Executive Summary / Key Takeaways

• JD.com is strategically expanding beyond its dominant Chinese e-commerce base into high-growth areas like on-demand retail and international markets, leveraging its unparalleled supply chain and AI-driven technological advantages.
• Despite significant investments in new businesses, which have impacted short-term net profitability, JD Retail continues to demonstrate robust growth and expanding operating margins, underscoring the resilience of its core business model.
• The company's aggressive push into food delivery has shown exponential growth in order volume and is generating early synergies with its core retail offerings, positioning it as a long-term driver for user engagement and cross-selling.
• JD.com's acquisition of CECONOMY AG marks a pivotal step in its global expansion, aiming to replicate its supply chain and online operational expertise in the European consumer electronics market.
• A strong commitment to shareholder returns through consistent dividends and substantial share buybacks reflects management's confidence in JD's long-term growth trajectory and its path to achieving high single-digit net profit margins.

Setting the Stage: JD's Supply Chain Foundation and Strategic Evolution

JD.com, Inc., incorporated in 2006, has evolved from its origins as 360buy Jingdong Inc. into a leading supply chain-based technology and service provider in China. Its core business, JD Retail, has long dominated categories such as electronics, home appliances, and a wide array of general merchandise, establishing a reputation for authenticity, speed, and reliability. This foundational strength is rooted in JD's self-operated logistics network and proprietary technology, which differentiate it in China's highly competitive e-commerce landscape, characterized by intense price wars with rivals like Alibaba Group Holding Limited and Pinduoduo .

The company's overarching strategy centers on enhancing user experience, lowering costs, and improving efficiency, all while leveraging its robust supply chain capabilities for sustainable long-term growth. This strategic focus has been consistently applied, from the launch of its supermarket category, JD Super, around September 2014—a segment management now views as a key "battlefield" for future growth—to its recent aggressive diversification. Facing a "hyper-competitive, deflationary home market," JD.com has strategically embarked on new growth frontiers, including on-demand retail and international expansion, aiming to diversify its revenue streams and enhance user stickiness. Broad industry trends, such as government stimulus policies, particularly the trade-in programs for electronics and home appliances, have provided tailwinds for its core business, while the burgeoning demand for AI and data centers is also shaping its technological roadmap.

Technological Edge: The AI and Logistics Powerhouse

JD.com's integrated, proprietary supply chain technology and extensive logistics network form the bedrock of its competitive advantage. This sophisticated infrastructure encompasses advanced warehousing, intelligent sorting, optimized transportation, and efficient last-mile delivery. The tangible benefits are substantial: JD's "211 fulfillment network" and "one second delivery" for its Miaosong service enable notably faster delivery times compared to many competitors. This operational efficiency is a critical differentiator, fostering stronger customer loyalty and repeat business. Furthermore, JD's 1P (first-party) model, supported by stringent merchant onboarding standards, ensures higher product quality control and authenticity, directly addressing consumer concerns in a market often plagued by counterfeits.

The company is aggressively integrating Artificial Intelligence (AI) and automation across its entire ecosystem, from demand generation to fulfillment. AI-driven optimization has restructured search and recommendation systems for JD Retail, leading to increased search result satisfaction and improved traffic distribution efficiency. JD has launched an AI shopping assistant, [Jinnian] (ph), and an AI Avatar, providing users with comprehensive product information and professional recommendations, thereby lowering the cost of product search and selection. For its over 1 million merchants, JD offers 24/7 AI-powered operational agency services and tools, covering everything from product launch and order management to after-sales support and data analysis. These tools, including AI marketing campaigns, AI pricing, and AI customer service, are designed to enhance operational efficiency and reduce costs for merchants. In its supply chain and fulfillment, AI algorithms improve the accuracy of demand-supply matching, while proprietary industrial robotics deployed in fulfillment centers boost operating efficiency, enhance employee safety, and lower overall fulfillment costs. Even internal workflows, such as short video content reviews and employee reimbursement, are seeing significant efficiency gains through AI integration.

For investors, this technological leadership translates into a robust competitive moat. It enables JD to maintain superior operational efficiency, drive market share expansion, and improve profitability through cost reductions and enhanced user experience. The continuous innovation in AI and logistics is foundational to JD's ability to diversify into high-frequency businesses like food delivery and expand internationally, leveraging existing strengths to create new growth avenues and solidify its long-term market positioning.

Financial Performance: Growth Amidst Strategic Investments

JD.com's recent financial performance reflects a dynamic interplay between robust core business growth and significant strategic investments in new initiatives. In the second quarter of 2025, total revenues surged by 22% year-on-year to RMB 357 billion, building on a 16% year-on-year increase in Q1 2025. This acceleration demonstrates the company's ability to meaningfully outpace the growth of China's total retail sales.

JD Retail, the company's cornerstone, continues to be a powerhouse. In Q2 2025, its revenues grew by 20.6% year-on-year, with non-GAAP operating profit increasing by a strong 38% year-on-year to RMB 13.9 billion. The segment's operating margin expanded to 4.5%, up from 3.9% in Q2 2024, marking a historic high for a promotion quarter. This improvement is primarily attributed to stronger supply chain capabilities, which enhance user experience, lower costs, and boost operational efficiency. Key categories within JD Retail, such as electronics and home appliances, maintained strong momentum with a 23% year-on-year revenue increase in Q2 2025, while general merchandise revenues grew by 16% year-on-year. The supermarket category, in particular, has achieved double-digit revenue growth for six consecutive quarters.

However, the strategic investments in new businesses have had a noticeable impact on consolidated profitability. The non-GAAP net income attributable to ordinary shareholders in Q2 2025 was RMB 7.4 billion, a decrease from RMB 14.5 billion in the same period last year. This decline is largely due to the rapid expansion of new ventures, particularly the food delivery and Jingxi businesses, which widened the non-GAAP operating loss for the New Business segment to RMB 14.8 billion in Q2 2025, even as its revenues tripled year-on-year. JD Logistics, while seeing revenues grow by 16.6% year-on-year in Q2 2025, experienced a 10.3% decline in non-GAAP operating income as it prioritized capacity building and growth optimization investments.

Despite these near-term margin headwinds, the overall gross margin reached 15.9% in Q2 2025, marking the thirteenth consecutive quarter of year-on-year expansion, predominantly driven by the core retail business. The company's liquidity remains robust, with cash and cash equivalents, restricted cash, and short-term investments totaling RMB 223 billion by the end of Q2 2025. While the last 12 months' free cash flow as of Q2 2025 decreased to RMB 10 billion from RMB 56 billion in the prior year, primarily due to cash outflows related to the trade-in program and lower operating income, management views these as strategic allocations for long-term value creation.

Expanding Horizons: New Businesses and Global Ambitions

JD.com's strategic expansion into new business initiatives, particularly on-demand retail and international markets, is a critical component of its long-term growth narrative. The JD Food Delivery business, launched recently, has experienced rapid growth, with daily order volume increasing exponentially in Q2 2025. This venture is not viewed as a standalone operation but as deeply integrated into JD's broader ecosystem, designed to generate powerful synergies with its core retail business. It is driving notable traffic and user growth, with user shopping frequency on JD's platform rising over 40% year-on-year in Q2 2025, and an even faster pace of over 50% for JD Plus members. The conversion rate of food delivery users purchasing B2C e-commerce products is steadily increasing, particularly benefiting supermarket categories, lifestyle services, and electronic accessories. JD Food Delivery is prioritizing enhancing core system capabilities, such as optimizing order dispatching algorithms, to improve user experience and merchant traffic. The company has onboarded over 1.5 million high-quality merchants in Q2 2025 and rapidly increased its full-time delivery drivers to over 150,000, emphasizing a "quality food delivery" model.

Globally, JD.com is executing a long-term vision to leverage its unique supply chain know-how and technology. JD Retail, JD Logistics, and JD Property have been building overseas retail formats and infrastructure, especially in Europe and the Middle East. A significant step in this international strategy is the voluntary public takeover offer for CECONOMY AG, the parent company of European consumer electronics retailers MediaMarkt and Saturn, for EUR 4.60 per share. This offer, announced on July 30, 2025, and with an acceptance period from September 1 to November 10, 2025, aims to combine CECONOMY's brand strength and market position in Europe with JD's online operational expertise and technology. JD.com will support CECONOMY's store digitalization and strengthen its logistics and supply chain management. The transaction is subject to regulatory clearances by November 10, 2026, and will be financed through a combination of an acquisition loan and the company's cash on balance sheet. JD also plans to launch its retail e-commerce platform, Joybuy, in Europe later this year.

Competitive Arena: Outmaneuvering Rivals

JD.com operates in a fiercely competitive landscape, primarily against domestic giants like Alibaba Group Holding Limited (BABA) and Pinduoduo (PDD), as well as global players like Amazon.com, Inc. (AMZN) in certain segments. JD's self-operated supply chain and logistics network provide a distinct advantage over Alibaba's marketplace model, offering faster delivery and superior product quality control. This leads to greater efficiency in fulfillment and a more reliable customer experience. However, Alibaba's broader ecosystem, encompassing cloud services and a vast array of integrated digital offerings, provides it with stronger cross-selling capabilities and generally higher profitability margins, driven by its advertising revenue.

Against Pinduoduo, JD's premium logistics and product selection position it as a more reliable choice for quality-focused consumers. JD's extensive warehouse network ensures greater delivery efficiency, contrasting with Pinduoduo's focus on cost-effective, social commerce experiences that drive rapid user acquisition among price-sensitive demographics. While Pinduoduo excels in viral growth and low-cost structures, JD's technology-driven supply chain offers better traceability and customer service, appealing to a different segment of the market.

In comparison to Amazon, particularly in shared markets like consumer electronics, JD's localized supply chain in China offers notably faster processing and delivery for domestic customers, providing greater efficiency within its home market. Amazon, however, boasts a global ecosystem and broader technological innovations, including its dominant cloud services, giving it a lead in global market positioning and technological breadth.

JD's competitive advantages, or "moats," are primarily its extensive logistics network and proprietary technology in supply chain management. These assets provide tangible benefits like faster delivery and reliable inventory management, fostering customer loyalty and potentially driving revenue growth through repeat business. This notably higher efficiency in order fulfillment helps JD counter Alibaba's ecosystem strengths and exploits Pinduoduo's quality control weaknesses, likely leading to increased market share in premium goods. JD's AI-driven supply chain technology offers significantly greater operational efficiency, translating into faster innovation cycles and robust growth. However, JD faces vulnerabilities, including its high dependence on logistics infrastructure, which can lead to higher operational costs compared to leaner models like Pinduoduo's. Its relatively limited social commerce features could also hinder customer acquisition compared to platforms with strong community-driven approaches.

Outlook and Shareholder Value: A Long-Term Vision

JD.com's management maintains a confident outlook, anticipating continued healthy, sustainable growth driven by the momentum in its core business and the strategic execution of new initiatives. The company's long-term goal remains to serve 1 billion e-commerce users in China, underpinned by continuous efforts to enhance user experience, lower costs, and drive greater efficiency. Management explicitly states that JD Retail's operating margin is progressing well towards its long-term target, and categories like supermarkets and fashion are expected to sustain strong growth throughout 2025. The fiscal 2025 retail growth outlook has been raised to double-digit growth, reflecting confidence in the core business.

While acknowledging that strategic investments in new businesses, particularly food delivery, will impact near-term profitability, management views these as crucial for long-term value creation. The long-term goal to achieve a high single-digit net profit margin remains unchanged, with the expectation that new businesses will gradually achieve economies of scale and operational efficiency, generating significant synergies with the core retail business. JD Logistics' investments in capacity building are also expected to lay the foundation for long-term efficiency gains and margin expansion. Analyst projections for fiscal 2025 anticipate revenue growth of 11.6% and adjusted EPADS of $4.61, with fiscal 2026 revenues growing 3.8% and adjusted EPADS rising to $4.95. The full-year JD Group profit is expected to exceed double-digit growth.

The company is committed to returning value to shareholders through consistent annual cash dividends and substantial share buybacks. In April 2025, JD completed a cash dividend payout of US $1.44 billion for 2024, equivalent to $1.00 per ADS. Furthermore, the company has repurchased approximately $1.5 billion worth of shares year-to-date in 2025, with $3.5 billion remaining in its $5 billion share repurchase program. This commitment underscores management's strong conviction in JD's long-term success and its dedication to sharing business success with shareholders.

Key risks include the intensifying competition in the food delivery market, which could pressure unit economics, and the inherent volatility of the macroeconomic and competitive environment. Additionally, potential high base effects and diminished demand elasticity in the electronics and appliance categories in the latter half of 2025 could pose challenges for sustained growth in these sectors. The CECONOMY acquisition is also subject to various regulatory clearances, which must be obtained by November 10, 2026. However, JD's strategy of disciplined investment, focus on ROI, and long-term perspective, coupled with its technological leadership, are designed to mitigate these risks and drive sustainable growth.

Conclusion

JD.com stands at a pivotal juncture, transforming from a domestic e-commerce leader into a diversified technology and service provider with global aspirations. Its core investment thesis is firmly rooted in the enduring strength of its supply chain-based retail model, which continues to deliver robust growth and expanding margins. The strategic foray into on-demand retail, particularly food delivery, and the ambitious international expansion exemplified by the CECONOMY acquisition, represent calculated moves to broaden its market reach and deepen user engagement. These initiatives, while requiring significant upfront investment and impacting short-term net profitability, are designed to unlock powerful synergies and establish new, long-term growth drivers.

JD's technological leadership, particularly in AI and automation across its logistics and operational functions, provides a formidable competitive advantage, driving efficiency, reducing costs, and enhancing user experience. This technological edge is crucial for outmaneuvering rivals in a dynamic market and for successfully integrating new businesses. With a clear long-term vision for high single-digit net profit margins and a strong commitment to shareholder returns, JD.com is positioning itself for sustained value creation. The company's ability to execute its strategic roadmap, integrate new acquisitions, and leverage its technological prowess will be key determinants of its continued success in an evolving global retail landscape.