JD.com

JD.com expects year-on-year revenue growth for JD Retail in the third quarter and further acceleration in the fourth quarter after a 5% decline in the second quarter. EBIT margin rose to 1.30% in the second quarter from negative 0.20%, thanks to margin improvement at JD Retail and new businesses.

Why it matters: The results and guidance reaffirm JD's earnings recovery story. We think recovering JD Retail revenue, a mix shift toward higher-margin marketplace business, optimization of product mix, and supply chain scale benefits will continue to improve JD Retail's earnings growth in the long run. In the new businesses segment, we expect food delivery losses to narrow further as order volume and monetization grow, alongside improving cost efficiency. We estimate food delivery will see a more than 50% year-on-year loss reduction in the third quarter, same as the second quarter. We think year-on-year increases in investment in the rest of the new businesses will remain prudent, at an estimated CNY 1 billion-CNY 2 billion per quarter. This is small compared with an estimated more than CNY 10 billion year-on-year food delivery loss reduction in both the second and third quarters.

The bottom line: We maintain our long-term earnings estimates and HKD 138/USD 36 fair value estimate for narrow-moat JD.com. The shares appear undervalued, as the market is overly concerned about competition in the online shopping space. We think customers who want a combination of authentic goods, same-/next-day delivery, and a large assortment will struggle to find an alternative platform to JD. Given JD's large market share in the core electronics and home appliances segment, we think on-demand delivery rivals and e-commerce platforms won't be able to replicate its sourcing scale and cost advantage.

Management is confident that JD Retail will achieve a high-single-digit EBIT margin over the long term. However, our midcycle margin estimate is more conservative at 4.5%, as we think intense industry competition will prevent JD Retail from reaching management's target.

Our fair value estimate is HKD 138.00 per share (USD 36.00 per ADS).

We expect a 2% revenue compound annual growth rate in the coming 10 years, driven by a 0% CAGR in net product sales and an 7% CAGR in services and others. We expect JD to continue to enhance sales through its omnichannel strategy by providing merchandise to online platforms and retailers, improving its third-party platform's operations, gaining new users, broadening its variety of products, and providing food delivery and travel services.

We expect non-GAAP operating margin to reach 2.9% in 2035 from 0.7% in 2025 mainly due to narrowing loss of the food delivery and other new businesses, and to a lesser extent rising contribution from the high-margin third-party platform. We expect the logistics segment to see a margin increase due to economies of scale. Our 10-year non-GAAP operating profit CAGR is 17%.

We think JD.com has a narrow economic moat, based on an intangible asset of high reliability and assurance (on-hand inventory, product authenticity, and fast proprietary logistics services) and a cost advantage resulting from economies of scale in its first-party business. We downgraded JD's moat to narrow from wide because intensifying competition from on-demand delivery and content-driven e-commerce no longer gives us confidence that JD can maintain excess returns on invested capital over the next 20 years. However, we remain confident it will do so over at least the next 10 years.

JD's intangible asset is derived from its fast, efficient, and high-quality proprietary logistics, complemented by the assurance of authentic products on its first-party platform. By procuring inventory directly from manufacturers and authorised brand distributors and placing it in warehouses closest to likely end consumers, JD can fulfill most of its first-party orders on the same or next day across almost all districts and counties in China. This model is fundamentally different from marketplace peers such as Alibaba, PDD, and Douyin that mainly rely on third-party sellers and third-party logistics providers.

This integrated first-party retail and logistics advantage, however, has narrowed. The rise of on-demand retail—in which Meituan and Alibaba deliver in an average of 38 minutes—has redefined the value proposition for JD's core premium shoppers, particularly in low-value, high-frequency categories where speed matters most. Content-led platforms have also taken share: between 2022 and 2025, Douyin and Pinduoduo lifted their GMV shares by 8 and 3 percentage points, respectively, while JD's declined by 4. We expect JD to cede a further 300 basis points of GMV share by 2035, taking it to 14% from 17% in 2025.

We nonetheless believe JD is not a no-moat company. JD's first-party platform carries more than 5 million stock keeping units, or SKUs, versus the 4,000-10,000 of a typical on-demand delivery warehouse, allowing it to satisfy long-tail demand that on-demand delivery rivals cannot. As China's largest retailer of home appliances with an approximately 60% share, JD can source these products at the lowest cost and reinvest the savings into comprehensive after-sales services—installation, uninstallation and disposal of old appliances, warranty support, and returns—that competitors would need considerable time and capital to replicate. This is why JD's GMV share in electronics and home appliances, the segment that accounted for 46% of 2025 revenue, has been stable since the fourth quarter of 2022, even as its overall GMV share eroded—big-ticket, durable goods are seldom bought on impulse and not solely driven by price. We think 30-minute delivery is not the priority for these items.

We also do not expect rivals' momentum to persist indefinitely. Pinduoduo's GMV growth slowed to high-single-digit percentages by March and April 2026 and its online marketing services revenue growth to 2.5% in the first quarter, signs of a maturing platform. Douyin's live-streaming format—best suited to discretionary, highly visual, low-price, impulse-driven goods—is approaching its GMV ceiling of CNY 3 trillion-CNY 4 trillion versus its CNY 2.6 trillion in 2025 on our estimate. Live streaming e-commerce cannot effectively serve planned, high-ticket, or bulky purchases. These dynamics limit further share loss and underpin our view that JD warrants a narrow moat rather than none.

Finally, JD's national fulfillment scale mirrors the competitive advantages of its global, moaty peers. Operators such as Mercado Libre, Sea Limited, Coupang, and Amazon all hold narrow or wide moats thanks to their extensive warehouse and fulfilment networks; JD's comparable infrastructure should at a minimum support a narrow moat in China. Although JD's entry into loss-making food delivery cut ROIC to 6% in 2025, we forecast ROIC to recover to over 20% by 2035, significantly below the 42% to 55% during 2021-24, but still well above our cost of capital assumption.

JD.com’s free return, exchange, and shipping policies substantially increase the new user base, purchase frequency, and average order value, leading to better-than-expected profit for the firm.

JD.com can increase the number of its merchants and their competitively priced products, similar to the scale of Taobao, 1688, and Pinduoduo, without sacrificing margins.

JD.com adopts generative AI in its platform to help customers buy products that meet their specific demand better compared with its peers, leading to market share gain.

Many customers associate the JD.com brand with a poorer quality of products and services and insufficiently competitive prices as JD.com pushes its third-party platform, leading to lower-than-expected sales.

JD.com’s profitability suffers due to higher employee compensation, low take rate, and heavy investments in the businesses, such as introduction of a lower free shipping threshold.

JD.com expands into value-destroying domains in which it lacks competitive advantages, resulting in lackluster earnings growth.