JD.com (NASDAQ:JD) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.

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Summary

JD.com reported a 21% year-on-year increase in non-GAAP net income attributable to ordinary shareholders, reaching 8.9 billion RMB, driven by margin expansion in JD Retail and reduced losses in JD Food Delivery.

The company sustained double-digit growth in key user metrics and set a record during the June 18 Grand Promotion, while streamlining marketing expenses.

JD Retail's gross margin expanded by 1.3 percentage points to 18.5%, and operating margin improved to 4.6%, supported by supply chain scale benefits and a favorable revenue mix.

JD Food Delivery narrowed its losses by over 50% year-on-year, highlighting improved unit economics and operational efficiency.

The company is integrating AI and logistics automation to enhance operational efficiency and user experience, contributing to improved profitability.

JD.com repurchased approximately 69.9 million Class A ordinary shares in H1 2026, demonstrating commitment to shareholder returns.

JD Retail experienced a decline in total revenues by 2.9% year-on-year due to high comparison base and price pressures in electronics, but expects recovery in the second half of 2026.

Joybuy experienced revenue doubling within two quarters, driven by localized supply chain capabilities and enhanced user experience in Europe.

Management expects sustained growth in advertising and marketplace revenues, facilitated by AI-driven efficiency and category mix optimization.

Full Transcript

OPERATOR

Hello and thank you for standing by for JD.com's second quarter 2026 earnings conference call. At this time, all participants are in listen-only mode. 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 Zheng, Head of Investor Relations.

Please go ahead.

Sean Zheng, Head of Investor Relations

Thank you, operator. Good day, everyone. Welcome to JD.com second quarter 2026 earnings conference call. With us today are CEO of JD.com, Ms. Sandy Xu, and CFO Mr. Yan Shan. Sandy will kick off the call with her opening remarks and Yan will discuss the financial results. Then we'll open the call to questions from analysts. Please note, unless otherwise stated, all comparison in this call will be against our result 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.

Sandy Xu, CEO

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 amid macro and industry headwinds while navigating a high trade-in comparison base, upstream price pressure in consumer electronics and evolving macro dynamics. Our commitment to high-quality development translated to robust product profitability.

Most notably, Q2 marked a definitive turning point for our profitability trajectory. Our non-GAAP net income attributable to ordinary shareholders surged by 21% year on year to 8.9 billion RMB, driven by both JD Retail's healthy margin expansion and JD Food Delivery's loss reduction. In particular, both JD Retail gross margin and operating margin hit historic highs 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 three 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-level marketing expenses, supported by enhanced operational efficiency and marketing optimization. Across JD Food Delivery and JD Retail, we maintained 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' life needs, such as healthcare, home services and auto aftermarket services, resonated strongly with our users, contributing to deeper user engagement and stickiness. In healthcare, we provide users with a full set of online and offline services from consultation to pharmacy and on-site care. 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 rapid user acquisition toward elevating user quality and lifetime value. Through disciplined lifecycle 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, momentum picked up in June. Our market position and user mind share remain 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 trade-in program fades, and our strong supply chain strengths allow us to navigate consumer electronics price cycles more effectively.

General Merchandise maintained healthy growth in the second quarter. In particular, the supermarket category remained a key standout, delivering near double-digit year-on-year revenue growth. With a proven multi-year 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 healthcare and industrial products also delivered solid double-digit growth in the quarter. As we further tap into method 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 two 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 a peak promotional quarter. Beyond the gross margin expansion, this performance also reflects our ROI-driven marketing spend.

This allowed us to direct more resources toward 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 roadmap. During the second quarter, JD Food Delivery maintained healthy order volume momentum while narrowing total losses by over 50% year on year.

Within just one 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 Zunci businesses advanced steadily along their strategic paths 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 increasing user retention and has doubled its revenues within two quarters. Zunci continued to deepen its penetration in larger markets with QAC increasing over 40% year on year and contributing 40% of new active customers in Q2, unlocking valuable incremental user pools for our 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 physical automation deeper into our core value chain in the second quarter, spanning demand forecasting, product sourcing, intelligent customer services and full-stack logistics automation. Next-generation shopping and conversion, we are proactively upgrading our search, recommendation, ad targeting engine along with our proprietary AI shopping agents.

By leveraging AI to sharpen precision in user intent matching and traffic allocation, we have driven tangible improvements 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 workflows. This deep integration is delivering measurable progress, enhancing customer satisfaction while 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, we expanded deployment of our proprietary goods-to-person solution across more warehouses and product categories. In autonomous delivery, JDL scaled thousands of air and ground vehicles across more than 20 provinces. As of Q2, we are launching our first 24/7 overnight autonomous delivery routes in Shenzhen.

Powering this automation is our Jingdong Logistics MetaBrain 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 whilst responding with agility to evolving macro trends. Our core JD Retail business will continue to drive efficiency gains across every link along 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 Yan.

Ian Shan, CFO

Thank you, Sandy. Hello, everyone. Thanks for joining the call today. In the second quarter, we delivered a high-quality financial performance anchored by robust bottom-line expansion. While electronics and home appliances performance was temporarily tempered by a high comparison 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 revenues, maintained healthy momentum.

Meanwhile, facing external challenges, we sharpened our focus on supply chain capabilities and operational efficiency, and this move 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 point to 2.6%, backed by robust profitability of JD Retail and the ongoing financial optimization of JD Food Delivery. As we head 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 remained committed to shareholder return. During the first half of the year, we repurchased a total of approximately 69.9 million Class A ordinary shares, equivalent to 34.9 million ADS, for a total of US$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 category, 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 the second half, we expect growth momentum to accelerate across categories as we continue to elevate user 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 point, primarily driven by higher growth in advertising revenues. Although growth moderated relative to previous quarters against a high user traffic base, marketplace and marketing revenues consistently outpaced product sales.

We expect this structural divergence 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 effort in supply chain and user experience gained traction, momentum picked up in June. We expect this recovery trajectory to build further into Q3, making a pivot 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 searchings in Q2, with operating margin up 7 basis points to 4.6%, a record high for promotional seasons. We achieved this milestone amid increased investment 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 R&D6.68.1 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 Daphon, 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 JD 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 unit 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 Joidai and Jingsi progressed in line with our strategic roadmap. Notably, Joy Buy 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 Joy Buy entered a rapid scaling phase, its loss margin narrowed sequentially, demonstrating our disciplined approach to business expansion and continuous operational refinement.

Turning to our consolidated profit performance, consolidated 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 percentage point. This operating leverage was largely driven by optimized marketing spend, which was partially offset by stepped-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 point 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 collection and the normalized cash outflows associated with the trading program. By the end of Q2, our cash and cash equivalents, restricted cash, and short-term investment totaled R&D235 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 a 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.

Sean Zheng, Head of Investor Relations

Thank you, Sandy and Yin. 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 the original language. Operator, we are opening the call for the Q&A session now.

OPERATOR

Thank you. The question and answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask questions, we will take two questions at a time from each caller. If you have more than two questions, please request to join the question queue again after your first two questions have been addressed. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced.

If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Kenneth Fong with UBS. Please go ahead.

Kenneth Fong, Analyst at UBS

Thanks, management, for taking my questions. Despite the high base in the second quarter, JD Retail still achieved an outperforming performance. Given the macro uncertainties, the front-loaded demand for 3C 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 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 quarter? Please. Thank you.

Sandy Xu, CEO

Let me translate the first answer to the first question. Thank you. Hi, 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 electronics and home appliance revenue was in line with our previous expectation, despite the category facing 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 mindshare, 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 our offline business growing at a much faster pace. As a result, our overall performance remained more resilient in home appliances and the 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 a visit. Looking into the second half, while the ongoing rising consumer electronics prices may continue to weigh on consumer demand, we remain confident that this category will grow. Growth will improve meaningfully in the second half for three reasons. Number one, the base effects start to gradually normalize starting from Q3 — the drag from last year's high base will gradually ease.

Growth in electronics and home appliances is expected to reaccelerate as comparison base normalizes. Second, 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 proactive planning and agile inventory management, we can effectively cushion the impact of rising consumer electronics prices. This helps us maintain robust operating resilience while delivering competitive prices 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 co-develop new products using these new technologies. Our Joy Insight has partnered with nearly 200 brands, leveraging JD.com's AI capability to enable smarter interaction across home appliances 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.com's unique value to brands becomes even clearer in uncertain 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. 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 did the trading program directly boost the 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 steadily gain market share across all general merchandise subcategories. Notably, supermarket — our largest category within general merchandise — delivered a near double-digit resilient performance, while healthcare and industrial products maintained solid double-digit growth. Okay, looking ahead, we are confident that the 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 1P supply chain capability for the general merchandise category, especially in supermarket. By extending product selection, building price competitiveness, and elevating service quality, we will enhance user experience and solidify JD.com's user mindshare in the general merchandise category. Second, we see sustained user growth momentum. As user mindshare for our general merchandise category deepens, our user base continues to grow healthily.

New businesses 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, while helping them optimize end-to-end operations. This allows merchants and brands to achieve more certain growth on JD.com while also bringing incremental sales to our platform.

At the same time, JD Retail 3P GMV growth has outpaced 1P for the past three consecutive quarters, with its contribution to total GMV expanding Q-on-Q in Q2. So overall, we expect JD Retail growth to accelerate quarter by quarter in the second half of the year. Our electronics and home appliances should steadily recover, while the general merchandise category maintains healthy growth. We also see ad conversion efficiency improve. Our advertising revenue has meaningful room to pick up speed.

Thank you for your question, Kenny. We can go to the next analyst.

OPERATOR

Thank you. Your next question comes from Ronald Keung with Goldman Sachs. Please go ahead.

Ronald Keung, Analyst at Goldman Sachs

Thank you, management. So, two questions. 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 the mega cap. So with this unique positioning of JD.com, 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 a still pending acquisition of the German retailer. So how do you differentiate or plan to differentiate your price, user experience, or logistics experience further? And what is your investment budget for the second half and next year?

Ian Shan, CFO

Thank you, Ronald. In the first half of this year we purchased around 69.9 million ordinary shares for a total amount of 1 billion US dollars. This represented 22.5% of our ordinary shares outstanding as of December 31, 2025, under the previously announced 3-year, 5 billion USD share repurchase program. The remaining amount is around 1 billion USD. We are executing on the program as planned. On shareholder return ratio, we remain firmly committed to creating value for our shareholders.

We will continue to invest in business operations and supply chain capabilities to enhance JD.com'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 total shareholder returns. Our track record also shows our strong commitment to shareholder returns. Since 2023 we have returned around 13 billion USD to shareholders through dividends and share repurchases.

On dividends, we have maintained annual dividend payments since 2022 and kept dividend per share stable even when profits 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 return.

Sandy Xu, CEO

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

First, JoyBuy is starting to establish a clear edge in user experience and retention. Powered by our own warehouse network in Europe, JoyBuy now offers same-day and next-day delivery across major European cities. Place an order in the morning, receive it enough — hyper-fast delivery services — to over 40 million customers in Europe. You can see, unlike other traditional so-called cross-border e-commerce platforms, JD.com leverages our supply chain to build a localized e-commerce model.

We are strengthening our product offering, proactively partnering with top-tier brands and suppliers, and delivering high-quality products to our local customers in Europe. During JoyBuy's recent summer Black Friday sales, 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 installation service truly delivered a differentiated experience, further boosting JoyBuy's brand reputation and customer satisfaction in Europe.

Of course, JoyBuy is still in a very early stage of capability building. As we fortify our core supply chain strength across product selection and logistics 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 expect as the order volume of JoyBuy continues to grow quickly and logistics fulfillment efficiency improves and service coverage expands, investment in 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.com's core model, with supply chain at the center. So as JoyBuy scales, economies of scale will kick in and drive its continuous improvement in JoyBuy's unit economics. Thank you. We can take the next question.

OPERATOR

Thank you. Your next question comes from Alicia Yap with Citigroup. Please go ahead.

Alicia Yap, Analyst at Citigroup

Hello, good evening. Thank you. So, four questions. First is related to food delivery. So with the landscape stabilizing, what is JD.com's latest plan for your market share, user growth, and also the cross-sell synergy target? Second question is for marketplace and also marketing revenues. How can JD.com sustain faster growth rate amid the competitions and also the slower consumption? What is your view on the growth expectations for this line item into the second half?

Thank you.

Ian Shan, CFO

Thank you, Alicia. Let me answer the first question regarding JD food delivery. JD food delivery has made solid progress in the second quarter. Order volume maintained healthy growth while narrowing total loss by over 50% year on year. So we didn't just one 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 B2 efficiency at scale, and growing contribution from commissions and advertising revenue.

In terms of synergy with our core business, as a deeply embedded business within JD ecosystem, JD food delivery is delivering clear synergies. First, it creates strong synergy with our core retail business across user acquisition and cross-sell. Our quarterly active customers maintained solid double-digit year on year growth in the quarter. Second, it 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.

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, we will deepen integration between food delivery and our core business to further unlock ecosystem synergy to drive sustainable user and revenue growth while lifting overall efficiency and profitability. For your second question, Alicia, JD remains committed to enhancing user experience.

Without compromising this 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, with advertising revenue showing faster momentum. 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 momentum in our advertising business.

On tech-driven efficiency, we have been driving ad distribution efficiency by integrating AI into our algorithms. This optimizes recommendation accuracy, boosting conversion rates and accelerating ad revenue growth. On category mix optimization, general merchandise categories, which have higher ad monetization rates, are growing faster and taking a larger share of our total sales. This mix shift structurally supports our advertising growth. On 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 delivery's own advertising capabilities continue to mature, contributing incremental ad revenue. 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. Okay, sir, we can go to the next question.

OPERATOR

Thank you. Your next question comes from Thomas Chong with Jefferies. Please go ahead.

Thomas Chong, Analyst at Jefferies

Hi, good evening. Thanks, management, for taking my questions. 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? Thank you.

Ian Shan, CFO

Thank you, Thomas. I'll take your questions. In Q2, JD Retail's operating margin improved steadily. This was mainly attributable to, first, gross margin saw sustained improvement. This is supported by product sales growth, 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 four 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. Looking into the second half of the year, we expect improved 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 a 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.

Over the long term, we remain confident in achieving our high single-digit margin target. The key drivers include: first, 1P capabilities — with stronger 1P supply chain capabilities and scale benefits, we expect product sales gross margin to improve steadily. Second, category upside — categories such as supermarket still have meaningful potential to improve 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 — as 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. In terms of investment in new businesses and JD Group's 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. At present, our new businesses are at different stages of development and investment cycles. 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 remains 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, while in its 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 investment for the business steady and within our control. As for Jinshi, as it effectively penetrates lower-tier markets with differentiated supplies, it has brought in a large amount of new users and enhanced user engagement for our platform. Moving forward, we expect Jinshi to drive rapid order growth while continuously improving its unit economics.

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, unlock synergies, and gradually become new growth engines, we are well positioned to drive steady long-term profit expansion for the group.

Sean Zheng, Head of Investor Relations

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

OPERATOR

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

Sean Zheng, Head of Investor Relations

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 the IR team. We appreciate your interest and support in JD.com and really look forward to talking with you again next quarter. Thank you very much. Have a good day.

OPERATOR

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

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