JD.com Stock

Hello, and thank you for standing by for JD.com's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] After management's prepared remarks, there will be a question-and-answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Sean Zhang, Head of Investor Relations.

Thank you, operator. Good day, everyone. Welcome to JD.com's Second Quarter 2026 Earnings Conference Call. With us today are CEO of JD.com; Mr. Sandy Xu; and CFO, Mr. Ian Shan. Sandy will kick off the call with her open marks, and Ian will discuss the financial results. Then we'll open the call to questions from analysts. Please note, unless otherwise stated, all comparisons in this call will be against our results from the comparable period of 2025.

Before turning the call over to Sandy, let me quickly cover the safe harbor. Please be reminded that during this call, our comments and responses to your questions reflect management's view as of today only. We will include forward-looking statements. Please refer to our latest safe harbor statement in the earnings press release on the IR website, which applies to this call. We will discuss certain non-GAAP financial measures. Please refer to the reconciliation of non-GAAP measures to the comparable GAAP measures also in the earnings press release. Please also note that all figures mentioned in this call are in RMB, unless otherwise stated.

With that, let me turn the call over to our CEO, Sandy. Sandy, please.

Thank you, Sean. Hello, everyone. Thank you for joining our second quarter 2026 earnings conference call. We closed the second quarter with steady performance in line with our expectations maintaining strong operational resilience amidst macro and industry headwinds. We are navigating a high trading comparison base, upstream price pressure in consumer electronics and evolving macro dynamics. Our commitment to high-quality moment translated to robust profitability. Most notably, Q2 marked definitive turning point for our profitability trajectory.

Our non-GAAP net income attributable to ordinary shareholders surged by 21% year-on-year to RMB 8.9 billion, driven by both JD Retail's healthy margin expansion and JD Food deliveries, loss reduction. In particular, both JD Retail gross margin and operating margin hit historic hype for peak promotional seasons and JD Food delivery narrowed its losses by over 50% year-on-year in the quarter. This performance underscores the unique strength of our business model. Even in a complex external environment, it continuously enables us to deepen our supply chain capabilities, unlock operational efficiencies across our business ecosystem and drive sustained profit expansion.

Moving to our operational highlights, I would like to share 3 key developments for the quarter. First, we maintained healthy user momentum while dramatically improving marketing efficiency in the quarter across key metrics, including MAU, quarterly active customers and plus members, we sustained double-digit year-on-year growth. Our June 18 grand promotion also set a new record for purchasing users. Crucially, we achieved this user expansion while streamlining group marketing expenses supported by enhanced operational efficiency and marketing optimization across JD Food delivery and JD retail.

We maintained a high-quality user momentum in Q2, primarily driven by deeper engagement among existing users. Notably, our efforts to provide diversified services catering to our users' largely such as health care, home services, and outdoor or aftermarket services, resonated strongly with our users, contributing to deeper user engagement and stickiness.

In health care, we provide users with a foot set online and off-line services from consultation to pharmacy and on-site car. In Home Services, revenues increased exponentially year-on-year in Q2. And in auto aftermarket services, our JD Auto service offline stores have covered over 1,000 districts and counties across China as of Q2. Overall, this reflects our strategic shift from related user acquisition towards elevating user quality and lifetime value. Through disciplined life cycle management, we are successfully converting new users into highly sticky loyal customers.

Second, core JD Retail delivered a resilient top line performance in Q2, while continuing to unlock profitability upside. Heading into Q3, we expect JD Retail to hit a turning point, reaccelerating into positive top line expansion while sustaining healthy bottom line. Looking at category performance, while revenues from electronics and home appliances were moderated by a high comparison base and upstream price increase in Q2. As momentum picked up in June, our market position and user share remains firmly intact amid these market dynamics.

Looking into the second half of the year, we expect top line growth for this category to accelerate from the first half as the high comparison base from the treating program space, and our strong supply chain strength allow us to navigate consumer electronics price cycles more effectively. General merchandise maintained healthy growth in the second quarter. In particular, our supermarket category remained a key standout, delivering near double-digit year-on-year revenue growth with a proven multiyear track record.

JD supermarket has established itself as the most attractive platform for both users and suppliers. This success is a powerful example, demonstrating how our core philosophy, the relentless pursuit of superior user experience, cost optimization and operational efficiency translates into sustainable market leadership. Other general merchandise categories, such as health care and industrial products, also delivered solid double-digit growth in the quarter. As we further tap into massive time, supported by our supply chain efficiency and strong user mind share we remain confident in our execution for the remainder of the year and beyond.

In addition to delivering resilient top line performance, JD Retail achieved further profitability improvement in the second quarter. Its gross margin expanded by 1.3 percentage points year-on-year to 18.5% mainly attributable to 2 drivers: deepening supply chain scale benefits and a favorable revenue mix, supported by high-margin marketplace and marketing revenues particularly the rapid growth in advertising revenues. JD Retail's operating margin increased by 7 basis points to 4.6%, setting a new record for peak promotional quarter.

Beyond the gross margin expansion, this performance also reflects our ROI-driven marketing spend. This allowed us to direct more resources towards R&D capabilities, which is fully aligned with our long-term business strategies.

Moving on to new businesses. Through our focus on operational efficiency, we substantially reduced losses in new businesses, particularly in JD Food delivery, while maintaining disciplined execution against our strategic road map. During the second quarter, JD Food delivery maintained healthy order volume momentum while narrowing total losses by over 50% year-on-year. Within just 1 year of execution, JD Food delivery has achieved a dramatic fast-paced improvement in unit economics, driven by our relentless focus to drive operational efficiency and revenue diversification.

Moving forward, we see substantial runway for further UE optimization in our food delivery business while we continue to unlock its cross-segment synergies with our core retail business. Operations at our Joybuy and [indiscernible] businesses advanced steadily along their strategic parts with strict ROI discipline. During the quarter, Joybuy sharpened its competitive edge in Europe through its fast reliable fulfillment and premium localized services such as integrated delivery and installation service for home appliances.

By directly addressing local consumers' pain points, Joybuy is building increase in user retention and has doubled its revenues within 2 quarters. UC continued to deepen its penetration in lower-tier markets. with QEC increasing over 40% year-on-year and contributing 40% of new active customers in Q2, unlocking valuable incremental user pools for our user eco flower ecosystem. While both businesses saw a sequential step-up in strategic investment. All spend was executed with rigorous discipline and strictly within our expectations.

Beyond operational execution, we accelerated the integration of AI and the physical automation deeper into our core value chain in the second quarter, spending demand forecasting, product sourcing, intelligent customer services and full stack logistics automation. Next-generation shopping and conversion, we are proactively upgrading our search, recommendation and targeting engine, along with our proprietary AI shopping agents by leveraging AI to shopping position in user intent, matching and traffic allocation. We have driven tangible improvement in user engagement, conversion and ROI for our brand partners.

On enterprise productivity and efficiency internally we are seamlessly integrating generative AI into automated customer service and cross-departmental workflow. This deep integration is delivering measurable progress enhancing customer satisfaction will structurally refining our cost structure and driving long-term operational efficiency. On the logistics automation, our progress in physical logistics automation gives us substantial headroom to further optimize our cost structure and operating efficiency.

In warehousing and sorting through JD Logistics, expanded deployment of our proprietary LangzuTech Goods-to-Person solution across more warehouses and product categories. The autonomous delivery, JDL scaled thousands of unmanned [indiscernible] vehicles across more than 20 provinces as of Q2 while launching our first 24/7 overnight autonomous delivery routes in Shenzhen. Powering this automation is our XinDong Logistics Metalpine, LLM, which drives real-time intelligent decision-making within our exclusive automated operating framework.

In summary, our teams executed with strategic consistency and resilience throughout the second quarter. Looking ahead to the second half of 2026, we remain fully committed to our strategic priorities while responding with agility to evolving macro trends. Our core JD Retail business will continue to drive efficiency gains across every link around the supply chain and new businesses will unlock strategic potential while maintaining strict financial discipline. Combined with our integrated AI capabilities, we are confident in building a resilient business that delivers high-quality, sustainable development through all market cycles.

With that, let me turn the call over to Ian.

Thank you, Sandy. Hello, everyone. Thanks for joining the call today. In the second quarter, we delivered a high-quality financial performance incurred by robust bottom line expansion while electronics and home appliances performance was temporarily tempered by high competition base leading total revenues to decrease slightly by 2.9% year-on-year. Our core secular growth drivers, including general merchandise categories, and marketplace and marketing revenue, maintain healthy momentum. Meanwhile, facing external challenges, we sharpened our focus on supply chain capabilities and operational efficiency, and these moves paid off clearly on our bottom line. Our non-GAAP net income rose 20.8% year-on-year to RMB 8.9 billion in Q2, with net margin expanding by 0.5 percentage points to 2.6%, backed by robust profitability of JD Retail and the ongoing financial optimization of JD Food delivery.

As we headed into the second half of the year, we are confident to return to positive growth on the top line while unlocking further profitability through our supply chain strength and robust execution. Alongside our resilient financial performance, we remain committed to shareholder return. During the first half of the year, we repurchased a total of approximately 69.9 million Class A ordinary share equivalent to 34.9 million ADIs for a total of USD 1 billion. This represents around 2.5% of our ordinary shares outstanding as of December 31, 2025.

Now let's go through our Q2 financial performance. Total revenues were RMB 346 billion in Q2, reflecting a 2.9% year-on-year decline as we navigated near-term category dynamics. Breaking down the mix, our product revenues reflected divergent performance across categories. Electronics and home appliances managed through the combined headwind of a high trading base and upstream component price increase. General merchandise remained a resilient growth anchor led by supermarket [indiscernible] which sustained rapid near double-digit revenue growth for the quarter. This performance highlights the strength of our multi-engine growth model across different market cycles.

Looking into Q2 second half, we expect growth momentum to accelerate across categories as we continue to elevate the experience through our superior product selection price competitiveness and service quality. Service revenues grew by 6.8% year-on-year in Q2. Within this line, Marketplace and marketing revenues were up 8.3%, primarily driven by higher growth in advertising revenue. Although growth moderated relatively to previous quarters against a high user traffic base. Marketplace and marketing revenues consistently outpaced the product sales. We expect this structural diversion to continue serving as an important driver for our margin expansion over time.

Logistics and other service revenues increased by 5.9% year-on-year in the quarter. The pace normalized as our food delivery business left its initial launch and entered a full comparable year-on-year period starting this quarter.

Now let's turn to our segment performance. JD Retail revenues came in at RMB 295 billion in Q2, down 4.7% year-on-year in the second quarter, in line with expectations as we navigated category specific base effects and market dynamics. Notably, as our continuous efforts in supply chain and user experience gain traction, momentum picked up in June. We expect this recovery trajectory to build further into Q3, making a people back to positive revenue growth for JD Retail. In terms of profitability, JD Retail delivered exceptional results in the second quarter. Gross margin expanded by 1.3 percentage points year-on-year to 18.5%. This marks JD Retail's 17th consecutive quarter of year-on-year gross margin expansion, a strong testament to our ability to consistently unlock profit potential across market cycles.

In addition, JD Retail's non-GAAP operating profit reached RMB 13.5 billion in Q2 with operating margin up 7 basis points to 4.6%, a record high for promotional season. We achieved this milestone and increased investments in research and development capabilities. Thanks to gross margin expansion and improved marketing efficiency which provided us great financial flexibility to steadily reinvest for long-term growth. In particular, JD Retail's marketing expense ratio dropped year-on-year for the fourth consecutive quarter. Overall, this set of results is a clear proof of our business model resilience, our deepening supply chain capabilities and favorable revenue mix can effectively cushion short-term top line fluctuations driving better profitability through operational quality rather than single scale expansion.

Moving on to JD Logistics. Its revenues grew by 24.3% year-on-year to RMB 68.1 billion in Q2 primarily driven by incremental contribution from on-demand delivery service. JD Logistics non-GAAP operating income reached RMB 2.3 billion up 15.6% year-on-year, representing an operating margin of 3.5%. JD Logistics' near-term margin fluctuations were mainly attributable to Deppon, while the rest of JD Logistics business maintained a healthy profitability trajectory.

Turning to our new business. Revenues came in at RMB 7.3 billion in Q2. The year-on-year decline was driven by the shifting of recognition of on-demand delivery revenue from new business to 3D Logistics, which took effect in Q1 2026. Profitability in this segment improved notably with operating loss narrowing significantly year-on-year to RMB 9.9 billion. This was primarily driven by a more than 50% loss reduction in JD Food delivery highlighting our strong execution in optimizing its unique economics through streamlined operations, revenue diversification and strict ROI discipline as market competition normalized.

We are confident that our food delivery business will continue to see meaningful year-on-year loss reduction throughout the rest of the year. Meanwhile, investments in Joybuy and Tencent progress in line with our strategic road map. Notably, Joybuy delivered encouraging sequential revenue growth in Q2 as our overseas supply chain strength and the differentiated service offerings continue to gain traction among European consumers. While absolute operating loss expanded as Joybuy entered a rapid scaling phase, its loss margin narrowed sequentially demonstrating our distinct approach to business expansion and continuous operational refinement.

Turning to our consolidated profit performance. Good level gross margin expanded meaningfully by 1.2 percentage points year-on-year to 17.1% in Q2, reaching a near all-time high. This expansion was primarily driven by JD Retail's remarkable margin performance on operating expense. Total operating expense decreased by 4.4% year-on-year in the quarter with the expense ratio decreasing by 0.3 points. This operating leverage was largely driven by optimized marketing spend, which was partially offset by step up R&D investments, particularly scalable AI applications. This linear OpEx structure reflects our strategic focus on operational efficiency and bottom line quality over low ROI volume expansion.

As a result, our consolidated non-GAAP net income attributable to ordinary shareholders expanded by 20.8% year-on-year to RMB 8.9 billion in Q2 lifting non-GAAP net margin by 0.5 percentage points to 2.6%. Q2 marks a definitive turning point for our consolidated profitability. And we are confident in sustaining this expanding profit trajectory as we move forward.

Turning to our liquidity. Last 12 months free cash flow as of the end of Q2 reached RMB 31 billion, representing a significant improvement compared to RMB 10 billion in the prior year period. This was primarily driven by disciplined working capital management specifically a healthy acceleration in account receivable collections and normalized cash outflows associated with the trading program by the end of Q2. Our cash and cash equivalents, restricted cash and short-term investments totaled RMB 235 billion.

In summary, the second quarter once again demonstrated the fundamental resilience of our business and the discipline of our strategic execution. Despite top line headwinds, we unlocked further margin upside in JD Retail, while maintaining disciplined ROI driven investments in new business. Looking ahead to the second half of 2026, we believe we have reached a clear inflection point. Top line growth is reaccelerating. Profitability continues on an upward trajectory and deep AI integration is actively redefining both user experience and enterprise efficiency. With solid operational momentum and strong balance sheet, we remain fully committed to delivering sustainable long-term value to our shareholders through high quality growth expanding profitability, a disciplined approach to capital allocation and consistent shareholder returns.

With that, I will turn it back to Sean. Thank you.

Thank you, Sandy and Ian. For the Q&A session, you are welcome to ask questions in Chinese or English. And our management will answer your question in Chinese, and will provide English translation for convenience purpose only. In case of any discrepancy, please refer to our management statement in original language.

Operator, we are opening the call for a Q&A session now.

[Operator Instructions] Your first question comes from Kenneth Fong with UBS.

[Foreign Language] Despite the high base in second quarter, JD Retail still achieve an outperforming performance given the macro uncertainties, the front-loaded demand for free [indiscernible] electronics and home appliances categories and continued price hike. Could management share the outlook for this category for the growth trend in the second half of the year.

And my second question is about general merchandise growth rate, which have experienced slowdown in the second quarter. What were the core factors driving this? And can management share your view for the growth trend for these general merchandise categories over the upcoming quarters, please?

[Foreign Language]

Let me translate the answer to the first question. Kenny, thank you for your question. As you said, in the second quarter, JD Retail once again showed strong operating resilience. The performance of our electronic Home Appliance revenue was in line with our previous expectation. Despite the category faced some short-term pressure in the quarter mainly due to last year's high base and the price hikes in electronics driven by the higher raw material cost. Even so, backed by our strong supply chain capabilities and solid user mind share, we continue to strengthen our market position.

Notably, our market share across all major home appliance categories grew steadily in the second quarter, especially our omnichannel effort also paid off with offline -- our off-line business growing at a much faster pace. As a result, our overall performance remained more resilient in home appliances and electronics category than the industry. As you already know, we opened JD Mall in Shanghai and Hong Kong, and we welcome analysts and investors to pay your visits.

Looking into the second half while the ongoing rising consumer electronic price may continue to weigh on consumer demand, we remain confident that this category will grow -- growth will improve meaningfully in the second half for 3 reasons. Number one, the base effects start to gradually normalize. Starting from Q3, the drag from last year high trading base will gradually ease growth in electronics and home appliance is expected to reaccelerate as comparison base normalize. Second, supply chain capabilities mitigate, we are using our supply chain capability to mitigate the price pressures. We continue to strengthen our supply chain capabilities, which is our strong competitive advantage through proactively planning an agile inventory management we can effectively cushion the impact of rising consumer electronics prices. This helps us maintain robust operating resilience while delivering competitive price to our users.

Third, is our product innovation. Rapid AI growth is unlocking opportunities for our product and category innovation. We work closely with brands to codevelop new products using these new technologies. Our JoyInside has partnered with nearly 200 brands leveraging JD's AI capability to enable smarter interaction across home appliance and robots, delivering a smarter and more convenient user experience. So over the long term, we remain highly confident in our leadership in the electronics and home appliance category while sales may fluctuate in the short term, JD's unique value to brands become even clearer in certain times. We will continue to leverage our 1P supply chain efficiency to deliver more competitive prices and service to our customers while providing brands with a highly predictable and efficient sales channel.

[Foreign Language]

To your second question, yes, our general merchandise category was also impacted by the high base in last Q3. At the same time, not only the trading program directly boosted sales of home goods, it also joined force with our food delivery business to drive notable traffic to our platform. and drive cross-sell to a certain extent. So while general merchandise growth moderated somewhat in Q2 this year, we continue to -- in fact, we continue to steadily gain market share across all general merchandise subcategory. Notably, Supermarkets, our largest category within general merchandise deliver a near double-digit resilient performance, while health care and industrial products maintain solid double-digit growth.

[Foreign Language].

Okay. Looking ahead, we are confident that general merchandise category will maintain healthy growth backed by several key drivers: number one, category operational excellence is enhancing user experience. We are seeing further upside in our IT supply chain capability for general merchandise category, especially in supermarket by expanding product selection, building price competitiveness and elevating service quality will enhance user experience and solidify JD's user mind share in general merchandise category.

Second, we see sustained user growth momentum. As user mind share for our general merchant category deepens our user base continues to grow healthily new business, including food delivery and Jingxi are bringing notable incremental traffic and new users. Moving forward, we will enhance our user operation to boost conversion and drive cross-sell, and we see meaningful upside in general merchandise category sales.

Third is our improving platform ecosystem. We continue to onboard high-quality merchants and incubate emerging brands, incubating emerging brands while helping them optimize end-to-end operations. This allows merchants and brands to achieve more certain growth on JD while also bringing incremental sales to our platform at the same time. JD Retail 3P GMV growth has outpaced 1P for the past 3 consecutive quarter with its contribution to total GMV extending Q-on-Q in Q2. So overall, we expect JD Retail growth to accelerate quarter-by-quarter in the second half of the year. Electronics and home appliance should steadily recover while general merchandise category maintained healthy growth. We also see a conversion efficiency improves, our advertising revenue has a meaningful room to pick up speed. Thank you for your question, Kenny. We can go to the next analyst.

Your next question comes from Ronald Keung with Goldman Sachs.

[Foreign Language] One is on your free cash flow. We're seeing you're entering into a much healthier free cash flow cycle in contrast to other mega caps in Internet, which are seeing CapEx exceeding operating cash flow for look at the mega cap. So with this unique positioning of JD yet I see some incremental investments, including some real estate. So will management consider setting a more official percentage of annual profits for shareholder returns.

Second is on Joybuy, seeing very fast growth there and is still pending acquisition of the German retailers. So how do you differentiate or plan to differentiate your price users experience or logistics experience further? And what is your investment budget for the second half and next year?

[Foreign Language]

In the first half of this year, we repurchased around 69.9 million of general shares for a total amount of USD 1 billion. This represented 2.5% of our ordinary shares outstanding as of December 31, 2025. Under the previously announced 3-year USD 5 billion share repurchase program, the remaining amount is around USD 1 billion, we are expected the program as planned. Our shareholder return ratio will remain firmly committed to creating value for our shareholders. We will continue to invest in business operations and supply chain capabilities to enhance JD's long-term competitiveness and value. We will return value to shareholders through multiple forms, including healthy and sustainable business development, dividends and share repurchases. Our goal is to maximize long-term to shareholder returns.

Our third, our track record also shows our strong commitment to shareholder returns. Since 2023, we have repurchased a return around USD 13 billion to shareholders through dividends and share repurchases. On dividends, we have maintained annual dividend payments since 2022, and cash dividend per share stable even when profit fluctuated in 2025, providing shareholders with steady cash returns. On buybacks, we have repurchased around 17% of our outstanding shares since 2023. So going forward, we will remain committed to shareholder returns.

[Foreign Language]

Ronald, let me answer your second question. So Joybuy core strength lies in taking JD's long-standing supply chain capabilities overseas and localizing them in Europe, particularly in home appliance and electronics, where we have a clear edge driven by our efficient 1P retail and logistics fulfillment capabilities we offer a highly differentiated user clearance, including integrated delivery and installation services. This has helped Joybuy gradually win stronger user recognition and mind share across Europe, increasing user retention and doubling Joybuy's revenue within 2 quarters.

[Foreign Language].

First, Joybuy is starting to establish a clear edge in user experience and retention powered by our own warehouse network in Europe. Joybuy now offer same-day and next-day delivery across major European cities bring in place order in the morning received in afternoon hyper fast services -- delivery services to over 40 million customers in Europe.

[Foreign Language].

You can see unlike other traditional -- so-called traditional cross-border ecommerce platforms, JD leverage our supply chain to build a localized e-commerce model. We are strengthening our product offering proactively partnering up with top-tier brands and suppliers and delivering high-quality products to our local customers in Europe during Joybuy's recent Summer Black Friday sale in June, our 211 same-day delivery and one-stop delivery and installation service drove strong electronics and home appliance sales. Notably, during the heat wave in Europe, we saw strong sales of air conditioners where our one-stop delivery and inflation service truly deliver a differentiated experience further boosting Joybuy brand reputation and customer satisfaction in Europe.

[Foreign Language].

Of course, Joybuy is still in a very early stage of capability building, so as we fortify our core supply chain strength across product selection and logistic fulfillment, in Q2, our investment in Joybuy grew modestly Q-on-Q, but its loss or loss margin improved sequentially. Over the coming quarters, we fast the order volume of job continue to grow quickly and logistic fulfillment efficiency improves and service coverage expands. Investment Joybuy is expected to increase accordingly. However, our investment will remain very disciplined and manageable. In addition, Joybuy's business model is consistent with JD's core model with supply chain at the center. So as Joybuy scale expense, economic scale will kick in and drive its continuous improvement in Joybuy's unit economics. Thank you. We can take the next question. .

Your next question comes from Alicia Yap with Citigroup.

[Foreign Language] So for question is first is related to food delivery. So with the landscape stabilizing, what is JD's latest plan for your market share, user growth and also the cross-sell synergy targets. Second question is for marketplace and also marketing revenues. How can JV sustain faster growth rates amid the competition and also the slower consumption. What is your view on the growth expectations for this line item into the second half?

[Foreign Language].

Thank you, Alicia. Let me answer the first question regarding JD Food delivery. JD Food delivery has made solid progress. In the second quarter, the volume maintained healthy growth while narrowing total loss by over 50% year-on-year. So within just 1 year of execution, the unit economics improved meaningfully for this business, driven by refined operations and higher subsidy efficiency, we saw subsidy per order notably decreased year-on-year, enhanced deficiency at scale and growing contribution from commissions and advertising revenues.

[Foreign Language].

In terms of synergy with our core business, as a deeply embedded business within JD ecosystem, JD Food delivery is leveraging -- is delivering clear synergies. First, it creates strong synergy with our core retail business across user acquisition and cross-sell. Our quarterly active customer maintained solid double-digit year-on-year growth in the quarter. Secondly, enriches our location-based supplies and merchant ecosystem. And third, we are integrating the underlying procurement capabilities between food delivery and logistics which we believe will boost our on-demand delivery capabilities and efficiency.

[Foreign Language].

In terms of the long-term goal, we aim to maintain healthy scale growth in food delivery and continue to boost operating efficiency and unit economics. More importantly, will deepen integration between food delivery and our core business to further unlock ecosystem synergies to drive sustainable user and revenue growth while lifting overall efficiency and profitability.

[Foreign Language]

For your second question, Alicia, JD remains committed to enhancing user experience without compromising its focus we will gradually drive monetization through improved efficiency. In the second quarter, our marketplace and marketing revenues sustained growth that outpaced our total revenues while advertising revenue showing faster momentum.

[Foreign Language].

Looking ahead to the second half of the year as our overall sales recover, we are confident in accelerating our advertising revenue growth. Meanwhile, we expect tech-driven efficiency gains. Category mix optimization and traffic pool expansion to help fuel sustained the momentum in our advertising business. On tax-driven efficiency, we have been driving added distribution efficiency by integrating AI into our algorithm. This optimizes recommendation accuracy both in conversion rates and acceleration and revenue growth. Our category mix optimization on general merchandise categories, which have higher ad monetization rates are growing faster and taking a larger share of our total dose.

This makes shape structurally support our advertising growth. Our traffic pool expansion, new businesses, such as food delivery have brought incremental traffic to our platform, expanding our overall traffic pool for advertising. In addition to that, food deliveries, home advertising capabilities continue to mature, contributing incremental ad revenue.

[Foreign Language].

Over the long term, as our platform ecosystem continues to improve and grow and as technology drives further efficiency gains, we expect our advertising revenue to maintain steady growth serving as one of the core drivers of our revenue and profit growth. Operator, we can go to the next question. .

Your next question comes from Thomas Chong with Jefferies.

[Foreign Language] My first question is, can management comment about second half JD Retail margin outlook. And my second question is about how we should think about the investment in new business. And on that front, how should we think about the group level profitability and net margin? .

[Foreign Language].

Thank you, Thomas. I will take your questions. In Q2, JD Retail's operating margin improved steadily. This was mainly attributable to first gross margin so sustained improvement. This is supported by product sales gross margin expansion as a result of enhanced operational and supply chain efficiency alongside an increasing contribution from high-margin commission and advertising revenue.

Second, JD Retail's marketing expense and expense ratio have been improving year-on-year, a trend we have seen for 4 consecutive quarters. While at the same time, we continued to place strong emphasis on R&D capabilities especially related to AI applications. JD Retail's R&D expenses increased notably in Q2.

[Foreign Language]

ooking into the second half of the year, we expect to improve supply chain efficiency to continue to drive higher gross margin for JD Retail. At the same time, we remain committed to long-term investments particularly in R&D for AI applications. We expect R&D expenses to maintain our growth trajectory for the near term, but we believe these investments are gradually translating into operational benefits, lifting long-term efficiency and optimizing the overall expense structure for JD Retail.

[Foreign Language].

Over the long term, we remain confident in achieving our high single-digit margin target. The key drivers include our first 1P capabilities with stronger 1P supply chain capabilities and scale benefits, we expect product sales force margin to improve steadily. Second category upside. Categories such as supermarket still have a meaningful potential to improve its profitability. In addition, as we further refine product mix, electronics and home appliances categories also have room for margin expansion over time. Lastly, platform ecosystem has high-margin service revenues such as commissions and advertising, grow at a rapid pace. We expect our revenue mix to further optimize serving as a structural driver for margin expansion. .

[Foreign Language]

In terms of investment in new businesses and JD Group consolidated profitability first, our efforts and investments in new businesses are long-term initiatives with a focus on leveraging and enhancing our supply chain strength. These areas include international business, lower tier markets and on-demand retail and so on. as these new businesses gradually mature, synergies across our business ecosystem will continue to unfold, supporting long-term healthy growth and profit contribution.

[Foreign Language].

At present, our new businesses are at different stages of development and investment cycle. We remain committed to strict financial discipline focusing on ROI efficiency and will dynamically balance resource allocation across the new initiatives. Overall, we will ensure our profitability trend at the group level remain healthy. Specifically, in Q2, JD Food delivery narrowed its losses by 50% year-on-year. Looking ahead, we remain focused on optimizing its unit economics and we expect further efficiency gains and a substantial narrowing of year-on-year losses in the second half of the year.

For international business, [indiscernible] is early stage, it's showing fast-paced and healthy momentum with unit economics gradually improving, given its rapid development, our investment has scaled up accordingly. Going forward, we will invest at a measured pace and keep total investments for the business steady and within our control. As for Jingxi, as it effectively penetrates low-tier markets with differentiated supplies. It has brought in a large amount of new users and enhanced engagement for our platform. Moving forward, we expect Jingxi to drive rapid order growth while continuously improving its unit economics.

[Foreign Language].

On JD Group's profitability, Q2 marked a clear inflection in its trajectory, returning to healthy year-on-year expansion. Looking ahead to the second half of the year, supported by core business health and investment discipline, we are confident in driving accelerated profit growth at the group level. Over the long term, as our core retail business has further room to enhance profitability and new businesses continue to optimize ROI efficiency analog synergies and gradually become new growth engines, we are well positioned to drive steady long-term profit expansion for the group.

So I think that's all the time we have for our Q&A. Back to operator. .

We are now approaching the end of the conference call. I will now turn the call over to JD.com, Sean Zhang for closing remarks.

Okay. Thank you. Thank you for joining us today on the call, and thank you for your questions. As always, if you have further questions, please feel free to contact me and our team. We appreciate your interest and support in JD.com and really looking forward to talking with you again next quarter. Thank you very much. Have a good day. .

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

Hello, and thank you for standing by for JD.com's First Quarter 2026 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the meeting over to your host for today's conference, Sean Zhang, Head of Investor Relations. Please go ahead.

Thank you. Good day, everyone. Welcome to JD.com's First Quarter 2026 Earnings Conference Call. With us today are CEO of JD.com, Ms. Sandy Xu; and CFO, Mr. Ian Shan. Sandy will kick off the call with her opening remarks, and Ian will discuss the financial results. Then we'll open the call to questions from analysts. Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2025.

Before turning the call over to Sandy, let me quickly cover the safe harbor. Please be reminded during this call, our comments and responses to your questions reflect management's view as of today only and will include forward-looking statements. Please refer to our latest safe harbor statement in the earnings press release on the IR website, which applies to this call. We'll discuss certain non-GAAP financial measures, and also please refer to the reconciliation of non-GAAP measures to the comparable GAAP measures in the earnings press release. Please also note, all figures mentioned in this call are in RMB, unless otherwise stated.

Now let me turn the call over to our CEO, Sandy.

Thank you, Sean. Hello, everyone. Thank you for joining our first quarter 2026 earnings conference call. We kicked off 2026 on firm ground. In Q1, our total revenues grew by 4.9% year-on-year, marking a sequentially accelerated pace as key growth drivers stayed firmly on track. We saw a sequential rebound in electronics and home appliances categories, while our general merchandise, marketplace and marketing revenues maintained double-digit growth trajectory in the quarter. Moreover, our profitability continued to see steady growth. JD Retail's operating margin expanded by 0.7 percentage points year-on-year to 5.6% in the quarter, nearing historical highs. This expansion achieved against a high comparison base for margin underscores our operational resilience and healthy mix shift.

Our new business segment also delivered a meaningful sequential loss reduction in the quarter, led by improved efficiency at JD Food Delivery, while Jingxi and international business maintained prudent investment discipline. Overall, we are pleased with this strong start to the year with our emerging growth drivers taking solid shape, while our profitability across all segments steadily trending upward.

Moving to our operational highlights. I would like to share 3 areas of robust progress we made during the first quarter. First, we maintained robust momentum in both user base expansion and engagement. In Q1, both our quarterly active customer and annual active customer base grew by over 20% year-on-year with AAC hitting a new record. This growth was powered by both healthy organic user growth in core JD Retail and strategic contributions from our new businesses, including food delivery and Jingxi.

Notably, JD Plus members, our most loyal and high-value user group, delivered another quarter of double-digit year-on-year growth in membership scale. Beyond scale, the quality of our user engagement is reaching new heights. Our quarterly customer shopping frequency rose by a notable 37% year-on-year in Q1, a powerful testament to the synergies we are successfully unlocking across our core retail engine and new business initiatives. This new momentum in both scale and frequency provides a solid foundation for us to further optimize the overall value of our user ecosystem. As our user base continues its rapid growth over multiple consecutive quarters, our strategic focus is clear, fostering deeper loyalty and driving the upward migration of user quality are the key next steps towards advancing our long-term growth road map.

Second, our core retail business demonstrated strong resilience in Q1. We delivered revenue growth in line with expectations while driving operation margin towards historical peaks despite notable near-term headwinds, including the high trading base and rising product prices for electronics. This performance underscores the enduring strength of our supply chain-driven model, which consistently enables us to navigate market cycles while delivering a steady upward trending performance. Q1 JD Retail's revenues grew by 1.8% year-on-year with broad-based sequential acceleration across all revenue streams. Looking at category performance in Q1, while revenues of electronics and home appliances were down 8.4% year-on-year, this still represents a sequential improvement.

Moving ahead, while we navigate ongoing external headwinds in Q2, we remain confident in a stronger performance in electronics and home appliances in the second half of the year. Our confidence is rooted in our continuous efforts to strengthen our supply chain capabilities, prioritize superior user experience and drive systemic cost optimization and efficiency gains.

Our general merchandise category remains a standout with revenue growth accelerating sequentially to 14.9% year-on-year in Q1, led by supermarket, health care, home goods, apparel, among others. Following 6 consecutive quarters of strong double-digit growth, general merchandise has contributed over half of our total GMV, solidifying its position as an increasingly important growth driver. We maintain a positive outlook for this momentum to continue throughout 2026 as we leverage our supply chain advantages and increasing scale benefits to continue to provide our users with diversified, reliable product offerings, competitive pricing and premium services. With a vast total addressable market and deepening user mind share, we are well positioned to capture the significant market opportunities ahead.

JD Retail's advertising and commission revenues have become a powerful engine for high-quality growth. We are pleased to report another quarter of strong double-digit growth in retail advertising and commission revenues for Q1. This performance served as a primary catalyst for the 18.8% year-on-year growth in our total marketplace and marketing revenues at the group level. As a high-margin business, advertising and commission continues to structurally optimize our revenue mix, providing a resilient foundation for margin expansion.

We expect advertising and commission revenues to remain an important growth driver for JD Retail throughout 2026, fueled by the following factors: our supply chain strength, expanding user base, enhanced 3P ecosystem and traffic allocation efficiency, optimized AI-powered advertising conversion and deepening synergies across our businesses.

Notably, JD Food Delivery business is already proving its strategic value. contributing an incremental 3% to advertising revenues in Q1. By effectively expanding our user touch points, food delivery is creating high-frequency monetization opportunities that complement our core retail operations. In addition to top line resilience, another compelling highlight this quarter is the encouraging expansion of JD Retail's profitability. Operating profit surged by 16.5% year-on-year to RMB 15 billion, reaching a record high for quarterly profit and driving operating margin to 5.6% against the challenging external complexities we outlined earlier.

This is fundamentally anchored in our supply chain strengths, which continue to yield expanding economies of scale and optimized procurement efficiencies. This strength fueled a broad-based gross margin expansion across our categories, leading retail's gross margin to a remarkable 18.6% in the quarter, up 1.8 percentage points year-on-year. This margin uplift was further amplified by a favorable revenue mix shift, particularly the increased contribution from high-margin streams such as advertising and commissions. We believe JD Retail's margin profile is a clear reflection of our evolving structural efficiencies, which we expect to provide further headroom for optimization going forward.

Moving on to our new business segment. We are beginning to see the fruits of our efficiency-oriented strategy marked by a significant sequential narrowing of losses and deepening synergies with our core retail businesses. In Q1, JD Food Delivery achieved the steepest sequential reduction in loss to date. While sustaining healthy order volumes, food delivery continued to improve its operating efficiency and diversify revenue streams, resulting in material improvement in unit economics. This progress underscores our commitment to rational, healthy development of the business and reinforces our clear stance against evolution within the sector. We fully embrace the regulatory guidance and will continue to align our business strategy with full compliance, prioritizing operational efficiency and high-quality growth as we move forward.

For Jingxi and Joybuy, both initiatives advanced steadily in line with their strategic road map while adhering to prudent investment discipline, Jingxi continued to deepen its penetration in lower-tier markets, particularly Tier 6 and rural townships, successfully tapping into new user growth opportunities for our platform. Joybuy has seen solid momentum since its official launch in March with order volume and user retention trending healthily. By the end of Q1, its same and next-day delivery service spanned over 30 major European cities, serving a population of over 40 million.

Collectively, the total investment in our new business segment narrowed by over 30% sequentially. This was driven by our rational expansion strategy and an efficiency-first operating philosophy. Building on this solid execution in Q1, we now have clearer visibility to further deliver on our efficiency-oriented investment goals for the new business segment throughout the full year.

We also continue to integrate AI across our entire value chain from demand identification and stimulation, 1P and 3P supply sourcing to autonomous logistics and premium customer services. In particular, we made further headway in logistics automation. In Q1, JD Logistics launched its next-generation LangzuTech Packer robotic arm. This proprietary technology is optimized for handling packages of diverse sizes and shapes as well as automated cage loading. This milestone marks the successful transition of this technology from the lab to real-world operations and enables us to significantly boost our sorting efficiency and competitive edge.

Additionally, our AI-powered digital human, JoyStreamer has transitioned from a functional tool to an intelligent AI agent with the number of merchants and live streaming sessions that utilize this technology surging tenfold year-on-year in Q1. Our goal is simple: to translate AI innovations into tangible retail experiences and sustainable value. We are well positioned to lead at the forefront of AI commerce and capture the vast opportunities ahead.

In summary, Q1 has been defined by strong execution and strategic consistency. Our performance across all segments has validated our road map, contributing to both resilient top line growth and robust profitability. With this solid foundation, we are confident in our full year trajectory and the long-term prospects. We will maintain the operational activities necessary to proactively navigate Q2 fluctuations, including a high trading base and rising product prices for electronics while fully leveraging our supply chain-driven model. Our commitment remains unwavering to scale our business by delivering a premium user experience with continuous cost optimization and efficiency gains.

With that, let me turn the call over to Ian.

Thank you, Sandy. Hello, everyone, and thanks for joining the call today. In the first quarter, our strategic execution remained firmly on track as we delivered a resilient overall financial performance. Total revenues grew by 5% year-on-year, while non-GAAP net profit attributable to ordinary shareholders came in at RMB 7.4 billion, reflecting a strengthened sequential momentum across both our top and bottom lines. Notably, our core retail segment returned to growth this quarter while delivering healthy year-on-year profit expansion. We also recorded a significant sequential loss narrowing in our new business segment, led by consecutive loss reductions in food delivery.

Alongside our resilient financial results, we remain fully committed to shareholder return. During the first quarter, we repurchased a total of approximately 44.5 million Class A ordinary shares, equivalent to 22.3 million ADS for a total of USD 631 million. This represents around 1.6% of our total ordinary shares outstanding as of December 31, 2025. In addition, we completed our annual cash dividend payment in April, totaling approximately USD 1.4 billion or $1 per ADS. Our continuous execution of our shareholder return plan underscores our strong conviction in JD's long-term value creation.

Now let's go through our Q1 financial performance. Our total net revenues were up 5% year-on-year to RMB 316 billion in Q1. Breaking down the mix, product revenues were up 1% year-on-year, driven by a 15% surge in general merchandise, which effectively cushioned the temporary decline in electronics and home appliances against a high trading base. Both categories saw sequential growth acceleration. Notably, general merchandise has extended its double-digit growth streak to 6 consecutive quarters. Within this, supermarket outperformed by sustaining its double-digit growth momentum, which further accelerated in Q1 compared to the previous quarter.

As we move ahead, we expect the impact of the high trading days and rising product price for electronics to persist in Q2, which will temper the growth trajectory of electronics and home appliances, but we remain confident in a stronger performance in the second half of the year. Service revenues grew by 21% year-on-year in Q1. Within this, marketplace and marketing revenues rose 19%. Advertising revenues remained a key driver, posting its sixth consecutive quarter of double-digit growth. By optimizing traffic allocation and conversion, we have effectively translated robust user engagement into superior ROI for our brands and merchants, a trend we expect to sustain throughout the year. Logistics and other service revenues were up 22% year-on-year. This growth was driven by both incremental delivery revenues from our food delivery business and the robust performance across JD Logistics' diverse service offerings.

Now let's turn to our segment performance. JD Retail revenues were up 2% year-on-year in Q1. While we continue to navigate near-term headwinds in electronics and home appliances, we remain confident in a second half rebound in those categories. Meanwhile, our emerging growth drivers, including general merchandise and marketplace and marketing services are expected to sustain their robust momentum. JD Retail's gross margin expanded by 1.8 percentage points year-on-year to an impressive 18.6% in the quarter. This expansion was attributable to our enhanced supply chain capabilities, which led to gross margin appreciation across all major categories.

In addition, it also reflected a favorable mix shift as our high-margin general merchandise and marketplace and marketing revenues outpaced the overall growth. Consequently, JD Retail's non-GAAP operating income increased by 16% year-on-year to RMB 15 billion in Q1, reaching the highest quarterly level for JD Retail, with operating margin rising 70 bps to 5.6%. This was achieved through a strategic balance of gross margin expansion, marketing efficiency and increasing investment in R&D for long-term growth. Notably, JD Retail's marketing expense ratio has declined year-on-year for 3 consecutive quarters, a strong testament to the deepening synergies with our new business initiatives.

Moving to JD Logistics. Its revenues grew by 29% year-on-year in Q1, driven by incremental contribution from food delivery. On the profitability front, JD Logistics non-GAAP operating income surged by 600% year-on-year in Q1. This exponential growth was driven by technological leverage from our AI and robotics initiatives alongside broader operational optimization. In our new business, revenues came in at RMB 6.3 billion, reflecting a moderated pace due to the resegmentation of our on-demand delivery revenues from new business to JD Logistics. Non-GAAP operating loss in new business narrowed significantly on a sequential basis to RMB 10.4 billion, led by JD Food Delivery, while Jingxi and international business remained disciplined in their investments. In particular, JD Food Delivery delivered its most significant sequential loss reduction since inception, driven by its improved unit economics as we continue to boost operating efficiency and diversified revenue streams, combined with a disciplined rational response to market dynamics.

Turning to our consolidated profit performance. Group level gross margin expanded by 90 bps year-on-year to 16.8% in Q1. This expansion was primarily driven by the strong performance of JD Retail, serving as a clear validation of the structural progress that we have made in broadening and strengthening our margin drivers. In terms of OpEx, total operating expense as a percentage of revenues increased year-on-year in the quarter, primarily reflecting increased marketing spending in JD Food Delivery and higher R&D investment to fuel our long-term growth and efficiency improvement. Consolidated non-GAAP net income attributable to ordinary shareholders was RMB 7.4 billion in Q1 representing a non-GAAP net margin of 2.3%. Regarding our liquidity, last 12 months free cash flow as of the end of Q1 stood at RMB 22 billion compared to RMB 38 billion in the prior year. This primarily reflects cash outflows associated with the trading program alongside fluctuations in operating income. By the end of Q1, our cash and cash equivalents, restricted cash and short-term investments totaled RMB 216 billion.

In summary, Q1 was another quarter that underscored the resilience and adaptability of our supply chain-driven model. We achieved a sequential acceleration in top line growth while successfully navigating a complex external environment. Both JD Retail and new business delivered robust profitability improvements and steadily moved along the strategic road map. Our scalable AI applications are increasingly transforming our core assets into a distinct competitive mode in the era of AI commerce. With this solid foundation, we are firmly committed to unlocking long-term value for our shareholders. This commitment is underpinned by our proven track record of growth, a clear trend of margin expansion and our solid shareholder returns.

With that, I will turn it back to Sean. Thank you.

Thank you, Sandy, Ian. For the Q&A session, you are welcome to ask questions in English or Chinese. Our management will answer the question in Chinese, and we will provide English translation for convenience purpose only. In any case of discrepancy, please refer to our management statement in the original language.

Operator, we can open the call for Q&A now.

[Operator Instructions] Your first question today comes from Kenneth Fong with UBS.

[Foreign Language] Congrats on the strong quarter. My first question is on the growth. Despite facing a high base in the first quarter, JD Retail still delivered better-than-expected growth and maintained solid performance even as overall market decelerate in March. Has management observed any shift in consumer behavior, particularly in the context of price increase in electronic categories? How should we think about the growth trend over the next few quarters? And my second question is about the margin. Against the backdrop of macro uncertainty, intensified industry competition and increased platform subsidies alongside with a rising ASP in electronic products, how should we assess JDR margin trajectory going forward?

[Foreign Language]

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

[Foreign Language]

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

[Foreign Language]

[Interpreted] Looking at the full year, the rest of the year, in the second quarter, sales of electronics and home appliance are expected to continue to face temporary pressure. This is due to the even higher base from trade-in program last year, combined with the impact of price hikes on smartphones and PCs impacting consumer sentiment. We will continue to strengthen our mind share while helping brands achieve more certain sales.

Moving into the second half of this year, we have stronger confidence in a growth acceleration, especially for home appliance category as the comparison base returns to normal and the continuous expansion of our omnichannel sales network further create greater sales potential for home appliance category. At the same time, we are confident in the healthy growth for both general merchandise and advertising and commission revenues. JD's growth engines are becoming more diversified. This gives us confidence to deliver healthy growth for the full year even in a volatile year.

[Foreign Language]

[Interpreted] In the first quarter, JD Retail achieved double-digit growth in operating profit. Its operating margin also expanded steadily to 5.6%. This was primarily driven by: first, gross margin expansion. For both our mature electronics and home appliances and fast-growing general merchandise categories, we have leveraged our supply chain capabilities to drive industry efficiency. While creating value for brands, we have also enhanced our own profitability, achieving year-on-year expansion in gross margins across categories. In the meantime, marketing efficiency improvement. JD Retail's marketing expense and expense ratio have seen year-on-year optimization for 3 consecutive quarters. As new businesses, including JD Food Delivery and Jingxi effectively drive traffic growth for our platform, we are allocating marketing resources with greater precision and efficiency, thereby enhancing the overall return on our marketing expenses.

Lastly, while improving our gross margin and marketing efficiency, we remain deeply committed to R&D development, particularly in AI. In Q1, our R&D expense continued to meaningfully increase and is expected to maintain an upward trend for some time ahead. We believe such investments will gradually translate to operational benefits, driving AI-powered efficiency gains and further optimizing our overall cost structure.

[Foreign Language]

[Interpreted] Looking ahead, our Q1 performance already further validates JD Retail's ability to deliver steady margin expansion over time. So we remain firmly committed to our long-term high single-digit margin target. The key drivers of this include: first, our 1P capabilities. We'll continue to enhance our 1P supply chain strength and leverage scale benefits to drive consistent product sales gross margin expansion. JD Retail's gross margin has delivered year-on-year improvement for 16 consecutive quarters, and we believe there is still upside potential.

Second, category improvement. We see meaningful margin upside in categories, including supermarket. Additionally, as we continue to optimize the product mix within our electronics and home appliances categories, we expect further margin expansion over the long term.

Third, platform ecosystem. We have been driving the healthy development of our platform ecosystem. This will support our high-margin service revenues such as commission and advertising to grow at a robust pace, contributing to our overall margin expansion. That said, we are still at a lower take rate level compared to the industry, and we believe there is substantial potential for improvement for us.

In the long term, as China's largest retailer with supply chain at its core, JD has the industry's most diverse application scenarios for AI and automation. This presents significant potential for us to continuously enhance user experience, reduce costs and drive greater efficiencies.

Your next question comes from Ronald Keung with Goldman Sachs.

[Foreign Language] First is about international since that you've launched Joybuy across 6 countries in Europe, how should we frame the near-term investment intensity to drive a critical order volume scale? And how do you think about the longer-term impact on a kind of next few year basis on new business loss? And the ROI from this investment? And second is on AI agents, which are increasingly driving consumer search and purchasing. So how will JD leverage the unique moats as China's largest retailer in this? And what are your defensive or offensive strategies in light of agent-to-agent interactions and on partnerships?

[Foreign Language]

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

[Foreign Language]

[Interpreted] In terms of investment, in Q1, investment of our international business remained stable Q-on-Q as we keep improving operating efficiency over the next few quarters where we will execute our established strategy -- as our business grows healthily, the overall investment may gradually increase as well. That said, as order volume grows, the economy of scale will kick in and continuously improve our unit economics. So overall, we believe our international business investment is highly manageable and remains in line with our initial expectations.

[Foreign Language]

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

[Foreign Language]

[Interpreted] Regarding the second question on AI, we believe no matter how technology evolves, whether AI assisted shopping or -- the essence of retail remains unchanged. It has always centered on delivering better user experience, lower cost and higher efficiency to meet users' continuous pursuit of better product, price and service. This is also the core mode of JD that we have been building over the past 2 decades of deep investment in supply chain. Today, we are leveraging new technologies, including AI and robotics to further enhance the user experience while reducing cost and improving efficiency. Let me walk you through a few examples.

[Foreign Language]

[Interpreted] On the demand side, we are making a comprehensive upgrade with our self-developed AI agent called [indiscernible] to help us more precisely identify, stimulate and match consumer demand. [indiscernible] has provided a more efficient and convenient shopping experience within the JD app.

[Foreign Language]

[Interpreted] In Q1, we have seen [indiscernible] demonstrate strong growth momentum with its quarterly active users growing by over 200% year-on-year, while the growth of user engagement was even more robust, increasing by over 300% year-on-year.

[Foreign Language]

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

[Foreign Language]

[Interpreted] And on the fulfillment side, we are broadly deploying AI and robotic technology to continuously drive up our automation and robotics coverage. Currently, JD's LangzuTech series of robots is able to cover the entire logistics chain and has been deployed at a scale -- at a global scale, gradually delivering cost reduction and efficiency gain.

[Foreign Language]

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

Your next question comes from Alicia Yap with Citigroup.

[Foreign Language] As the food delivery landscape gradually improves, we understand that JD remains committed to investing in this area to drive new user acquisition and also cross-selling. So can management share whether the goal is to operate the business profitably? Or furthermore, does JD actually aim to break even at the same time as the competitors? Or does management view food delivery as a long-term strategic investment that will continue to operate at a slight loss or maybe just near a breakeven point?

And then second question is that what is management view on the future FMCG and also the fresh category landscape? So what could be the share split between the large supermarket chain, the online, the on-demand, the quick commerce? What will be the preferred models that JD want and which model will be more profitable? And then any views and thoughts on the competition landscape evolving?

[Foreign Language]

[Interpreted] First, in Q1, while keeping healthy order volume, JD Food Delivery achieved biggest sequential loss reduction to date, with solid progress in UE improvement. On food delivery revenues, as we continued to optimize operations and upgrade advertising system, total revenues of commission and advertising surged nearly 2x on a quarter-on-quarter basis in Q1. At the same time, we maintain a rational approach amidst industry-wide subsidy competition. We continue to refine our operations and marketing efficiency across different user groups and regions. Furthermore, through supply chain innovation, we are advancing the growth of this business. We also fully implement regulatory requirements and remain committed to compliant operations.

[Foreign Language]

[Interpreted] We believe our food delivery business will eventually achieve profitability. However, JD Food delivery is not a stand-alone business. We will be unlocking its synergetic value within our business ecosystem. On users front, first, user scale. JD Food Delivery has been driving healthy growth in traffic and user base for our platform. In Q1, both our DAU and quarterly active customers increased by over 20% year-on-year, and the number of our annual active customers reached a record high. This also contributed to our advertising revenue growth. Second, user engagement as food delivery effectively fulfills the demand of our existing high-quality users. It helped to drive a 37% year-on-year increase in user shopping frequency on our platform. Third, cross-sales. We've also seen stronger cross-category purchases among food delivery users, particularly in supermarket categories and our on-demand retail offering.

[Foreign Language]

[Interpreted] On the supply side, food delivery also enriches the location-based supplies on our platform, spanning categories from dining and supermarket to general merchandise. This also enables us to deepen partnerships with merchants and brands. On the fulfillment side, we will be unlocking and testing synergies between food delivery and logistics fulfillment to develop a robust last mile infrastructure. This not only enhances our on-demand delivery capacity but accelerates the coordination and optimization of our overall logistics operations and management.

[Foreign Language]

[Interpreted] Food delivery and on-demand retail are long-term strategies for JD. We will drive healthy development of the businesses through a long-term perspective.

[Foreign Language]

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

[Foreign Language]

[Interpreted] As a B2C retailer with deep supply chain expertise, JD supermarket holds significant competitive advantage across product selections, supply chain and warehouse management, cost and price competitiveness and user experience despite intense market competition. As the largest supermarket in China, JD supermarket has demonstrated remarkable growth resilience, achieving double-digit revenue growth for 9 consecutive quarter.

On profitability, we continue to enhance the profitability of supermarket category by leveraging our scale advantage and supply chain capabilities. Looking ahead, we still see substantial runway for improvement in both gross margin and our fulfillment expense ratio, allowing us to unleash results from our scale and sustain steady growth while gradually expanding our profitability. We believe that competition in supermarket sector will ultimately return to the focus on user experience, cost and efficiency by leveraging our continuously improving self-operated supply chain capability, JD supermarket delivers better product at lower price to customers while helping brands achieve consistent and incremental sales. We are highly confident that in the long -- in the long-term healthy growth of supermarket, which is becoming a key growth engine for us in the coming years.

Your next question comes from Thomas Chong with Jefferies.

[Foreign Language] I have two questions. My first question is about the latest updates about our ecosystem strategies, including number of 3P merchants contribution as well as the outlook over the next few quarters. And my second question is about capital return. Can management share the latest updates about the return to shareholders?

[Foreign Language]

[Interpreted] Our platform ecosystem always centers on user experience, lower cost and enhance the efficiency. By leveraging different business models, we provide the best combination of products, price and services to meet diverse consumer needs. We've made solid progress in our platform ecosystem development. Let me share a few key indicators that maintained rapid growth in Q1.

First, our active merchant base. It maintained a triple-digit year-on-year growth rate in Q1. We've onboarded more high-quality brands and industrial belt merchants, providing users with a more diverse product supply. Meanwhile, our food delivery business has also brought in a large number of quality restaurant merchants, further expanding our service scope. Second, users. We have seen positive feedback from users. The number of users who shopped 3P offerings on our platform grew at a fast pace, outpacing the growth of our total users. This also supported the fast growth of 3P order volume, which accounted for over 50% of our total orders in Q1.

[Foreign Language]

[Interpreted] From a financial perspective, in Q1, our 3P GMV grew faster than 1P and total GMV. More importantly, our marketplace and marketing revenues have delivered double-digit growth for 6 consecutive quarters. The increasing contribution from these high-margin revenue streams continues to drive our overall profitability. Over the long term, we believe 3P GMV contribution will surpass 1P. Our platform ecosystem will become a key driver for both our revenue growth and margin expansion.

[Foreign Language]

[Interpreted] Regarding shareholder return, in the first quarter, we repurchased a total of around 44.5 million ordinary shares, equivalent to 22.3 million ADS for a total of USD 631 million, representing 1.6% of our total ordinary shares outstanding as of the end of 2025. The remaining amount of our ongoing repurchase program is USD 1.4 billion, and the expire date will be in August next year. We expect to continue to execute our share buyback at planned pace. In addition, we announced the annual cash dividend of $1 per ADS for the year of 2025 in March and completed payment in April as planned.

Going forward, we remain committed to returning value to our shareholders through dividends and share buybacks. At the same time, we will maintain focus on achieving healthy long-term growth in business scale, profitability and cash flow. We aim to share JD's success with our shareholders in multiple ways.

Thank you. That's all the questions we can take today. So let me just wrap up. I think we are running over time. Thank you for joining us on the call today, and thanks for your questions. If you have further questions, please contact me and the IR team. We appreciate your interest in JD.com and look forward to talking with you again next quarter. Thank you.

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

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Hello, and thank you for standing by for JD.com's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the meeting over to your host for today's conference, Sean Zhang, Head of Investor Relations. Please go ahead.

Thank you. Good day, everyone. Welcome to JD.com's Fourth Quarter and Full Year 2025 Earnings Conference Call. With us today are CEO of JD.com, Ms. Sandy Xu; and CFO, Mr. Ian Shan. Sandy will kick off the call with her opening remarks, and Ian will discuss the financial results, then we'll open the call to questions from analysts.

Please note, unless otherwise stated, all comparisons in this call will be against our results from the comparable period of 2024. Before turning the call over to Sandy, let me quickly cover the safe harbor. Please be reminded that during this call, our comments and responses to your questions reflect management's view as of today only and will include forward-looking statements. Please refer to our latest safe harbor statement in the earnings press release on our IR website, which applies to this call.

We'll discuss certain non-GAAP financial measures. Please refer to the reconciliation of non-GAAP measures to the comparable GAAP measure in the earnings press release. Please also note, all figures mentioned in this call are in RMB, unless otherwise stated.

Now let me turn the call over to our CEO, Sandy.

Thank you, Sean. Hello, everyone. Thank you for joining our fourth quarter and full year 2025 earnings conference call. We closed Q4 with results in line with expectations as we navigated short-term challenges while delivering on solid overall full year performance for 2025.

During Q4, despite a high year-on-year comparison base in electronics and home appliances, our top line remains resilient, thanks to the continued strong momentum in both our general merchandise categories and marketplace and marketing revenues.

Our profitability, our core business, JD Retail achieved a notable gross margin expansion in Q4 as we further leveraged our supply chain advantages. We strategically invested some of these gains into our price competitiveness, particularly in electronics and home appliances categories as well as in R&D capabilities and talent to secure a long-term edge.

This slightly tempered retail's margin expansion in the quarter, but the impact was well absorbed by our increasingly diversified profit streams, including high-margin marketplace and marketing services and margin improvement in categories such as supermarket and health care. Beyond core retail, our new businesses continued to report steady efficiency gains and a sequential decline in total investments.

Beyond the quarterly fluctuation, 2025 remained a year of solid execution where we delivered on our full year expectations. We have made encouraging strides across our key long-term growth drivers. User base and engagement gained significant momentum and our core retail segment accelerated back to double-digit top line growth.

Notably, we achieved this while expanding JD Retail operating margin for the sixth consecutive year, despite a highly competitive landscape, and we are expanding our TAM with several promising new business initiatives.

This solid progress is rooted in our deepening supply chain capabilities, which remain the engine for delivering superior user experience, optimized and enhanced operating efficiency. This is the backbone of our business model, not only supporting our core retail business, but also fueling our expansion into the new markets, our strategic initiatives. We are confident that these strategic pillars position us for more sustainable and profitable growth.

Moving into our operational highlights. I'd like to share 3 highlights from Q4 and full year 2025 as well as our thoughts for 2026. First, our user base expanded in both scale and depth [Technical Difficulty]. Our quarterly active customers grew by 30% year-on-year in Q4, capping a year where we exceeded 700 million annual active customers.

This growth was powered by the organic user growth of our core retail business and further accelerated by new strategic initiatives, including JD Food Delivery and Jingxi. High-value users also hit a new milestone. Our active JD Plus user base sustained double-digit [Audio Gap] surpassing [Audio Gap] by year-end.

What is even more encouraging is the quality of user growth. User shopping frequency surged by over 40% year-on-year for the full year with broad-based gains across all user groups, including new and existing users as well as Plus members.

In addition to user acquisition, JD Food Delivery also played an important role in this frequency lift. We view the expansion of user base and engagement as a long-term strategic driver for our business and expect it will further amplify in 2026 and beyond.

Second, our core retail business demonstrated remarkable resiliency in Q4, maintaining stable margin in the quarter despite short-term top line headwinds. On a full year basis, JD Retail delivered strong double-digit growth in both revenue and operating profit with operating margins expanding by 52 bps to 4.6%.

Viewed through a long-term lens, this consistent trajectory of JD Retail's growth and margin expansion over multiple years stands as a powerful testament to the resilience of our supply chain-driven model.

While Q4 revenue edged down to 1.7% year-on-year due to softness of electronics and home appliance categories, we have proactively strengthened our supply chain capabilities and deepened user mind share. These efforts are already paying off with improved momentum year-to-date in 2026. Furthermore, we expect to be benefiting from the resumed trade-in program this year, which will provide a constructive backdrop for industry growth.

Turning to general merchandise. Its performance remained strong with revenue up 12.1% year-on-year in Q4 and 15.3% for the full year. Supermarket revenue maintained double-digit growth in Q4. For the full year, supermarket growth reached mid-teens, accompanied by steady growth and operating margin expansion.

Our fashion categories also achieved significant gains in both top line and user mind share expansion throughout 2025, with healthy growth across user base, shopping frequency, ARPU and ticket size. These results were driven entirely by the team's execution rather than external tailwinds.

We are confident in sustaining the general merchandise momentum as our category mix continues to evolve towards a more diversified structure. Another exciting emerging growth driver for JD Retail is advertising revenue, which boosted our marketplace and marketing revenues to grow 15% in Q4 and 18.9% year-on-year for the full year.

The robust growth was fueled by our optimized traffic allocation, enhanced conversion efficiency and the roll out of our AI-powered algorithms and agents for our suppliers and merchants.

We are also seeing a strategic shift where advertisers are reallocating budgets towards platforms like JD as we are regarded as the most consistent daily sales platform, the premium designation for brand building and the platform that offers the highest return throughout a product's entire life cycle.

Notably, the synergy with JD Food Delivery is starting to bear fruit, contributing an incremental 2% to 3% to ad revenue in Q4. We remain confident in sustaining our advertising revenue momentum in 2026.

The third highlight is the solid progress of our new businesses. Within the segment, JD Food Delivery continued to drive healthy progress in Q4. We maintained steady order momentum while further optimizing our investment, further reducing the total investment scale by nearly 20% quarter-on-quarter.

Since its inception, JD Food Delivery has sustained sequential loss reduction every single quarter, a direct result of our relentless focus on improving operating efficiency and an ROI-driven investment framework.

In Q4, JD Food Delivery loss rate over GMV narrowed significantly compared to a quarter ago while maintaining the scale momentum. More importantly, the strategic synergies with our core retail business are deepening. Beyond the strong user momentum mentioned earlier, both cohorts cumulative cross-selling rate and shopping frequency trended upward in Q4.

Additionally, total active merchants have increased by over 270%, which was also partially contributed by the high-quality restaurants that onboarded our platform. Looking ahead, JD Food Delivery will continue to prioritize healthy volume growth while improving its unit economics at a greater level. We expect investment efficiency in food delivery to improve further this year compared to 2025 levels.

Regarding our other new business initiatives, both Jingxi and international business are progressing on track. Jingxi continues to successfully penetrate lower tier markets, expanding both our user base and user mind share.

Furthermore, we are excited to announce that Joybuy, our online retail business in Europe, will officially launch this month. We are committed to redefining the local shopping experience by providing same-day and next-day delivery services, a move that opens up greater growth horizons for JD. We will continue to invest in these higher potential segments in a prudent and controlled matter to build our long-term sustained development.

While executing our core strategies, we are equally inspired by the transformative potential of AI. By leveraging our deep supply chain capabilities, we are embedding AI across our entire value chain, identifying and stimulating demand, sourcing 1P and 3P supply and pioneering autonomous logistics. Let me share a few samples of our AI initiatives.

First, proprietary intelligence. Our large language model, JoyAI, now supports over 1,000 real-world applications across customer experience, procurement, merchant services and operations. In 2025, JoyAI's total token invocations surged nearly 100-fold from 2024, fueling faster, smarter decision making throughout the company.

Second, demand cultivation. We are reshaping the shopping journey and enhancing user experience through AI-driven search and recommendations. Jingyan, our AI agent, surpassed 150 million annual AAC in 2025 with over 20% user penetration driven billings in GMV. We expect to double this user base in 2026.

Third, logistics automation. Parallel to the digital intelligence is our leadership in autonomous logistics. In 2025, JD Logistics continued to redefine logistics efficiency. As of the year-end, it deployed over 20 flagship LangzuTech warehouses across China. We also launched this capacity internationally, launching our first LangzuTech facility in the U.K. to efficiently support a premium 211 same day and next day fulfillment experience locally.

Furthermore, services and innovation. Our multimodal AI customer service handled over 4.2 billion user inquiries during the 11.11 promotion, achieving higher satisfaction with lower human intervention. Beyond operations, we are unlocking new consumption potential through JoyInside, our AI agent for hardware, which has partnered with 40 hardware brands to introduce a range of AI products. Sales of JoyInside-integrated products surged 20-fold during 11.11 compared to the June 18 promotion.

By harnessing AI to redefine our competitive edge, we are further equipped to enhance our user experience, lower costs and improving operating efficiency. We are well positioned to capture the opportunities arising from AI to unlock new growth frontier for 2026 and beyond, ultimately placing us at the forefront of AI commerce.

In summary, 2025 was a year of constructive progress and strategic fortitude. Despite navigating short-term macro environment and high base comparison, we remained steadfast in sharpening our supply chain edge and fortifying our foundation for the future.

As we enter 2026, we are already seeing a consistent upward trend. Our user momentum remains robust and the growth trajectory of our general merchandise and the marketplace and marketing services has carried over seamlessly into the new [Audio Gap]. In the meantime, we have continued to strengthen our competitiveness advantages across product supply, price competitiveness and fulfillment experience.

This operational strength, combined with our technological advances and disciplined ROI-focused approach to new businesses gives us great confidence in our 2026 outlook. We remain fully committed to driving sustainable, profitable growth and creating long-term value for our shareholders.

With this, I will turn the call over to Ian.

Thank you, Sandy. Hello, everyone, and thanks for joining the call today. In Q4, our total revenues grew by 2% year-on-year, and non-GAAP net profit came in at RMB 1.1 billion.

While we faced short-term headwinds in electronics and home appliances categories, our overall performance remained resilient. This stability was driven by our strategic focus on diversifying growth drivers and profit streams alongside disciplined investments in our new business.

On a full year basis, we achieved meaningful progress across our core retail segment, new businesses and user growth and engagement, reinforcing our long-term sustainable development.

As we drive business development, we remain firmly committed to delivering shareholder returns. Our Board has approved a total annual cash dividend of approximately USD 1.4 billion for 2025, representing USD 0.05 per ordinary share or USD 1 per ADS.

Furthermore, we remained active in terms of share buybacks. In 2025, we repurchased about 6.3% of our outstanding shares for a total of USD 3 billion. All of the repurchased shares have been canceled. These efforts underscore our confidence in long-term development.

Now let's go through our Q4 and full year 2025 financial performance. Total net revenues for Q4 increased by 2% year-on-year to RMB 352 billion. On the full year basis, total net revenues increased by 13% to RMB 1.3 trillion in 2025. Breaking down the mix, product revenues faced a 3% dip in Q4, mainly due to a high trading base, but grew by 10% for the full year.

By category, revenues of electronics and home appliances was down 12% in Q4, but up 7% for the full year. We have navigated this high base challenge in close collaboration with our partners and are encouraged by the improved momentum year-to-date in 2026.

On the other hand, general merchandise delivered robust results with revenues up 12% in Q4 and 15% for the full year, led by sustained momentum in our supermarket, fashion and health care categories throughout 2025. We believe this momentum will continue in 2026 as we further build our strength in these high-potential sectors.

Service revenues grew by 20% year-on-year in Q4 and 24% for the full year. Notably, marketplace and marketing revenues were up 15% and 19% for the quarter and full year, respectively.

A key driver of this was advertising revenues, which achieved double-digit growth across every quarter of 2025. We have enhanced advertising efficiency of our platform through leveraging technology as well as our surging user traffic and engagement.

Looking into 2026, we expect marketplace and marketing revenues to maintain solid growth momentum, contributing to both top line growth and profitability. Additionally, logistics and other service revenues grew by 24% year-on-year in Q4 and 27% for the full year, mainly driven by the incremental delivery returns revenues from our food delivery business.

Now let's turn to our segment performance. JD Retail revenues down 2% year-on-year in Q4, but up 11% for the full year of 2025. The quarterly decline was primarily due to the high trading base for electronics and home appliances, which was largely mitigated by growth in general merchandise and advertising revenues.

It's important to note that JD Retail is no longer a single growth driver business. We have successfully built a diversified growth metric that provides the business with multiple engines and strong resilience across different market conditions.

Notably, JD Retail's gross margin increased by 1.1 percentage points year-on-year in both Q4 and full year 2025. This consistent improvement has sustained across multiple years despite changes in the competitive landscape, reflecting our enhanced supply chain strength and a favorable mix shift.

JD Retail's non-GAAP operating income in Q4 was down 2% year-on-year with operating margin holding steady at 3.2%. The temporary pause in margin expansion this quarter was a strategic choice. We deployed supplementary subsidies for electronics and home appliances to offer competitive price and maintain market leadership while increasing OpEx through targeted investments in R&D and employee compensation to fuel future growth.

On a full year basis, JD Retail's non-GAAP operating income in 2025 grew by 25% year-on-year, with operating margin improved by 52 bps to 4.6%. Taking a long-term view, JD Retail's margin trajectory remains very healthy, climbing consistently from 2.7% in 2019, when we initiated this segment reporting, to 4.6% in 2025.

As we continue to emphasize high-margin advertising business and realize efficiency gains in categories such as supermarket, we remain on a steady and successful path towards our long-term margin targets.

Moving to JD Logistics. Its revenues grew by 22% year-on-year in Q4 and 19% for the full year with incremental contribution from food delivery. On the profitability front, JD Logistics' non-GAAP operating income was down 17% year-on-year in 2025, but up 3% in Q4.

JD Logistics remains committed to investing in elevating customer experience, expanding service capabilities in both domestic and overseas markets, and advancing AI and robotic technologies. We view this as essential investments that pave the way for JDL's long-term sustainable growth in both top and bottom line.

New businesses' revenue surged by 201% year-on-year in Q4 and 157% for the full year driven by the rapid scaling of food delivery, Jingxi and international business. The segment's non-GAAP operating loss narrowed to RMB 14.8 billion in Q4. This sequential improvement was primarily driven by the narrowing loss at JD Food Delivery, which achieved a notable reduction of about 20% in loss compared to the previous quarter, continuing its consistent trend of improvement since launch.

As we enter 2026, our priority for food delivery remains to drive healthy order volume while deepening synergies with our core retail business. We believe investment in food delivery has peaked in 2025 and will trend downward this year if market competition trends towards becoming more rational. Beyond food delivery, we will continue to explore promising opportunities in Jingxi and international business with financial discipline to ensure long-term value creation.

Moving to our consolidated profit performance. Group level gross margin expanded by 32 bps year-on-year to 15.6% in Q4 and rose 18 bps to 16% for the full year. This improvement was primarily driven by the consistent gross margin expansion of JD Retail.

Consolidated non-GAAP net income attributable to ordinary shareholders was RMB 1.1 billion in Q4 and RMB 27 billion for the full year, representing a non-GAAP net margin of 0.3% and 2.1%, respectively.

Our near-term profitability mainly reflects our strategic investments in new businesses. We believe these initiatives will broaden the group's growth potential, driving both sustainable growth and margin improvement over the long term.

Our free cash flow for the full year of 2025 was RMB 6 billion compared to RMB 44 billion last year. This primarily reflects cash outflows associated with the trade-in program alongside fluctuations in operating income.

Our accounts receivable also recorded a sequential decline for 2 consecutive quarters, primarily due to the healthy recovery of the trade-in related receivables. We conclude the year with a robust liquidity position with cash and cash equivalents, restricted cash and short-term investments totaling RMB 225 billion as of year-end.

In summary, 2025 was a year of solid strategic progress. We achieved strong growth in our user base, accelerated core retail top line with margin expansion fueled by increasingly diversified drivers. Furthermore, our new businesses are now on a healthy, promising operating track. We have built a more resilient ecosystem.

While our business segments operated with increasing synergies, our focus remains clear. We will continue to focus on enhancing user experience, lowering costs and improving operating efficiency to deliver strong performance across our retail business top line and profitability while advancing our new business initiatives with a long-term perspective.

With that, I will turn it back to Sean. Thank you.

Thank you, Sandy and Ian. For the Q&A session, analysts are welcome to ask questions in Chinese or English. Our management will answer your question in Chinese and will provide English translation for convenience purpose only. In case of any discrepancy, please refer to our management statement in original language.

Operator, we can open the call for Q&A session now.

[Operator Instructions] Your first question comes from Ronald Keung with Goldman Sachs.

[Interpreted] First is on JD Retail 2026 growth, as electronic appliances return to a more normalized base from the second half, the general merchandise remains very healthy. So how should we think of the growth rate for JD Retail in 2026 for the first half and second half and the differences given the base?

Second is on the on-demand and food delivery. How should we think of the path to further unit economics improvement? Compared with the bigger competitors, how are we differentiating ourselves through supply chain, supply chain-driven business models? And how should we think about your determination and commitment to this business? And with the regulations and investigations on the food delivery industry, would that also contribute to the unit economics improvement?

[Foreign Language]

[Interpreted] Okay. Thank you, Ronald. So for your first question, first, our general merchandise category continues a very healthy, robust growth trajectory. Looking back at 2025, the category achieved growth faster, even factoring in the impact of trade-in program on the other category. So general merchant category served as a primary growth engine for JD Retail. Categories such as -- subcategories such as supermarket, fashion and health care all achieved very strong results.

Looking into 2026, we remain very confident in sustaining this healthy momentum. Supermarket category still has significant untapped potential in terms of user penetration and expansion of the subcategory. Fashion category, we have completed many infrastructural work such as merchant recruitment last year and will further build growth momentum on this very strong foundation. Health care category, we expect to continue maintain its industry-leading position and user mind share.

Regarding electronics and home appliance category, it continue to face high base effect in the short term. In 2026, the government trade-in program will continue, but we have to bear in mind that the government-backed cash subsidy were consumed much faster and more in first half 2025 compared to the second half 2025.

So for our electronics, home appliance category, including home appliances, cell phones, computers and digital products, will remain affected by a high base in the first half this year. However, we anticipate a sequential improvement in growth compared to the last quarter, fourth quarter of 2025 with more robust recovery expected in the second half 2026, and our market share remains very resilient.

Furthermore, we have to bear in mind that memory chip costs keep rising. So prices of mobile phones, digital products are expected to increase across the board. This may dampen consumption and affect sales volume. But at the same time, the rise of AOV will partially offset the impact of lower sales to a certain extent. We'll continue to strengthen our user mind share and drive sales by further reinforcing our supply chain capability, expanding our proactive off-line presence and enhancing overall service experience.

Meanwhile, AI and emerging technologies are creating numerous opportunity for innovation and new product categories further demonstrating our strength of supply chain. While initial data contribution from this new AI-related products remain modest relative to our -- the current scale of this category, but we see significant opportunities and shifts. And we will work closely with brand owners and suppliers to respond rapidly and develop new products and meet evolving user needs through the swift application of new technology.

Looking ahead to 2026. First, our growth drivers are becoming more diversified. General merchandise category maintains a healthy growth trend, while service revenue, including advertising will also sustain rapid growth momentum.

Second, we expect electronics and home appliance category to remain impacted by a high base in the first half this year and with growth in the second half to accelerate better than the first half. Overall, we will maintain our market share and user mind share. At the same time, we'll continuously leverage technological innovation to drive industry progress.

Third, supported by the steady improvement in JD's traffic, user base and shopping frequency, we are confident to achieving -- in achieving healthy and high-quality growth for the full year 2026.

[Foreign Language]

[Interpreted] Regarding your second question. So while food delivery business -- our food delivery business remains in its early stage in 2025, we actively invested in both operations and R&D. Looking at this year 2026, we'll continue to strengthen our capabilities and onboard more quality merchants and products and enhance user experience.

At the same time, we'll begin generating revenue through offering merchant services, achieving an orderly and rational monetization. So our goal is to sustain healthy scaling of this business while continuously improving operational efficiency. We expect total investment in food delivery to decrease in 2026 compared to 2025. Well, that also, of course, depends on the market competition dynamics.

How we do this? First, JD Food Delivery's differentiating advantage includes our commitment to our positioning in high-quality food delivery. Second, superior service quality driven by full-time riders. Third, the synergetic integration across JD ecosystem, leveraging on our strong supply chain advantage.

In terms of improving UE, we have clear drivers. First, more diversified revenue streams; second, continuous optimization of subsidy efficiency, including targeted subsidy tailored to different users and regions; third, enhanced delivery efficiency driven by economic scale that accompany healthy order volume growth.

It's also worth noting that our Seven Fresh Kitchen, which is a highly innovative and differentiated business model, is progressing well. It's deeply integrated with JD supply chain capability, leverage strong synergy with our on-demand retail business. As of the end of February, Seven Fresh Kitchen operational footprint has expanded to over 50 kitchen locations and we welcome analysts and investors to try it out.

Regarding the long-term positioning, food delivery and on-demand retail is a long-term strategy for JD, will drive our strategic progress with a long-term perspective, continuously enhancing operational efficiency to drive profitability improvement.

At the same time, we'll continue to unlock potential synergy between food delivery and our core retail business, fueling the company's long-term healthy growth. In 2025, our food delivery provided -- proved to be a strategic engine for user growth, effectively acquiring new users and significantly boosting purchase frequency across our platform.

In 2026, we expect to see a further unlocking of synergies driven by robust cross-selling and incremental growth in advertising revenue. Lastly, regarding the food delivery regulation, first, we support and welcome regulatory oversight that maintains a fair and competitive market environment as they foster a healthy development of the industry.

Second, we remain steadfast in our opposition in evolutionary competition within the sector. Third, we are committed to driving high-quality -- evolution of quality food delivery, high-quality food delivery through continuous innovation in our supply chain model.

Thank you. Next question, please.

Your next question comes from Kenneth Fong with UBS.

[Interpreted] My first question is about the profitability and investment in new business. Under the backdrop of macro uncertainties and yet the accelerated investment in overseas and Jingxi business, how should management balance the growth as well as the profitability? What level of investment should we expect for 2026 for this new business? And how should it affect the group earnings?

And my second question is about the overseas business. Can management share some update on the CECONOMY acquisition progress time line and the impact on financials post consolidation? From the strategic angle, how would Joybuy position? And what kind of benefit or synergy should we expect from the group level, i.e., retail, logistics and the whole supply chain point of view?

[Interpreted] Regarding our thoughts on investment and profitability, from a long-term perspective, we are confident in the prospects of the China market and our own business development. Based on our views of the market opportunities, we have made long-term strategic investments, including in our international business, lower tier markets and on-demand retail.

At the same time, we have been committed to investing in R&D and technologies. By enhancing our foundational capabilities and expanding our service scope, we believe we will continue to unlock new growth opportunities, which will also drive our long-term profitability. JD's high single-digit long-term margin target remains unchanged.

In terms of JD Retail, we expect to see healthy growth of retail's profit in 2026 and our long-term target for JD Retail, which is high single-digit profit margin, also remains unchanged. Key growth drivers of this, including improvement in product sales, gross margin brought by our enhancing supply chain capabilities, robust growth in high-margin business, such as advertising, as well as continued margin improvement in categories, including supermarket.

JD Retail's flow benefit will also continue to play out and its operating efficiency will have further room to improve as we increasingly adopt AI technology.

In terms of our investments in new businesses. For JD Food Delivery, its loss narrowed by nearly 20% quarter-on-quarter in Q4. We continued to maintain its healthy scale expansion while narrowing its loss ratio with improved operating efficiency and revenue growth during the quarter.

Looking at 2026, we will continue to drive healthy scale growth of the food delivery business and further unlock its synergies with core JD Retail. If the industry competition trends towards more rationality, we expect our investment in JD Food Delivery in 2026 to decline from the 2025 level.

For international business, we will gradually increase our investment on a controlled scale. We will maintain financial discipline in the investment.

For Jingxi, it has focused on lower-tier markets and a nonbranded product supply. It has made a meaningful penetration improvement, particularly in Tier 6 and lower cities. This has helped expand our user growth boundaries as it offers differentiated product offerings from our main apps. We expect to increase our investment in Jingxi a little bit, but we believe its UE to continue to improve in 2026, delivering healthy and sustainable business growth.

As to your question about the CECONOMY deal, at the current stage, it is under regulatory review. We will update the market in due course.

Joybuy is our full category online retail platform in Europe. It is scheduled to officially launch in March. Building overseas supply chain capabilities is a long-term initiative that takes time and continued efforts. Based on its trial operations, Joybuy has received a very positive user feedback, especially on the performance side.

Logistics experience will be a key differentiator for Joybuy. We are building our own delivery network in Europe, and the JoyExpress has been launched recently. It provides same and next-day delivery in major cities across the U.K., Germany, France and the Netherlands along with services such as door-to-door delivery. We welcome all analysts and investors to try out our services.

As for synergies, first, on supply chain capabilities, while helping Chinese brands expand globally, we also aim to bring more high-quality European brands into the Chinese market, further strengthening our global supply chain capabilities.

Second, on logistics, as Joybuy expands in Europe, the synergy between retail and the logistics in our overseas business will be further strengthened, reinforcing Joybuy's competitive edge. Third, on the technology front, JD's long-standing expertise and robust infrastructure will continue to empower our international business.

Next question, please, operator.

Your next question comes from Alicia Yap with Citigroup.

[Interpreted] So in light of the potential slower retail sales growth outlook this year, what is the growth rate management have in mind for your general merchandise GMV and revenue growth? How can JD continue to grow faster in this category amid the competitions and also slower consumption? And what are the specific differentiated areas JD is able to drive sales in this segment?

And second question is that can management share your thoughts on how JD might prepare and position to embrace the upcoming threats and opportunity from the agentic commerce?

[Foreign Language]

[Interpreted] Thank you, Alicia. For your first question on the general merchandise category, we shared in the opening remarks that the category is maintaining healthy momentum. So looking back at our track record, the general merchandise category have maintained double-digit growth for the past 5 consecutive quarters and notably outperforming the industry.

This is driven by our evolving supply chain capability and a remarkable improvement in operation efficiency expertise. This lay a solid foundation for continued growth in this category.

So we are -- we remain very confident in the healthy momentum of general merchant category in 2026. The sustained growth driver includes, first, huge market potential with ample room for growth in categories such as supermarket, fashion and health care.

Second, user growth. So new business, including food delivery, Jingxi, have brought growth in traffic, user and shopping frequency on JD platform. So we are also accelerating internal synergy and we have observed healthy cross-selling trends in category like supermarkets.

Third, continuously strengthen supply chain capability and user mind share. So from a category perspective, our supermarket category leverages JD's unique 1P model to deliver an excellent user experience and at the same time, competitive pricing.

Meanwhile, our fashion category has seen notable improvement in building underlying capability, including search and recommendation in 2025 as well as attracting more high-quality brands to deepen their collaboration with us.

We are also applying AI to achieve more precise and personalized matching in search and recommendation. In Q4 '25, we recorded double-digit growth -- year-on-year growth in both sports and outdoor apparel revenues.

In terms of our differentiated advantage in this category, first and foremost, the core moat of JD 1P model is the key. This includes more diverse product selection, more competitive pricing and more rigorous quality control.

Second, leveraging on the core capability of JD Logistics, we offer high-quality fulfillment experience of faster, more accurate and door-to-door delivery service.

Third, from the brand standpoint, JD is the most consistent daily sales platform. JD is the premier destination for brand building and the platform that offers the highest returns throughout our product's entire life cycle. So we provide brands with stable and efficient sales performance.

[Foreign Language]

[Interpreted] For the second question, we see AI and agentic commerce as a greater opportunity for JD evolution than a challenge. First, agenetic commerce is still in early stage and mainly affect the front-end user traffic.

Our view is that no matter how traffic patterns change, the core retail business remains as user experience, cost and efficiency. So as we stay focused on optimizing product price and service, JD supply chain strength will yield even greater synergy, further widening our competitive moat in the agentic era.

At the same time, we are accelerating our technology investment while driving the adoption of our in-house large language model, we remain committed to an open ecosystem, actively collaborating with industry-leading external AI LLM providers.

We are evolving into a leading technology commerce company, spending entire spectrum from supply chain to customers. As JD run a 1P business model with in-house fulfillment logistics service capability, the technology and AI application scenario is abundant. So this really differentiates us from platform business model.

I'll briefly give some examples. On the demand side, we are reshaping the shopping journey and enhancing user experience through AI-driven search and recommendation. On the supply side, we leverage AI to continuously enhance operational efficiency in AI in areas such as sourcing, pricing, inventory management, replacing manual labor.

We are also expanding our application in the physical world in terms of fulfillment, automation and after-sale services. Beyond operation, we are unlocking new consumption potential as well through applying AI, such as JoyInside, our AI agent for hardware.

As I mentioned before, the sales of JoyInside-integrated products surged 20-fold during 11.11 compared to the June 18 promotion. So you can see we are leveraging -- we are very proactively leveraging AI to reshape our competitive advantage and continue to optimize our user experience, at the same time, drive cost efficiency.

Looking ahead, we are very confident and believe we are well positioned to capture the strategic AI opportunity to solidify our leadership in AI-driven e-commerce.

Next question, please?

Your next question comes from Thomas Chong with Jefferies.

[Interpreted] I have 2 questions. First, can management share about the latest developments on shareholders return? And second, can management talk about any changes to the regulatory environment for Internet platform companies and how should we think about it?

[Interpreted] Thank you, Thomas. Despite the long-term strategic investment we made in 2025, we remain committed to shareholder returns through both dividends and share buybacks.

We declared the 2025 annual cash dividend of USD 1 per ADS, stable compared to last year. The total dividend amount is USD 1.4 billion. This underscores our commitment to delivering consistent cash returns to shareholders based on our sustainable profitability and cash flow in the long term.

In addition, we repurchased USD 3 billion worth of shares in 2025, representing 6.3% of total outstanding shares as of the end of 2024. All the repurchased shares have been canceled. We remain firmly committed to shareholder returns through healthy business development, dividends and share buybacks.

At the same time, we will remain focused on the healthy growth of our business scale, profitability and cash flow and make strategic investments for the long term while creating value and sharing JD's long-term success with our shareholders.

[Foreign Language]

[Interpreted] I'll take the last question. Regulators continuously promote the standardized development or the healthy development of the platform economy, ensuring sector's long-term sustainability. So we welcome regulatory guidance. The government's commitment is to support compliance, corporate development rather than -- remain unchanged.

We believe regulatory oversight is not a constraint, but rather a catalyst for driving healthy, high-quality industry growth. So JD has always prioritized compliant operation as the cornerstone of our business. Whether it is antimonopoly measures, tax standardization or preservation of evolutionary competition -- prevention of evolutionary competition, this effort aligns perfectly with JD long-standing philosophy of compliance.

So under a normalized regulatory environment, fair growth opportunity are created as we prevent bad money drives out good. So as a result, over the long term, the advantage of JD compliant and sustainable business model will become increasingly prominent. Thank you.

We are now approaching the end of the conference call. I will turn the call over to JD.com's Sean Zhang for closing remarks.

Thank you for joining us on the call today, and thanks for all your questions. If you have further questions, please contact me and IR team. We appreciate your interest in JD.com and look forward to talking with you again next quarter. Thank you.

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

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Hello, and thank you for standing by for JD.com's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the meeting over to your host for today's conference, Sean Zhang, Head of Investor Relations. Please go ahead.

Thank you. Good day, everyone. Welcome to JD.com's Third Quarter 2025 Earnings Conference Call.

With us today are CEO of JD.com, Ms. Sandy Xu; and CFO, Mr. Ian Shan. Sandy will kick off the call with her opening remarks, and Ian will discuss the financial results. Then we'll open the call to questions from analysts.

Before turning the call over to Sandy, let me quickly cover the safe harbor. Please be reminded that during this call, our comments and responses to your questions reflect management's view as of today only and will include forward-looking statements. Please refer to our latest safe harbor statement in earnings press release on our IR website, which applies to this call.

We will discuss certain non-GAAP financial measures. Please refer to the reconciliation of non-GAAP measures to the comparable GAAP measures in the earnings press release. Please also note all figures mentioned in this call today are in RMB, unless otherwise stated.

Now let me turn the call over to our CEO, Sandy. Sandy, please?

Thank you, Sean. Hello, everyone. Thank you for joining our third quarter 2025 earnings conference call. We achieved a set of solid results across our strategic priorities during the third quarter and further enhanced our capabilities to drive better user experience, lower cost and higher efficiency. Our total revenues were up 15% year-on-year, sustaining our double-digit growth momentum. We are delighted to see growth of our general merchandise categories and marketplace and marketing revenue continue to accelerate sequentially. Both are becoming our important growth drivers.

Non-GAAP net profit came in at RMB 5.8 billion in the quarter with the core retail business margin continued to expand year-on-year. Our food delivery business also sustained healthy expansion while its loss narrowed in Q3 from the prior quarter as we continue to optimize operating efficiencies and improve unit economics.

Overall, our business are making good progress along our long-term strategic road map. We are confident that our core retail business will steadily expand market share with healthy margin improvement and new initiatives will create deeper synergies and drive healthier financial models, further strengthening our entire business ecosystem.

Among all the encouraging developments that underpin these results, I would like to point 3 most notable highlights for this quarter, which I believe should be the key takeaways from today's call. First, strong momentum in our user base and engagement. Our quarterly active customer number was up over 40% year-on-year in Q3, sustaining the momentum built in the previous quarters, thanks to both organic growth of JD Retail as well as contributions from our new businesses such as JD Food Delivery and Jingxi. The consistent growth has led to our annual active customers exceeding 700 million in October, making a new milestone in our user expansion.

In particular, the number of JD Plus members, our highest quality user group also recorded healthy growth in the quarter. In addition to user scale, user shopping frequency on our platform also increased by over 40% year-on-year in Q3, a pace we've sustained for 2 consecutive quarters.

Notably, we saw meaningful shopping frequency increase across all user groups, including new users, existing users and JD Plus members. This user momentum is clear proof that we have stayed very focused on providing a better user experience amid evolving user demand.

In return, our expanding and more active user pool further improves our engagement with users, deepens our user insights and enables us to better address their demand. This virtual cycle ultimately supports our sustainable growth in the long run.

Second, our core retail business remained strong in Q3. Retail revenues increased by 11% year-on-year in the quarter to RMB 251 billion. There were a mix of contributors to this. While the high base effect for electronics and home appliances category started to kick in, sales of general merchandise as well as marketplace and the marketing revenues continue to accelerate growth this quarter.

Profit wise, both JD Retail's gross margin and operating margin further expanded at a solid pace, demonstrating the continued scale benefits and operating efficiency gains of the business.

Looking at the main categories, the electronics and home appliances category has been faced with a high base since the second half of Q3, which has been weighing on its growth momentum. This is an industry-wide challenge and we are working closely with brands and manufacturers to navigate through it. For example, we've been leveraging our market and user insights to support brands and manufacturers in developing new and customized product models. Meanwhile, we continue to lower the cost for brands and strive to secure the best prices for our customers. Thanks to our supply chain capabilities. Although the high base effect is expected to linger the near term, it's clear that the advantages of our business model and market position in these categories remain intact, and we are confident in building on these strengths, to unlock new growth potential in this market.

General merchandise category recorded 19% year-on-year revenue growth in Q3, an impressive acceleration from a quarter ago. Within this category, revenues from supermarket, fashion and health categories maintained double-digit year-on-year growth in the quarter. The strong tailwind is expected to sustain into Q4. This is a result of our efforts in enhancing our product portfolio, price competitiveness and service quality, which eventually translates to better user experience and stronger user main share.

As we continue to tap into the huge market potential, we believe general merchandise will play a bigger role in supporting JD Retail's long-term growth.

In addition to healthier category mix, another bright spot in our Q3 performance was marketplace and marketing revenues which, at the group level, grew 24% year-on-year in the quarter. It has remained on a double-digit growth trajectory for 4 consecutive quarters. In particular, growth of our advertising revenues has accelerated sequentially in every quarter this year and exceeded 20% year-on-year in Q3. This strong momentum mainly stems from the accelerated ad revenues generated by core JD Retail business.

Our improved ecosystem for both 1P business and 3P merchants, fighter AI-powered ad tools and improved traffic allocation efficiency all have contributed to the strong trend. As we move into Q4, we expect marketplace and marketing revenues to continue the healthy growth. Our platform ecosystem is taking good shape and gaining positive traction with suppliers and merchants, large and small.

The third highlight I want to share is our new businesses. Within the segment, JD Food Delivery continued to make healthy progress in Q3. It's GMV achieved double-digit quarter-on-quarter growth in the quarter driven by both order volume growth and a healthier order mix with high-value orders contributing a vast majority of total orders. While scaling up the food delivery business also narrowed operating loss sequentially in Q3, thanks to the improving UE performance. This encouraging progress is achieved through our enriched supplies, increased operating efficiency, disciplined investment made a competitive market and our efforts to expand food delivery revenue streams.

More importantly, food delivery continued to generate strong synergies with our retail business. In addition to user growth and engagement, the cohort cumulative cross-selling rate has been on an upward trend. Products from our supermarket electronic accessories and Jingxi categories remained the biggest beneficiaries of this trend.

Going forward, we will focus on further growing the food delivery business scale, UE optimization and unlocking stronger synergies with retail, logistics and other businesses across our ecosystem. Other new businesses, including both Jingxi and international business are progressing well as planned. Jingxi further penetrated into the lower-tier markets and grew its merchant and user base. Our international retail business is gradually establishing capabilities in the U.K. from Germany and Benelux regions, paving the way for our global expansion, both are making solid steps in executing on their long-term strategies.

One more thing before I wrap up. We unveiled our AI road map during the 2025 JD Discovery Conference in September. I want to share a few exciting updates here. First, we launched a number of new AI products at the event, including TaTaTa, an all-purpose digital human assistant app and JoyInside, an AI agent for robots, toys, devices, among others.

Second, we introduced the industry specific AI applications across 4 sectors of retail, health care, logistics and Industrial.

Third, we also made upgrades to a few of our retail technology infrastructure, such as JD Streamer, our new digital human technology that provides e-commerce live streaming and short video production solutions. JoyStreamer has served over 40,000 brands so far with significantly lower cost and better sales performance compared to real human live streaming costs.

In addition, we provide 24/7 nonstop AI customer service which handled over 4.2 billion inquiries during our 11.11 Grand Promotion. We are excited about the potential of these AI applications as we foster a comprehensive AI ecosystem spanning across various industries.

To conclude, Q3 was a productive quarter with all our business lines moving ahead steadily on our strategic road map. The user momentum on our platform was strong. Our core retail business is in solid shape with multiple complementary long-term growth drivers and great potential for long-term margin improvement. Beyond core retail new businesses, including food delivery, Jingxi and our international retail business are on track for healthy development, both financially and operationally. Taken together, our businesses are operating in synergy, bolstering our conviction in the path ahead, we see great opportunities to further unlock the collaborative value of our business ecosystem and to position us well for sustainable, high-quality growth.

With that, now let me turn the call over to Ian.

Thank you, Sandy. Hello, everyone, and thank you for joining the call today. In the third quarter, we recorded a set of healthy performance across our business lines. Our total revenues were up 15% year-on-year, outpacing the growth of MBS total retail sales. This was supported by double-digit revenue growth in our core retail business.

Despite the high base for electronics and home appliances, general merchandise and service revenues both delivered stronger growth in Q3 and recorded their fastest pace since the second quarter 2023. In terms of profit, JD Retail achieved strong year-on-year expansion in both gross and operating margins in the quarter. And our food delivery business also saw a sequential reduction in investments scale. Overall, our business are moving in the right direction, and we are at a stronger position to drive sustainable growth for the long term.

Now let's go through our financial results in the third quarter. Total net revenues increased by a solid 15% year-on-year to RMB 299 billion in Q3. Breaking down the mix. Product revenues were up 10% year-on-year in Q3. Revenues of electronics and home appliances were up 5% decelerating from last quarter due to the high base effect created by the trading program. This is in line with our expectations and we are confident that -- we are positioned to further solidify our leading market position as we leverage our supply chain advantages and stay focused on enhancing user experience, reducing costs and improving efficiency.

Revenues of general merchandise were up 19% year-on-year in the quarter, a notable highlight of our Q3 performance. Growth in general merchandise has sustained double-digit growth for 4 consecutive quarters and further accelerated from the previous quarter. Within general merchandising, both supermarkets and fashion categories saw growth rate surpassing mid-teens in Q3. The results were mainly driven by our continuous efforts to enhance our operational capabilities, build up better user experience and mind share, alongside our growing market share. This gives us the confidence that the strong momentum in our general merchandise categories will continue going forward as we capture the huge potential in this market.

Service revenues were up 31% year-on-year in Q3, a solid acceleration compared to previous quarters. Notably, marketplace and marketing revenues increased 24% year-on-year, accelerating sequentially every quarter for 7 quarters in a row.

Within this line, advertising revenues continue to see robust growth, mainly driven by the notable improvement of user engagement and better advertising tools that we provide for both suppliers and merchants at our core retail business.

This demonstrates our more robust ecosystem and the strong growth in the number of merchants and users on our platform. We expect marketplace and marketing revenues to continue solid growth in Q4, contributing to both our top line growth and margin performance. Logistics and other service revenues grew 35% year-on-year in Q3, mainly driven by the incremental delivery revenues from food delivery business.

Now let's turn to our segment performance. JD Retail revenues were up 11% year-on-year in Q3. Our core retail business has built multiple growth drivers and we believe growth of the general merchandise category and value-added services, including advertising will be important pillars in retail's long-term growth.

JD Retail also saw healthy progress in margin expansion in the quarter. This gross margin has sustained year-on-year expansion for 14 quarters in a row and was up 1.3 percentage points to 19.3% in Q3. This was driven by a favorable mix shift towards higher-margin business, along with optimized procurement costs by leveraging our scale effect and supply chain advantages.

In addition, in Q3, JD Retail's non-GAAP operating income was up 28% year-on-year to RMB 14.8 billion, and operating margin was up 76 bps to 5.9%, both continuing strong momentum.

Moving to JD Logistics. The logistics revenues were up 24% year-on-year in Q3. Both internal and external revenues grew at a steady pace. And JD Logistics also saw incremental delivery service revenues generated by food delivery business.

In terms of profit, JD Logistics non-GAAP operating income was compressed 39% year-on-year to RMB 1.3 billion in the quarter as it continued to invest in customer experience, service capabilities and technology to enhance the efficiency of the entire logistics process. These efforts aim to boost JD Logistics competitiveness in products and services and strengthen its market position, which over time, will translate into sustainable margin expansion.

Our net new business generated RMB 15.6 billion in revenues, a steady growth compared to last quarter. This was driven by the continued expansion of our food delivery, Jingxy an international business. Non-GAAP operating loss of new business slightly widened sequentially to RMB 15.7 billion. To break this down, food delivery saw a sequential reduction in its investment in Q3. Our food delivery business continues to scale with a healthier financial model with expanded revenue streams, disciplined spending in users and increased operating efficiency.

As to other new business, both Jingxy and international business increased investments compared to a quarter ago. They're in a rapid development stage and are important pillars in JD's long-term strategies. Going forward, we will continue to scale up the new business and further unlock synergies to set the stage for our future growth. At the same time, we are committed to improving UE performance and aim to drive healthy and sustainable bottom line growth in the long run.

For our consolidated profit performance in Q3, our gross profit was up 12% year-on-year to RMB 50 billion. And gross margin was 17%, slightly reduced by 0.4 percentage points. This was primarily due to margin dilution from the food delivery business and JD Logistics, which offset JD Retail's solid gross margin expansion in the quarter.

Consolidated non-GAAP net income attributable to ordinary shareholders was RMB 5.8 billion in Q3, and non-GAAP net margin was 1.9%, both down year-on-year. This near-term headwinds in profit mainly reflect our investments in food delivery. Our last 12 months free cash flow as of the end of Q3 was RMB 13 billion compared to RMB 34 billion in the same period last year. This was primarily due to cash outflows associated with the trading program. and the decline in operating income. By the end of the third quarter, our cash and cash equivalents, restricted cash and short-term investments totaled RMB 211 billion.

In summary, we're encouraged by the solid progress in both core retail and new business. Retail has built a growth metric with multiple drivers and a clear path to our long-term margin target. Food delivery is growing with a healthier financial model and other new business, including lower tier market and international business are also making solid steps to the next chapter. All our businesses are on the right track, starting to generate notable synergies with 1 another and collectively contributing to our high-quality development in the long term.

With that, I will turn it back to Sean. Thank you.

Thank you, Sandy and Ian. For the Q&A session, you're welcome to ask questions in English or Chinese, and our management will answer the question in Chinese, will provide English translation for convenience purpose only. In case of any discrepancy, please refer to our management statement in the original language. Operator, we'll open the call for a Q&A session now.

[Operator Instructions] Your first question comes from Kenneth Fong.

[Foreign Language]

[Interpreted] My first question is on the government trading subsidies. As the year-on-year comparison base is getting higher into the second -- into the fourth quarter, can management share the growth outlook for the electronics and home appliances grow for JD Retail?

And financially, as the trading subsidies fade and volume kind of slower in terms of growth year-on-year. How should we think about the margin impact on JD Retail. My second question is on the overseas development. Post the recent acquisition on some company overseas and JD Joy by commenced operation. Can management share about this overseas strategy, including the scale and the pace of investment?

[Foreign Language]

[Interpreted] Thanks for your question, Kenny. Yes, since last year, the training program has stimulated consumer demand and contributed to the sales of home appliance and PCs, so this created an inevitable high base for the industry, which is within the market expectation. Although the trading program has caused short-term fluctuation in the consumer demand, its more substantial impact is driving industry upgrade and promoting products that are innovative, intelligent and green and ultimately, leading to high-quality growth of the industry.

[Foreign Language]

[Interpreted] Since the treating program, JD has actively supported the implementation of the policy. As such, we have further enhanced our market share and supply chain capability in the related categories and especially on our 1P model, the continuous enhancement of our core advantage differentiate JD and build our long-term growth foundation we'll continue to leverage our strength in product price and service with the goal to further strengthen user mind share and consolidate and expand our market share will focus on a few areas.

[Foreign Language]

[Interpreted] So this area includes, first, on the product innovation, we'll collaborate with brands to launch more customized products, driving product upgrades and innovation on price optimization will also leverage our scale advantage and supply chain capability to further optimize cost, offering user more competitive price.

And on the service, so we're offering omnichannel consumer service will build a seamless online and offline shopping experience for our customer. For example, we have been strengthening our off-line presence in home appliance and 3C categories, focusing on large stores like JD Mall, JD Home appliance, city flagship stores in the high-tier cities, and smaller ones such as JD Home appliance stores in the low-tier market. In addition, we also provide differentiated service, including integrated delivery and installation, offering better user experience and more efficient service to our users. With these efforts will further consolidate our market share. As of Q3, we have built -- we have over 20 JD Malls nationwide and the number of JD Appliance City flagship stores exceeded 100.

[Foreign Language]

[Interpreted] In terms of profit margin, we'll continue to offer users the best value for money product to ensure better user experience and mind share. Additionally, whether during the training program or in a normalized phase going forward, our team will leverage supply chain capabilities and enhance collaboration with brands.

[Foreign Language]

[Interpreted] So overall, we are confident in our user mind share and market share in the home appliance and 3C categories, JD will continue to strengthen our capabilities and strategic positioning, working very closely with brands to address short-term challenges and support the long-term healthy development of the industry.

Additionally, our growth drivers are now more diversified. We have seen sustained sales growth acceleration in categories such as supermarket, health, fashion and service revenue from advertising, which are emerging as new growth engines for JD. Furthermore, as I just have shared both our user base and shopping frequency have been on a stronger growth trend during JD 11.11 Grand promotion, the number of our shopping customer increased by 40% year-on-year. This set of momentum will support our healthy growth next year and give us more confidence in the long term.

[Foreign Language]

[Interpreted] Regarding your second question on JD's international business. So first, from the strategic perspective, international expansion has always been a key long-term strategy for JD, as the largest retailer in China, we aim to gradually establish a highly efficient global retail network so that we can deliver JD's premium shopping experience to consumers worldwide.

We recognize the international market is very big, for example, Europe is the second largest consumer electronics market in the world, only second to China, and there are still many great areas to improve user experience. We also aim to seize the opportunity of Chinese supply chain going global, leveraging our supply chain advantage to better support Chinese brands in their international expansion.

In terms of business model, unlike other cross-border e-commerce platforms, we leverage our supply chain capabilities, commit to a local e-commerce approach and localization strategy. We collaborate with high-quality brands and suppliers around the world to create mutually beneficial partnership.

[Foreign Language]

[Interpreted] In terms of progress, currently Joybuy our European online retail business is in the test phase in countries, including the U.K., France, Germany and the Netherlands. This marks an important step in JD's international strategy will continue to enhance user experience and build in key -- build our key capabilities in areas including first expanding product offerings and collaboration with premium global brands; second, enhancing logistics capability to improve the efficiency and stability of warehousing and delivery third, investing in R&D to optimize the product functionality and enhancing shopping experience.

We welcome investor analysts based in Europe to experience our Joybuy app and provide us your experience. Regarding CECONOMY, the transaction is still subject to the regulatory approval will provide you guys further updates when appropriate.

[Foreign Language]

[Interpreted] So from the investment standpoint, this is a gradual process. We will continue to advance our international expansion strategy steadily while maintain a gradual and prudent financial discipline. We will prioritize investment efficiency and make dynamic adjustments to adhere healthy and sustainable -- to achieve healthy and sustainable growth. Overall, the scale of the investment in our international business will not be substantial for JD.com and will carefully manage the investment pace and scale. Operator, we can take the next question.

Your next question comes from Ronald Keung with Goldman Sachs.

[Foreign Language]

[Interpreted] The first is on food delivery. What is the duration that the JD will be committed to invest at this loss-making period as part of customer acquisition? And what's the progress in improving economics and commissions and business models like the 7Fresh and even coffee across the 7Fresh brands?

Second question is on general merchandise, seeing very healthy growth there in 3P. So how do we plan to further strengthen the competitive edge in the 3P categories, supermarket, health and apparel in terms of speed, selection, quality and price?

[Foreign Language]

[Interpreted] Thank you, Ronald, for your question. Both food delivery and on-demand retail is a long-term strategy for JD. We aim to drive healthy and sustainable growth of the business. We have been optimizing operational efficiency and improving UE. So in Q3, we remain very rational amid the intensified competition in the industry our food delivery business is currently in its first stage of development.

Our goal for this stage is to establish better user mind share and market share in the quality food delivery sector. We will be committed to providing high-quality food delivery service to our existing premium user while attracting new users. Additionally, as you guys know, we'll be good at is supply chain. So we'll continue to deepen our supply chain effort such as through our innovative 7Fresh teaching model to offer differentiated experience and service to our users.

[Foreign Language]

[Interpreted] So in the third quarter, JD Food Delivery maintained healthy growth trend. JD Food Delivery GMV achieved double-digit growth quarter-on-quarter. Alongside order volume growth, we also delivered a healthier order mix with a proportion of mill or mail orders steadily rising and contributing `to a bus majority of our total order.

At the same time, average price per order also increased quarter-on-quarter compared to Q2 meet intensified competition. So this is remarkable. While scaling up overall investment in food delivery in JD Food Delivery business in Q3, narrowed sequentially thanks to the UE improvement, the revenue contribution of food delivery is still limited as we are implementing a commission-free policy for merchants and only started to generate limited advertising revenues.

That said, our team has made solid progress in improving operational efficiency, including enriching supplies the number of high-quality restaurant merchants continue to grow in the quarter. And we also further improved our subsidy efficiency with refined operations and tailored subsidy strategy to different regions, user groups and order types. In addition, as we continue to upgrade our underlying system capability we have seen better operating efficiency. We also launched our new business, 7Fresh Kitchen model in July, which address full safety concerns through supply chain innovation. Our goal is to ensure that consumers can enjoy their meals with peace of mind and at the same time, help quality restaurant improve profitability.

Since its launch, 7Fresh Kitchen has been welcomed by our customers with a rapid increase in its order volume. It has also boosted sales and order growth of other quality restaurants within the 3-kilometer range. By the end of this year, people will see more semi-fresh kitchen in the region of Beijing.

[Foreign Language]

[Interpreted] Looking ahead, we'll drive our strategic progress with a long-term perspective and focus on long-term ROI. Our goal is to create a sustainable business that drives healthy order growth and at the same time, gradually and long scale effect and enhance operations with better UE.

Ultimately, JD food delivery should be a self-sustaining business. Moreover, food delivery is deeply integrated into JD overall ecosystem. We believe there is significant potential for synergies in user momentum, supply and fulfillment within our ecosystem. The way of our business working together is not simply adding 1 and cutting another. JD user acquisition costs -- in the long term JD-user acquisition cost will decrease. And at the group level, we are committed to driving sustainable growth while maintaining profitable and cash flow sufficient.

[Foreign Language]

[Interpreted] Regarding your question about our general merchandise category, as I mentioned before, it has sustained a 4 quarter consecutive double-digit growth key categories, especially supermarket, health, fashion and home goods all delivered very strong growth. We see significant growth potential in general merchandise, including supermarket and fashion as our users have substantial unmet demand, we have clear growth strategy for each of these key categories.

First, on supermarket categories, we focus on improving user mind share and user penetration through promotions such as -- through our promotions such as Black Friday and Super 18 will build stronger user mind share of our supermarket offering. Supermarket category will also take the opportunity of our rapid user growth on the platform to drive healthy -- higher penetration and conversion.

We have been optimizing costs and improving operational efficiencies through our supply chain capability, providing more competitive price to our user which validates the economic scale of our 1P model. Our supermarket category has made solid progress in this area and build strong competitive -- competitiveness compared to other models online and offline. At the same time, we will collaborate with brands further refine our operations and build categories with strong JD mind share and growth potential such as liquor, baby and mom products and household cleaning categories or all have already established strong user mind share, we expect to make breakthroughs in other categories as well.

[Foreign Language]

[Interpreted] Overall, our strategy for the general merchandise category is very clear. We are confident in the growth potential and market opportunity in the general merchandise sector as we enhance operation and user mind share. General merchandise is an important pillar of JD growth metrics and will support our long-term sustainable growth. We can take the next question, operator?

Your next question comes from Alicia Yap with Citigroup.

[Foreign Language]

[Interpreted] So can management share with us the synergies on general merchandise category that benefit from the food delivery traffic, most of your food delivery users come from loyal JD user -- and what is the retention rate of the newly acquired user through the food delivery? Would you be able to quantify and share the cohort of new food delivery users who become active user of JD Core retail user. And second question is can management update us on your latest AI strategy and investment. Can you elaborate how AI has helped on JD's Core business? And how do we think about the financial impact?

[Foreign Language]

[Interpreted] Thank you, Alicia, for your questions. I will take the first one. So as JD Food Delivery drives healthy development, we also see it's generating deeper synergies with JD Retail. First, on the user growth and user engagement side. In Q3, DAU of JD app maintained a rapid growth with growth rates leading the industry.

Our quarterly active customers and user shopping frequency, both recorded over 40% year-on-year growth in the quarter. As we continue to provide quality food delivery, we have seen JD food deliveries user retention rate maintained at a relatively high level and at the same time, boost our overall user engagement and user shopping frequency, while serving our high-quality existing users, our food delivery business also attracts new users to our platform.

Our annual active customer number surpassed the milestone of 700 million in October, reflecting our expanding user base and increasing user stickiness. At the same time, we will be accelerating the deployment and further optimizing our user conversion strategies and tools based on the preferences of food delivery users -- we have been providing retail product selection and recommendation in a more precise way, thus driving better user conversion. We have seen that the conversion rate of the new users acquired by JD Food Delivery has been trending up month by month. And for the earliest group of such users, their cohort conversion has reached close to 50% in Q3.

[Foreign Language]

[Interpreted] Second, on the cross-sell side, we will see a stronger trend of cross-category purchases of food delivery users, particularly of our general merchandise category including supermarket products and live services. We believe food delivery will create new growth momentum to our general merchandise category as it attracts new users and drives up shopping frequency of our existing users.

In addition, 3D food delivery has also accelerated the development of our on-demand retail business. We will build a dedicated team that pays close attention to this area. Going forward, we will continue to accelerate the synergies between food delivery and core retail business, in terms of user momentum, cross-category purchases and marketing. In addition, we will tap into more synergies of our broader business ecosystem driving healthy progress in our user base expansion, revenue growth and efficiency improvement.

[Foreign Language]

[Interpreted] I'll answer the second question. So we are in the new era where we see a lot of new opportunities in AI and significant value of business model reform. JD has built a solid comprehensive AI capability framework that covers infrastructure models, platforms, application scenarios and products.

Over the next 3 years, we will make a sustained investment to foster a trading RMB scale AI ecosystem across various industries. So at our JDB conference, in September, we have unveiled JD AI strategy road map and launch flagship AI product, including our JD AI TaTaTa and all-purpose digital human assistance and JoyInside an AI agents for robot toys, devices and among others.

[Foreign Language]

[Interpreted] In terms of application, JD's differentiation is that we have extensive application scenarios, including retail, logistics, health care and industry -- other industry sectors -- so taking both retail and logistics, as example, in retail use case, we are providing merchants with over 50 AI tools, such as AI systems, AI agent for advertising allocation and [indiscernible] MDM to help them -- help merchants enhance efficiency and lower cost in content generation marketing, supply chain management and customer service.

We also redefined e-commerce experience in the AI era. We launched a smart search and recommendation function through natural language interaction, it can precisely understand user needs and delivering a huge breakthrough in shopping efficiency and truly personalized shopping experience.

In the logistics use case, while our logistic robots have been deployed across more than 20 provinces in China and over 10 countries globally, covering the entire logistics chain from warehousing, sorting to transportation and distribution.

Looking ahead, the expanding deployment of logistic robots autonomous vehicles and drones will further reduce logistic costs in the society, increase our business partner efficiency and keep optimizing shopping experience for our consumers. Okay, operator, we can take the last question.

Your last question comes from Thomas Chong at Jefferies.

[Foreign Language]

[Interpreted] My first question is about our ecosystem development, including the number of 3P merchants contribution as well as the expectation over the next few quarters. And my second question is about the outlook in terms of our profitability and margin in the next few years.

[Foreign Language] My first question is above our ecosystem development

[Interpreted] Thank you, Thomas. We've actually made solid progress in developing our platform ecosystem with a set of indicators growing at a very rapid pace. So in Q3, our active merchant number grew by over 200% year-on-year.

We have onboarded more top-tier merchants as well as merchants from industrial belts, providing users further enriched product offering. Meanwhile, our food delivery business has also brought in a large number of quality restaurants to merchants. We have also seen positive feedback from users. In Q3, the number of users who shopped our 3P offerings grew at a fast pace of over 50% year-on-year, outpacing the growth of our total users reflected in the financial results our commission and advertising revenues have been on a very rapid growth trajectory with growth rates accelerating to 24% year-on-year in Q3, which is the highest pace since Q2 2022.

[Foreign Language]

[Interpreted] We believe our platform ecosystem has a lot of potential. In particular, we will further explore industrial belts to onboard more merchants -- we will also continue to expand our full delivery merchant base to enrich local supplies for our 3P ecosystem.

In addition, we will continue to strengthen our platform infrastructure and provide more tech tools to merchants with the goal to help them enhance operating efficiency on our platform. We will also optimize merchant operation rules and traffic allocation efficiency to create a clear growth path and a fair ecosystem for our 3P merchants.

In addition to that, we will continue to strengthen user mind share of our 3P offerings. We will see that for our 3P driven categories such as fashion category, users have built growing mind share of shopping for clothing on JD.com. We are committed to developing our platform ecosystem, achieving win-win outcomes with our 3P merchants and better serving our users. Platform Ecosystem business will also be our long-term driver for both revenue growth and profitability expansion.

[Foreign Language]

[Interpreted] For your second question, in Q3, JD Retail continued to see steady profit growth. This further validates our confidence in retail's long-term margin trajectory. The main drivers for this include: first, the healthy development of our platform ecosystem will drive growth momentum in our commission and advertising revenues, which will be a contributor to our margin expansion.

Second, as we continue to build up our supply chain advantages and the scale effect of our core retail business, we are confident to further lower cost and improve our operating efficiency, which will lead to better margin performance. To note, JD Retail's gross margin has been expanding year-on-year for 14 consecutive quarters. Third, our category mix shift will also impact our margin performance. Currently, the operating efficiency and margin performance of most of our categories and brands have been improving.

In particular, our supermarket category has built stronger procurement capabilities and differentiated product offerings. We see meaningful potential to further increase supermarkets margins going forward.

Meanwhile, as we continue to optimize the product mix for electronics and home appliances, we also see room to increase these categories margins in the long term. In terms of investments in our new businesses, we will be centered around supply chain capabilities to make investments such as in food delivery, international and Jingxi businesses. As we further enhance our supply, performance and services and broadened coverage in categories, customers and regions, we see more growth potential of our businesses.

As the new initiatives generate deeper synergies with our existing businesses, we expect to see improvements in operating efficiency and profitability of our broader business ecosystem. Finally, our high single-digit margin target for the long term remains unchanged.

We are now approaching the end of the conference call. I will turn the call over to JD.com's Sean Zhang for closing remarks.

Thank you for joining us on the call today, and thanks for your questions. If you have further questions, please do not hesitate to contact me and the IR team. We appreciate your interest in JD.com and look forward to talking with you again next quarter. Thank you. Have a good day.

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

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]