JD.com's Hong Kong-listed shares closed 8.3% higher on Tuesday, reaching HK$128.20, after the Chinese e-commerce giant reported first-quarter results that surpassed analyst forecasts. The company's U.S.-listed ADRs also gained, rising about 3.2% in premarket trading to $31.49. The rally was driven by stronger-than-expected revenue and adjusted earnings, alleviating investor concerns about the costly expansion into food delivery.
For the quarter ended March 31, JD.com posted revenue of RMB315.7 billion, beating the consensus estimate of RMB311 billion. Adjusted earnings per American depositary share came in at RMB5.12, well above the RMB3.64 expected by analysts. The better-than-expected performance was largely attributed to improved margins in its core retail business and a significant reduction in losses from its food-delivery operations compared to the previous quarter.
JD Retail, the company's main segment, reported operating income of RMB15.0 billion, with the operating margin improving to 5.6% from 4.9% a year earlier. Management highlighted a "significant" decrease in investment spending on JD Food Delivery versus the prior quarter, signaling a more disciplined approach to new business ventures. This margin resilience was a key factor in the stock's positive reaction, as investors had been wary of the potential for margin erosion amid fierce competition.
Despite the top-line beat, net income fell 53% year-over-year to RMB5.1 billion, reflecting higher costs across fulfillment, research and development, and marketing. However, this figure still exceeded expectations. The company is navigating a challenging environment marked by cautious Chinese consumer spending, ongoing real estate headwinds, elevated U.S. tariffs on Chinese goods, and rising fuel costs that are squeezing household budgets.
CEO Sandy Xu acknowledged the headwinds, noting that revenue from electronics and home appliances—a historically strong category—declined 8.4% year-over-year. However, she expressed optimism for the second half of the year, stating the company expects "stronger performance in electronics and home appliances" before year-end. CFO Ian Su Shan emphasized the margin story, pointing to growth in higher-margin segments such as marketplace services and marketing revenue, while noting that losses in newer businesses narrowed sharply. He also highlighted that JD.com repurchased $631 million worth of shares during the quarter, representing about 1.6% of total shares outstanding, with $1.4 billion remaining under the current buyback program.
The competitive landscape remains intense. JD.com is locked in a price war with Alibaba and Meituan in food delivery, which has pressured margins across the sector. Meanwhile, PDD Holdings continues to exert downward pressure on pricing with its aggressive discounting strategy. Bulls point to JD.com's strong service revenue growth—up 20.6%—and a 29.0% surge in logistics revenue as evidence that the company is diversifying beyond its traditional electronics and appliances business. If food-delivery losses continue to shrink, the biggest margin drag could be behind it.
However, bears remain cautious. The company's New Businesses segment, which includes food delivery, posted an operating loss of RMB10.35 billion for the quarter. While the sequential improvement is encouraging, it does not fully address the structural price-war issue, especially as Alibaba and Meituan continue to invest heavily in delivery subsidies and PDD keeps prices low. Additionally, macro risks such as the ongoing U.S.-China tariff standoff—with Polymarket pricing in a 63% chance of a deal by May 31—continue to weigh on Chinese ADRs.
In summary, JD.com's latest earnings report offers a nuanced picture. The company demonstrated that it can still defend margins in its core retail business even as it invests in new growth areas. For now, that has been enough to satisfy investors, but the key question remains: can JD.com sustain this margin improvement as competition intensifies and costs continue to rise?
