacted our reported effective tax rate this quarter.

Net loss attributable to Coupang's stockholders was [ $570 million ] or approximately $160 million, excluding the fines. This resulted in a diluted loss per share of $0.32 or approximately $0.09, excluding the fines. We generated $163 million in consolidated adjusted EBITDA this quarter, which excludes the $410 million in fines recorded this quarter resulting in an adjusted EBITDA margin of 1.8%.

This represents a contraction of approximately 320 basis points year-over-year at the low end of the guidance range we provided. The vast majority of this year-over-year contraction is attributable to 3 temporary items, supply chain dislocation, elevated levels of marketing investments, our primary fixed cost base size to a pre-incident demand curve each of which we expect to work through over the next few quarters.

On cash flow, on a trailing 12-month basis, we generated operating cash flow of $1.4 billion and free cash flow of $105 million. The decreases versus prior periods reflect the lower profitability resulting from the data incident, increased level of investment in developing offerings and elevated levels of capital expenditures.

During the quarter, we repurchased an additional 23 million shares of our Class A common stock for approximately $459 million. We continue to be opportunistic in our capital allocation as we identify opportunities to generate long-term returns for our shareholders.

Now a few comments on our outlook. We expect Q3 consolidated constant currency revenue growth to be 8% to 9%. With the year-over-year comparison pressured by the timing of the Chuseok holiday season in Korea, which negatively impacts Q3 of this year compared to Q3 of the prior year. As Bom indicated, excluding the portion of customers that left during the data incident period and not yet returned, we are seeing growth in customer spend at 16% year-over-year. After we fully lap the affected periods in Q2 next year, the cohort that has not returned will no longer be in our year-over-year comparison. And we expect the spend growth rates of Product Commerce to reflect the spend growth rates of the underlying customer base.

On margins, we expect underlying improvements in Product Commerce to continue their progress in Q3. However, we expect these to be offset by higher weather-related seasonality and the timing of Chuseok holiday that is different from last year. As a result, despite our expectation of making meaningful improvements in the underlying drivers we noted this quarter, we anticipate consolidated year-over-year adjusted EBITDA margin contraction in Q3 of 300 to 400 basis points, similar to the contraction we guided to for Q2.

Looking beyond Q3, we expect the improvements to become increasingly more evident with product commerce adjusted EBITDA margins by mid-2027, returning to margin levels approximating those we generated prior to the data incident. We plan to provide more detailed guidance on the 2027 margin expectations towards the end of this year.

We continue to estimate full year developing offerings adjusted EBITDA losses of between $950 million and $1 billion. The largest contributor of the developing offering losses this year remains the long-term investments we are making into building our retail offering in Taiwan. As always, our investment in developing offerings is anchored by our commitment to rigorous analysis, operational excellence and disciplined capital allocation.

Operator, we are now ready to begin the Q&A.

[Operator Instructions]. The first question is from Stanley Yang from JPMorgan. Your line is now open.

Thank you for your opportunity to ask the questions. I have 2 questions. First, on the margin guidance, I couldn't hear very clearly about this [ point ]. But did you guide your EBITDA margin of the product commerce will recover to 2025 level in 2027. Can you confirm that? And if that is the case, what will be the major margin expansion drivers and related to this [ no ] margin outlook, have you seen a more competitive environment post-data accidents that caused cost pressure? That was my first question.

And my second question is about this Taiwan. So do you have any visibility into a potential structural decline in development [ in loss ] in Taiwan over time? If so, what will be the major drivers?

Yes. Thanks for your question, Stanley. Yes, we did guide that we'll recover our margins by middle of 2027. Specifically in Q3, we guided that the underlying drivers of our margin are improving. Some of the drivers haven't fully recovered yet and won't require until next year because of the scale, but we are on trend to benefit from high utilization as the volume grows.

Second, in the projected numbers for Q2, this progress is for Q3. This progress is [ masked ] by holidays, timing and seasonal cost patterns.which is why we guided 300 to 400 basis points of year-over-year contraction similar to Q2 -- beyond Q3, the improvement will become increasingly evident in the reported numbers as we expect this Product Commerce margin to return to approximately pre-incident levels by mid-'27, and we'll provide a retail guidance towards the end of the year. The reason for our confidence is that nothing has structurally changed. The pressure is from some temporary items that we chose to carry rather than cut and trade away the customer experience. We have also seen this play out before. Coming out of COVID, a sudden shift in demand pressured margins the same way and the same discipline brought them back.

Yes. So just to quickly touch on that a little bit. Yes, Stanley, we have guided margins to recover fully in 2027. The drivers of that margin expansion are the opposite of what led to the compression. The compression -- the large majority of the compression traces back to volume coming in softer than our demand trajectory. As Gaurav mentioned, we run a business with very tight execution. And so when demand deviates meaningfully below that trajectory, we get capacity stranded -- being stranded and we miss out on some of the volume-based savings that affect our economics. All of that is reversible and it's not structural, but the bulk of it is mechanical, and we expect to recover it in 2027.

We have seen more elevated competitive activities. But the -- we think the past year has given us an unusually direct test, customers who paused during the incident had a lot of time to try alternatives, months trial alternatives. And when they came back, and most of them did, they came back, not splitting their prior spend with us. They're back, as Gaurav mentioned, spending at the highest levels ever and growing that spend now as fast as they did before.

We also have membership now, an all-time high. And as customers who never left are also spending at record levels growing as fast as they did before. So we feel very confident about the position that our service -- the value proposition that we're providing for our customers. And we'll keep focusing on widening the experience gap with broader selection, lower prices and faster service.

On developing offerings, the economics of our -- I think we've typically talked about developing offerings as a whole. Taiwan is a big part of it. As I mentioned earlier, Eats has really come full circle and completed the cycle. We're talking about Taiwan, which is in the middle of that cycle. It's on the same curve that Korea is on just earlier. And the economics there reflects the stage of the build out that it's at. And its priority right now is building that foundation for durable growth and economics at scale. And we're encouraged by the signals we look for and customer behavior and response that we invest behind. And our guidance for developing offerings we typically provide at the end of the year. So we look forward to sharing that with you later this year.

Our [ last ] question will be from Eric Cha from Goldman Sachs. Your line is now open.

I have 2 questions also related to the guidance you provided today. So first, the first question is on -- actually your commentary around the product commerce revenue growth. I think you mentioned that without the WOW members that have left the spending growth was about 16%, which compares to the 8% growth on a reported basis as a whole. Just wanted to understand the gap between these 2 numbers. I think you mentioned that the people that have left are minority. So it does seem like this minority seems to have a bit of an outsized impact. So I just wanted to just get a sense why the gap seems a bit large.

And also, when we head into the fourth quarter, obviously, we'll be lapping a quarter where it's post the incident. So given that you mentioned that the existing WOW members are growing at 16% level, can we expect a meaningful step-up in growth by the time we reach fourth quarter this year? So that's my first question.

The second question relates to the margin. And I think as Stanley mentioned, you commented that the margin will be down 300 to 400 bps year-over-year. Does that include your sort of expectation around a material impact or some impact from the fire incident as I believe it does cause a bit of efficiencies around logistics. So I was just wondering how much of that was baked into the guidance?

And also, you mentioned the margin will be fully recovered by midpoint next year. Just wanted to understand the cadence of that improvement, I'm not sure how you will answer the first question, but if -- by fourth quarter, we do have a bit of an improvement in the year-over-year for the top line, can we expect a bit of a step-up in the fourth quarter, seeing the evidence of that sort of reversal kicking in? So largely sort of a linear fashion, I know you mentioned linear is not the way you see. But moving from 5% margin to probably around 8% margin for PC, Product Commerce margin, should we expect a step-up in fourth quarter and then continuously move up to the 8% level? Or do we expect rather compressed level and then step up in the midpoint next year to around 8% level? Just wanted to get color around that.

Eric, thanks for your question. For clarification, the data incident was closer to the end of [ Q3 ] which began in the end of Q4. And the affected period extended into part of Q1, actually most of Q1. So I think that's one point of clarification.

The cleanest way to understand the picture is, as I mentioned, to set aside that small group that's still missing. The customers who left during that period and haven't yet come back, everyone else is growing at about 16% year-over-year. As I mentioned, that's close to the right Product Commerce was compounding before the incident. And there are 3 groups that make up that 16%, all of whom are healthy. The largest is customers who never left, they're spending more with us than at any point in our history, compounding at their old pace. Second group is a group that left came back. As I mentioned, they came back are spending now at record levels. And they represent an even larger share of spend that left because the returnees skewed towards the higher spenders. And now spending at record levels growing faster than they did -- as fast as they did before.the incident. And the third is new customers who are joining us actually even faster than they did before the incident.

So the gap, as you point out, is between the 16% and the reported 8% is primarily driven by that small group of lower spending customers who haven't returned yet. There is, of course, this factor of spend growth outpacing revenue growth as well. But really, the vast -- the majority of that gap is really driven by that small group that is in the [ base ] of the year-over-year comp and is really distorting or obscuring the growth rate of the underlying customer base, the customers who are with us.

As I mentioned, next year, the mechanics work as such -- as we outpace -- as we lap the period. The group that still haven't returned to us hasn't returned -- won't have [ a ] return to us by that point, will drop out of our year-over-year comp base. And so this product commerce spend growth naturally converges to the spend growth of the customers who are with us, our customer base at that point, which will be then compared against a comp base that no longer includes that missing cohort. So hopefully, that mechanics -- the mechanics of that are clear.

And as to your point -- to your question of how that reflects in our growth rate, as you might imagine, we had varying levels of disruption that began at the end of Q4 that extended into Q1 after we fully lap that effective period or as we lap that period, you might see some of the [ apps ] and customers drop out of the base, but you'll see the full effect of that after we fully lapped the effective period.

Yes, Eric, let me take your question on the margins. We highlighted that the margin contraction were primarily driven by the supply chain headwinds, alleviated levels of marketing activities to reaccelerate or accelerate the customer acquisition and the headwinds from our current capacity and fixed cost structure built against the pre-incident demand curve. So we expect to make meaningful progress in mitigating these impacts over the next several quarters, including in Q3. But Q3 has this specific timing issue of holidays and seasonal cost patterns.

The whole margin [ step ] down and recovery is driven by our volumes that came in softer than our planned trajectory since the incident. The mechanics going forward are clear. As the demand rebuilds capacity and fixed cost utilization come back into balance and the volume-based supply chain savings that we are missing this year come back and the incremental marketing, we have deliberately deployed this year begins to normalize. So as you also pointed out, it may not be linear or at least we're not forecasting or giving any guidance on that.but we are confident that we'll -- we should be able to make the whole recovery.

The next question is from Seyon Park from Morgan Stanley.

I'll ask a question on developing offering. I think there was many questions asked on Product Commerce margins already, so I'll skip that. But just on -- first of all, on the developing offerings, you did see the losses narrow meaningfully in the second quarter. Can you maybe provide us a little bit of context as to what part of the business saw lowered losses? And how we should think about the losses for the third quarter and the fourth quarter? That's my first question.

Second question, I guess, is a little bit going beyond the core. A lot of talk about agentic AI and how AI could change how we purchase items online? And I know Coupang is already using a lot of AI especially for demand forecasting, delivery and the like. Does the company have plans to maybe utilize AI like from an agentic side of things, is that something that's kind of in one of the research pieces that we can kind of expect going forward? That's my second question.

Thanks for your question. On developing offering losses, as I mentioned, Taiwan is in the middle of that cycle. It is where we're primarily investing. I think I wouldn't read too much into investment levels quarter-to-quarter. We provide guidance on an annual basis. And as I mentioned, we currently remain in line with the full year guidance we're providing for developing offerings. And we're still at a very exciting phase of building that foundation for both durable growth and economics.

In Korea, we saw the power of building that underlying infrastructure that really powers the quality of customer experience that leads to both compounding growth and attractive economics in the long term. We saw the benefits of that of building the network, the last [ mile ] capability, the full supply chain, these things take time to build, but they compound for a very long time afterwards, as you've seen.

And the economics of Taiwan and the growth of Taiwan actually reflects the stage that we're at in the build-out. And again, I wouldn't -- the buildout is still under progress, and we don't manage to a [ quarter ] quarter. We provided annual guidance. But we see that the build-out is happening in some ways, even faster in Taiwan than in Korea. As I mentioned, it took Korea 4 years of logistics build-out to reach Dawn Delivery. Taiwan has reached it in just 1. We still have a lot of work to reach the quality of experience we're striving for. But Taiwan does benefit from over a decade of systems and operating processes that it's inheriting.

And we invest -- we scale our investment as customers validate it, and we're especially encouraged by the cohort response that we're tracking. The customer behavior we see in Taiwan at this stage looks very much like Product Commerce did in its early years. And that's the signal we invest behind. So we look forward to updating our guidance with you at the end of the year around developing offerings.

On AI, as you point out, we are already have already deployed AI in many parts of our business. It's already contributing across operations, fulfillment, logistics, supply chain, pricing, advertising, customer service. It's providing meaningful improvements in service levels and cost to serve where it's been deployed. We have customer-facing -- active investments on the customer-facing side as well, for example, in certain discovery where the industry's direction, we think is clear. And AI has the potential, as we've mentioned earlier, to really multiply the asset base that we have underneath it, the physical network, our operating assets or customer experience, and we've already seen and will expect it to improve customer engagement and compound productivity and lower cost to serve and all the benefits that we've mentioned earlier, on margin-accretive offerings, we think it actually has the potential to expand the addressable market itself, the opportunity itself because we've seen signs of it being able to -- and we see the potential for it to raise the return of the merchant brand customers who use them.

On the agentic AI part that you've brought up specifically, we think this is still a work in progress. We think the industry's direction or the -- it's not clear that the winning experience has emerged but we're investing. We are investing in teams and the research, as you mentioned, to explore it while being thoughtful about it and investing with the same discipline that we do and all the other initiatives that we have on the exploration front.

Whatever form agentic shopping takes, we believe we'll be in the best position to provide the winning experience.which we believe will combine AI with all the other aspects of customer experience to provide a complete and seamless buying experience.that customers trust. And to build a complete and seamless buying experience, you need more than AI. AI is one input, but there are many other assets that will be part of it. And we believe we should be in a position to provide the best of all worlds.on that front. So we'll continue to invest in exploring this opportunity thoughtfully and when a winning approach emerges we'll be positioned to execute with the same operational excellence and capital discipline we apply everywhere else.

Yes. Let me jump in. I had missed the question regarding fire impact in Q3 guidance. Let me address that from Eric, let me just address that. Regarding the recent fire at one of our fulfillment centers in Korea in July, this fire has not had a significant impact on revenue generation or our ability to meet the customer demand, and nor do we expect significant disruption to our ability to meet the future customer demand. So while we experienced disruption at the affected facility, we have been leveraging the flexibility of our broader logistics network to continue serving customers.

It's still far too early for us to assess any financial impact that may result from the fire but we are working very closely with the relevant stakeholders to assess the level of damage to our assets. We currently estimate the total carrying value of our owned inventory and fixed assets at the facility prior to the fire, as well as our obligation to sellers relating to their inventory sold in the facility to be approximately $246 million. We maintain insurance coverage for fire and intend to pursue the available claims. So any losses associated with FLC fire and the corresponding insurance recoveries would be recognized in future quarters beginning in Q3.

And while we're on the note of addressing questions that we missed. I think I missed a question from Stanley about how competition has affected our marketing spend. And I want to quickly touch on that question. The step-up in marketing so far this year isn't a response to any competitive activity. It's primarily a onetime investment to accelerate reacquisition of customers after the exceptional event of the incident. It's deliberate, we plan to bring it back down next year. Nothing about our long-term approach around marketing has changed. We've always been disciplined on that front and focused on generating attractive returns on investment.

The next question is from Jiong Shao from Barclays.

Just so in the spirit of not making you miss another question, I'm going to ask one at a time, if that's okay. So the first question is on your Q3 revenue guidance. I mean, for Q2, your group revenue was up 10% year-over-year and PC revenue growth was up 8%. So there's a 2-point gap. So if [ you ] take your Q3 rev guide of 8% to 9% and the PC, the implied PC may be 6% to 7%, let's say, that's a deceleration of Q2. I know you talked about holiday [ cutting ] the shift. So I was wondering if you can guesstimate or give us some help on how to estimate the impact from that cutting the shift. Is there any estimate you can give us apple-to-apple comparison basis in terms of the product commerce growth? That's the first question.

Thanks, Jiong, for the question. At this time, we are not giving estimates by a reason, but at a high level, there are a couple of factors impacting it. Our cohort strength exiting the quarter remains a growth strength for Product Commerce exiting the quarter remains really strong. So this is primarily a temporary calendarization impact and weather seasonal related impact, which we expect in Q3. But getting into Q4 and Q1, we expect to see stronger growth as our customers who have left us as Bom was talking earlier, as we are starting to overlap those customers.

Yes, I think the point to come to communicate clearly is that the underlying base we see continuing to grow very fast. As I mentioned, the underlying base grew 16% year-over-year. The customers are with us. We expect that trend to stay strong in Q3. And Q3 carries this added calendar effect that Gaurav mentioned.which is that the Chuseok holidays timing this year creates a headwind against last year's Q3.

But underlying the trend of the headwind of the Q3 holidays timing, the seasonal timing as well as the absent cohort that creates that year over base -- year-over-year comp distortion. We think the -- we believe the underlying customer base will continue to compound at very strong rates in Q3 similar to what we saw this quarter. And as I mentioned, also the record while membership numbers -- the new members are really a leading indicator, they don't quite show up in the revenues, they show up on a lagging basis. And so you'll see that in future quarters and years to come.

So the Q3 guidance isn't a reflection of the underlying growth. It's really a residual math of that one missing cohort and a holiday period shift this year.

Okay. Thank you for your comments. My second question is, I just want to confirm your margin guidance because all the drivers you talked about are reversing after the data leak. So I would imagine, when you talk about the margins in mid-'27 [ buying ] back to the data leak incident applies to Product Commerce, not just to the group. I just want to confirm that point.

That's correct. We're talking about margin recovery for product commerce next year.

Okay. Perfect. Great. And my last question is also a follow-up to what you mentioned about that missing cohort. So I was just wondering what may be some of the reasons you feel that this missing cohort may not come back to Coupang, given the obvious value we're providing to these consumers. Maybe tie into what's going on with the competitors are doing. Our competitors are adding more value to not only attract these cohorts appear to be keeping them for a bit longer than what we hope.

Yes, Jiong. It's difficult to say with absolute certainty why some customers haven't returned. But we think the data lets us rule some things out. And I don't think it's a change in the value proposition or a structural shift in the market. And I say that because when customers from this group come back even after months away, they return to their full prior spend levels and have grown from there.

These returning customers, as I've mentioned, are now spending at record levels, growing as fast as they did before the incident. If the value proposition or the relative value proposition had weakened for them, that's not the behavior you'd see. We understand that there may be some leftover sentiment and trust factors in play for customers who have still not returned. And our plan is to keep earning their trust every day, keep winning them back over time.

We will now take our last question from Wei Fang from Mizuho.

I have one regarding your supply expansion in Taiwan. So we've seen some of the local Taiwan brands onboarding recently and particularly in those high-volume categories like pet supply, personal care, et cetera. I believe the success is part of your -- part of the drivers for your gross margin expansion in the quarter. I was wondering if management can comment on the pace of local brand onboarding, like, compared to your home country, Korea, at a similar stage of development. If possible, can you also help provide any like example so far in terms of Taiwan local brands onboarded?

Wei, we're such an early stage right now. The supplier adoption is following a trajectory similar to what we experienced during the early years in Korea. And that's been an encouraging sign. And expanding local selection is one of our top priorities, but we're very early in that journey. We're still at a fraction of the overall selection that we plan to get to that we will have at a later stage. And so while it's exciting, and we're making progress, we're still -- we're just getting started in building that out right now.

This concludes today's conference call. Thank you, and you may now disconnect.

Hello, everyone. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the Coupang 2026 First Quarter Earnings Conference Call.

Now I'd like to turn the call over to Mike Parker, Vice President of Investor Relations. You may begin your conference.

Thanks, operator. Welcome, everyone, to Coupang's First Quarter 2026 Earnings Conference Call. I'm pleased to be joined on the call today by our Founder and CEO, Bom Kim; and our CFO, Gaurav Anand.

The following discussion, including responses to your questions, reflects management's views as of today's date only. We do not undertake any obligation to update or revise this information except as required by law.

Certain statements made on today's call may include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and in our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings.

As we share our first quarter 2026 results on today's call, the comparisons we make to prior periods will be on a year-over-year basis, unless otherwise noted. We may also present both GAAP and non-GAAP financial measures. Additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to the most comparable GAAP measures are included in our earnings release, our slides accompanying this webcast and our SEC filings, which are posted on the company's Investor Relations website.

And now I'll turn the call over to Bom.

Thanks, everyone, for joining us today. I'd like to cover a few things where we stand in the recovery from last quarter's data incident, how we see the path forward on growth and the nature of the temporary dislocation in margins and how we think about it over the longer term.

Starting with where we are. Customer obsession, operational excellence and disciplined capital allocation have guided us since our inception, and they're the same principles guiding us through this period. As we shared previously, January marked the low point in our product commerce revenue growth rate. Each month since has improved on a year-over-year basis and the pace of improvement strengthened through February and March. Our recovery is powered by the same drivers that have shaped our business since we launched Rocket delivery over 10 years ago, a relentless focus on evolving customers across selection, price and service. That experience was built or many years and billions of dollars of investment and one which we believe continues to widen its lead in the market. The customer behavior we've seen since the data incident reinforces this. For example, the vast majority of WOW members never left, and they have continued to compound their spend at double-digit rates throughout this period. Of those who did leave, the majority have come back and picked up where they left off, resuming the levels of spend they were at before the incident, and they're now compounding alongside the members who stayed. Through the end of April, we've closed nearly 80% of the decline in WOW memberships that followed the incident through a combination of those returning members and strong new sign-ups. New WOW sign-ups and churn have returned to historical stable levels. Across the board, customers are reengaging in ways that reflect the conviction they've long placed in the Coupang experience. It's worth to spend a moment on how this recovery shows up in the reported numbers in product commerce. Year-over-year growth will take time to fully reflect the underlying recovery. The months of pause compounding from the effective period continue to weigh on the comps even as [indiscernible] behavior normalizes. Our revenue growth rate trajectory from January to March is running ahead of historical patterns, and we expect the year-over-year comps to continue improving throughout the year.

Turning to margins. 2 distinct factors are pressuring profitability this quarter, and I want to describe them separately because they behave very differently going forward. The first is the customer vouchers we issued in response to the incident. These are onetime in nature. The bulk of the impact is contained to one with a modest tailwind to the first part of Q2. The second is a set of temporary inefficiencies in our network. Our capacity build-out and supply chain commitments are all made well in advance, calibrated to a demand trajectory, we project based on a stable, predictable customer pattern. That's how we manage cost to serve efficiently, and that's the path we were on before the incident. When an external event of this kind disrupts that pattern, actual demand falls short of what those commitments were [indiscernible] for and we carry the cost of underutilized capacity and inventory secured through the period. As demand returns to a predictable curve, we expect our capacity and supply chain to come back into balance and the inefficiencies to work their way out. We're adapting our network and supply chain through this period as we did when we came out of COVID, and we expect those adjustments will show up progressively in the P&L.

Stepping back from the near term. We believe the long-term drivers of margin expansion at Coupang remain intact and continue to improve. We expect operational efficiencies across our network supply, chain optimization, ongoing investment in automation and technology and the scaling of our margin-accretive categories and offerings to drive further margin expansion over the long term. We expect annual margin expansion to resume next year, and we have strong conviction in the underlying margin potential of the business over the long term. Beyond the recovery, the work of building the business continues. Selection remains the primary lever for unlocking the underlying growth potential in our Product Commerce segment. A meaningful portion of what customers want to buy is still not available on Rocket. And we believe the combination of our first-party catalog and Fulfillment and Logistics by Coupang is the path to closing that gap at scale. Automation and AI across our services, including our Fulfillment and Logistics network, continue to improve service levels and lower cost to serve in parallel, and we expect them to be meaningful contributors to both the customer experience and margin expansion in the years ahead.

Turn to developing offerings. In Taiwan, we're building the foundation for a truly differentiated customer experience. Our own last mile delivery network, which guarantees next-day delivery now covers the vast majority of our volume and that coverage continues to expand. We're still in the early stages of bringing the full Rocket delivery experience to Taiwan customers. But even at this stage, the response from customers has been remarkable. Core retention behavior is reminiscent of what we saw in the early years of product commerce in Korea. Our conviction in the long-term opportunity, both to WOW customers and to generate attractive returns on the capital we're deploying grow stronger each quarter. Given that conviction this year, our focus in Taiwan is on building the foundation for an unparalleled customer experience and durable growth over the long term. That means deliberate long-term investments in network design, last mile logistics build-out and supply chain improvements, the kind of foundation that takes time to lay but that will define the customer experience and competitive position of the service for years to come.

In Eats, as I mentioned, the recovery is following a similar path to Product Commerce, which speaks to the strength of the customer value proposition we are building across both services. In Developing Offerings, our approach is unchanged. We start with small investments, test rigorously and deploy more capital only into opportunities we believe can generate lasting customer WOW and durable cash flows. We remain disciplined capital allocators taking the long view. Our recovery is ongoing, and we have more work ahead. We're focused on continuing to build and improve on the experience that brought customers to Coupang in the first place. Across Product Commerce and Developing Offerings.

I'll now turn the call over to Gaurav to walk through the financials in more detail.

Thanks, Bom. As we guided coming into the year, even reflected the impacts from last quarter's data incident, and our results are consistent with the trajectory we outlined in February. The underlying business has continued to strengthen as we have progressed through this period, and we expect the impacts on Product Commerce to diminish as we now move further from the affected quarter. I will first walk through the segment operating results and then speak to our consolidated performance.

In Product Commerce, we reported segment net revenues of $7.2 billion, growing 4% on a reported basis and 5% in constant currency. As we look at each month within the quarter, the constant currency growth rate adjusted for timing of holidays reached its low point in January and accelerated sequentially in February and March, consistent with the recovery that we had described earlier. Product Commerce active customers for the quarter were $23.9 million, growing 2% year-over-year but down 3% over last quarter. The sequential decline reflects the lagging effect of the data incident on the metric because active customers are measured on a trailing 3-month basis and the incident occurred late in Q4. The affected period is more fully reflected in this quarter's count than in the last quarter. The most recent trend is the more meaningful signal. We have seen stabilization and improvement in the underlying metrics this quarter with encouraging momentum in account reactivations and new customer growth. The recent positive momentum in WOW membership, we spoke to last quarter has also accelerated over the past few months. As we noted, the vast majority of our members never left, and through the end of April, we have closed 80% of the decline in WOW membership that followed the incident. And the majority of WOW members who left have returned, and they have resumed the levels of spend they were at before the incident.

Product Commerce gross profit for the quarter was $2.2 billion, with a gross profit margin of 30.3%. This represents a contraction of approximately 100 basis points year-over-year and 160 basis points quarter-over-quarter. The decline in gross profit margin is the result of near-term factors tied to the data incident, including the impact of vouchers we issued in response to the incident and the temporary inefficiencies in our network such as excess capacity and supply chain commitments positioned against our pre-incident demand curve. We believe the long-term drivers of margin expansion at Coupang remain intact and will continue to compound, including operational efficiencies, supply chain optimization, ongoing investment in automation and technology and the scaling of our margin-accretive categories and offerings. We expect them to resume driving margin expansion and their underlying impact to become more evident as we move past these temporary inefficiencies.

Segment adjusted EBITDA for Product Commerce was $358 million for the quarter, resulting in an adjusted EBITDA margin of 5%. This represents a contraction of roughly 300 basis points year-over-year and 270 basis points quarter-over-quarter, driven primarily by the gross profit dynamics I just described, along with the near-term pressure from operating costs that were sized for a pre-incident demand curve. We expect this to normalize as we work through those commitments, and we make adjustments.

Turning to Developing Offerings. We reported segment net revenue of $1.3 billion, growing 28% on a reported basis and 25% in constant currency. The growth is primarily driven by the hyper growth rate in Taiwan, along with a continued high growth rate in Eats and Rocket Now in Japan. We generated $123 million in gross profit for the quarter in Developing Offerings, down 25% over last year as we continue to make investments in response to the encouraging customer engagement we are seeing across these early-stage offerings.

Segment adjusted EBITDA losses were $329 million, consistent with our expected cadence of investment, underlying our full year guidance of between $950 million and $1 billion in segment adjusted EBITDA losses that we communicated last quarter.

On a consolidated basis, we reported total net revenues of $8.5 billion for the quarter, representing growth of 8% on both a reported and constant currency basis. This is consistent with the 5% to 10% constant currency growth rate range we guided to last quarter.

Consolidated gross profit was $2.3 billion with a gross [indiscernible] profit margin of 27%, a contraction of approximately 230 basis points year-over-year and 180 basis points quarter-over-quarter. This margin compression reflects the temporary impact that I outlined in Product Commerce from the data incident along with the increased level of investment in Developing Offerings.

OG&A expense was $2.5 billion or 29.9% of total net revenues, roughly 250 basis points higher than Q1 of last year. The year-over-year increase largely reflects 2 dynamics. Much of our cost base was sized for the demand trajectory we were on before the incident, which creates a near-term gap between cost base and current revenue. And the increase in operating costs within Developing Offerings consisted of the levels of investment we are making to support those growth initiatives.

Our losses before income taxes was $255 million and we incurred income tax expense of $11 million. Our effective tax rate this quarter was elevated because the losses in our early-stage operations in Taiwan and Japan don't generate offsetting tax benefits at the consolidated level. We anticipate an effective tax rate of between 75% to 80% for the full year. We continue to expect this to normalize closer to 25% over the long term. We are reporting an operating loss for the quarter of $242 million and net loss attributable to Coupang stockholders of $266 million, resulting in a diluted loss per share of $0.15.

Consolidated adjusted EBITDA was $29 million, resulting in an adjusted EBITDA margin of 0.3%. This represents a contraction of approximately 450 basis points year-over-year and 270 basis points quarter-over-quarter, driven primarily by the Product Commerce gross profit dynamics from the data incident and the increased level of investment in Developing Offerings.

On cash flow, for the trailing 12-month period, we generated operating cash flow of $1.6 billion and free cash flow of $301 million. The year-over-year decrease in trailing 12-month free cash flow is primarily driven by the increased losses in Developing Offerings as well as higher levels of CapEx. This quarter, we also repurchased 20.4 million shares of our Class A common stock for $391 million. Our Board of Directors has recently approved an additional $1 billion to be added to a stock repurchase program as part of our broader capital allocation strategy to generate meaningful returns for our shareholders.

Now a few final comments on our outlook. For Q2, we anticipate consolidated constant currency revenue growth of 9% to 10%. We also expect our top line growth rates to continue improving over the course of the year as the impacts from the data incident diminish. We also expect consolidated adjusted EBITDA margin year-over-year contraction of approximately 300 to 400 basis points for Q2, primarily reflecting the near-term factors from the recent data incident. As we have noted, the long-term drivers of margin expansion remain intact. As we work our way through the temporary inefficiencies in our network, we expect margins to improve throughout the year with annual margin expansion resuming next year. The levels of service and value we are able to consistently provide to customers and the response we increasingly see from those customers give us confidence that the recovery will continue to build through the year, and we remain intensely focused on delivering moments of WOW for our customers every day.

Operator, we are now ready to begin the Q&A.

[Operator Instructions] The first question is from Eric Cha with Goldman Sachs.

I have 2 questions. First one is -- would you say, given the returning WOW members and probably higher demand visibility into the second half, the timing difference of demand and investment could be somewhat resolved in second half. And if so, with the 2027 margin would have profitability expansion over 2025 level? So that's the first question. .

And the second question is, did the Developing Offerings guidance you gave previously, did that include the voucher impact? And I don't think it is, but any likelihood the annual guidance may be revised higher given the annualized base in first quarter was a bit higher than expected.

Thanks for your question. I think it's worth going a little bit deeper into the margin point that you raised. I mentioned earlier that some short-term factors are in play, like customer vouchers as well as temporary inefficiencies. On the latter point, let me take a moment to explain how our cost structure works because I think it's important context for understanding both this quarter and the path forward. A meaningful portion of our cost base is fixed and built in advance. That includes our fulfillment centers, logistics network, supply chain commitments we make to partners as well as headcount, we secure to operate all of it. And none of these decisions are made on a quarter's notice. A new fulfillment center takes substantial time to plan, build and bring online. Supply chain commitments are negotiated with significant lead times. And as you can imagine, hiring and training our people is something we do well in advance of when we need them. And we size all of these against the projected demand curve. That's what we expect customer demand to look like quarters and in some cases, even years from now, based on the trajectory we're on. When demand follows that curve, our fixed cost base operates at the utilization we plan for and our cost to serve looks the way it should. And that's how we've consistently expanded margins over time. When an external event temporarily disrupts that curve, demand falls short of what those costs were sized for. The fulfillment centers are still there, supply chain commitments are still in place. The teams are still on payroll, but the volume flowing through is lower. So our utilization of those costs is temporarily below target. And that underutilization shows up directly in our gross margins and our adjusted EBITDA. It's the same dynamic that played out when we came out of COVID, when capacity built for 1 demand curve was suddenly serving a different one. And when this happens, we have typically 2 choices. The first is to make dramatic changes in the short term to try to hit some short-term number, close facilities, reduce head count and so forth. That option is available, but we believe it's the wrong one for our business and our customers in the long run. And we'd be unwinding capacity that we know we'll need again as the recovery continues and unwinding now to rebuild it later, especially with the lead times so that some of these things have is not only disruptive but highly inefficient. And the second choice that we have is to absorb that temporary underutilization knowing that as growth recovers demand catches up -- back up to the cost base, and the utilization returns to target. And that's the choice we're making. And we're making this -- we're managing this period actively. We're adapting our network where appropriate, much like we did coming out of COVID. But our overarching posture is that the cost base we've built is the right one for the path we're on, and we're not going to dismantle it for a temporary dislocation. And as the recovery progresses, utilization rebalances and the margin pressures work their way out. And that's the mechanism that gives us confidence in resuming annual margin expansion next year.

Eric, on your question regarding the [ TO ] losses, the $329 million loss in Q1 is in line with what we had expected. And our full year developing offering investments remain tracking to the $950 million to the $1 billion range we had given. It includes a voucher program that we have provided. So Developing Offerings, again, is an early foundational building stages with lots of moving pieces across initiatives and a lot of decisions being made at regular intervals. We are watching, continue to watch it closely, and we'll continue to update you as the year unfolds, if anything changes.

Operator, I think we're ready for the next question.

Our next question will come from Jiong Shao with Barclays.

I have 2. I'd like to perhaps ask one at a time if that's okay. I was just wondering, firstly, would you be able to sort of help us quantify a bit about the voucher impact in Q1 on revenue or EBITDA for Product Commerce and to deal given some vouchers [indiscernible] for Product Commerce all to whatever degree you are winning to share? That's my first question.

Sure. Let me take that. So regarding the $1.2 billion voucher program, our primary objective has been to ensure that our customers felt valued and supported during this challenging period. The redemption levels were consistent with our internal expectations. And from an accounting perspective, the vouchers are netted against the revenue. So they did have an impact this quarter on both revenue growth and margins. So as we noted earlier, with the voucher utilization period extending into the first few weeks of April, we do expect there will be a modest impact in Q2 also. .

Gaurav, if I may, just follow up on that. I believe your vouchers are expiring in about 10 days, so the impact for Q2 should be much smaller. But at the same time, you are guiding your Q2 EBITDA to be down 3 to 4 points year-over-year. Was that just because of the sort of the scale of the operation Bom talked about earlier, like you sized that up for certain scale. Now there's a lot of fixed cost. Are there other reasons that's driving the 300 to 400 basis points decline year-over-year on the group EBITDA for your Q2 guide.

Yes. Jiong. As Bom mentioned earlier, we had planned fixed capacity, both that shows in gross margin and our OG&A to be at the levels which were higher than the current trends that were created by this event. So because of that, the continued margin Q2 guidance is what we said it is.

Okay. Okay. My second question is that we have seen some media reports -- my apologies if they're not final or official that Bom has been designated as a head of the [indiscernible]. For those of us who are not super familiar with this sort of thing in Korea. I don't know. Could you talk about like what does that mean? Does that mean anything different for shareholders for corporate governance if that matters at all?

Sure. We are aware of the recent designation in Korea and are carefully reviewing it. As always, we continue to be committed to complying with all regulatory requirements in all the jurisdictions where we operate. We'll continue engaging consecutively with all our regulators and work through all our obligations as needed. That's as much we can share at this time.

[Operator Instructions] Our next question comes from Stanley Yang with JPMorgan.

Thank you for your opportunity to ask question. I have 2 questions. First question is, you mentioned already about the WOW members trend. So when do you expect your WOW users to be recovered to your pre-data bridge level? And what would be the normalized annual addition of WOW users after your full recovery?

My second question is, is there any change in your developing offering loss mix between Taiwan and Japan. When or at which scale do you expect Taiwan loss to pick up and start declining? I also would appreciate your comment on the operating trend of the Rocket Now in Japan?

Stanley, thanks for your question. In terms of specific dates, I think we're focused more on the trajectory and the underlying customer behavior more than on any date for recovery. I think there are some very helpful and informative signals that we're seeing in the customer behavior that's worth noting around our WOW membership. And as we mentioned, not only is WOW membership numbers being driven by new sign-ups, but it's also driven by members who are returning. The vast majority of our WOW members never paused in the aftermath of the incident. They continue to compound at double-digit rates the same way they have for years. And the minority who did pause are returning rapidly and the majority of them have returned in a very short period of time. And just as importantly, they're resuming their prior levels of spend, not splitting that share of wallet with alternatives. And we've now closed nearly 80% of the decline in WOW memberships that occurred after the event with a combination of those returning members and strong new sign-ups, which are along with churn back to historical levels. And I think what's helpful to know is that all of those patterns are consistent with an event-driven disruption working its way out, not with a structural shift in our position. And the fact that our -- the vast majority of the customers never paused, they continue to compound at double-digit rates. And the members who paused are returning rapidly and picking up their spend right where they left off and continuing to compound is confirmation of our view that we're returning to the same drivers that have been powering our growth for years in the past. Those customers continue to value the Coupang experience and are not finding that value proposition somewhere else. And that's what we believe will continue to power our growth in the years ahead.

And regarding your question on Taiwan and investment. Taiwan continues to grow at hyper growth rates. We are very excited about it and the future that it holds for us. The investments, we were not splitting out investments between different initiatives. Right now, we allocate capital, just based on where we see the opportunities are the strongest. And each initiative is at a different point in the life cycle. But...

In Taiwan, as I mentioned earlier, we're prioritizing building the foundation for an unparalleled customer experience. We're excited to be entering a lot of these very exciting foundational building -- foundation-building stage of the journey, such as network design, supply chain improvements. We now have provided access to our next day delivery experience to a majority, a vast majority of consumers in Taiwan, and it already represents the vast majority of our volume, and we're continuing to strengthen that last mile delivery network, not only to increase access, but to improve the levels of service that we provide. And we're also investing to expand aggressively the selection that customers can purchase on that network across [indiscernible] categories.

Our next question will come from Seyon Park with Morgan Stanley.

I also have 2 questions. First is just on -- the macro picture overall, I think industry-wise, you have started a bit of the acceleration in e-commerce growth. And just given the [ K-shape ] economy that we're kind of seeing, I kind of wanted to get your views as to whether we are seeing any signs of slowing for the e-commerce industry overall or whether it's some seasonal factors that are also impacting it, given Coupang is now a big chunk of that e-commerce. Clearly, the impact that we've seen from the data breach may also have impacted the growth of the overall industry as well. So I just kind of wanted to get management's view on how they see just the overall industry growth. There seems to be a lot of conflicting data. Obviously, GDP was also stronger. So any views there would be much appreciated.

The second question is really on the buyback. You announced that another $1 billion has been approved. It does seem like the cadence of the buyback is starting to accelerate, and hence, just wanted to get some guidance or any comments as to whether we should see a higher cadence of buybacks in the coming quarters?

Seyon. I think from our perspective, we're always much more focused and obsessed with our customers, how our customers are behaving. And we ultimately believe the biggest drivers of customer behavior are -- is the experience that we're providing. We've seen that consistently through ups and downs in the macro over the many years that we've served our customers and the markets that we operate in. I think there's some important, again, things to maybe point out again that we've always seen for years our customers compounding their spend, and the vast majority of customers who remain with us and did not pause continue to compound at double digits, very healthy rates. The customers who have returned the majority of customers who -- of the minority that paused, who've returned have picked up exactly where they've left off and are now also compounding alongside them. So I think a lot of the behavior that we're seeing is still very strong on that front. I do think it's also important, maybe you are seeing some discrepancy also in the underlying behavior that I'm talking about and the numbers you may be seeing this quarter and -- because the year-over-year growth rate this quarter doesn't move in lockstep with that underlying customer behavior that I'm pointing out. And maybe I'll take this opportunity to explain also how growth at Coupang normally compounds. Each month, our existing customers grow their spend with us and new customers join and start building their spend over time. Both of those streams add to our base and keeps getting larger. That's the engine that has produced our historical growth rates. That's been remarkably consistent for us. And I think we've shared [indiscernible] data in the past. We shared it regularly. That's really an important health metric for us. And there are again, ups and downs on the macro, that engine of existing customers continue to compound, new customers joining and building their spend over time. Those 2 streams are really the engine that produces our growth rate. Now when an external event interrupts that cycle for a period, 2 things happen. First, the customers who pause stop adding to that base for the months that they've paused. And the new customers who would have joined during that period don't join at the usual pace. And second, this is the subtle part we loose the months of compounding of that customer spend that we typically observe with both streams. And once a month is gone, you can't get it back. And now even if everything underneath fully recovers, past customers come back at prior spending levels, new acquisitions return to historical pace. The year-over-year comparison still carries the weight of those last months. And this year's revenue is now missing the months of compounding that didn't happen during that affected period, while last year's revenue also included -- sorry, the last year's revenue included all 12 months of uninterepted compounding. So the 2 sides of the comparison are no longer symmetric. And this effect works its way out as we lap the effective period. And after we've lapped the effective period, that's the point at which the comp returns to being apples-to-apples. And this also probably gets to a little bit to Eric's earlier question as well about our growth rate this year. While we see very encouraging and positive signs in our customers returning, picking up their spends where they left off, growing and compounding. We see very healthy compounding behavior underneath because of the [ lost ] months of compounding, you'll see our Y-o-Y growth lag and will be behind the demand curve that we projected for our fixed cost. And a lot of the -- that earlier point that I made about cost dynamics. So some of the things that Eric was asking about, I think, are -- can be gleaned from or some of the things that we want to point out can be cleaned from what I'm sharing here. But hopefully, this gives you a fuller picture of how we think about growth and the drivers of growth. .

We will now take our last question from the line of Wei Fang.

I have 2. First 1 is a follow-up on an answer -- prior question on your 2Q EBITDA guidance. I don't think you mentioned any impact from the fuel inflation. Just want to understand if that's included there and also if you can help quantify for?

And the second question is on competition. I understand that some Chinese e-commerce places are now growing their MAUs nicely in Korea as well. I think they combined maybe more than 10 million of already internal users. I know maybe the spending levels not there yet but can management give us some overview on the landscape, maybe today versus a year ago, anything has changed. And maybe anything -- any comment you can give in terms of like a 3P take in the business?

Wei, thanks for your question. We've always operated in a in highly competitive markets. And we've had many new entrants, many players. It's one of the most dynamic spaces and industries that you can operate in. And over many years, what we've learned over and over again that kind of what matters most is the customer experience and staying relentlessly focused on customers and not what any set of competitors or individual competitor does. The markets that we're operating in are large. We represent just a small share in each of them, and there's room for many winners. I think what -- we believe ultimately drives growth is the differentiated value we provide to customers, the combination of selection, price and delivery that no one else offers. I think we're very encouraged, as I mentioned, that the customers who -- the vast majority of customers who stayed with us through the affected period over the last couple of quarters have continued to compound at double-digit rates as they have for years. The customers who've come back have not split -- have returned to their old levels of spend and have not split that spend with other alternatives. That's also, we think, a good sign that they really value what we're providing, the Coupang experience and not finding that value proposition elsewhere. And that value proposition is really the engine of our growth. It's really what we're focused on making even more valuable for our customers every day. And that's what we believe will really determine our success in the years ahead.

Yes, I'll take the -- I'll respond to your question on the impact of oil prices. So with the increase in fuel prices, not going really into effect until late Q1, we saw a very small impact on our operations this quarter in Q1. We benefit from the efficiencies created by our end-to-end owned supply chain and logistics infrastructure and processes. And looking into the near future, we keep our focus on continuing to create the best experience for consumers, while we also are driving operational excellence. We don't see this, the oil prices having a significant or material impact in Q2 so far, and we'll continue to monitor it. On Q2, again, even though we guided our margins to where we did, there is no structural change in our entitlement and over time, what we see.

This concludes today's conference call. Thank you, and you may now disconnect.

Hello, everyone. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the Coupang 2025 Fourth Quarter Earnings Conference Call. [Operator Instructions]

Now I'd like to turn the call over to Mike Parker, Vice President of Investor Relations. You may begin your conference.

Thanks, operator. Welcome, everyone, to Coupang's Fourth Quarter 2025 Earnings Conference Call. I'm pleased to be joined on the call today by our Founder and CEO, Bom Kim, our CFO, Gaurav Anand; and HL Rogers, our General Counsel and Chief Administrative Officer and the Interim CEO of our Korean subsidiary.

The following discussion, including responses to your questions, reflects management's views as of today's date only. We do not undertake any obligation to update or revise this information except as required by law.

Certain statements made on today's call may include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and in our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings.

As we share our fourth quarter 2025 results on today's call, the comparisons we make to prior periods will be on a year-over-year basis, unless otherwise noted. We may also present both GAAP and non-GAAP financial measures. Additional disclosures regarding these non-GAAP measures, including reconciliations of those measures to the most comparable GAAP measures are included in our earnings release, our slides accompanying this webcast and in our SEC filings, which are posted on the company's Investor Relations website.

And now I'll turn the call over to Bom.

Thanks, everyone, for joining us today. Before we discuss our fourth quarter results in detail, I want to address the data incident that we communicated late last year. Let me start with our customers. First, I want to apologize again for the concern and inconvenience this has caused. Everything we've built at Coupang has been driven by a single focus, wowing our customers. Our customers are the only reason we exist, and earning their trust is something we strive to do every single day. There is nothing more serious at Coupang than failing to live up to our customers' expectations. We know we have to do better, and we will.

Now I'd like to turn things over to HL Rogers, our General Counsel and the interim head of our Korean subsidiary to provide an update on where things stand.

Thank you, Bom. As we previously shared, last year, a former employee illegally accessed data from over 33 million user accounts and retained data from approximately 3,000 user accounts in Korea and 1 user account in Taiwan. Since the incident was first disclosed, Coupang has retained world-class security firms, including Mandiant and Palo Alto Networks to conduct a comprehensive third-party forensic investigation.

The investigation has found that the information accessed was limited to basic contact and order information, names, e-mails, phone numbers, delivery addresses and limited order history. Building lobby codes were accessed for 2,609 user accounts in Korea. Third-party forensics and cybersecurity experts, including Mandiant, have confirmed that no highly sensitive data was ever accessed. No financial data, no passwords and no government-issued IDs were compromised.

All of the former employees' devices known to have been used in the attack have been recovered. Mandiant has also found that the forensic evidence is consistent with the conclusion that the former employee retained data from approximately 3,000 user accounts in Korea and 1 user account in Taiwan and later deleted the data. Importantly, there is no evidence that any of that data was ever viewed by anyone else. This is also supported by the fact that there have been 0 confirmed instances of any of this customer data being exploited.

We have retained the services of multiple outside experts to monitor, among other places, the dark web and deep web, including CN Security. To date, there has been no detection of the misuse of customer data attributable to the incident nor is there evidence that any Coupang user data attributable to the incident exists in those sources. The Korean National Police Agency and the government's investigative organization, the JIT, have also indicated that they have found no evidence of any misuse of customer data or any secondary harm resulting from this incident to date.

Palo Alto Networks, one of the world's foremost cybersecurity firms concluded from their investigation that "Coupang security controls are aligned with industry standards. The recent incident was not caused by a systemic failure of security measures but was the result of a targeted attack executed by a malicious former employee who leveraged inside knowledge of systems and exploited a valid software development process."

This was a crime committed by a former employee against Coupang and against our customers. We have called for him to be brought to justice and prosecuted to the fullest extent of the law. When individuals abuse positions of trust to commit crimes against the people they were meant to serve, we believe such criminals must face consequences for their actions for the sake of justice and to deter others who might consider exploiting similar positions of trust in the future.

The method by which the former employee was able to access the system was closed and remediated in November 2025 and no longer poses any risk to customer data. In the immediate aftermath of the incident, we observed a reaction from some of our customers that included removing saved payment methods, changing passwords and in some cases, deleting their accounts. As the facts became clearer, confirming that no financial data, no log-in credentials and no highly sensitive data were ever accessed, we have seen those trends stabilize and begin to recover.

In the weeks since the data incident, we've taken steps to address the impact and help prevent recurrence. At the end of December, we announced a customer compensation program to issue approximately $1.2 billion in vouchers, which are available to customers who are notified of the data incident to redeem toward future Coupang purchases beginning on January 15. We shared the details and findings with the Korean government during the course of its investigations, and we look forward to continuing to work with them to address the incident comprehensively and to resolve any misunderstandings that may exist.

While the investigation by one of the Korean agencies has concluded, others are still ongoing and additional investigations may be initiated. It's too early to know what may come of these investigations or to what extent any fines or other actions may follow. We are committed to continue cooperating fully with the government's investigations. And while we took immediate steps and closed this exploited access, we will continue to take the necessary steps to improve our systems and strengthen our safeguards to help prevent any recurrence.

With that, I'll turn the time back over to Bom.

Thank you, HL. We're committed to working closely with government authorities as a constructive partner. Our customers' trust is at the heart of everything we do. Since Coupang's inception, customers have come to trust us to provide the best overall experience in retail through the broadest selection, everyday savings and an unmatched delivery experience.

That experience is the product of billions of dollars of investment and years of innovation that have yielded a unique network, one that today supports the livelihoods of hundreds of thousands of brands and sellers. And behind it are tens of thousands of dedicated employees who are obsessed with one thing, delivering the perfect experience to our customers. That is the foundation we continue to build on. And we remain as focused as ever on what has always set Coupang apart, thinking long term, investing for the long term and taking the harder path when necessary to break trade-offs and wow our customers.

Now let me turn to our fourth quarter results. We continue to be focused on building for the future. We're deploying greater levels of innovation and automation across our operations with the goal of improving the customer experience while lowering the cost to serve. This includes investing in Rocket Delivery, where we see enormous room to grow our selection.

We're actively investing to expand our first-party retail selection, which remains far below where we believe it can be. And our FLC merchant offering extends that opportunity even further. There are still hundreds of thousands of small businesses we're unable to serve through direct sourcing alone. FLC opens up Coupang's billions of dollars in technology, logistics and fulfillment infrastructure to give them access to capabilities that they could never build on their own and to reach customers at scale. In turn, customers get the convenience of Rocket Delivery across an ever-expanding catalog. Together, our first-party sourcing and FLC give us a path to tens of millions of products, and we're still in the early innings of that journey.

Turning to Developing Offerings. We're encouraged by the results we're seeing from the disciplined investments we're making across these early-stage initiatives. Most notably, Taiwan continues to experience hyper growth with revenues again growing triple digits year-over-year this quarter. That growth is being driven by our increasing selection that began primarily in FMCG but is expanding to more categories and the improving speed and reliability of our fulfillment and delivery operations.

Much like our retail offering in Korea, the customer experience in Taiwan is built on our obsession with providing the broadest assortment, the lowest prices and the best delivery experience. We shared last quarter that we had recently begun building our own last-mile logistics capabilities in Taiwan with the aim of delivering the same experience that customers in Korea have come to love. That vision is quickly becoming a reality. The team is rapidly building out this service, which now covers nearly 70% of the geography in Taiwan.

We ended the year with roughly 75% of our volume in December delivered next day through our own last-mile logistics network with consistent service and no significant increase in variable unit costs. These efforts demonstrate our focus on creating moments of wow every day for our customers, which in turn is helping to drive deeper levels of customer engagement and retention.

It's worth noting that growth at this stage won't always follow a linear trajectory. This isn't a pure online marketplace where the only inputs are electrons. We're building a real retail fulfillment and logistics operation with direct sourcing, physical inventory and the people and infrastructure to move it all.

Scaling those inputs the right way requires deliberate pacing, which means growth rates can vary quarter-to-quarter. What gives us great confidence is the underlying customer response fueling that growth, which has been remarkably and consistently strong. We'll continue to invest aggressively to help ensure that we can match that demand without compromising the customer experience or long-term scalability.

We remain encouraged by the potential we continue to see in our Eats offering in Korea. And with our Rocket Now food delivery offering in Japan, we're gaining a deeper understanding of the market opportunity and what customers value most. It's still very early stages, but the customer retention and engagement trends that we're seeing across customer cohorts are promising.

And at Farfetch, this quarter marks the first quarter since our acquisition, where we generated positive year-over-year revenue growth with positive overall economics. We see a real opportunity to create value for luxury customers around the world by combining Farfetch's vast assortment with a white glove shipping and returns experience. While this past quarter will stand out as a challenging period for Coupang, our customers and our business partners, I'm particularly proud of how our teams have responded. They address the data incident with a laser focus on serving our customers while working to strengthen our systems.

I'll now turn the call over to Gaurav to walk through our Q4 financials in more detail.

Thanks, Bom. I'll start again this quarter by providing an overview of the key operating results for each of our 2 segments and then speak to our results on a consolidated basis.

We ended the quarter with Product Commerce segment net revenue of $7.4 billion, growing 8% or 12% on a constant currency basis. This growth rate was several points lower than the 18% constant currency growth rate we reported last quarter. This was primarily driven by a slowdown in December that appears related to the data incident with a smaller impact from the Chuseok holiday falling in a different quarter this year than last, which affects the year-over-year comparison.

Product Commerce Active Customers for the quarter were 24.6 million, growing 8% year-over-year but down slightly from 24.7 million active customers reported last quarter. While the quarter-over-quarter decline in active customers also appears related to the data incident, we are seeing stabilization since the end of Q4 with a large number of customers reactivating their accounts and improving trends in customer growth.

Regarding WOW membership, the vast majority of our WOW members retained their membership in Q4, and their fourth quarter spend increased double digits year-over-year. We did see a slight decrease year-over-year in total WOW members this quarter, the result of elevated churn in December that appears to be related to the data incident. More recently, however, we have seen these trends stabilize with both churn and the new WOW sign-ups returning to historical stable levels.

This quarter, we are reporting Product Commerce gross profit of $2.4 billion, increasing 5% year-over-year or 9% in constant currency. This growth was adversely impacted by slower revenue growth we experienced in December. Excluding the nonrecurring impact of the FC fire insurance gain recorded in Q4 last year, the adjusted gross profit growth rate in constant currency was 15%, several hundred basis points higher than the corresponding revenue growth rate. This was driven by faster growth in our marketplace offering, including FLC relative to our 1P offering.

Gross profit margin for Product Commerce was 31.9% for the quarter, contracting over 80 basis points versus last year. Adjusting for the fire insurance gain last year, gross profit margins improved 85 basis points over last year as we continue to generate further operational efficiencies and benefit from growth of our margin-accretive categories and offerings. On a quarter-over-quarter basis, we saw a slight decrease in gross profit margin due primarily to the quarter-over-quarter decrease in revenue growth rates between quarters.

Product Commerce generated segment adjusted EBITDA of $567 million for the quarter, up 5% year-over-year. This resulted in an adjusted EBITDA margin of 7.7%, an 18 basis point decrease over last year. On a quarter-over-quarter basis, segment adjusted EBITDA margin decreased 118 basis points, primarily due to lower revenue growth this quarter and the related decline in gross profit margin, which was partially offset by improvements in operational efficiency.

Moving now to Developing Offerings, where we reported record segment net revenues of $1.4 billion for the quarter, growing 32% or 31% in constant currency. The growth in Developing Offerings continues to be led by the triple-digit growth rate in Taiwan. While we saw a moderate impact on the pace of growth in Eats following the data incident, we have recently observed a stabilization and improvement in those trends. We expect our Eats offerings in Korea and Japan, which are self-sustaining on a combined basis, to continue their robust growth trajectory.

Developing Offerings generated $183 million in gross profit for the quarter, down 24% over last year as we continue to make investments to cultivate these early-stage offerings. Total segment adjusted EBITDA losses for Developing Offerings were $300 million for the quarter, slightly up over last quarter. This resulted in full year losses of $995 million. The primary driver of these investments is a strong customer response we are seeing across our initiatives. Taiwan, in particular, continues to experience hyper growth and accelerating customer engagement.

Now turning to our consolidated results, where this quarter, we reported total net revenues of $8.8 billion, growing 11% on a reported basis and 14% on a constant currency basis. The decrease in quarter-over-quarter growth rates appears to be driven by the customer impact in December and to a lesser extent, the timing shift in the Chuseok holiday season in Korea. We generated consolidated gross profit of $2.5 billion, increasing 2% year-over-year or 5% in constant currency.

Adjusting for the fire insurance gain last year, the adjusted gross profit growth rate in constant currency was 10%. Gross profit margin was 28.8%, down over 100 basis points versus last year, adjusted for the fire insurance gain and decreasing over 50 basis points versus last quarter. The quarter-over-quarter decrease is primarily related to the short-term change in demand as well as the increased level of investments in Developing Offerings.

Operating income for the fourth quarter was $8 million, decreasing $171 million versus last year adjusted for the fire insurance proceeds, Farfetch acquisition and restructuring costs last year. The year-over-year decrease was driven by increased levels of investment in Developing Offerings this quarter as well as the short-term impacts previously discussed.

Net loss attributable to Coupang stockholders was $26 million, resulting in a diluted loss per share of $0.01. In addition to the effect of those items impacting operating income, the change in net income or loss was primarily driven by an elevated effective tax rate from the increasing losses in Developing Offerings, including Taiwan.

We ended the year with a full year effective tax rate of 64%, consistent with the range we guided to last quarter. Over the long term, we continue to expect to normalize to an effective tax rate closer to 25%.

We generated consolidated adjusted EBITDA of $267 million this quarter, a 37% decrease versus last year. Adjusted EBITDA margin was 3%, decreasing over 220 basis points over last year and over 140 basis points over last quarter. The decreases in adjusted EBITDA dollars and margin are primarily due to increased level of investments in Developing Offerings and the recent impacts of the data incident previously discussed.

For cash flows for the full year, we reported operating cash flow of $1.8 billion and free cash flow of $527 million. The nearly 50% year-over-year reduction in free cash flow was predominantly due to the data incident impact on working capital in Q4 as well as increased levels of capital expenditure in the current year.

Looking forward to next year, we believe we will continue to see muted trends in growth and profitability over the next few months with the impacts from the data incident, diminishing over the course of the year as we work through this period of transition and continue delivering the experience our customers expect.

During this period, we expect there to be some unevenness in our top line growth rates. Product Commerce was delivering strong revenue growth rates during the 3 months period prior to the data incident, growing 16% in constant currency before the slowdown in December. Adjusting for the difference in the timing of Lunar New Year holiday this year versus last year, we believe that the Product Commerce constant currency growth rate reached its lowest levels in January with an estimated 4% growth with recent indicators of improving trends beginning in February.

For Q1, we anticipate growing consolidated constant currency revenues in the 5% to 10% range. We expect to provide full year growth guidance in the coming quarters as we gain greater visibility into the pace of recovery.

We anticipate that our previous trends of delivering annual consolidated EBITDA margin expansion will be disrupted this year given the dynamic trends in Product Commerce revenue growth, investments to support customers through this transition and potential costs related to the data incident. We believe these near-term investments do not represent a structural change.

For Developing Offerings, we expect to incur full year adjusted EBITDA losses in 2026 between $950 million and $1 billion. This level of investment reflects our deep conviction in the potential of these initiatives to generate meaningful cash flows over time. As always, our investment in Developing Offerings is anchored by our commitment to rigorous analysis, operational excellence and disciplined capital allocation. As we continue to focus on our customers as well as the growth and profitability of our business, we are encouraged by the strong balance sheet we continue to maintain with over $6 billion in cash and a strong cash flow generation.

Operator, we are now ready to begin the Q&A.

[Operator Instructions] The first question is from Stanley Yang from JPMorgan.

Actually, I have two questions. My first question is we expect a negative impact from the data hacking issue. But fourth quarter Product Commerce revenue growth of 12% year-on-year on a constant currency basis seems to be larger than expected deceleration from 18% growth in third quarter. So my first question is, what is your estimated negative impact on your financials, such as revenue and EBITDA from this data breach issues in the fourth quarter?

Moving to my second question. You guided a stabilizing trend of your WOW membership metrics in the first quarter. Can you please show a bit more colors on your other key consumer metrics trajectories, such as active users, GMV or per person spending, et cetera?

Yes, Stanley, thanks for your questions. So Stanley, as we noted earlier, we are seeing muted trends in our Product Commerce. The data incident began to adversely impact revenue growth rates, active customers and WOW membership towards end of the quarter. So for the 3-month period prior to December, Product Commerce was delivering strong revenue growth of 16% in constant currency. And we believe the softening of those growth rates reached the lowest levels in Jan with an estimated 4% constant currency growth rate adjusted to the timing of Lunar New Year holiday. And we have seen improving trends since then.

We have recently seen a stabilization of the adverse trends in active customers and WOW membership. The churn in WOW membership has returned to historical low levels and WOW memberships trends also appear to have normalized. So we have still a lot of work to do. Our customers have come to rely on Coupang to provide the best overall experience in retail through the broadest selection, everyday savings and an unmatched delivery experience, and we have to remain disciplined to meet and exceed those expectations every day.

The next question is from Eric Cha from Goldman Sachs.

I have two questions as well. So for Taiwan, could you provide a time line for when the Taiwan business will reach unit economics positive? And would be -- and also, it would be helpful if you could make the comparison with Korea to any KPIs you might track such as market share trends, merchandise margin, membership numbers. So any sort of this data would be helpful. And also, my second question is can you refresh your comment on the tech investment, potentially seeing operating leverage and as to when that could be in timing?

Thanks for your question. Taiwan is following the same strategy that we've executed before. And at this stage, we're really focused on building the best customer experience and the foundation for long-term scalability and profitability. Once you have an experience that wows the customer, then the path to profitability is really a function of scale and operational leverage and we're making progress on all three of those fronts.

The early signs are very encouraging. Next-day delivery at 75% of our overall volume and growing without meaningful cost increase, triple-digit revenue growth and strong customer retention and spend trends. And really, the focus right now is on getting the fundamentals right, and our investment is always going to be anchored by rigorous analysis and disciplined capital allocation.

Yes. On the tech spend question, the amount of our cybersecurity spend over the past 4 years has consistently been among the top 3 of all companies in Korea. In fact, going back to 2023, when we communicated our increased pace of investments in tech and we expect to maintain those overall levels of spend into tech, but we'll prioritize a larger portion of that spend to further strengthen our cybersecurity capabilities for the future.

While there are some incremental investments we'll continue making, we do not expect this to result in a structural change in our OG&A spend. So our long-term view remains unchanged. Many of these tech investments are foundational, carry a meaningful fixed cost component. And as the business scales, we expect to see operating leverage from those investments over time.

The next question is from Seyon Park from Morgan Stanley.

Can you hear me?

Yes.

All right. I also have a question on the Developing Offerings guidance. The annual guidance of $950 million to $1 billion of losses would indicate that compared to the last 2 quarters, the level of losses would decline somewhat. So I think it would be very helpful if maybe you can get a little bit more color as to how we should think about this in terms of some of the product lines, the loss trend for Taiwan versus the likes of Eats, Farfetch, Japan and then you have like a content spend as well for each of those components, where that would be heading if you can get a little bit more granularity, that would be very helpful.

Yes. We manage our Developing Offerings as a portfolio of initiatives. Each are at a different stage of maturity and investment intensity. We're not providing any specific guidance on losses or investments individually, though we continue to see a strong momentum and potential within Developing Offerings. Taiwan, where our growth is exceeding our expectations, which was set earlier this year. All these investments reflect continue to reflect our deep conviction in the potential for these initiatives to generate meaningful cash flow over time. And there -- all these investments are again anchored by a commitment and rigorous analysis, operational experience and disciplined capital allocation.

Our next question comes from Jiong Shao from Barclays.

I have a follow-up on the deal guide first, and then I have two questions. As you highlighted that in December, 75% of the packages in Taiwan were delivered through our 1P logistics. I mean 75% is a very high number and your DO losses increased significantly in Q3, Q4 last year. So as you build up this sort of boots on the ground, so just looking out for 2026, should we think perhaps the investment or losses for DO will be higher in the first half and then start to go down in the second half.

My two questions. The first is that there is an AI scared trade around the world in capital markets. AI seems to be destroying a lot of things and agentic AI impact on e-commerce has been hardly debated in recent periods. So I was hoping you can talk about how you view platforms such as Coupang will not be somehow disintermediated by some chatbot or AI agent somewhere from somebody else. Any thoughts will be appreciated.

And second question is about shareholder return. I think you announced a $1 billion buyback last May. If you can give us an update on where you are in terms of deploying capital to buy back your shares, especially in light of the recent weakness of the share price and any potential or perhaps increase that program.

Thanks, Jiong. Yes. Well, let me -- I'll just take the AI question really quickly. I think we're really excited about the progress we're seeing on AI. Ultimately, we believe customers care about selection, service and savings. And they'll shop where they can find the best combination of all three. And as I mentioned in the call earlier, we're a business that involves not only technology and software, but it's not just a business made of electrons, but we're really -- we have real retail real infrastructure and people to move physical inventory.

There's tremendous potential for AI to amplify the value that we deliver across all 3 of the pillars that we strive to improve, selection, service and savings. And we believe AI will be a powerful means of us trying to -- of us doing those jobs better over time, delivering the best experience at the lowest cost, and we intend to make a strong effort in the coming years to capture those opportunities.

Yes. Jiong, on your question regarding the timing of investments in DO. DO is a portfolio of initiatives and each are at different stages. Some of them are cyclic and at different stages of maturity and investment intensity. So we're not giving specific guidance quarterly, but we believe we are in the range of our guidance for the full year.

On share repurchase and capital allocation, we repurchased about 5.9 million shares during the quarter as part of our existing authorization. We still have significant capacity remaining under the $1 billion authorization approved by the Board, of which $243 million has been utilized to date. So we continue to view share repurchases as an important component of our allocation framework. We'll remain disciplined and opportunistic in our approach, and we'll continue to evaluate buybacks along other strategic priorities.

Let me add a little bit more color also on the question you asked, Jiong and I think it also touches a little bit on the question that Seyon asked and I think Eric as well, I think we can delve into it a little bit more deeply. You mentioned the 75 -- you brought up to 75% of our overall volume in last-mile logistics. As I noted earlier, that didn't come with an increase in variable cost. There is, however, foundational infrastructure and fixed investment to build the foundation for the customer experience that we want to provide. For example, on selection, we're adding a tremendous amount of selection that customers want that we still haven't added yet a lot of selection there, but we're making real progress. We're partnering directly with hundreds of brands, both local and global, and that number is growing. And as brands see what our service is able to do for those customers -- for customers, those relationships deepen and our assortment availability expands with them.

Now on the -- once those incur infrastructure and foundational investments are made and we build a foundation for an experience that wows a customer, the path to profitability is then building scale efficiencies and operating leverage against that. And that's really the dynamics that you should keep in mind when we think about the investment cycle here.

We will now take our last question from Wei Fang from Mizuho Security.

Great. Also I have some questions, follow-ups on the Taiwan business. I see recently some data points suggest that your price advantage versus peers seems to be narrowing. I understand pricing is just one way to compete, right, to think about the business. And also given the fact that you're now really covering 70% of geo with much better fulfillment capacity, I was wondering if management can, first of all, maybe help comment on your pricing strategy from now going forward and then talk about your current stage growth strategy. Maybe lastly, if you could, what percentage of sales in Taiwan right now is coming from the local vendors?

Thanks for your question. As we noted earlier, Taiwan continues to experience hyper growth. Revenues grew triple digits year-over-year again this quarter. And it's important to keep in mind that the drivers of that growth are the same things that build our offering in Korea. It's expanding selection. It's improving the speed and reliability of our fulfillment delivery and delivering everyday savings. The goal here is to build the best experience at the lowest cost, not one of these things at the cost of the other, but delivering all 3 of them. What was the second question?

If you can talk about your current stage growth strategy. And then the last one is what percentage of sales is coming from.

Yes. We really -- it's the -- when you look at delivering all aspects of that, we're still in the early stages of delivering all 3 aspects, all 3 pillars of the customer experience. But even at our current levels of service, the customer response is what's giving us a lot of conviction here. What gives us great confidence isn't any single quarter's growth rate. It's the underlying engagement and retention trends that we're seeing across cohorts and the response to the customer experience that we're providing. And that's been remarkably and consistently strong.

So we'll continue to invest aggressively. It's still in early stage. But we feel very confident that over the long term, as long as we can deliver continue to match that demand without customizing -- compromising the customer experience or long-term scalability, we believe we have the potential here to generate the highest level of value for both our shareholders and our customers.

This concludes today's conference call. Thank you, and you may now disconnect.

Hello, everyone. My name is Christoph and I will be your conference operator today. At this time, I would like to welcome everyone to the Coupang 2025 Third Quarter Earnings Conference Call. [Operator Instructions]

Now I'd like to turn the call over to Mike Parker, Vice President of Investor Relations, you may begin your conference.

Thanks, operator, and welcome, everyone, to Coupang's Third Quarter 2025 Earnings Conference Call. I'm pleased to be joined on the call today by our Founder and CEO, Bom Kim; and our CFO, Gaurav Anand.

The following discussion, including responses to your questions, reflects management's views as of today's date only. We do not undertake any obligation to update or revise this information except as required by law. Certain statements made on today's call may include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and in our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings.

As we share our third quarter 2025 results on today's call, the comparisons we make to prior periods will be on a year-over-year basis, unless otherwise noted. We may also present both GAAP and non-GAAP financial measures. Additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to the most comparable GAAP measures are included in our earnings release, our slides accompanying this webcast and our SEC filings, which are posted on the company's Investor Relations website.

And now I'll turn the call over to Bom.

Thanks, everyone, for joining us today. Before we walk through our third quarter results in detail, I'd like to start with a few highlights. This quarter continues our strong steady trajectory, delivering growth and expanding margins yet again. We delivered 18% year-over-year growth in consolidated revenues or 20% in constant currency, expanding to $9.3 billion for the quarter. We also saw a robust year-over-year growth in margins with gross profit margins expanding over 50 basis points to 29.4% and adjusted EBITDA margins expanding 10 basis points to 4.5%. This was driven primarily by our Product Commerce segment, where we grew both gross profit and adjusted EBITDA margins by more than 200 basis points over last year.

Our results this quarter continue to demonstrate our conviction that Korea remains a remarkably durable growth opportunity with a largely untapped runway ahead. We continue to see broad-based strength across our customer cohorts. The resiliency of that compounding customer spend over time is a reflection of the deep investments we've made with an obsession to create the best customer experience found anywhere in the world with the broadest selection, the fastest and most reliable delivery, and the highest level of savings for our customers.

Looking ahead, we believe one of the biggest opportunities to expand our customer value proposition and drive future growth is broadening selection across both first-party and marketplace offerings. On the first-party side, we're onboarding new brands at an accelerating pace, but there's still tremendous runway ahead. Many products in our first-party catalog aren't yet sourced directly from brand partners. Deepening those direct relationships will allow us to provide more choice, better value and greater convenience for our customers.

Turning now to FLC, which continues to grow at remarkable levels where we're only beginning to unlock its full potential. We're making massive investments in FLC to bring more convenience and savings to merchants, which in turn brings more selection, convenience and savings to our customers. This allows us to expand deeper into newer categories like furniture, fashion and sporting goods, enhancing the breadth and depth of selection available to customers.

Our commitment to continuously improving the customer experience goes hand-in-hand with our focus on driving operational excellence. We're aggressively accelerating the deployment of automation technologies across our logistics and fulfillment network, which remains at low levels relative to its potential. Enabled by our culture of process and technology innovation, this automation is already improving service levels and operating costs, and we expect it will become an even more powerful driver of both in the years ahead.

Beyond automation, we continue to innovate across our operations to enhance convenience and sustainability. We've recently begun the deployment of reusable eco-bags beyond Fresh, extending them to non-Fresh orders as well. When we deliver orders in reusable eco-bags, customers receive their items directly in their door side pouches, no boxes to unpack, no packaging to throw away, making the experience cleaner, simpler and more sustainable. It's a small but powerful example of how innovation, operational discipline and customer wow can reinforce one another.

The success we're seeing in Product Commerce is a result of years of strategic investments and disciplined execution focused on breaking trade-offs for customers. We see similar potential for each of the nascent initiatives within Developing Offerings. In Taiwan, our momentum continues to accelerate, generating exciting year-over-year and quarter-over-quarter revenue growth again this quarter. Our focus on building the best overall customer experience is gaining meaningful traction with consumers, driving higher levels of adoption and retention. These levels of customer adoption in Taiwan are similar to those we saw at the same stage in building our retail business in Korea, reinforcing our confidence in its long-term potential.

As we look forward, we expect the continued growth in Taiwan to be driven primarily by 2 factors: first, our rapidly expanding selection. While still very early, we're making considerable progress in growing our first-party assortment. We also began rolling out our 3P marketplace recently, which we expect will allow us to significantly expand selection, increasing the value proposition for consumers. And second, we've begun building out our own last mile logistics in Taiwan. While it's still early, the team has made impressive progress this past quarter. We've seen significant growth in the share of our volume being delivered through our own last mile logistics, creating the potential for us to approach the levels of speed and reliability that customers have come to expect from Coupang in Korea.

As we continue to invest and scale our newer offerings, we're committed to remaining disciplined in our capital allocation. We'll continue to test and learn, leaning in only where we see clear evidence that we can deliver sustained customer wow and attractive long-term cash flows. This has been our approach since the early days of investing in product commerce, and it will continue to guide how we invest in developing offerings.

With that, I'll turn it over to Gaurav to walk through the financials in more detail.

Thanks, Bom. I'll start this quarter by giving an update on the key operating results for each of our 2 segments and then speak to our results on a consolidated basis.

First, with Product Commerce, where we again delivered durable growth this quarter, even accelerating versus the growth rates we saw last quarter. Net revenues were $8 billion, increasing 16% year-over-year or 18% on an FX-neutral or constant currency basis, primarily reflecting the strong growth in customer spend we saw across our first-party and marketplace offerings, including FLC. The growth in net revenues this quarter did benefit somewhat from the timing shift of the major holiday season in Korea year-over-year.

We generated a 10% growth in active customers this quarter, but the growth in net revenues was driven primarily by increased spending from our existing customers. Our continued investments into enhancing the overall customer experience from expanding selection to lower prices and faster delivery times are driving even deeper levels of spend across all our customer cohorts.

As our marketplace offering, including FLC, continues to grow faster than 1P, our revenue growth rate in Product Commerce doesn't fully capture our overall growth. The growth in gross profit may be, in some ways, a better measure. This quarter, we generated gross profit of $2.6 billion in Product Commerce, up 24% year-over-year or 26% in constant currency. Gross profit margin was 32.1% for the quarter, expanding over 210 basis points versus last year. This margin expansion was driven by the scaling of our margin-accretive categories and offerings as well as further supply chain optimization.

On a quarter-over-quarter basis, we saw a 46 basis point decrease in gross profit margin due primarily to increased operational costs from seasonal weather-related impacts that we often see in Q3 versus Q2 as well as some fluctuations in product category mix between quarters.

Product Commerce also delivered significant growth in segment adjusted EBITDA reporting $705 million in segment adjusted EBITDA for the quarter, up 50% over last year. This represents a margin of 8.8%, an increase of over 200 basis points year-over-year. On a quarter-over-quarter basis, segment adjusted EBITDA margin decreased 21 basis points due mostly to the related decline in gross profit margin, which was partially offset by further operational efficiencies.

Turning to Developing Offerings. We generated net revenue of $1.3 billion, increasing 32% over last year or 31% on an FX-neutral basis. This was primarily led by the accelerating triple-digit growth rate in Taiwan as well as the robust growth we continue to see in Eats. Developing Offerings' gross profit for the quarter was $156 million, a decrease of 22% over last year, reflecting the continued investments we are making into the early-stage initiatives within Developing Offerings.

Segment adjusted EBITDA for Developing Offerings was a loss of $292 million, driven by the increased level of investments required to support the growing momentum we are seeing, most notably in Taiwan. We previously guided for full year Developing Offerings' adjusted EBITDA losses of $900 million to $950 million this year. We now expect to come around the higher end of that range due to continued momentum we are seeing, especially Taiwan. These investment levels continue to demonstrate our increasing confidence in the potential for each of these offerings.

Now on to our consolidated results. We generated total net revenues of $9.3 billion, growing 18% on a reported basis and 20% on a constant currency basis. This is consistent with our full year guidance of total net revenue growth of roughly 20% in constant currency. This quarter, we reported consolidated gross profit of $2.7 billion, increasing 20% or 22% on an FX-neutral basis.

Gross profit margin expanded to 29.4%, up over 50 basis points versus last year, but decreasing nearly 70 basis points versus last quarter. This quarter-over-quarter decrease is due mostly to the seasonal weather-related impacts in Product Commerce and the further investments we are making in growth initiatives within Developing Offerings. While margins may be uneven quarter-over-quarter, we continue to see significant room for margin expansion over time.

This quarter, OG&A expense was 27.6% of total net revenues versus 27.5% last year. This slight increase is primarily due to the relative increase in operations cost within Developing Offerings, consistent with our levels of investment to support these various growth initiatives.

We generated $162 million in operating income, an increase of $53 million over last year or roughly 50%. Our operating income margin was 1.7%, expanding 36 basis points year-over-year. Net income attributable to Coupang's stockholders was $95 million, resulting in a diluted earnings per share of $0.05. This includes an effective income tax rate of 42% in the quarter, which is elevated in part due to the losses in our early-stage operations, including Taiwan. We now expect a temporarily elevated full year effective tax rate of 60% to 65% consistent with our expectation for the cash tax rate for the year. Over the long term, we continue to expect to normalize to an effective tax rate closer to 25%.

On a consolidated basis, we generated adjusted EBITDA of $413 million, up 20% over last year with an adjusted EBITDA margin of 4.5%. This results in margin expansion of 10 basis points over last year and a decrease of 56 basis points over last quarter. This quarter-over-quarter decrease is primarily due to increased level of investments in Developing Offerings. While we may continue to see periods of variability in margin expansion quarter-over-quarter, we expect that consolidated margins will continue expanding on an annual basis for the foreseeable future, inclusive of our investments into Developing Offerings.

Finally, on cash flows, where we delivered robust growth in both operating and free cash flow this quarter. For the trailing 12 months, operating cash flow was $2.4 billion, growing 30% over last year. Free cash flow grew 36% to $1.3 billion for the trailing 12 months compared to $1.6 billion in adjusted EBITDA generated over the same time period.

Stepping back, this quarter represents another example of our ability to generate robust top line growth, continued margin expansion and strong cash generation while maintaining disciplined capital allocation. This is a result of our team's relentless focus on wowing customers and delivering operational excellence.

Operator, we are now ready to begin the Q&A.

[Operator Instructions] The first question is from Eric Cha from Goldman Sachs.

I have two. And the first one is, given the launch of Naver, Kurly partnership recently, I was wondering if Coupang saw any impact on its Fresh GMV or any other metrics for that matter impacting the momentum. And second question is, I think Gaurav mentioned about the tailwind we had for Product Commerce GMV in the third quarter related to how the holiday was positioned. In reverse, should we be expecting some sort of a headwind in the fourth quarter due to this? And could you give us some idea how substantial that could be?

Eric, thanks for your questions. On Fresh, the strong trajectory that we've spoken to about Fresh earlier this year has only continued. Its growth remains well above that of our overall business. That's the result of years of investment to create a wow experience for our customers to be able to offer what we believe is the best selection in Fresh with both dawn and same-day delivery available nationwide, add to that low prices and free shipping for orders above just $11, we think that's an exciting value proposition for customers.

Of course, there's plenty of competition in this space, as you noted, both online and offline. Unlike luxury products, for example, there's no shortage of stores and sites that carry Fresh. That's why we remain focused and obsessed with continuous innovation to enhance the customer experience and to make Fresh even more affordable for customers.

The next question is from...

I'm sorry. I'm sorry. I'm sorry, Christa. Sorry, I think we're having some technical problems.

Sorry, Eric, on your question regarding Chuseok. The timing of Chuseok this year fell between third and fourth quarter and the length of holiday, which varies from year to year, drove some impacts on compatibility. This is in large timing dynamic and our underlying demand trends remain solid. So we continue to expect our full year consolidated growth rates to be in line with our guidance that we have communicated throughout this year and to come in at roughly 20% year-over-year growth in constant currency.

The next question is from Stanley Yang from JPMorgan.

I have a question on the Taiwan market. So Taiwan e-commerce market is very difficult to follow on the back of the lack of the company data or industry data. So can you please provide a bit of color, what is the current rough estimate of your e-commerce share in Taiwan and how rapidly growing? And I also wonder your operating loss trajectory in Taiwan going forward, given a significantly elevated Development Offerings loss guidance this year, do you expect operating loss to increase or decrease next year? Also, when do you think -- when do you expect the loss to pick out and start declining in Taiwan?

Stanley, thanks for your question. It's very early in Taiwan and probably too early to go into a lot of details on a number of areas. What I can share is that Taiwan has exceeded our expectations this year and remains one of our fastest-growing opportunities. We're focused right now at this stage on creating the best possible customer experience. And our ambition is to deliver the same wow experience there that we've been able to deliver and customers have come to love in Korea. And we're seeing real traction. We're seeing strong customer adoption and engagement and that's translating into both accelerating growth revenue and improving customer retention.

Much of the momentum that we spoke about last quarter has only continued to build. And what gives us the most confidence is that the customer behavior in Taiwan from adoption to repeat purchase behavior looks remarkably similar to what we experienced in the early stages of our Korea retail journey. And we're very much early in our journey, but we're building real capabilities to wow our customers, including the rollout of our own last mile network that we believe will serve as a foundation for durable growth over time.

I want to point out that we're building this offering to generate the highest level of value, not only for customers, but shareholders as well. The momentum that we're seeing is exciting. The trajectory won't always be linear because we're focused on breaking real trade-offs to our customers and driving operational excellence. But overall, we're incredibly excited about Taiwan and the long-term potential there.

The next question is from Seyon Park from Morgan Stanley.

If I can just ask two questions. The first is a follow-up for Taiwan. And I guess -- you mentioned how Taiwan is very similar to Korea kind of in its earlier stages. But then obviously, there are differences between the 2 countries. The e-commerce penetration is significantly lower in Taiwan, I guess, compared to Korea back, let's say, 5, 6 years ago. And also, I think some of the pushback that we get from investors who are familiar with Taiwan is that they have a very well-developed convenience store network. The traditional markets are much more widely used. I think there are some restrictions about putting the boxes in front of the doors. And I think you have to -- or the customer needs to pick that up directly. So I was just kind of curious if these kind of differences play a factor in how the company is kind of addressing some of these differences. That's my first question.

The second question I have is on AI. I think that the past 6 months and especially the past 1 month from all that's happened in Korea, we are hearing proposals of very big projects we've had Jensen Huang come out and pledged 260,000 GPUs. And I just kind of wanted to hear what Coupang's plans are on the AI side? Whether Coupang also has plans to purchase GPUs or build data centers that are either for Coupang's internal usage or it could be for -- to provide services to customers as well?

Seyon, thanks for your question. I think there's a number of pieces there. Let me quickly touch on Taiwan. I think, of course, all markets have some nuances and differences. But in all the most meaningful areas, we see more similarities than differences. And I think you're seeing that reflected in the consumer response. Customers care about selection, service, price and the service that we're providing, while still far from the service levels that we're providing in Korea or -- is resonating with customers, and we see that in the customer adoption, retention, the response. And it's exciting to see that.

We'll continue to focus on improving that service level -- those service levels and building the right capabilities to deliver that customer experience with operational excellence. And we remain confident that we'll be able to deliver a great experience, impactful moments of wow for customers and a great return for shareholders over time.

On AI, I think we are focused on building our own internal AI computing infrastructure to support our operations and improve performance and cost efficiencies. We have some small effort to test and learn on the -- on making parts of that technology available externally. But we're not at the stage of having or discussing any real customer demand or capital plans there. I think in all that we do, we'll focus on practical applications, practical savings for the company for the -- primarily and remain disciplined in how we allocate resources and provide any updates there if there are any meaningful developments in the future.

Generally speaking about AI, we've talked about this before, but AI has always been very central to operations, and that's only becoming more true. AI is developing -- delivering tangible benefits across our operations, including in areas that relate to demand forecasting, automating, fulfillment processes, optimizing delivery routes among many other applications. These advances are helping us reduce waste, improve productivity and enhance the customer experience. We're confident that AI will deliver significant savings and improve our P&L over time. And we have many efforts underway that we expect to bear fruits along those lines.

But for us, AI is also more than just about efficiency. It provides an exciting opportunity to raise the bar for service quality and customer satisfaction. And we're just as eager to expand our investment and experimentation cycles on that front. And as always, we'll be disciplined about where we invest allocating our resources with a clear eye towards attractive returns.

[Operator Instructions] Our next question is from Jiong Shao from Barclays.

Congratulations on very strong results. First question is about Taiwan again. I think, Bom, you talked about one of the key investment areas and drivers for future growth is around building our 1P logistics, delivery logistics. I was just wondering if you're able to share like roughly what kind of percentage of the GMV now is going through your own 1P logistics in Taiwan. And you also mentioned now that everything is going to be linear, so I was just wondering trajectory-wise, do you anticipate with your years of success in Korea, you think you can build out the 1P logistics in Taiwan much faster with your extensive experience. And also whether or not eventually the percentage of GMV going through 1P in Korea is going to be similar -- sorry, in Taiwan is going to be similar to that percentage in Korea?

And second question is around your technology investments. I think your EBITDA margins for Product Commerce this quarter was particularly strong. And I remember a few quarters ago, you talked about you started an investment cycle for technology and that cycle sort of start to taper off I think around this time now. So I was just wondering that the strong expansion in EBITDA margins in Q3 was sort of an indication of the start of that kind of tapering off process.

Thanks, Jiong, for your questions. On Taiwan, I think I can say that our 1P logistics scale out, it's still early in our journey. And I do think it's too early to go into details. I will be able to share more as things develop. You point out something that we've stressed in the past that we do -- we are advantaged in Taiwan and that we can transfer a lot of the learning processes and even technologies that we built for our Korea market to Taiwan, and we are making good progress on expanding and rolling out our logistics in Taiwan and expect that to expand at a fast rate.

I think in all of these areas, we're really focused on not only building out real capabilities to serve our customers well, but to do it with the right operational excellence. That's always been key to our success. We're offering the best customer experience with the best operational excellence that we can achieve in the market. So we're focused on building those real capabilities right now. And as things mature and evolve, we'll share more when the time is right.

Yes. On your question on tech investment cycle and Product Commerce margins, Product Commerce margins are already around 9% and expanding on an annual basis. We see significant runway for further growth across the business from applying technology, AI and automation to scaling these margin-accretive offerings and improving the core processes. And Bom mentioned earlier, we recently began rolling out reusable bags in general merchandise, which not only improves customer experience, but also enhances operating efficiency. So with many initiatives, we expect Product Commerce margins to move well past the 10% margins, and the consolidated margins would continue over time.

On the tech investment, in the earlier quarters, we saw a relative increase in the tech-related spend in terms of percentage of total revenues. This was an important investment, enabling us to build a more scalable foundation for future growth. And we have also seen that increase in spend reduced in recent quarters. This quarter, the OG&A expense was 27.6% of total net revenue, up only 10 bps over last year and down nearly 70 bps over last quarter. So we are still investing in tech for future growth, but the pace of this investment has been slowing down. We expect that to continue, though there may be unevenness naturally quarter-to-quarter.

We will now take our last question from the line of Wei Fang from Mizuho Securities.

I have two. The first one I'll ask on Taiwan. I think you guys launched the WOW membership earlier this year with a 90-day no-cost promotion, right? Can you talk about what you have done so far? And how the retention after the 90 days, if any of them already hit the deadline already, given the fact that you now have outplayed the game with your last mile logistics?

And second question is on, I wonder if management can talk just a little bit about your recent sponsorship for the APEC Summit 2025. How big is that one-off sponsorship spending? And what have you guys have learned so far?

Wei, I think the sponsorship on APEC is not a significant business lever. I don't think there's that much more to share, or I don't want to over significance of any specific thing that we do. We do a number of things across the company. I don't think that was one of the major initiatives in our company. I will talk about -- I can touch a little bit more about Taiwan as well.

I think as you mentioned, we're rolling out our last mile logistics. We're rolling out our WOW membership. We're doing a lot of these things. We're beginning to provide customers some semblance of the service levels that we're providing in Korea, but we're still far from providing those service levels. And for example, WOW membership, we're just a few months in, but the early customer response on all fronts has been encouraging.

As I point out, we will continue to add more benefits to our WOW membership. We'll continue to improve our service levels. But already, the customer response looks remarkably similar to what we experienced in the early stages of our journey there in Korea. And that's been the most exciting and encouraging part of it. Our growth is driven heavily and primarily by customer cohort expansion, spend expansion, not just new customers. And we're committed to improving the customer experience and making WOW membership and even more compelling deal for customers in Taiwan in the future. Right now, we're focused on learning, on improving, finding ways to deliver more value to customers and strengthening the customer experience every day.

And let me clarify a little bit about the -- let me clarify a little bit about the APEC sponsorship. We continue to partner and build working relationships with all countries, and especially with our presence in Taiwan, Japan and many global countries with Farfetch. I think it's a lever, as Bom mentioned, to partner and build relationships for future investment opportunities more than a direct business impact.

This concludes today's conference call. Thank you, and you may now disconnect.